FAA Looking Into Why OC Supervisors Chose Low-Ranked Firm for Major Airport Lease

County of Orange

A private business jet at John Wayne Airport.

Federal aviation officials are looking into why Orange County supervisors plan to award a lucrative John Wayne Airport lease to a company that was ranked fifth by the county’s official evaluation panel.

A batch of emails released Monday by county officials includes correspondence from Federal Aviation Administration officials saying they’re conducting an “inquiry” into a complaint by the top-ranked bidder, Signature Flight Support. The company has argued that supervisors violated federal contracting rules when they picked fifth-ranked ACI Jet.

County Counsel Leon Page, in a formal response Monday to the FAA, wrote that “Signature’s allegations are wholly without merit.”

Writing to Page on Feb. 16, FAA manager Tony Garcia suggests the lease award be “postponed” by the county while the inquiry is in progress, “at least until the County can provide information that explains the reason for its decision-making.”

That suggestion, Garcia later wrote, was made “to allow the Board [of Supervisors] to eventually go forward with its decision without the cloud of an unsettled complaint.”

The federal inquiry is ongoing, FAA spokesman Ian Gregor confirmed Monday.

The controversy surrounds which company will win profitable leases for servicing corporate jets and other general aviation aircraft at the airport. The providers are known officially as fixed-base operators, or FBOs.

A county evaluation panel chose both incumbents, Signature and Atlantic, as the first and second-ranked firms, respectively. But supervisors instead voted 4-1 in late January to award Signature’s lease to ACI Jet, which was ranked fifth by the panel. The sole no vote was from Lisa Bartlett.

Supervisors, particularly Shawn Nelson, pointed to complaints from airport tenants that Signature charged above-market fuel prices. But neither Nelson, nor any of the other supervisors who voted for ACI, explained why they skipped over the third and fourth ranked firms to choose the fifth-ranked company.

Nelson made the motion on Jan. 24 to award the contract to ACI.

Signature, in turn, filed complaints with federal transportation officials alleging that the county was violating federal and state laws that require “fair and objective” awarding of government contracts.

A final decision to award the leases to ACI and Atlantic is scheduled for Tuesday’s supervisors meeting, according to the meeting agenda.

Federal officials, meanwhile, have asked Page to explain the supervisors’ actions.

The county’s own bidding rules for the lease “give a reasonable impression that the winners of the [lease] would be the [companies] that scored the highest,” wrote Garcia, the FAA official, in a Feb. 21 email.

He asked if Page thinks supervisors “can ignore the selection criteria specified in the [bidding documents] and choose any company” they want to, regardless of the firm’s ranking.

Page says supervisors do have that power, “provided that the selection is not made for discriminatory reasons.” State law, he says, allows the county to “bypass to these elaborate bid procedures” when at least four out of five supervisors vote for a lease.

Additionally, Page wrote that the county’s bidding solicitation warned companies from the beginning that their fuel pricing would be handled separately from the evaluation panel’s scoring, and would be taken into consideration by supervisors at the time of the contract award.

“For over two decades, two firms, Signature and [Atlantic Aviation] have enjoyed a virtual ‘duopoly’ at [John Wayne Airport] as their respective leases have never been put out to competitive bid, despite long-standing complaints from local pilots of the abusive, and possibly collusive, setting of fuel prices,” Page wrote.

“The Board’s anticipated selection of ACI Jet is expected to improve competition and customer service at [the airport]. Significantly, ACI Jet has offered to provide a variety of pricing formulas that may lead to more competitive fuel pricing for airport users and FBO customers.”

The county withheld the FAA correspondence from journalists for nearly a week and a half, until just after Page finished his response to the FAA.

On Feb. 16, the FAA and Page exchanged a series of emails about the inquiry, and the next day reporters with Voice of OC and the Orange County Register requested them.

But after numerous follow-up inquiries from Voice of OC over the following days, county officials wouldn’t acknowledge that the emails existed. Instead, they waited until 10 days after the request before providing the records, on Monday, the same day Page sent his formal response to the FAA.

Signature officials, meanwhile, say they have long given discounts to nearly all of their customers, and have since reduced their fuel prices by over 30 percent.

Attorneys for Signature have suggested they want to make a deal that works for everyone, with one of their attorneys publicly telling supervisors last week that they want to find “a win win for all stakeholders in this matter.”

Meanwhile, Signature has been referencing documents, which they also provided to Voice of OC, that claim supervisors’ votes were already aligned before the bidding process even began.

In a letter dated Aug. 4, an attorney for Atlantic alleged that the CEO of one of the bidders, Joe Daichendt, had claimed to Atlantic’s tenants and CEO that he had “4 out of 5 votes” on the Board of Supervisors.

Atlantic CEO Lou Pepper “was very surprised and frustrated with the amount of influence you claimed to have over the Board, and asked where and how you got to this point in such a short time,” wrote Atlantic attorney Tad Allan, of the firm O’Melveny & Myers LLP, in his letter to Daichendt.

Daichendt replied that “it took years to get this far,” Allan wrote. “Lou replied that he thought that the Supervisors’ job was to do what was best for the County, and not repay donors,” he continued.

“You seemed to know what minimum standards would need to be met–including a ‘local ownership’ requirement–and that Atlantic wouldn’t qualify. Since it is our understanding that the [request for qualifications] has not yet been drafted, how could you possibly know its content? We are very troubled by the influence and advance knowledge you claim to have about the County’s procurement process, including details that have not been publicly disclosed.”

At the time of the letter, Daichendt was CEO of OC Jet Center, which later dropped out of the bidding. He is now ACI’s interim general manager, according to the Orange County Register, which first disclosed the letter’s existence.

Daichendt disputed the claims in an Aug. 8 letter that threatened possible legal action in response.

“At no time did Mr. Daichendt indicate that he had, by any means, “‘4 out of 5′ votes” to make a deal or bring about a similar arrangement,” wrote Jacobus M. Vollebregt, an attorney with Best Best & Krieger, on behalf of OC Jet Center.

“Mr. Daichendt is not aware that the Board of Supervisors has made a final decision on whether and how to hold a public bidding process, nor does our client have any personal knowledge of how the Board views this issue, beyond what is available in the public record.”

He added: “While OC Jet Center does not wish to engage in litigation over these matters, our client will use all legal means at their disposal to protect their rights.”

In comments to the Register, Nelson also denied any impropriety. He instead portrayed the letters’ emergence as an effort by Signature to save a contract it’s about to lose.

Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at ngerda@voiceofoc.org.

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  • Shirley L. Grindle

    Interesting to note that since January 2015, the following contributions were received by the Supervisors from Joe Daichendt and Gary Daichendt (who runs Theory R):
    Lisa Bartlett $3800, Todd Spitzer $3,400, Shawn Nelson $500, Andrew Do $1500.
    Neither of the two Daichendts had made contributions to the above-named prior to 2014 but with the pending contract renewal in 2015-2016, it doesn’t take a genius to figure out why they decided to get in the game.
    If the Supervisors didn’t like the Evaluation Committees ranking, then they should have sent it back with directions as to which parameters were to be included in the assessment of the bidders. There has to be a reason for the ranking — the Board has no business in reverting to the old history of awarding contracts to either the company with the most influential lobbyist or the company that writes checks to their campaign committees.

  • LFOldTimer

    Maybe the FAA should team up with the FBI on the on-going investigation and add this one to the mix. And bring in the OC Grand Jury too.

    Our only hope to bring civility and integrity and lawfulness back to county government are the Feds. If they let us down we’re totally screwed.

  • David Zenger

    “At the time of the letter, Daichendt was CEO of OC Jet Center, which later dropped out of the bidding. He is now ACI’s interim general manager, according to the Orange County Register, which first disclosed the letter’s existence.”

    The other shoe drops.

  • kburgoyne

    Another good write-up, Nick. You brought in a lot of info from all the different angles. You’ve done a good job of painting the portrait of what is a rather complicated web. I was inclined to jump all over the BoS, for which you give ample information to justify if one wishes, but you also provide a lot of information where an open-minded person should step back and say “Wow, there’s a lot of interweaving pieces here.”

    Signature supposedly has complaints against it (does it really?), yet the eval panel put Signature at the top of the list, yet the BoS skipped over the top of the list to go lower. One might ask why the eval panel put Signature at the top when “supposedly” there are complaints against it. Don’t know either way. Maybe the complaint are a strong minority.

    Somebody on the BoS who actually wanted to do work on behalf of the citizens would start investigating this first-hand. (I’m being too idealistic, right?) One would assume the eval panel held discussions with the customer base — the tenants.

    I think if I was on the BoS I’d be burning up some shoe leather visiting the tenants. It makes sense hearing first hand what they had to say, and then holding discussions with the eval board if I felt the report needed some clarification between what I was hearing from the tenants and what I was reading in the report. Also important to hear from ALL the tenants. Doubtful all the tenants will be unified in their views.

  • disqus_rWJlZbjRAM

    Save money!

  • verifiedsane

    When the public is given even a small glimpse into the self serving backroom corruption and deal making that comprises the board of supervisors and OC leadership; what happens? The board of supervisors gives the citizenry and their constituents little more than the equivalent of the middle finger, and then goes about their usual business of self serving political corruption. OC is being run by a ruling class oligarchy of well connected criminals of both political stripes. This is why “you” (the lowly citizen are now living in virtual servitude to the government) will never see any truly independent oversight or have a true voice in the process. The harsh reality is this shell game is rigged. The general public are lost chasing illusions, empty bluster, & their own partisan tails; not even realizing they have not been even invited to play in the first place.

    • OCservant_Leader

      Well said.