Center’s contract put out to bid
09.26.10 – 11:38 pm
By Ray Gronberg
DURHAM — City and county officials have put the management contract for the Durham Convention Center out to bid in hopes of finding an operator who will
help stem the tide of red ink it now generates.
A request for proposals gives companies until Oct. 26 to explain how they would market and run the downtown meeting center, which of late has been requiring a combined subsidy from the two governments of about $1.2 million a year.
The governments are ending an existing management deal with Shaner Hotels, the owner of the adjoining Durham Marriott, as of Dec. 31.
Administrators believe Shaner will put in a new bid, as the convention center and the Marriott share a lot of space.
But before putting the contract out for bids, officials “kicked the tires a bit and found out that there are [other] people interested in giving us a proposal,” City Manager Tom Bonfield said.
Forcing companies to compete for the next management contract was among the key recommendations of a consultants’ report earlier this year that criticized the existing deal with Shaner.
The report, drafted by Hunden Strategic Partners, said city and county officials made a bad deal with Shaner in 2005 that allowed the hotelier to improve its bottom line at the convention center’s expense.
The consultants estimated that the two governments were shouldering about $500,000 a year in excess costs for convention center employees whose work was also benefitting the hotel.
Officials also believe Shaner has been using some convention center space for its own purposes without formally leasing it. That’s going to stop, no matter which company wins the next management contract, County Manager Mike Ruffin said.
Going forward, Shaner officials are “going to have to pay for what they lease, and lease for what they want,” Ruffin said.
The convention center will be closed for renovations during the first half of 2012,allowing a new operator a chance to settle in.
City and county officials are willing to negotiate the terms of a new contract, but they’ve attached to the request for proposals their own ideas about what a deal should look like.
They suggest a 5-year contract that would pay the winning company a fixed annual management fee, plus several bonuses rewarding financial results and good customer service that, if hit, would match the fixed fee.
The figures they put on the fee and incentives suggest that they went into the process willing to pay the winning bidder nearly $1.1 million over the life of the deal.
Officials also want a fairly broad set of termination rights, including a clause allowing them to fire the operator if losses at the facility are significantly greater than expected for two years running.
Bonfield said officials have “no preconceived notions” about wanting to replace Shaner, nor are they convinced Shaner’s control of the Marriott gives it a built-in advantage versus other potential bidders. On that front, “I guess we’ll just have to wait and see,” Bonfield said.
Ruffin said he is “very comfortable with the direction we’re headed” and dead set on reducing the center’s subsidy demands. “I’m convinced that can happen,” he added.
The chairman of the Durham Convention Center Authority, lawyer Patrick Byker, also indicated that he’s happy with the approach city and county officials are taking.
“The convention center, let’s face it, is a significant burden on city and county taxpayers,” Byker said. “We have to be sure we’re getting the best deal we can.”