TITLE
Recommendation to adopt Specifications No. RFP CM17-011 for production of an annual Grand Prix Race and associated events; and
Authorize City Manager, or designee, to execute all documents necessary to enter into an Exclusive Negotiating Agreement with Grand Prix Association Long Beach, LLC, a Delaware limited liability company, for up to 90 days with the option of two, 30-day extensions, for the production of an annual Grand Prix Race and associated events, for the period of five years, from July 1, 2018 to June 30, 2023, with the option of one five-year extension.
(District 2)
DISCUSSION
In October 2016, the City released Request for Proposals RFP CM17-011 (RFP) seeking proposals from representatives or promoters of open-wheel auto racing formats to produce an annual Grand Prix Race event, as well as supporting race car events and other race-related activities, which in tandem create a large-scale, preeminent, world class race car event providing family-oriented entertainment and drawing national and international attention to the City.
The RFP was advertised in the Long Beach Press-Telegram on October 7, 2016, and 5,380 potential proposers were notified of the RFP opportunity. Of those proposers, 74 downloaded the RFP documents via the City’s electronic bid system. The RFP documents were made available from the Purchasing Division, located on the seventh floor of City Hall, and the Division's website at: www.longbeach.gov/purchasing. An RFP announcement was also included in the Purchasing Division's weekly update of Open Bid Opportunities, which is sent to 22 local, minority and women-owned business groups. The RFP closed on November 18, 2016. The City received two responses, one from the Grand Prix Association of Long Beach (GPALB), currently affiliated with Indy Car, and the other from World Automobile Championship of California, LLC (WACC), proposing a Formula 1 affiliation.
After completing an exhaustive evaluation process, it is the recommendation of City staff that the City Council authorize the City Manager to enter into an Exclusive Negotiating Agreement (ENA) with GPALB for an initial period of 90 days, with the option of two 30-day extensions, to negotiate an agreement between the City and GPALB for the production of a Grand Prix Race and associated events, for an initial period of five years, with the option of one five-year extension, at the discretion of the City. Upon completion, the final agreement will be presented to the City Council for approval.
EVALUATION PROCESS
To assist in the selection process, the City engaged a specialized team from KPMG, including experts in the field of racing and motor sports. KPMG (with assistance from their industry subconsultant, Apex Design) provided assistance in analyzing the financial, operational, technical, and promotional aspects of the proposals; the feasibility and capability of the proposers; the economic benefits and revenue opportunities for the City; and, the impact on City services. Upon completion of its review, KMPG provided the City a final report, which included an overview of the proposals, a detailed review of the information provided in the proposals and subsequent clarification questions submitted to the proposers, an evaluation of the responses with respect to the RFP evaluation criteria, and conclusions based on its technical evaluation.
Additionally, both proposers were invited to present to a review committee (Committee) comprised of City staff, subject matter experts, and outside staff from municipalities that have produced similar-sized special events.
City staff reviewed both the KPMG report and the feedback received from the Committee to assess the strengths and limitations of both proposals. The findings of this review are presented below.
Findings
The evaluation process revealed strengths and limitations in both proposals. A copy of the full KPMG report is attached. The following is a summary of key considerations that were identified by the KPMG report and by City staff.
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Grand Prix Association of Long Beach (GPALB) |
World Automobile Championship of California (WACC) |
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• Ability to organize and promote an event in 2019. • Demonstrated economic benefits to the City. • Demonstrated ability to deliver street race over multiple years in the City. • Ability to deliver on technical and financial aspects. • Ability to produce valid license to produce sanctioned race. • Provided sufficient level of information to support financial, operational, and promotional aspects of race. • GPALB currently holds a five-year permit from the California Coastal Commission. • Economic benefits are based on estimates from a study completed in 1997. |
• Indicated significant potential economic benefits. • Extensive operational experience in comparable events. • Demonstrated marketing and event promotion capability of partners (Liberty Media Corporation). • Proposer’s connections with both Automobile Competition Committee of the United States (ACCUS) and FIA key management personnel may expedite the commencement of a technical relationship. • Unable to organize and promote an event until 2020 at the earliest. • At this time, a recent economic impact study evaluating the benefits specifically to the City is not available to allow the City to make an informed assessment of the magnitude and likelihood of the benefits stated in the proposal. • Understanding of the City’s possible financial liability is unknown. • Unclear whether cost estimates were completed by recognized cost consultant. Sanctioning from governing body will not occur until after selection is made; unclear what happens if Formula 1 does not agree to hold a race. • Modifications to City infrastructure would require reconstruction of certain streets, medians and intersections. Pit structures contemplated to be built limit long-term redevelopment of area, result in loss of parking spaces in the Elephant Lot and potential taking of park lands adjacent to the Elephant Lot. • Physical changes to the race course may require CEQA review, zone change and approval of the California Coastal Commission, which could require an estimated 24 months. |
After review of the proposals and follow up questions/clarification submitted in response to the RFP, consideration of input from the Interview Panel (consisting of staff from the Departments of Public Works, Economic and Property Development, Fire, Police and Office of Special Events, and representatives from the City’s Economic Development Commission and the City of Los Angeles Special Events Office), and review of the KPMG report and its findings, City staff has determined that GPALB submitted the most qualified, responsible, and feasible proposal based upon review of the submittals, in-person interviews, and the criteria specified in the RFP. Further, GPALB provided a sufficient level of detail on financial, operational, technical, and marketing information in their response to the RFP; performed in a satisfactory manner in their existing contract obligations; and, were able to demonstrate the economic benefits of the Grand Prix Race and associated events to the City.
Finally, the City analyzed the concept of hosting both races of differing formats (IndyCar and Formula 1) simultaneously. City staff explored the dual race option and determined that it is not feasible because: (i) the two race formats have different requirements for the track (including length of track, race course layout, ancillary improvements) that are not compatible; (ii) it is unknown how multiple races would impact attendance and economic outcomes; and, (iii) Formula 1 has indicated that they would view back-to-back races as a competitive disadvantage.
Conclusion
After thorough consideration, City staff recommends entering into an ENA with GPALB based on the depth of information provided on the operational, marketing, promotional, and community benefits associated with its proposal.
Staff recommends that the City Council authorize the City Manager, or designee, to enter into an ENA with GPALB to negotiate terms of an agreement for the promotion and operation of an Indy Car Grand Prix Race and associated events. The ENA will be for a term of 90 days, with up to two 30-day extensions, if negotiations are not completed.
While a detailed agreement with GPALB will be negotiated during the term of the ENA, the general terms and conditions of the agreement will include:
• Five-year initial term with one five-year option to extend the term, at the discretion of the City.
• The promoter will significantly reduce current set up and take down times, similar to those proposed by WACC.
• The promoter will alleviate or remove the negative physical impacts of the race on the City’s streets, sidewalks and infrastructure (including tire marks on pavement and sidewalks, and slurry sealing streets) either through individual effort or a payment to the City.
• The promoter will provide the City with an Economic Impact Study periodically to quantify the benefits of the race to the City.
• The promoter will pay a Race Fee, Administrative Cost Reimbursement, Extraordinary Cost Reimbursement, and Lost Revenues to the City.
• The City will have no responsibility for out-of-pocket expenses associated with the Grand Prix Race and associated events.
• The promoter will provide an outreach program for disadvantaged youth during the term of the agreement.
• The parties will agree on the promotional package to be provided to the City.
• All physical improvements to the track will be the responsibility of the promoter.
• The race will be held annually in April, unless a change is approved by the City Manager.
• Minimum of 14 cars will participate in the race.
• The promoter will submit a schedule of planned events for race week to the City Manager for approval.
This matter was reviewed by Deputy City Attorney Richard F. Anthony on July 25, 2017 and by Assistant Finance Director Lea Eriksen on July 7, 2017.
TIMING CONSIDERATIONS
City Council action is requested on August 8, 2017, to allow adequate time for race event preparations.
FISCAL IMPACT
There is no fiscal impact associated with the recommended action to initiate an ENA with GPALB. Financial terms and conditions will be provided when the proposed contract is presented for City Council approval. It is the intention of City staff that all costs incurred by the City as a result of the Grand Prix Race and associated events will be reimbursed by GPALB, and there will be no fiscal impact on the City budget.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN KEISLER
DIRECTOR OF ECONOMIC & PROPERTY DEVELOPMENT
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER