Sky Harbor's Taxi Plan Relies on Start-Ups - But One Experienced Cab Company Could End Up in the Driver's Seat
Nine years ago, when the city of Phoenix last issued a request for proposals for taxicab service at Sky Harbor airport, it chose three experienced companies: AAA, Discount, and Allstate.
This year, it's selecting a one-week-old start-up — and a firm based out of a UPS store.
That sounds crazy, I know, but I'm not exaggerating. The city, which tightly regulates which cab companies can pick up passengers at Sky Harbor, issued a new request for proposals, or RFP, on August 4. But when it announced its recommended providers later that month, two of the three companies on the list weren't just upstarts. They were infants.
One, Visum Investments, incorporated eight months earlier. More shockingly, the other company, Apache Taxi, did so on July 30, just five short days before the RFP process commenced.
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Apache was started by the same guys who own a limo company, Magic Limo, in Tempe. At least Apache has a small office, even if it's on the site of a used tire shop. And, yes, you can order a cab from its brand-spankin'-new Web site, provided you're willing to do so five hours in advance of your trip.
But Visum? I couldn't find a Web site, or even a phone number, for Visum, so I drove to its corporate office. Imagine my surprise when I found myself in an Arcadia strip mall. The "Suite 21-598" on Visum's corporate record is actually mailbox #598 at the UPS Store there, wedged between a Pei Wei and a Pita Jungle. Believe me, there were no taxis idling in the Pei Wei parking lot.
So how does a company like Visum end up on the short list for one of the most important contracts the city will issue this year?
The answer is twofold.
First, I think Phoenix's aviation staff botched the RFP process. It chose companies based on how much they were willing to pay, not the quality of their service — making it easy for completely untested companies to win. (More on that in a minute.)
But the bigger problem may not be the process. It's the evidence suggesting that a group of businessmen may have taken advantage of the city's carelessness. At minimum, there are serious questions about whether bidders may have worked together, even while supposedly competing.
At this point, I can't fully connect the dots. I requested public records on the RFP process two weeks ago, but even though the City Council may sign off on contracts as early as next week, I have yet to get a single page of information. (Thanks, guys!) What I know comes from corporate filings, property records, and the testimony of eyewitnesses.
And what I know is enough to raise some serious questions. I worry that if the city doesn't at least pause to address them, it's setting itself up for trouble.
The city contracts with cab companies at the airport for good reason: You can't just have a free-for-all with every hack in town lining up to take passengers. Nor can you just assume the right number of taxis would line up without some control at the top.
But with the way this process is shaking out, the city is going with two companies without track records, much less a tested business model. That may result in a virtual monopoly for the third company on its list of winners, AAA Cab. And that's problematic: It would force any driver who wants to work the airport to sign up with AAA. At that point, the company has little incentive to provide good benefits or a living wage to its drivers.
As one driver told a Phoenix City Council subcommittee, "You get a company that has 120 cars at the airport, you work for them and you lose your job — what else you got?"
Forget about that "company" operating out of a UPS box, Visum Investments, for a moment. And forget about that now-three-month-old start-up at Bob's Tire Corral, Apache Taxi.
Let's focus instead on who really stands to gain from the two company's selection. Let's talk about AAA Cab.
Along with rival Discount Cab, AAA is the big game in town. Even if you think you've never called AAA for a taxi, you probably have: AAA also does business as Yellow Cab, Checker Cab, and Fiesta Cab.
And AAA stands to win big-time if the city goes with its current list of cab providers.
Here's why: Currently, the city allows 180 cabs to be licensed for airport service. Since 2000, those cabs have been evenly allotted to Discount, AAA, and Allstate.
Under the request for proposals issued in August, the city indicated it would choose up to three bidders. But it didn't require that each bidder handle one-third of the contract. A company submitting a proposal could choose to put as few as 20 cabs into play.
And the city didn't evaluate the proposals for how long the company has been in service or whether it even has cabs. (See: Visum Investments.) It merely made sure that cab companies hit a few marks — a manager with experience, and a laughably low $10,000 bond, which the city gets to seize if the company defaults on their end of the contract. (Suffice it to say, $10,000 would hardly cover the cost of restarting the RFP process.) Then the city asked what the company was willing to pay, per cab, in its bid.
The city set the per-cab minimum at $3,000.
The two highest bidders, Visum and Apache, promised the city nearly six times that: $19,777 and $16,176 per cab. But both Visum and Apache said they could handle only the minimum number of cabs, 20 each.
AAA Cab had the third-highest bid, just $115 per cab less than Apache. And AAA said it would be willing to cover all 180 cabs needed at the airport, if necessary.
So when the two highest bidders were interested only in the bare minimum, that left 140 cabs for AAA. That's more than twice the number of cabs that AAA currently supplies at the airport. It also knocks AAA's big rival, Discount, right out of the airport contract.
No matter what happens to Visum and Apache, AAA will now manage at least 75 percent of the airport cabs. Not bad for a company that spent the past nine years sharing its turf equally with two competitors.
I talked to AAA executives on Monday. They insist the whole thing was on the up-and-up. They recently lost a contract to provide limos at the airport; they learned their lesson and bid higher this time. They say it's a lucky coincidence that the other top bidders went for the minimum and left a bigger piece of the pie for them.
But executives at Discount Cab are concerned that there may be more to the story.
Now, Discount has good reason to have sour grapes, as they admit. But after sitting down with its executives last week, I'm convinced many of their concerns are real.
For one thing, both the company's president, Mike Pinckard, and its risk manager, LaMonte K. Jackson, were willing to go on the record. That's always refreshing.
For another, they have the numbers to back up their argument — spreadsheets showing how they arrived at their proposal and how paying the city $19,777 per cab can't possibly sustain itself in this economy.
Pinckard and Jacson are worried that Visum and Apache overbid so badly that there's no way their business model will work — especially because they lack the economies of scale of larger cab operations. "I'd be amazed if they last six months," Pinckard told me.
And that might mean their cabs would revert to the only winning bidder capable of putting 180 cabs in play: AAA. (When questioned about the possibility by New Times, Deputy Aviation Director Deborah Ostreicher didn't rule it out. However, she said if there's enough time left on the contract, the city would prefer to go with the next qualified company on the list.)
Discount executives are worried that the fix is in.
"There's only one possible combination of bidders that would allow AAA to have the maximum number of cabs at the airport, and that's the one we have," Jackson says. "There's so many coincidences that it can't be a coincidence."
Indeed, there's clear evidence that the upstart companies are, at minimum, acquaintances. One of Apache's owners, Abbas Naini, knows one of Visum's owners, 29-year-old Soroosh Ghafaripanah. The two purchased a Scottsdale condo together in 2006. And at one point, according to the database at www.intelius.com, Ghafaripanah used Naini's limo company as his address. (Neither Ghafaripanah or Naini responded to messages seeking comment.)
But do Visum and Apache also know AAA?
Discount executives say they're concerned about just this possibility. At a recent industry conference in Las Vegas, they say, AAA's owners were hanging out with Abbas Naini, the guy who started Apache Taxi just one week before the city opened the RFP process.
And, at the city's meeting to announce the winning bidders, Naini sat with the owners of AAA, Jackson and Pinckard say.
"At the end of the meeting, Naini walked out with [the vice president of AAA]," Pinckard says.
To that, the guys at AAA just laugh. Hossein Dibazar, the company's general manager, acknowledges that he and his partner are Iranian, as is Naini. And, he says, they've been aware of him for years. But "we don't get along," he says.
"I'm not going to tell him the secrets of my business," he says. Naini, he adds, came to ask for advice after the city recommended Naini's bid be accepted — and AAA intends to help his company learn the ropes just as they helped Discount Cab nine years ago.
For the record, AAA regrets giving that help. "We created monsters out of these people," says Van Means, a director at AAA.
But I'm not so sure Discount doesn't have point. Taken together, the connections certainly raise questions.
And that's why it's so disturbing that the city has shown no interest in asking them. Questioned about Visum's UPS Store address, Ostreicher says only that the company meets the city's requirements. She's also not worried about possible collusion: "Our research with the Arizona Corporation Commission shows that the three recommended proposers are independently owned taxicab companies."
Despite concerns from taxi drivers in attendance, the recommended list of Visum, Apache, and AAA sailed through the city's airport advisory committee last month and was sent to the city council aviation subcommittee.
At that meeting last week, there were no fewer questions. But the council members in attendance were distinctly uninterested in exploring them.
Jackson, of Discount, questioned how Visum and Apache could come through on their bids: "How are you guys going to handle a proposer that's overbid and cannot handle the service levels at Sky Harbor?" he asked the council members.
Councilwoman Peggy Neely almost chopped Jackson's head off.
She asked Discount if it had bid $11,305 per cab. Yes, Jackson said, it had.
"That's only a $7,000 difference then. Thank you," she snapped. Never mind that $7,000 per cab, in a fleet of 20, is a huge difference: $140,000 annually could certainly make or a break a small company in this economy.
Ultimately, Neely had nothing but praise for the staff members who put the RFP together.
"Kudos," Neely told the staff. "I know you've been dealing with these issues for years. You've brought this down and done an excellent job."
"I think you guys have done an excellent job," Councilman Michael Johnson agreed. The committee sent the list of three winning bids on to the full council with a unanimous vote.
I found myself marveling at that vote as I stood in the parking lot of the UPS Store last week, trying in vain to find the corporate office for Visum Investments.
There are plenty of questions the council needs to be asking here. Just who is behind Visum Investments? How do they know the guys from Apache Taxi? Does Apache's owner really not get along with AAA? And what's going to happen if — shock of shockers — Visum can't manage to come through on its bid? In that case, does AAA pick up the slack — or does the city admit it failed and start things over?
Call me a cynic, but I'm not ready to give "kudos" to the airport staff just yet. Until I see an actual fleet of Visum and Apache taxis ready to handle airport travelers, and not just 180 cabs from AAA, I'm going to reserve my judgment.
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