DEL MAR — Claiming a request for proposals did not comply with state contracting requirements, involved a predetermined outcome and “was essentially a sham,” the organizers of KAABOO Del Mar protested a recommendation to award Belly Up Entertainment a talent-buying contract for a 1,900-seat concert venue scheduled to open in Surfside Race Place in about a year.
“The ultimate decision with respect to the award lacked a rational basis and, therefore, was arbitrary and capricious,” the 18-page protest letter states.
It alleges that before issuance of the RFP in October 2017, the 22nd District Agricultural Association, which governs the Del Mar Fairgrounds where KAABOO takes place and Surfside is located, planned to partner with Belly Up.
According to an excerpt from a 2016 feasibility study conducted by students from California State University San Marcos, “In an interview, Mr. Fennell had specified that the 22nd District will hire the Belly Up as a talent buyer for the venue.”
Tim Fennell, fairgrounds general manager, said he doesn’t remember making such a comment.
He said the students, hired to reconfirm what his staff concluded about the viability of the concert venue, “could have derived that by chatting with me or others because we have a good relationship with Belly Up, they’re local and they have a great reputation.”
KAABOO officials say advice sought from Belly Up during the study indicates a prior consulting relationship between the two entities, so awarding the contract to the Solana Beach company would be prohibited by state law.
The protest also claims the RFP violates another state law because it was designed to be “unnecessarily restrictive and narrow” and written to limit bids to one bidder by stating extensive knowledge, experience and established relationships with the local community surrounding the fairgrounds are highly desired.
“This requirement of a bidder’s literal physical adjacency to the Fairgrounds created a situation where only one talent buyer, the Belly Up, could qualify,” the protest letter states.
In its proposal, KAABOO officials said they detailed years of booking and marketing experience with venues less than 20 miles from the fairgrounds.
In a letter to the 22nd DAA, Chris Goldsmith, president of Belly Up Entertainment, objected to KAABOO’s original proposal and rejected claims that, among other things, a prior relationship existed between the 22nd DAA and Belly Up, the request for proposals was flawed and a conflict of interest.
“KAABOO’s protest contains many opinions stated as fact that are actually very disputable,” Goldsmith said at the Jan. 9 fair board meeting. “Because they are now part of the public record, we feel the need to set that record straight.”
Goldsmith said KAABOO listed clauses in state law that “appear” to support the allegation of prior “consulting services,” but “conveniently” fail to include those that state payment is an “integral part of what defines” such a relationship.
“While the Belly Up did answer questions and participate in a student-run study many months prior to the RFP, it is important to note that the Belly Up has had no contact with the 22nd DAA regarding this RFP, and the Belly Up has never received any payment from the 22nd DAA for consulting services,” he said.
“(E)ven if the Belly Up was not receiving compensation … allowing the Belly Up to provide advisory services and then bid on the RFP, and awarding it the contract following such consulting services, including its intimate involvement with the planning and analysis for the venue, violates the spirit, if not the strict terms, of the State law and policy,” KAABOO’s protest states.
Goldsmith’s letter also addresses KAABOO’s assertion that the RFP was flawed by requiring local sensitivity and references and, as a result, attracted limited proposers.
“KAABOO itself may have contributed to this outcome by joining forces with two other proposers in order to improve its chances of winning the bid,” it states.
In addition to Belly Up and KAABOO, Music Box responded to the RFP. A fourth bid submitted by another company was late and therefore not considered, fair board member Stephen Shewmaker said.
“KAABOO claims it was unfairly penalized for using subcontractors in its proposal, even though (its) proposal appears to rely mainly on the achievements of these third parties in its effort to meet the RFP’s minimum qualifications,” Goldsmith added.
“Meanwhile, as a company in its own right, KAABOO demonstrates little business experience beyond its three events at the fairgrounds, nor does it indicate anywhere in its proposal that the company or its festival has ever been profitable,” he said.
Goldsmith noted KAABOO’s protest also contends Belly Up’s loyalty would be split because it is a talent buyer for other area venues, including its own in Solana Beach. He said there is no conflict because most of Belly Up’s entertainment is sought for smaller-capacity venues that seat 600 or 700 concertgoers.
Goldsmith further claimed KAABOO would have a conflict of interest by seeking to book its three-day festival and the concert venue.
Surfside is an approximately 100,000-square-foot satellite wagering facility built in 1991 to accommodate 5,000 people. At one point it attracted about 2,700, but a decrease in offsite betting has resulted in an average daily attendance of about 350.
The San Marcos study concluded that repurposing about 40 percent of the facility into an entertainment venue would be “highly profitable,” with a return on investment in less than five years if at least 90 concerts are held annually.
Current plans are for 60 concerts a year, or about five a month.
In a response letter to KAABOO dated Jan. 10, the 22nd DAA states it did not contract with Belly Up, which did not receive payment for, or provide, consulting services. The San Marcos study, which included input from Belly Up, was conducted as part of its due diligence before embarking on the approximately $13 million renovation.
“As a state agency, the District has an obligation to determine whether the expenditure of state funds is warranted and justified,” the letter states.
The geographical language was included not to limit competition, the letter states, but to “ensure that all proposers possessed a strong understanding of the demographics of North San Diego County … and in an effort to maintain strong relationships with its neighbors (including the residents of Del Mar and Solana Beach) and maintain and grow community support for the District and its activities,” especially once the new venue is operational.
The letter also notes KAABBOO creator Bryan Gordon said his festival and the proposed concert venue would improperly compete and create a conflict of interest. However, his statements “did not play a factor during the RFP process.”
A scoring system was used to select the preferred entertainment-buying organization. KAABOO finished 4.31 points behind Belly Up.
If KAABOO representatives are not satisfied with the explanations in the district’s letter, the matter will be referred to a hearing officer, who must make a recommendation to the board within 30 days of the final submission of evidence.
The 22nd DAA will vote on the final award contract after that.
“KAABOO came in with a lower proposal that offers a greater economic impact … especially by coordinating the festival with the new venue,” Joshua Goodman, a company spokesman, said. “So we just want to know why we weren’t selected.
“The fact that KAABOO has experience in this size range is a benefit,” he added. “Exactly what the board wants, KAABOO already does. We’re just asking that they please let us provide a great experience for guests.”