SMG Challenges AEG Contract Award in L.A.

TSE STAFF
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Los Angeles – The news that Anschutz Entertainment Group (AEG) was chosen by the City of Los Angeles over rival SMG to operate the Los Angeles Convention Center barely created a blip on the radar of Los Angeles area media, which has grown accustomed to AEG’s widespread presence in downtown L.A.

But to rival SMG, it raised red flags. While SMG operates 70 convention centers in the U.S. alone, including the recent agreement to manage the Pennsylvania Convention Center in Philadelphia,  AEG’s roster of convention centers is primarily international, including centers in Australia and Qatar. Los Angeles City Administrative Officer Miguel Santana told the Los Angeles Times that city officials were satisfied with AEG’s overseas convention center experience.

SMG raised other concerns. Gregg Caren, senior vice president of strategic development, submitted a protest letter to the city claiming that AEG failed to meet the city’s own search specifications for the convention center and that AEG has a conflict of interest through its ownership of the two L.A. Live hotels.

Staples Center vice president of communications Michael Roth defended the selection to the Los Angeles Times, suggesting that SMG’s contracts operating convention centers in cities that compete with Los Angeles are a bigger conflict of interest than “a company headquartered in Los Angeles.” AEG is a wholly owned subsidiary of Denver-based Anschutz Co. The Colorado Convention Center in Denver is under SMG management.

The choice of a private company operator for the Los Angeles Convention Center came after Los Angeles Mayor Antonio Villaraigosa last year moved to privatize operations at the center for financial reasons. The recommendation was made by an independent panel whose members were not disclosed to the public.

The challenge to the selection process isn’t the first time AEG has been on the hot seat during this selection process. In April, AEG’s bid was disqualified due to the company’s failure to provide required financial documents to the city. AEG cried foul, saying the city provided unclear instructions and the city council subsequently granted a continuation for bids that allowed AEG back into the equation. Only AEG and SMG submitted bids to operate the building.

The selection of AEG also was made over general objections to privatizing the convention center from officials of the Service Employees International Union Local 721. According to the Times, AEG also donated $50,000 to a campaign group that provided financial support to mayoral candidate Wendy Greuel, who lost the election to Eric Garcetti. The Mayor-elect and new City Council assume their duties on July 1. City Council was expected to finalize the recommendation to award management contract to AEG this month. Whether the letter from SMG questioning the process will delay that vote remains unclear. City officials did not return calls for comment.

Reach Gregg Caren at (610) 729-7922 or gcaren@smgworld.com; Miguel Santana at (213) 473-7534.