[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




THE STATUS OF THE NATIONAL PARK SERVICE CONCESSIONS MANAGEMENT PROGRAM 
                     AND IMPLEMENTING REGULATIONS

=======================================================================

                           OVERSIGHT HEARING

                               before the

      SUBCOMMITTEE ON NATIONAL PARKS, RECREATION, AND PUBLIC LANDS

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                        Tuesday, March 25, 2003

                               __________

                            Serial No. 108-9

                               __________

           Printed for the use of the Committee on Resources



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                         COMMITTEE ON RESOURCES

                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Jim Saxton, New Jersey                   Samoa
Elton Gallegly, California           Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee       Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland         Frank Pallone, Jr., New Jersey
Ken Calvert, California              Calvin M. Dooley, California
Scott McInnis, Colorado              Donna M. Christensen, Virgin 
Barbara Cubin, Wyoming                   Islands
George Radanovich, California        Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Jay Inslee, Washington
    Carolina                         Grace F. Napolitano, California
Chris Cannon, Utah                   Tom Udall, New Mexico
John E. Peterson, Pennsylvania       Mark Udall, Colorado
Jim Gibbons, Nevada,                 Anibal Acevedo-Vila, Puerto Rico
  Vice Chairman                      Brad Carson, Oklahoma
Mark E. Souder, Indiana              Raul M. Grijalva, Arizona
Greg Walden, Oregon                  Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado         Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona               George Miller, California
Tom Osborne, Nebraska                Edward J. Markey, Massachusetts
Jeff Flake, Arizona                  Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana           Ciro D. Rodriguez, Texas
Rick Renzi, Arizona                  Joe Baca, California
Tom Cole, Oklahoma                   Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
VACANCY

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                
      SUBCOMMITTEE ON NATIONAL PARKS, RECREATION, AND PUBLIC LANDS

               GEORGE P. RADANOVICH, California, Chairman
     DONNA M. CHRISTENSEN, Virgin Islands, Ranking Democrat Member

Elton Gallegly, California           Dale E. Kildee, Michigan
John J. Duncan, Jr., Tennessee       Ron Kind, Wisconsin
Wayne T. Gilchrest, Maryland         Tom Udall, New Mexico
Barbara Cubin, Wyoming               Mark Udall, Colorado
Walter B. Jones, Jr., North          Anibal Acevedo-Vila, Puerto Rico
    Carolina                         Raul M. Grijalva, Arizona
Chris Cannon, Utah                   Dennis A. Cardoza, California
John E. Peterson, Pennsylvania       Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada                  Nick J. Rahall II, West Virginia, 
Mark E. Souder, Indiana                  ex officio
Rob Bishop, Utah
Richard W. Pombo, California, ex 
    officio


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 25, 2003...................................     1

Statement of Members:
    Christensen, Hon. Donna M., a Delegate in Congress from the 
      Virgin  Islands............................................     3
    Radanovich, Hon. George P., a Representative in Congress from 
      the State of California....................................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Fears, Bruce W., President, Delaware North Companies Parks 
      and Resorts, Inc., Buffalo, New York.......................    28
        Prepared statement of....................................    30
    Jones, A. Durand, Deputy Director, National Park Service, 
      U.S. Department of the Interior, Washington, D.C...........     4
        Prepared statement of....................................     7
    Lamb, Jennifer, Public Policy Director, National Outdoor 
      Leadership School, Lander, Wyoming.........................    34
        Prepared statement of....................................    36
    Todd, Andrew N., Chairman, National Park Hospitality 
      Association, and President and CEO, Xanterra Parks & 
      Resorts, Aurora, Colorado..................................    20
        Prepared statement of....................................    23
    Voorhees, Philip H., Vice President, Park Funding and 
      Management, National Parks Conservation Association, 
      Washington, D.C............................................    43
        Prepared statement of....................................    45
    Woodside, David B., Vice-Chairman, National Park Hospitality 
      Association, and President and General Manager, The Acadia 
      Corporation, Bar Harbor, Maine.............................    31
        Prepared statement of....................................    33

 
     OVERSIGHT HEARING ON THE STATUS OF THE NATIONAL PARK SERVICE 
      CONCESSIONS MANAGEMENT PROGRAM AND IMPLEMENTING REGULATIONS

                              ----------                              


                        Tuesday, March 25, 2003

                     U.S. House of Representatives

      Subcommittee on National Parks, Recreation, and Public Lands

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 3 p.m., in 
room 1334, Longworth House Office Building, Hon. George P. 
Radanovich [Chairman of the Subcommittee] presiding.
    Present: Representatives Radanovich, Cubin, Souder, 
Christensen, Kildee, Grijalva and Bordallo.

STATEMENT OF THE HON. GEORGE P. RADANOVICH, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. The hearing of the Subcommittee on National 
Parks, Recreation and Public Lands oversight hearing regarding 
concessions management will now come to order.
    I want to apologize. I know that this hearing was to 
originally start at 2 o'clock. I did have a bill to manage on 
the floor and, unfortunately, things can get a little long-
winded on the floor and it took a little longer than it 
probably should have, so I am very pleased now to begin the 
Subcommittee hearing.
    As this is the first Subcommittee hearing of the 108th 
Congress, I would like to welcome back my colleague and friend, 
the Ranking Member from the Virgin Islands, Mrs. Donna 
Christensen, with whom we hope to build upon the bipartisan 
relationship of the previous Congress.
    I would also like to welcome the new members of the 
Subcommittee, Mrs. Cubin of Wyoming, Mr. Peterson of 
Pennsylvania, Mr. Bishop of Utah, Mr Kind from Wisconsin, Mr. 
Grijalva from Arizona, Mr. Cordoza of California, and Mrs. 
Bordallo of Guam.
    Welcome to the Subcommittee. I think you will find this is 
the Subcommittee that has almost more work than any other 
Subcommittee, at least in the number of bills. There is a lot 
that we deal with here on a daily basis. So I welcome you to 
the Committee and look forward to the talents that you will be 
bringing. Thank you very much.
    Today the Subcommittee will conduct an oversight hearing on 
the always complicated subject of park concessions, in 
particular, the status of the National Park Service Concessions 
Management Program and its implementing regulations.
    At this time I would like to inform members that the 
National Park Service, working through the Concessions 
Management Advisory Board, formed a working group in January to 
attempt to cooperatively resolve some of the more pressing 
issues facing the concessionaires in light of the April, 2000 
regulations, such as Leasehold Surrender Interests or cross-
collateralization. And I thought tax law was complicated.
    [Laughter.]
    In all seriousness, I am very confident that the working 
group will resolve some of these pressing issues through 
Director's orders and new regulations. I, for one, do not wish 
to revisit the 1998 Act.
    The intent of the hearing today is not to necessarily 
attack the Park Service or increase tensions between the 
National Park Service and the concessions community but, 
rather, to keep the pressure on the Service and the concessions 
working group to produce consensus on the most contentious 
issues.
    Obviously, staff and I are following the discussions 
closely. Quite frankly, I expect results from the working group 
and I am pleased with the progress so far. I would like to see 
an environment where concessionaires believe that their 
investment is recognized and valued, while at the same time the 
Secretary's vision of the four C's--consultation, cooperation, 
communication and conservation--is fulfilled.
    As my colleagues are aware, the strong partnerships between 
the Park Service and the private concessionaires have existed 
since the creation of Yellowstone National Park in 1872. 
Today's services provided by the concessionaires include basic 
conveniences such as food and beverages, to more sophisticated 
services such as lodging and transportation.
    Like many of my colleagues on this Subcommittee, I believe 
that the 9,000-plus concession operations on Federal lands, 
including those throughout the National Park System, make it 
possible for our parks to provide the public with a rich 
experience that they otherwise would not have. In fact, 
concessionaires help fulfill a legal mandate of the Park 
Service, which is to leave the resources unimpaired, while 
providing for the enjoyment of the public. Sometimes I believe 
that the second component of the Park Service's mission is not 
given its due deference. It is essential that we help aid the 
public in enjoying these national treasures--and most of them 
do that in one way or the other--through the successful 
partnership of the Park Service and our concessionaires.
    I look forward to the testimony of the National Park 
Service and to the concessionaires, and I now yield to the 
Ranking Member, Mrs. Christensen, for any opening statement 
that she may have.
    [The prepared statement of Mr. Radanovich follows:]

Statement of The Honorable George Radanovich, Chairman, Subcommittee on 
              National Parks, Recreation and Public Lands

    Good afternoon. The Subcommittee on National Parks, Recreation and 
Public Lands will come to order.
    As this is the first Subcommittee hearing of the 108th Congress, I 
would like to welcome back my colleague and friend, the Ranking Member 
from the Virgin Islands, Mrs. Christensen, with whom we hope to build 
upon the bipartisan relationship of the previous Congress. I would also 
like to welcome the new Members of the Subcommittee: Ms. Cubin of 
Wyoming, Mr. Peterson of Pennsylvania, Mr. Bishop of Utah, Mr. Kind of 
Wisconsin, Mr. Grijalva of Arizona, Mr. Cardoza of California and Ms. 
Bordallo of Guam.
    Today, the Subcommittee will conduct an oversight hearing on the 
always complicated subject of park concessions, in particular the 
status of the National Park Service Concessions Management Program and 
its implementing regulations. At this time, I would like to inform 
Members that the National Park Service, working through the Concessions 
Management Advisory Board, formed a Working Group in January to attempt 
to cooperatively resolve some of the more pressing issues facing 
concessioners in light of the April 2000 regulations, such as leasehold 
surrender interest or cross-collateralization--and I thought tax law 
was complicated. In all seriousness, I am very confident that the 
Working Group will resolve some of these pressing issues through 
Directors Orders and new regulations. I, for one, do not wish to 
revisit the 1998 Act.
    The intent of the hearing today is not to necessarily attack the 
Park Service or increase tensions between the National Park Service and 
the concession community, but rather to keep the pressure on the 
Service and the concessions working group to produce consensus on the 
most contentious issues. Obviously, staff and I are following the 
discussions closely. Quite frankly, I expect results from the Working 
Group. I would like to see an environment were concessioners believe 
their investment is recognized and valued, while at the same time, the 
Secretary's vision of the 4-C's--consultation, cooperation, 
communication, and conservation--are fulfilled.
    As my colleagues are aware, the strong partnerships between the 
Park Service and private concessioners have existed since the creation 
Yellowstone National Park in 1872. Today, services provided by 
concessioners include basic conveniences such as food and beverages to 
more sophisticated services such as lodging and transportation.
    Like many of my colleagues on the Subcommittee, I believe that the 
9,000-plus concession operations on Federal Lands, including those 
throughout the National Park System, make it possible for our parks to 
provide the public with a rich experience that they otherwise would not 
have. In fact, concessioners help fulfill a legal mandate of the park 
service which is to leave the resources unimpaired while providing for 
the enjoyment for the public. Sometimes, I believe, that the second 
component of the Park Service's mission is not given its due deference. 
It is essential that we help aid the public in enjoying these national 
treasures and most of them do that, in one way or another, through the 
successful partnership of the Park Service and our concessioners.
    I look forward to the testimony of the National Park Service and 
the concessioners.
                                 ______
                                 

   STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A DELEGATE IN 
       CONGRESS FROM THE TERRITORY OF THE VIRGIN ISLANDS

    Mrs. Christensen. Thank you, Mr. Chairman. I, too, look 
forward to working with you in this Congress and doing a lot of 
good things to improve our parks and public lands throughout 
the Nation, as we have done in the past. And I want to join you 
in welcoming our new members.
    Mr. Chairman and guests, the reform of the National Park 
Service concessions program was over 20 years in the making. 
With the enactment of title IV of Public Law 105-391 in 1998, 
significant changes were made to the National Park Service's 
concession program. While far from perfect, the law did take a 
very important step in beginning to correct some of the more 
glaring problems of the former concessions program.
    Pursuant to the detailed provisions of the new law, the 
National Park Service issued concessions regulations in April 
of 2000. Those regulations were developed with public review 
and comment and have survived several legal challenges. It is 
my understanding the National Park Service has also hosted 
several meetings recently with concessionaires and others, 
including congressional staff, to discuss concession 
regulations and policies and promote a better understanding of 
the issues by all parties. I commend the Park Service for 
holding those meetings.
    Mr. Chairman, I look forward to learning more about the 
National Park Service's concessions program and how those 
meetings are going and what is coming out of them.
    We appreciate the attendance of our witnesses today and 
welcome their testimony.
    Mr. Radanovich. Thank you, Mrs. Christensen.
    Are there any other opening statements from other 
Subcommittee members? OK. Thank you very much.
    We will now begin with panel No. 1. Mr. Randy Jones, 
welcome. You've been a frequent visitor to this Subcommittee as 
the Deputy Director of the National Park Service. I want to 
welcome you again to the Committee.
    I think we're giving you 5 minutes, if people would stick 
as closely as you can to that 5 minutes. If I interrupt you 
after that, you'll know why. Randy, we welcome your testimony.

 STATEMENT OF A. DURAND JONES, DEPUTY DIRECTOR, NATIONAL PARK 
            SERVICE, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Jones. Thank you, Mr. Chairman. It's a pleasure to be 
here. I look forward to many appearances before you in the next 
few months.
    Mr. Chairman and members of the Committee--and I do ask 
that my entire statement be submitted for the record, and I 
will be happy just to go through the highlights of it.
    Mr. Radanovich. Very good.
    Mr. Jones. Thank you for the opportunity to discuss the 
ongoing efforts and accomplishments for the National Park 
Service in implementing portions of the National Park Omnibus 
Management Act, the Concessions Management Improvement Act, 
Public Law 105-391.
    We are interested in providing this update on the status of 
the program, including the issues that you have expressed 
interest in, the improvements we are making, the ongoing 
development of working relationships with our external 
partners, and seeking your input and comments on this important 
program. As you indicated in your comments, it is, at best, an 
incredibly complicated program.
    The National Park concessions program administers 590 
concessions contracts in 126 parks. These contracts currently 
generate $818 million in annual gross revenues. he new statute 
provided a new process for concessions contracting and the 
terms and conditions of those contracts.
    We particularly appreciate the ongoing help and assistance 
of the Concessions Management Advisory Board working group in 
our recent efforts to engage representatives of our concessions 
partners, along with members of both authorizing committee 
staffs, in discussions to address several key issues of common 
concern. These have included management of Leasehold Surrender 
Interest, cross collateralization of loans, approval of sales 
and transfers, and a more simplified and flexible pricing 
program.
    Through all of these discussions, we're trying to learn 
through the experiences we have had as we develop the new 
regulations in trying to always seek new improvements to make 
the system work better. Through a committee of the advisory 
board, we have made substantial progress in achieving common 
understanding of these issues, and framing a range of 
alternatives to improve our handling of them. In particular, we 
believe there are conditions under which we can favorably 
consider requests for cross collateralization, and we are 
working on specific criteria to accomplish this.
    Similarly, there appears to be ways to simplify our review 
of sales and transfers which will streamline the process for 
concessioners to conduct business. The advisory board has 
already endorsed and we have approved the implementation of a 
core menu pricing system, which will make the approval of 
pricing go much quicker.
    Finally, we've had extensive discussions regarding the 
application and handling of the Leasehold Surrender Interest 
issue, and those discussions will continue at the June meeting. 
We will be continuing our discussions on all of these topics in 
the next few months. Recommendations from this Committee will 
be publicly presented and discussed at future meetings of the 
full advisory board, and subsequently submitted to the Director 
of the National Park Service with recommendations for action.
    In responses to law and recommendations of the advisory 
board, the Park Service has made and will continue to make a 
number of other business changes. The concessions program has 
made extensive use of external firms. For example, we have over 
21 different organizations as prime and sub-contractors 
advising us on various elements of the concessions program and 
management.
    The National Park Service is following recommendations made 
by the advisory board in four specific areas: initiating 
professional staff development, improving external 
relationships with stakeholders, business practices and open 
competition, and contract progress.
    Professional development guidance. Our goal for ongoing 
professional development of concessions program staff is in its 
initial stages. We are implementing a program to improve the 
skills of our concession staff through formal training. We are 
also increasing our program to hire very qualified candidates. 
For example, at Grand Canyon National Park, Rocky Mountain 
National Park, and the Golden Gate National Recreation Act, we 
hired individuals to manage the concession programs in those 
parks who have MBAs, therefore providing a rich background and 
experience for us to upgrade our level of professionalism.
    We have developed a strategic partnership with Northern 
Arizona University School of Hospitality to conduct an 
extensive training program for our employees to again improve 
their skill base. The program's goal will be to ensure all 
concession staff are qualified and certified to fulfill their 
role in an increasingly complex business program.
    The relationship we have with our external stakeholders 
continues to improve. For all incumbents and potential 
operators, we offer educational sessions on how to do business 
with the National Park Service. These sessions are designed to 
assist participants in understanding the regulations, the 
prospectus, and the development process so they can submit 
proposals to us.
    Through outsourcing, we have developed protocols that focus 
on the key business process of contracting and contract 
oversight in all concessions contracts. We believe the 
competition for renewal of concession contracts is a healthy 
step and allows for potentially new business opportunities 
which benefits the concessioner, the visitor, and the National 
Park Service.
    A potential issue of concern to the National Park Service 
is the possibility of government debt obligation in 
relationship to concessioner Possessory Interest. Possessory 
Interest is guaranteed either by the newly selected 
concessioner or the U.S. Government, if no successor is 
identified. Possessory Interest reflects a government 
obligation. However, Possessory Interest is not as readily 
quantifiable as Leasehold Surrender Interest, which will 
replace Possessory Interest in all new contracts. We are 
aggressively evaluating the total obligation represented by PI 
and prospectively by Leasehold Surrender Interest. When this 
work is complete, we expect to complete a comprehensive 
approach to managing these obligations.
    By the end of 2002, six large contract prospectuses were 
issued and five contracts were executed. over the course of the 
next year, we estimate that 15 additional prospectuses will be 
issued under our revised process for large contracts. We 
completed a total of 100 contracts during 2002, and expect to 
complete 200 additional contracts during the additional fiscal 
year, putting us on course to complete our backlog and get it 
behind us by the end of 2004.
    The National Park Service is addressing the concerns of the 
small business operator regarding the implementation of 
Commercial Use Authorizations. Based upon the concerns raised 
during the public review process, we intend to request the 
Concessions Advisory Board to establish a multi-disciplined 
work group to consider the issues raised by those comments. So 
we are holding any decision as far as taking those proposed 
rules to final until we've had a chance to talk further with 
the advisory board.
    Concerning nonprofit organizations, nonprofit organizations 
range from scout troops and educational institutes to park 
cooperating associations, friends groups or foundations. Each 
offers support to the park in a unique way, and as a 
distinctive entity. They must each have the proper permit, 
authorization or agreement based on the type and level of 
services they offer the park and its visitors. So they may be 
in some cases concessions contracts, they may be under the old 
system Commercial Use Authorizations, or they could be under 
special use permits. We are managing all of these nonprofit 
organizations to ensure they're meeting the applicable 
requirements.
    This is an issue that has currently been under review by 
the General Accounting Office, and we have provided the GAO 
substantial information in support of their study.
    We thank you for the support and the direction that you 
have provided, and look forward to a concessions program that 
is successful for the National Park Service, our concessions 
partners, and the general public. We have a long ways to go in 
getting this program completed, implemented and managed in a 
good, professional, sound way. We think we've made progress and 
we will continue to strive to make it a program that this 
Committee will be very proud of.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Jones follows:]

 Statement of A. Durand Jones, Deputy Director, National Park Service, 
                    U.S. Department of the Interior

    Mr. Chairman, members of the Subcommittee, thank you for the 
opportunity to discuss the ongoing efforts and accomplishments by the 
National Park Service (NPS) in implementing Title IV of the National 
Parks Omnibus Management Act of 1998, the Concessions Management 
Improvement Act, Public Law 105-391.
    We are interested in providing an update on the status of the NPS 
concessions management program including the issues in which you have 
expressed interest; the improvements we are making; the ongoing 
development of working relationships with our external partners and 
seeking your input and comments on the program.
    The NPS concessions program administers 590 concessions contracts 
in 126 parks. These contracts currently generate $818.6 million in 
annual revenues. Of these 590 contracts, 52 currently gross above $3.0 
million. These high-dollar contracts represent about 80% of the total 
annual concessions revenues. In contrast, the more than 75% of 
contracts generating less than $500,000 account for less than 6% of the 
gross revenues.
    Title IV of Public Law 105-391 was enacted on November 13, 1998. 
This title repealed the Concessions Policy Act of 1965, Public Law 89-
249, and established a new process for concessions contracting and the 
terms and conditions of those contracts. A major change was the repeal 
of the preferential right of renewal for all contracts grossing over 
$500,000, other than those held by outfitters and guides. The law also 
established the National Park Service Concessions Management Advisory 
Board (CMAB) and directed other changes in the National Park Service 
Concessions Program (NPSCP). The law was the bipartisan product of over 
20 years of work by legislators, including your Committee.
    We are moving forward with our implementation of the law through 
our concessions regulations and other actions, and we appreciate the 
assistance received by the CMAB, established by Section 409 (s) of 
Title IV.

Concessions Management Advisory Board Working Group
    We particularly appreciate the CMAB's assistance in our recent 
effort to engage representatives of our concessions partners, along 
with members of both authorizing committee staffs, in discussions to 
address several key issues of common concern. These have included 
management of Leasehold Surrender Interest (LSI), cross 
collateralization of loans, approval of sales and transfers, and more 
simplified and flexible pricing approval. Through a committee of the 
CMAB, we made substantial progress in achieving common understanding of 
these issues and framing a range of alternatives to improve our 
handling of them. In particular, we believe there are conditions under 
which we can favorably consider requests for cross collateralization 
and we are working on specific criteria to accomplish this. Similarly, 
there appear to be ways to simplify our review of sales and transfers 
which will streamline the process for concessioners to conduct 
business. The CMAB has already endorsed and we have approved the 
implementation of a core menu pricing system. We will implement this 
system more broadly. In addition we are exploring other ideas to make 
pricing approval simpler and more effective. Finally, we have had 
extensive discussion regarding the application and handling of LSI. We 
believe that our discussions have created a common ground of 
understanding on how this concept functions in relation to standard 
business practices. Further, we have identified several potential 
approaches to simplify and improve the application of LSI in a fair and 
equitable manner. We will be continuing our discussions on all these 
topics in the coming months. Recommendations coming from this committee 
will be publicly presented and discussed at future meetings of the full 
CMAB and subsequently submitted to the Director of the NPS with 
recommendations for action.
    In response to the law and to recommendations of the CMAB, the NPS 
has made and will continue to make a number of other business process 
changes. In doing so, the concessions program has made extensive use of 
external firms (including PricewaterhouseCoopers (PwC)) with specific 
expertise in the arenas of asset management, hospitality, recreation, 
tourism, engineering and finance. Our process improvements and 
commitment not only responds to the intent of the Concessions 
Management Improvement Act but implements the President's management 
agenda as well.
    To ensure proper implementation of the law, the NPS is following 
recommendations made by the CMAB in four specific areas: initiating 
professional staff development, improving external relationships with 
stakeholders, business practices and open competition, and contract 
progress.

Professional Development Guidance
    Our goal for ongoing professional development of concessions 
program staff is in its initial stages. The NPSCP, through the guidance 
of the CMAB, is implementing a program to improve the skills of 
concessions staff through formal and informal training. In addition, 
through the recruitment process, we are hiring qualified business 
candidates. The most recent positions filled include the Chief of 
Concessions Management at Grand Canyon National Park, a Management 
Assistant with concessions responsibilities at Rocky Mountain National 
Park and a Concessions Management Specialist at Golden Gate National 
Recreation Area. As additional concessions positions become vacant, we 
will seek candidates with a business background, focusing, when 
possible, on candidates with experience in the hospitality industry. 
The NPS realizes that we must have the necessary business acumen, 
knowledge and skills to perform our duties in a highly professional 
manner. We have developed a strategic partnership with Northern Arizona 
University (NAU) School of Hospitality as an opportunity for NPSCP 
employees to further advance their Concessions Management skills. This 
multi-year program includes 420 hours of course study that is based 
upon the NAU core hospitality curriculum. The objective of this program 
is to provide a hospitality management curriculum that will improve the 
overall accountability and professionalism of the NPSCP. Additional 
training was developed to enhance the skill set of NPSCP staff working 
on concessions contracts and to lay the foundation of a NPSCP 
Certification Program. The program's goal will be to ensure all 
concessions staff are qualified and certified to fulfill their role in 
a complex business program. The coursework was developed and is taught 
collaboratively through a partnership with the American Hotel and 
Lodging-Educational Institute, NPS, the Department of the Interior and 
PwC.

Improving Relationships with Stakeholders
    The relationship we have with our external stakeholders continues 
to improve. We are working to involve all affected parties in the 
concessions program. For example, the 1998 law placed an emphasis on 
competition for contracts in the national parks. However, all 
incumbents grossing $500,000 or less, and all outfitters and guides, 
continue to enjoy a preference in the renewal of their contracts, if 
the concessioner has operated satisfactorily during the term of its 
contract and has submitted a responsive proposal for a proposed new 
contract which satisfies the minimum requirements established by the 
Secretary. For all incumbents and potential operators, we offer 
educational sessions on ``How to do Business with the NPS.'' These 
sessions are designed to assist participants in understanding the NPSCP 
and the key components of the prospectus development process. Three 
such outreach sessions were held in Fiscal Year 2002, in Napa, 
California, Phoenix, Arizona, and Atlanta, Georgia, and we anticipate 
holding two additional sessions in Fiscal Year 2003.

Business Practices and Open Competition
    Through outsourcing, we developed protocols that focus on the key 
business processes of contracting and contract oversight in all 
concessions contracts. We will ensure, that the franchise fee 
established by the contracts reflect the ``probable value to the 
concessioner of the privileges granted by the particular contract 
involved.'' The law requires that this value ``be based upon a 
reasonable opportunity for net profit in relation to the capital 
invested and the obligations of the contract.'' We are also outlining 
how to better meet our fiduciary responsibilities through responsible 
contract oversight.
    We believe that competition for the renewal of concessions 
contracts is a healthy step, and allows for potentially new business 
opportunities, which benefit the concessioner, the visitor and the 
National Park Service. We believe it is the intent of Congress for 
incumbents and potential operators to have the opportunity to compete 
fairly and equally for a concessions contract, so that government and 
visitors receive the best services available. A potential issue of 
concern to the National Park Service is the possibility of government 
debt obligation in relationship to concessioner Possessory Interest 
(PI). It is important to note that the compensation for concessioner PI 
is guaranteed either by the newly selected concessioner or the U.S. 
government (if no successor is identified). PI reflects a governmental 
obligation. However, PI is not as readily quantifiable as LSI, which 
will replace PI in all new contracts. As reported in the 2000 NPSCP 
Annual Financial Report (AFR) database, 127 concession contracts 
reported assets in which PI was claimed. This represents more than 20 
percent of concessions contracts. We are aggressively evaluating the 
total obligation represented by PI and prospectively by LSI. When this 
work is complete we expect to present a comprehensive approach to 
managing these obligations.

Contract Progress
    Our backlog on concessions contracts has been a concern for all 
involved. The largest 52 concessions contracts include hospitality, 
retail, marina and transportation assets and operations. Recognizing 
their complexity, high value, legal and financial risk, we have sought 
external expertise to assist us in developing an action plan for the 
development of prospectuses for these contracts. In Fiscal Year 2002, 
the NPSCP with the aid of external experts, identified the 52 contracts 
and the level of prospectus due diligence necessary for each. By the 
end of Fiscal Year 2002, six large prospectuses were issued and five 
contracts were executed. Over the course of the next year, we estimate 
that fifteen additional prospectuses will be issued under our revised 
process for large contracts. As we mentioned earlier, we have engaged 
PwC and numerous other firms to assist parks in developing a strategy 
for undertaking appropriate due diligence for these large contracts, 
including real property condition assessments, real and personal 
property valuations, market and financial analysis, and concessions 
facility planning. We are assessing the condition of our facilities and 
aligning our capital improvement programs to address deferred 
maintenance. Thus far, over $13 million dollars of deferred maintenance 
has been identified and will be eliminated through the maintenance 
reserve and other improvement requirements in new contracts. As with 
other park facilities, we will be monitoring facility conditions to 
measure the performance of concessioners and park managers.
    The parks, in conjunction with PwC and its subject-matter experts, 
have been working together to redesign the prospectus to appropriately 
reflect the needs of NPS and offerors. Currently, the regions and 
individual parks are responsible for the prospectus development of 
those contracts grossing less than $3 million in annual revenues, and 
each region has developed a strategy for implementation. Approximately 
100 of the small contracts were issued between Fiscal Year 2001 and the 
end of Fiscal Year 2002, and approximately 200 will be issued in Fiscal 
Year 2003.

Commercial Use Authorizations
    The NPS is addressing the concerns of the small business operator 
regarding the implementation of the Commercial Use Authorization (CUA)- 
Proposed Rule. We received significant public comment on the proposed 
rule, issued on November 27, 2002. Based upon the concerns raised, the 
NPS intends to request CMAB establish a multi-disciplined work group, 
to consider the issues raised by the comments. The work group will 
consist of interagency personnel, representatives of private sector 
interested parties and designated officials of the CMAB. This approach 
will allow for consideration of the business need for a predictable, 
stable platform while ensuring consistency with the preservation of 
park resources. Recommendations of the work group will be transmitted 
for full consideration by CMAB in a public meeting. NPS will review any 
advice from CMAB on this issue in determining how best to move forward 
with this rule.

Non-profit Organizations
    The issue of non-profit organizations supporting our National Park 
units, and the effect these non-profit organizations may have on a park 
concessioner appears to be of concern to some park concessioners. Non-
profit organizations range from scout troops and educational 
institutes, to park cooperating associations, friends groups or 
foundations. Each offers support to the park in a unique way, and as a 
distinctive entity. They must each have the proper permit, 
authorization, or agreement based on the services they offer the park 
or its visitors. We are managing all these non-profit organizations to 
assure they are meeting applicable requirements.
    This Subcommittee as asked the Government Accounting Office (GAO) 
to assess NPS compliance with applicable regulations, policies, and 
contracts to determine whether park subsidies are provided to non-
profit organizations, and to determine how services provided by non-
profit organizations affect concessioners. The NPS has provided GAO 
substantial information in support of this study. The Division of 
Interpretation, the Partnership Office and the Concessions Office will 
work together to address any issues that may arise as a result of the 
review. We look forward to receipt of the review.
    The NPS is actively working on improving the concessions management 
program. We have made many improvements since the passage of P.L. 105-
391, and anticipate continual improvements as we work with our 
concessioners, private sector contractors, and this Committee. We thank 
you for the support and direction you have provided and we look forward 
to a concessions program that is successful for the NPS, our 
concessions partners and the general public.
    This concludes my testimony. I would be happy to answer any 
questions you might have.
                                 ______
                                 
    Mr. Radanovich. Thank you, Mr. Jones. We'll go ahead and 
proceed with questions. I will go ahead and begin and then 
we'll do the same thing with the next panel.
    Mr. Jones, the Federal Government understands and uses the 
Generally Accepted Accounting Principles, as does the private 
sector. Within the GAAP, definitions can be found that clearly 
identify what type of projects or expenditures qualify as 
capital improvements.
    With respect to Leasehold Surrender Interests, or LSI, why 
has the National Park Service redefined what qualifies as a 
capital improvement instead of using the same definitions and 
procedures, for example, in GAAP, as the rest of the people 
that deal with these types of things?
    Mr. Jones. Yes, we have looked at that particular issue. 
Some of it relates to the structure of the statute itself, 
which says Leasehold Surrender Interest is granted for 
construction. I am not--accounting is not my personal 
specialty, but I would offer that it's my understanding that, 
under the GAAP procedures, there is a lot of flexibility in 
interpretation of what types of things you can, for accounting 
purposes, put under that program which, for example, could 
include things that we would consider routine maintenance. We 
think the program should be limited to those items that are 
construction in nature, as the statute explicitly directs us to 
do.
    Mr. Radanovich. What was the genesis of the 50 percent rule 
and what prompted its need?
    Mr. Jones. The 50 percent rule was an attempt to quantify a 
mechanism, again trying to identify what constituted 
construction. I think there has never been any dispute or 
doubt, if a concessioner is building a new building from the 
ground up, that it therefore clearly qualifies as Leasehold 
Surrender Interest.
    The question comes that, when you're doing a major 
modification, be it a new kitchen, be it a new roof, and how 
the standard should be set as to what constitutes maintenance 
of a building versus what constitutes new construction that 
would qualify for Leasehold Surrender Interest.
    The original draft regulations actually provided that for 
existing buildings, as I understand it, nothing would qualify 
and it would all be considered maintenance. The public comment 
period recognized that to be perhaps not the best way to go. It 
was changed as an attempt to compromise it 50 percent. Based on 
our continuing dialog, we recognize there are still some 
ongoing problems with that, and it was based on that 
understanding as to why we asked the Concessions Advisory Board 
to take this issue up, working with Pricewaterhouse and some of 
our other consultants, working with the concessioners and 
Committee staff, to try to identify is there a simpler, better, 
clearer way that all parties could agree what should qualify as 
Leasehold Surrender Interest.
    Mr. Radanovich. I see.
    Mr. Jones, with regard to the reserve account, do you see 
that account ever being used for capital items or items that 
would, per the '98 Act, be accorded LSI status?
    Mr. Jones. The reserve account that we're now using in the 
new contracts is specifically designated as a maintenance 
reserve contract; therefore, it would be our vision that they 
would not qualify as Leasehold Surrender Interest, based on our 
philosophy that if organizations or entities are using 
government buildings, that we would expect them to do routine 
maintenance.
    Mr. Radanovich. One other question. A small guide and/or 
outfitter has a franchise fee set at 6 percent, but when he or 
she arrives at the park, there are entrance fees, boat launch 
fees, back country fees, et cetera. Now his or her franchise 
fee is actually up to 13 percent.
    What is the National Park Service doing to prevent fee 
layering, or what specifically are you doing to ensure that the 
collection of these additional entrance and special use fees 
are taking into consideration when setting up the original 
franchise fee structure?
    Mr. Jones. Mr. Chairman, I think the last part of your 
question is the key element, that we need to make sure that the 
other fees that are paid are taken into consideration as we 
establish the franchise fee that would be the minimum 
requirement in a prospectus.
    As far as to the extent of the visitors who are coming in 
by concessioner or paying park entrance fees, in that regard 
they would be treated no differently than any other visitor 
coming into the park. But we do agree that we need to take 
those things into consideration in setting a franchise fee.
    Mr. Radanovich. Thank you very much, Mr. Jones.
    Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman, and thank you, 
Mr. Jones, for your testimony.
    A major reason for the Concessions Reform Act of 1998 was 
to foster competition. Has that happened?
    Mr. Jones. Yes. Under the statute, outfitters and guides 
are automatically given a preferential right to renew, and 
small concession operations under gross sales of $500,000, as 
you know, are also granted a preferential right to renew their 
contracts.
    We are seeing in the new, larger contracts that are going 
out a lot of competition, a lot of bids. Most important, we 
think for the visitor what we're seeing are overall more 
comprehensive, more responsive bids that address a wide variety 
of visitor services and environmental programs, and also, from 
a financial point of view, addressing franchise fees. So we're 
already seeing evidence that the increased competition, in 
fact, is good for the parks and good for the public.
    Mrs. Christensen. Great.
    How many concession contracts have been issued in the 5 
years since the Act?
    Mr. Jones. When the statute was first passed, things 
initially were put on hold as we developed the regulations to 
implement the statute. We then found ourselves for the next few 
years in court defending those regulations, in which the courts 
did, in fact, uphold the regulations, with a couple of very 
minor, fine-tuning exceptions.
    So once the courts finished their process, we charged ahead 
with the program full speed. For example, in 2002, we did award 
111 contracts. During the current fiscal year, we are expecting 
to award over 200 contracts. We are currently on pace to catch 
up with the backlog and get it done by the end of 2004.
    Mrs. Christensen. Thank you.
    You mentioned the legal challenges. Could up update us on 
the challenges that were made to the concession regulations?
    Mr. Jones. The major issue that is still pending--
arguments, in fact, were presented to the Supreme Court just a 
couple of weeks ago--is the one issue as to whether---and I'm 
paraphrasing this, because I'm definitely not an attorney--is 
whether they are considered procurement contracts and, 
therefore, what are the rules and procedures that would govern 
implementation of those contracts. That element of the case was 
accepted by the Supreme Court, has been argued in front of the 
Court, and we're waiting for their decision.
    Mrs. Christensen. Just on the LSI for a minute, concerns 
have been raised and there have been suggestions that this be 
reopened for discussion and maybe some changes.
    Doesn't the 1998 Act require reexamination and a possible 
replacement in 2007--
    Mr. Jones. Yes, it does.
    Mrs. Christensen. And wouldn't it be better for us to 
discontinue it?
    Mr. Jones. The language of the Act specifically does 
address how Leasehold Surrender Interest would be calculated. 
To give it the best and fair chance to see how we should assess 
that 4 years from now, we want to try to make it as workable as 
possible. So in any regulatory process, once they are issued 
and we go through a learning curve and we talk to the people 
most affected, we're trying to be open to say OK, what changes 
need to be done to make the system work better, with the 
ultimate answer going to be in 4 years when we have to respond 
back to these Committees as to what's working and what doesn't 
work.
    Mrs. Christensen. Thank you.
    Mr. Chairman, I have no further questions.
    Mr. Radanovich. Thank you very much, Mrs. Christensen.
    Mrs. Cubin?
    Mrs. Cubin. Thank you, Mr. Chairman, and thank you for 
being here, Mr. Jones.
    It always troubles me when the Federal Government has to go 
to court. Those are costs that we don't build into any of our 
programs, and those are costs that--that's money that comes 
right out of the operation of the park, all the parks. That's 
always distressing to me, especially when it goes all the way 
to the Supreme Court, when it's over a rulemaking thing.
    Who were the plaintiffs? You don't need to tell me names, 
but were they possible concessionaires, were they people who 
made bids, were they legislators? Who were the plaintiffs in 
the suits?
    Mr. Jones. It was, again, my understanding--I have not ever 
read any of the documents personally, but it was the 
hospitality association who brought the complaint, and I don't 
know who else was involved.
    Mrs. Cubin. OK, that answers my question well enough.
    What other points were discussed besides whether or not the 
concessionaire should be considered a procurement activity?
    Mr. Jones. Again, I'm honestly not the best one to answer 
that, because those were all issues that were pending on the 
national scene when I was living a very happy life as the 
Superintendent of Rocky Mountain National Park.
    Mrs. Cubin. I understand. Believe me, I understand.
    The reason I ask is because one of the parts of the rules--
and the Chairman may have already brought this up--but it 
stated that the capital improvements that are made by the 
concessionaires become the property of the United States, 
without right of compensation. I wondered if that was one of 
the points.
    Mr. Jones. Going back to the original 1965 Concessions 
Policy Act, the improvements made by concessioners on Federal 
properties have always been the ownership of the United States. 
The concessioners have always had a contractual right to be 
compensated for their investment.
    In the course of the last 40-plus years, there have been 
several different versions and variations in all those 
contracts that have been drafted and, therefore, how they get 
interpreted.
    Mrs. Cubin. I was aware of that. But are you telling me 
then there's really not a change in that, that the 
concessionaires are compensated for their--
    Mr. Jones. They are. The questions that have been on the 
table is what is the mechanism used to determine the dollar 
amount of that compensation. The fundamental question of 
entitlement is--
    Mrs. Cubin. Right. It's just always up in the air, always 
questionable and always open to opposition.
    There was one other thing that I wanted to ask. It is my 
understanding that there were four factors in the legislation, 
and that when the rule came out it added another factor, one 
that assesses how the proposer of the contract conducts the 
concession operations in terms of environmentally healthy ways 
and, among other things, requiring energy conservation, waste 
reduction, and recycling.
    Now, that was never in any part of the legislation. Was 
that particular thing challenged in the lawsuit?
    Mr. Jones. I honestly do not know. I do know that--and I 
would be happy to provide that information to you.
    Mrs. Cubin. Yes, I would appreciate it.
    Mr. Jones. I could provide it to the Committee for the 
record.
    I do know that has been one of the areas--and I would just 
cite one example. Forever Living Resorts, for example, who is a 
major concessioner in many parks, including the Grand Tetons, 
has been a real leader in solving problems from an 
environmental point of view of emissions on houseboats. Those 
are the kinds of leadership roles that some of our 
concessioners have taken that we wanted to be able to recognize 
and reward as we came to issuing contracts.
    Mrs. Cubin. I absolutely agree with the practice. What I 
don't necessarily agree with is rulemaking that supersedes or 
that adds to legislation where it wasn't intended, although I 
certainly approve of the activities and the fact that the Park 
Service is taking note of those concessionaires who do a better 
job.
    Thank you very much. I yield back.
    Mr. Radanovich. Thank you, Barbara.
    Ms. Bordallo is recognized for 5 minutes.
    Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman, 
and Ranking Member Christensen. I would like to thank you, Mr. 
Chairman. I'm a new member and I'm very honored and pleased to 
serve on this Committee.
    Mr. Radanovich. You're very welcome.
    Ms. Bordallo. Mr. Jones, how is customer satisfaction 
measured by the Service or its contractors, and how are these 
measures weighed into the contract bidding and the renewal 
process, if they're considered at all, and in what way?
    Mr. Jones. How we handle issues of customer satisfaction 
beyond concessions, we actually have a program and 
implementation of the Government Performance and Results Act, 
doing a series of surveys of the park visitors themselves, to 
ask them about how they're enjoying their experience and what 
kinds of services they would like to see in the park, and how 
we can do a better job and be responsive as a government 
agency.
    When it comes to what goes into a specific contract, every 
single one of them is based on the specific needs of that 
contract. As an example, what one needs to be a primary 
consideration of someone who is taking mountain climbers to the 
top of Denali or Mount Ranier is very different than a river 
runner, which is very different than a hotel operator. So 
there's really no standard answer as to exactly what criteria 
are used beyond some of the basic requirements in the statute 
of what has to be included in a prospectus.
    Ms. Bordallo. But you do use a visitors survey of some 
type, is that correct?
    Mr. Jones. I need to actually consult with my staff on that 
question. [Conferring.]
    I am told we not doing it on specific contracts.
    Ms. Bordallo. I see. All right.
    The other question I wanted to ask is, I noticed in your 
written testimony you talked about or placed emphasis on 
improving relationships with the stakeholders. I believe this 
is to become more business like and efficient. You hold these 
outreach sessions.
    Mr. Jones. Right. That's correct.
    Ms. Bordallo. Twice a year, I think is what I read.
    What are you planning to do for this next fiscal year? Do 
you have sessions already planned?
    Mr. Jones. I assume. I again need to refer to staff back 
here. [Conferring.]
    Yes. Yes, we do have two scheduled. A major purpose of what 
these sessions are designed to do--and they're open to anybody 
who would like to bid, either an existing concessioner or 
anyone who would like to become a concessioner. There are many 
things, both in the statute and the regulations--and it goes 
back to the Chairman's question, on things like Leasehold 
Surrender Interest--that as a concept, there really is nothing 
analogous in the private sector. So providing an understanding 
of how to interpret and how to work the system, so to speak, so 
that everybody is on a level playing field, is the purpose of 
why we've been holding these sessions. And they have been well 
attended.
    Ms. Bordallo. Do you feel two is enough?
    Mr. Jones. Given the availability of funds, it's probably 
as much as we can do at this time.
    Ms. Bordallo. Thank you very much, Mr. Jones.
    Mr. Radanovich. Thank you very much.
    Mr. Souder.
    Mr. Souder. Thank you, Mr. Chairman. Mr. Jones.
    I have a question because I kind of lost track of this. It 
relates to a broader question. At Minnie Glacier Lodge in 
Glacier National Park, one of the challenges is the cost of 
rehabing these old structure is so costly, particularly one 
like that, that can only have a short season and rebuilding was 
so high, that there were questions about how to tradeoff what 
the concessionaires can charge in the rooms, particularly when 
we have kind of a ``no new net gain of rooms'' in the park, how 
to actually make this work to preserve our older structures, 
which is a challenge that's going to get greater.
    I wondered whether you've been giving more flexibility to 
concessionaires to not have the same rate pressure on the 
rooms, particularly with historic lodges, and how you see that 
evolving. Since most concessionaire activity or the growth in 
that is occurring in the gateway communities anyway, the net 
effect is you can't make some of these things profitable unless 
you have a huge concession with multiple lodges inside the 
park.
    Mr. Jones. Of course, Congressman, you and I have had some 
of these discussions before on your visits to the parks. Minnie 
Glacier Hotels is probably one of the best examples of what is, 
without a doubt, a major challenge of a structure that is 
without a doubt of national historic significance and, 
therefore, needs to be preserved and protected. But the amount 
of money that needs to be invested in the structures in Glacier 
are so high that it raises a fundamental question of how you 
can do that investment and still have people who would be 
willing to bid on the contracts.
    So what we really need to do, and what our new 
superintendent at Glacier has been charged with, is to come up 
with some hopefully creative, inventive solutions. We're 
talking, for example, to organizations like the National Trust 
for Historic Preservation, to say what is the role private 
philanthropy can play in fixing up some of these historic 
structures with the motive of protecting them. Then, of course, 
the best way to protect them for the long term is to have a 
concessioner who is willing to keep reinvesting. But getting 
that initial capital is a major challenge without an easy 
answer.
    Mr. Souder. My understanding from the previous 
concessionaire, one of the proposals was that there was this 
cap because at the Minnie Curin Inn--whatever the title of the 
motel is--there weren't enough rooms and there wasn't a 
willingness to expand the number to just net in that zone, so 
that they could raise the room rate, which might be $350 to 
$450, which by the way they're getting in Waterton Park right 
across the Canadian border, because at Lake Louise, Banff and 
the Canadian parks they don't have the caps on the room rate.
    Is the Park Service looking at that flexibility, to say 
look, to preserve a structure like this, we may have to throw 
off the balance and say look, the wealthiest people are going 
to have to fund keeping that open.
    Mr. Jones. We would like to do it through a way of working 
with the concessioner on the flexibility of how a structure is 
renovated, so that if what makes sense economically for that 
place to go is to say renovate the interior with different 
types of rooms that would be higher end and, therefore, we want 
to make sure that when the public is paying a fee to use 
facilities in the parks, they are actually getting what they 
pay for. So I don't see a situation of where we just stop the 
approval process of rates.
    But how we can structure contracts, terms of contracts, how 
we can do things, since a place like Glacier has several 
different properties, so you can do one thing at a property 
that would help offset a different property under the terms of 
the same contract, we just have to be creative and innovative. 
Some of them like Glacier are some of our toughest challenges.
    Mr. Souder. But do you have a guideline that says ``x'' 
number of rooms have to be below a certain dollar, and ``x'' 
number in the mid range, and ``x'' number in the--
    Mr. Jones. No, we do not.
    Mr. Souder. So you've been flexible with that.
    On the transportation plans, when a concessionaire agrees 
to bid for a contract, if there is a transportation plan change 
like at Bryce or Zion, does the concessionaire, if all of a 
sudden people don't have the flexibility to go to the lodge or 
they have to leave the park earlier and may not be able to stay 
for dinner, is that calculated in their contracts, or do you 
give them a waiver to change their bidding process or anything?
    Mr. Jones. If there's an action that is a result--an impact 
on a concession operation that is a result of an action that 
we've taken, concessioners have the right to appeal franchise 
fees, and in some cases they can even come back and ask to 
renegotiate the term of a contract to address the issues you 
just raised.
    Mr. Souder. That would be a huge step. There is nothing 
short of a major step like that that, when you trigger 
something that logically will have maybe a three to 5 percent 
impact--and that's even debatable. I know at Bryce they're 
having this debate. For example, dinner reservations drop, but 
who's to say exactly why that did, but the fear of being left 
in the park may be one.
    Mr. Jones. Well, a situation also at the various parks 
depends--for example, Bryce, Zion, Grand Canyon, which are 
experiencing a significant reduction in visitation that based 
on our initial studies appears to be as much generated by a 
reduction in the number of international tourists coming to the 
park, as opposed to U.S. tourists. Part of that appears to be 
as much the economy and the strength of the dollar and, of 
course, in addition to some of the impacts in the aftermath of 
September 11th. So a challenge we always have when there's a 
downturn in any one business operation or concession is to try 
to do an assessment in cooperation with the concessioner as to 
what's the root cause of that.
    Mr. Souder. But the burden of proof is on the 
concessionaire to establish it when you make a change?
    Mr. Jones. We want to work with them on that, yes.
    Mr. Souder. Thanks.
    Mr. Radanovich. Thank you.
    Mr. Jones, I have one question. It's a long-winded 
question, so if you'll bear along with me on this. I do want to 
get this on the record, though.
    With the exception of the Defense Department programs and 
the National Park Service Concessions Program, the rest of the 
Federal Government is using Federal acquisition regulations, or 
FAR, which include procedures for awarding contracts and 
subsequent notification to all bidders on the procedures and 
methods used to select the winner, along with specific 
information as to how other bidders fared in the process.
    In the recent Yellowstone contract, no such information has 
been forthcoming. Bidders have no clue as to why they were not 
selected or why the winner was. There is on information on what 
would make them a more competitive bidder on future contracts 
or any discussion on how the bidding process could be made 
better to benefit the government, the public, and the bid 
process itself.
    In most cases, the rest of the government has apparently 
found that using FAR has improved their programs and contract 
results. Why has not the National Park Service taken on these 
Federal Acquisition Regulations in its bidding process?
    Mr. Jones. If I can maybe separate my answer into two 
different issues. One, to the extent that the Concessions 
Policy Act is subject to the FARs, the issue currently before 
the Supreme Court and the issue before the Supreme Court is 
interpretation of the intent of Congress, so if I can sort of 
be evasive in an answer by saying it is our intent to implement 
it as the courts and the Congress tell us to.
    Mr. Radanovich. See what the Court does, huh?
    Mr. Jones. And then we can go from there.
    As far as the fundamental policy issue of getting 
information back to the concessioners on the bidding process so 
that they can grow and learn is something that I would agree 
with you on and is something we need to do, but I would not say 
that that would be necessarily part of the FAR process. We 
should just be doing it as part of the concessions program. I 
am hoping that we're going to be moving in that direction.
    Mr. Radanovich. To further talk about the bidding process, 
I was made aware recently where some concessions operations 
would bid on a particular project, the winner would be 
selected, and then the project itself would be appraised, and 
then the bid amount adjusted to that appraisal, sometimes even 
less.
    Why are not appraisals done before the bidding process, and 
why are they done afterwards by the Park Service? It just makes 
sense that there would be some baseline value to the project 
during the bidding process when it begins.
    Mr. Jones. There is the ideal scenario, and then as we're 
dealing on a case-by-case basis, there are many examples--
again, if I can go back to my tenure at Rocky Mountain National 
Park, where what you just raised is what I did with one of our 
concessioners and we, in fact, negotiated the value of the 
Possessory Interest and settled that prior to the award of the 
new contract.
    In other cases, that's easier when you have the natural 
order of things, when you know a contract is going to expire so 
many years in the future and you can start a deliberative 
process. Where we are now is in a massive catch-up program of 
contracts that have expired and, in many cases, several years 
ago, a statutory limitation of contract extensions not to 
exceed 3 years, and we want to avoid a situation of potential 
chaos of people challenging whether we can do a further 
extension and therefore end up with a possible interruption of 
services. So we're in a mad dash to get contracts caught up and 
awarded. So what the ideal scenario is versus what we're faced 
with right now I think are two different circumstances.
    Mr. Radanovich. Thank you.
    Are there any more questions of Mr. Jones? Mr. Souder?
    Mr. Souder. Thank you, Mr. Chairman.
    I wanted to ask a question about visitor centers. At Rocky 
Mountain you have done an innovative thing with--I don't think 
it would actually be a concessionaire because it's outside the 
park--but you worked with them to help pay for a visitors 
center in conjunction with putting a visitors center with their 
operation.
    But in many parks we don't have enough funds to build 
adequate visitor centers. There is a big discussion about what 
size gift shops, what size book stores, what size cafeterias 
should be in visitor centers because it becomes a way for us to 
pay for the visitor center. Yet that obviously alters 
concessionaire contracts as well as gateway communities 
attitudes, Gettysburg being the classic, where we scale down, 
scale down, and all of a sudden then we say at our Committee 
there's not enough to pay for the visitors center. Well, if you 
cut back the gift shop and the restaurant enough, there's not 
enough to pay for a visitor center.
    In these concessions guidelines, are the rules of what you 
can do and can't do in the park negotiating visitor centers, 
vis-a-vis existing concessionaires?
    Mr. Jones. Those are addressed on a park-by-park specific 
as it relates to the planning and environmental compliance 
that's done for a proposed visitor center. A visitor center 
could incorporate, for example, the need for concession 
operations. We have several that are incorporated. For example, 
the Carlsbad Caverns National Park concession operation 
operates the same building with the visitor center. They're all 
in the same open space. So each one is done based on the needs 
of a local area.
    Mr. Souder. Let me give an example. If Mesa Verde, to try 
to fund their new visitor center--which they would need quite a 
bit of capital to do it the way they want--decided to put in a 
large gift operation, bookstore operation, would that be rebid 
or would the concessionaire that's currently in the park, 
because their business center is at the edge and isn't there--
how does the concessionaire who bid on the amount of food, the 
amount of other things that were going to be calculated in the 
number of visitors at the park, how do they deal with the new 
prospect of a--
    Mr. Jones. Again, it somewhat relates to the terms of a 
specific contract at a park. Some parks have concession 
contractors that give the incumbent concessioner essentially 
rights for everything within the boundaries of the park, or a 
geographic area within the park. Other parks--for example, 
Olympic National Park may have a dozen different concessioners, 
each in different geographic areas. So it depends upon each 
unique circumstance of the park, the terms of the concessions 
contract, and also--You mentioned the word bookstores, as to 
what would be viewed as one of our cooperating associations as 
opposed to food service, which would traditionally be viewed as 
a concessions operation.
    Mr. Souder. So there is not a park-wide standard that--
    Mr. Jones. There is not a park-wide standard, no, sir.
    Mr. Souder. On Leasehold Surrender, when there are 
questions of whether a leaseholder is investing the way the 
Park Service would like, or whether the structures are being 
maintained, is there a warning process that kind of gives an 
advance, or is there any way on this compensation for the 
interest--In other words, yes, they don't own it, the 
government owns it, but you have to repay--that presumably is 
somewhat built into the bidding. But is there any kind of 
``heads up'' before you just get hammered?
    Mr. Jones. Well, the process that we'll go through is, when 
a concessioner wants to do a major capital project that would 
qualify for Leasehold Surrender Interest, that project would 
have to be submitted and approved under the terms of their 
concessions contract by the superintendent.
    The one nice thing about Leasehold Surrender Interest is 
that, once a project is identified, we think it will be a much 
simpler process to calculate the values and what the 
entitlements of the concessioner are compared to some of the 
circumstances we've had from some of the very old contracts.
    Mr. Souder. Let's say, hypothetically, at Lake Yellowstone 
Hotel, there was a less than satisfactory working relationship 
in how it was being developed and what the value of that was. 
There would be presumably discussions with the superintendent, 
but is there any official process that says, look, we've got 
some concerns here, here's how it could affect your Surrender 
Interest?
    Mr. Jones. The right of a Leasehold Surrender Interest is a 
contractual right. As far as satisfactory performance, that's 
another issue in which contract implementation and oversight, 
which is a responsibility we have, which is one of the reasons 
we're trying to gear up and improve our training in the 
education program of our people to help administer that in a 
consistent and more professional way.
    Mr. Souder. Thank you, Mr. Chairman.
    Mr. Radanovich. Thank you, Mr. Souder. Mr. Jones, thank you 
very much. I have no more questions. Thank you very much for 
being here.
    Mr. Jones. Thank you, Mr. Chairman.
    Mr. Radanovich. With that, we'll go ahead and introduce our 
next panel.
    Panel 2 is Mr. Andy Todd, who is president and CEO of 
Xanterra Parks and Resorts, from Aurora, CO; Mr. Bruce Fears, 
president of Delaware North Parks Services from Buffalo, NY; 
Mr. David Woodside, president and general manager, Acadia 
Corporation, from Bar Harbor, ME; Ms. Jennifer Lamb, Public 
Policy Director, the National Outdoor Leadership School, 
Lander, WY; and Mr. Philip Voorhees, vice president of Park 
Funding & Management, National Parks Conservation Association, 
Washington, D.C. You all may come up to the table.
    OK, we'll just go right down the list. Each invitee will 
have 5 minutes to deliver their presentation. We will start 
with you, Mr. Todd. Andy, welcome to the Committee. If you 
would please begin, we would appreciate it. We will do all 
these testimonies, and then, after that, we'll open up 
questions for the whole panel.
    Mr. Todd.

     STATEMENT OF ANDREW N. TODD, CHAIRMAN, NATIONAL PARK 
HOSPITALITY ASSOCIATION, AND PRESIDENT/CEO, XANTERRA PARKS AND 
                            RESORTS

    Mr. Todd. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here and discuss the concession policy of the 
national parks.
    I personally have a high degree of interest in this topic, 
since the concessions policies and regulations govern how 
business is conducted in our parks, as well as how 
concessionaires and the NPS interact and resolve issues.
    I am President of Xanterra Parks and Resorts, who has 11 
national parks, including the major contracts at Grand Canyon 
and Yellowstone. I am also Chairman of the National Park 
Hospitality Association, which is the primary trade association 
for the concessionaires at national parks whose membership is 
responsible for the bulk of the services provided in the parks.
    I will submit written testimony and will try to touch on 
the highlights of the written testimony here in the oral 
presentation.
    In regards to the 1998 Act, which, of course, the 
regulations were written to interpret, I have a pretty strong 
history. I participated in numerous meetings with former 
Congressman Hansen, as well as Senator Thomas and his staff 
when the bill was being drafted. I have also testified in prior 
House and Senate hearings and discussed the concession 
legislation and the related regulations.
    Initially, when the regulations were finalized and released 
in April of 2002, obviously I was very frustrated to see that 
they were written in a manner which we thought was inconsistent 
with the law, especially when we, as an association, had 
submitted pages of comments regarding the regulations and the 
problems they were going to create with the current law prior 
to them being finalized during the public comment period. 
Nonetheless, the leadership of the Park Service at that time, 
under the old administration, ignored the comments primarily 
and issued the regulations final anyway. So, unfortunately, 4 
years later we're kind of in the same boat we were in then, and 
that's having regulations that, in my opinion, are unworkable 
in some key areas and contradict the underlying statute.
    However, there has been a recent ray of hope and, under the 
new administration, Fran Mainella, the Director of the Park 
Service, has been very open and very cordial and expressed a 
willingness, along with her staff, Cindy Orlando in particular, 
to meet with the concessionaires and other key constituents to 
try to resolve the issues in a timely way.
    The most pressing issues have been the following: one, the 
Leasehold Surrender Interest, which I want to give you a little 
bit of a background on because, to me, it's warranted. That is, 
of course, the term that created the old possessory interest 
term, which was simply the methodology used to award and 
compensate concessionaires for private investments in the 
national parks. It was created in the 1998 Act to encourage 
concessionaires to invest in the parks and guarantee them a 
return on their investment.
    Per the '98 Act, it was supposed to be pretty simple; that 
was, if you invest capital improvements in the park, you were 
supposed to get a return of CPI. One of the issues in the 
discussions back then was the fact that possessory interest is 
very complex and a hard topic to understand per the '65 Act 
contracts. So it was supposed to, by creating LSI, which was a 
new terminology they gave it, that was supposed to make it 
simple. You invest a capital outlay in the park and it grows by 
CPI, and who could argue, you know, about the CPI being an 
unreasonable return.
    One of the things that has been kind of discouraging to me 
is the fact that, back when the law was being discussed years 
ago, the '98 Act, one of the big things the concessionaires had 
was preferential right of renewal, which was the right to match 
anybody else's best off, and possessory interest, which was a 
way to compensate you for your investment. Through all the 
hearings and conferences in the House and Senate, it was 
eventually determined--and Senator Thomas agreed, as well as 
former Congressman Jim Hansen--that they would no longer allow 
preferential right of renewal except for the guides and 
outfitters in the contracts with less than $500,000 in revenue. 
But what you would be entitled to is Leasehold Surrender 
Interest.
    So what, I guess, was troubling to me was, once the 
regulations came out, it seemed like the one thing we got was 
so diluted by its definition of what qualifies for Leasehold 
Surrender Interest that you felt like even the piece that you 
compromised on and got somehow disappeared.
    I know Mr. Jones mentioned the fact that the law indicates 
you're to be awarded Leasehold Surrender on new construction. 
Of course, everybody knows the national parks, at 98 percent of 
construction in the parks, is not all new built. It's on 
existing structures. So if it only applied to that 
specifically, it wouldn't even be an issue on probably 99 
percent of the cases. But, of course, the issue comes is when 
you're always investing in an existing structure, so the 
question becomes, when you make that investment in a structure 
that is existing, which is always the case, how do you account 
for it and do you get credit for it?
    So when some of the rules came out, including this 50 
percent rule, saying if you have a $10 million structure, you 
put $2 million in the roof, well, that's not 50 percent of the 
10 million so it doesn't qualify. Of course, that seemed 
ludicrous to concessionaires, thinking how could that possibly 
have been the intent.
    At all the meetings I was at when that was discussed, it 
was always assumed that some kind of private sector measure 
would be the determinant in whether something qualifies for 
Leasehold Surrender Interest or not. So what I thought was a 
pretty simple procedure, and was meant to be simple, has now 
gotten somewhat complicated because the regulations have 
figured out ways to carve out what that value wound up being.
    Now, if you go to invest money in a park, you end up 
sending the superintendent--as Randy mentioned, you send a 
submission to the superintendent for the project and hope that 
they bless it, but, quite frankly, that's complicated, because 
by then you're already in the contract and you should know when 
you're bidding on these things whether the capital you're going 
to invest in the parks is going to be deemed LSI credit. If you 
have to wait until specific projects throughout the term of 
your contract determine that, that's very hard to bid and 
assess the risk that you're dealing with.
    I guess another major issue is that it was always assumed 
that some kind of measure, such as GAAP or whatever, would end 
up being the measurement for determining the value and what 
qualifies. I guess I never dreamed there would be, nor do I 
think the other concessionaires thought there would be, some 
new Park Service definition of what qualifies for treatment of 
capital improvements. So I'm not sure how that was determined. 
I would hope it wasn't determine just to figure out a way to 
make sure that LSI doesn't get big. The whole thing was, if you 
want money to be invested in the parks, the government doesn't 
have it, so you better get the private sector to do it, and if 
they do, you're going to have to give them at least CPI credit 
in return on that investment, which like I said doesn't seem 
like that's an outrageous return to expect.
    I guess the other issue that becomes a big issue is how do 
you fix the problem. I know there's been discussions about 
we'll fix that via a Director's order, which is simply a Park 
Service Director's order and it doesn't go out for public 
comment or review. You just simply issue it and that's the new 
policy.
    To me, this falls way short of what should be done, because 
the issues we're talking about, like an LSI, for example, are 
so critical to the law, to simply have a Director's order that 
says it will work for a while--the question is, what if they 
decide to change the Director's order a year or two from now, 
or under another Director of the Park Service, it seems like 
the years of this battling over legislation, that would be a 
very uncertain way and wouldn't give me much assurance, to 
think that if I sign a 15- or 20-year contract, wondering what 
happens in year three of that contract, do they change the 
Director's order back to something else. So, in my opinion, you 
have to fix the regulations. I'm adamant about that. You have 
to fix the regulations on these things that are so different 
than the actual statute. The Director's orders are too tenable 
and not permanent enough to give any assurance.
    The other big issue that we discussed. The advisory board 
is underway, as you know, having meetings with the working 
group of several constituents, and certainly the Park Service 
has been open so far to hearing everyone's discussion. I'm 
really not sure, to be honest, ultimately how decisions will be 
made in that group. The advisory board is just as it says, an 
advisory board. I know that a lot of those members don't have 
the history and the experience to know how to resolve the 
issues, especially if one person says fix it via a Director's 
order, or the concessionaires say change the regulations, the 
Park Service says Director's order, I'm not sure who's going to 
make that call, quite frankly. So the advisory board is good, 
but you can kind of see we're progressing along and you're 
wondering how you're eventually going to reach a decision and 
how is it going to be shaped when all is said and done to reach 
consensus, or if there isn't a consensus, who's going to make 
the final call on how it is resolved.
    The other issue is cross collateralization--
    Mr. Radanovich. Mr. Todd, if you could wind it down, too. I 
do want to hear your other issue, we're a little over 5 
minutes.
    Mr. Todd. Actually, I'm fine.
    Mr. Radanovich. We'll be happy to hear you. Take another 
minute.
    Mr. Todd. On cross collateralization, that was simply an 
issue of pledging more assets or contracts as security for a 
loan, for a single loan, in order that the lender would then 
have a bigger diversification of risk on their portfolio and 
give you a better interest rate. So I think we're very close 
with the Park Service in resolving that issue.
    But somehow, when the regulations came out, some of the 
legal experts for the association felt like the regulations 
were prohibiting you from pledging, if you're a multiple park 
operator, from pledging more than one contract to a single 
loan, which, of course, if you have ten contracts, for example, 
or like our case, ten, and you end up having to get a loan, you 
don't want to have to go get a loan for every single contract, 
one by one, because, quite frankly, some of the contracts are 
losers and don't make any money and no one will give you a loan 
for that. So the only way for it to make any sense would be to 
pledge the whole thing as a blanket loan and diversify the risk 
both for ourselves and for the lender. So that's an issue that 
I think we're reaching a good conclusion on that. The only 
question, again, is whether you do it via Director's order or 
through the regulation.
    Thank you.
    [The prepared statement of Mr. Todd follows:]

   Statement of Andrew N. Todd, Chairman, National Park Hospitality 
        Association, and President/CEO, Xanterra Parks & Resorts

    Mr. Chairman, I am pleased to have been invited to your important 
oversight hearing on concessions policy in our National Parks. I hereby 
submit my written testimony for the record. As Chairman of the Board of 
Directors of the National Park Hospitality Association (``NPHA''), I 
represent a membership that is responsible for most of the visitor 
services provided by the private sector in our National Parks.
    I am also President and CEO of Xanterra Parks & Resorts, which 
operates both large and small commercial enterprises that benefit park 
visitors. I also have substantial prior experience in real estate 
investment and finance.

I. Introduction
    The primary purpose of our participation in these hearings is to 
bring the Committee up to date on efforts to reconcile problems that 
have emerged in the wake of the passage of the National Parks Omnibus 
Management Act of 1998 (the ``1998 Act''). Although generally these 
relate to the regulations and form contracts that the National Park 
Service (``NPS'') has promulgated that were supposed to be written to 
interpret and implement the 1998 Act, there are other important issues 
that deal with the administration of concessions contracts generally 
that should be brought to your attention and that are identified below.
    The regulations (the ``Regulations'') are embodied in 36 C.F.R. 
Part 51, and the three separate form contracts that the NPS has drafted 
(the ``Standard Contracts'') were adopted by the agency and published 
in the Federal register on May 4, 2000, and July 19, 2000. To our 
knowledge, one of the Standard Contract forms has formed the basis for 
each prospectus issued by the NPS under the 1998 Act.
    I have previously appeared before this Subcommittee on a number of 
occasions. Most recently, on February 10, 2000, I appeared to protest 
the published proposals of the NPS that largely resulted in the 
Regulations and Standard Contracts a few months later. My written 
testimony to that hearing (as well as the written testimony of another 
NPHA member, Terry Povah) gives an overview of the history of 
concessions, the goals and accomplishments of the 1998 Act and the 
industry's primary objections to the Regulations and Standard Contracts 
and the reasons for those objections. Although some of that information 
concerning specific issues is repeated below, I refer any interested 
members to the written testimony we provided at that previous hearing 
for a more in depth treatment of the general purposes behind the 1998 
Act and the historical background.
    It is no secret that the debate leading up to the passage of the 
1998 Act was spirited and divisive. For our industry, these debates 
amounted to nothing less than a battle for the survival of a viable 
concession program in the parks. Although much of the debate centered 
on whether concessioners who had faithfully performed under their prior 
contracts should be entitled to retain the preferential renewal rights 
they enjoyed under the prior law, many other issues had a potentially 
devastating impact on the ability of concessioners to earn a reasonable 
profit on their operations and investments. Some, we felt, would force 
many prospective bidders for contracts, including incumbents, to 
examine whether they could undertake the potential risks as a result of 
bidding on a concession opportunity. These risks could impair their 
non-concession businesses, to the extent the NPS sought rights that 
went beyond the contracts, or could simply arise from the uncertainty 
associated with ambiguous regulations and contract terms. The result 
was that the 1998 Act included compromises on many of these issues.
    Although Senator Thomas moved a long way toward the position of the 
prior administration and sponsors of competing legislation in crafting 
a compromise, the prior administration was not content with the partial 
victories it won on some issues and crafted the Regulations and 
Standard Contracts with a view toward imposing restrictions on 
concession contracts that it had fought for in the debates but had not 
achieved. The most negotiated trade-off concerned Sen. Thomas' decision 
to terminate the preferential right of renewal for larger contracts, 
but preserve (in modified form) the right of the concessioner to 
receive a modest return on its invested capital by replacing the 
previous concept of possessory interest with a new valuation formula, 
called leasehold surrender interest (``LSI''), that was designed to fix 
the return at cost as adjusted for inflation, thereby decreasing the 
uncertainty and potential for disputes concerning the valuation of 
these interests.
    As a consequence, there remain many provisions of these important 
documents that do not honor either the explicit provisions or the 
intent of the 1998 Act. The NPHA and certain of our members found it 
necessary to challenge some of these provisions in court, resulting in 
over 2 years of expensive litigation that culminated in a Supreme Court 
argument on one issue earlier this month. Although the decisions of the 
courts so far and certain representations of the NPS made during the 
proceedings have clarified some of the matters challenged by the NPHA, 
others matters in dispute were not decided by the courts, either 
because the courts did not find them ``ripe'' for review, or because 
the NPHA did not raise them in the litigation due to their sheer 
number. Thus, we believe there is much remaining work to do to 
normalize NPS regulations and contracting procedures with the goals 
that Congress was trying to achieve in passing the 1998 Act.
    That being said, I am happy to report that the NPHA and its members 
enjoy a much better relationship with the NPS since Fran Mainella has 
taken her place and built her staff. It has been refreshing for our 
members to hear that public access to our parks and the provision of 
quality services to park visitors is again a priority of the NPS and 
that the NPS again considers its partnership with concessioners as 
among the most important of its strategic relationships. It is also a 
hopeful sign that the NPS has chosen to seek out professional 
consultants (PricewaterhouseCoopers) to help in assessing its business 
relationships. While the NPS has as impressive staff dedicated to the 
protection of park resources, many--including members of this 
Subcommittee and the NPS itself--have acknowledged that NPS employees 
do not have the necessary business and financial backgrounds to 
adequately deal with the agency's commercial relationships. Although 
the NPS has been working toward improving its staff in this area, we 
believe that outsourcing many of these functions will move the agency 
more quickly along the path to fixing the problem. If we can engage in 
dialogue with people who have a working understanding of return on 
investment and the financial markets, and realize that reducing 
financial incentives in one area necessitates a compensating 
enhancement of incentives in others, the process has a better chance of 
succeeding and the parks will benefit. One must remember that each 
contract is the result of a solicitation process and that bids will 
reflect the overall returns that the bidders require, which will to a 
large extent depend on the risks that the contract and the regulations 
place on the operator. Because of the hundreds of contracts that are in 
the pipeline, the sooner that these matters can be resolved, the 
better.
    I have been assured by Director Mainella and persons at various 
other levels of the NPS that they intend to address the problems 
created by the Regulations and Standard Contract. In that regard, 
through the auspices of a task force assembled by the National Park 
Service Concessions Management Advisory Board (the ``Board''), there 
have been two preliminary meetings among various constituencies to 
identify some of the more-important issues and try to devise a 
framework for resolving them.
    However, although we have agreed to participate in these meetings, 
in the final analysis, solutions need to be crafted that comply with 
the law, create certainty among concessioners, reflect standard 
business practices, encourage the improvement of visitor services 
(including operations and facilities), increase administrative 
efficiency, and reduce bureaucracy and wasteful disputes between the 
government and its contractors. We believe that the top levels of the 
NPS embrace each of these goals as well.
    To the extent that the solutions proposed do not achieve these 
goals, we will not hesitate to continue to identify failures in the 
process and seek help from this Committee if needed. In that regard, 
the encouragement of this Subcommittee to address these issues promptly 
and to facilitate legislative fixes where the regulatory and 
contracting process has failed would be most welcome.

II. Key Challenges

A. As indicated above, several of the issues that were the subject of 
litigation between NPS and NPHA were not fully resolved by the courts. 
Accordingly, Director Mainella is working with NPHA and other 
interested parties to attempt to cooperatively resolve these issues and 
others of importance. The key areas currently being discussed are: (a) 
measurement and assignment of leasehold surrender interests; (b) cross-
collateralization of concessioner financing arrangements across 
multiple contracts; (c) NPS oversight of transactions that affect the 
ownership of a concession contract or a concessioner; (d) improvement 
and simplification of the rate approval process; and (e) attempting to 
devise a long-term strategy on how best to provide services in parks 
where the economics don't support the existing contract structure.

B. Leasehold Surrender Interests (``LSI''):
    1. LThe key element of these discussions, and that of greatest 
interest to both NPS and concessioners, is how LSI will be handled 
under 1998 Act contracts. As you know, LSI was developed to provide the 
concessioners with investment protection in concession facilities in 
order to attract bidders to National Park contract opportunities. 
However, concessioners believe there are several critical areas where 
changes are necessary. Because all of the provisions of the Regulations 
relating to LSI are interconnected, we believe that there are edits 
required to a significant number of those Regulations to conform them 
to the law (including the matters resolved in the litigation) and 
improve the administration of concession contracts in this area. 
Conforming changes would also need to be made to the Standard Contract 
forms.
    The primary LSI-related issues are:
    a. Definitions of Capital Improvements, including the 50% rule
        1. LWhile certain sections of the Regulations correctly call 
        for Generally Accepted Accounting Principles (``GAAP'') to be 
        used as the benchmark to determine whether costs should be 
        accorded LSI treatment, there are provisions in Sec. 51.51 that 
        are contrary to GAAP, such as the rejection of building 
        materials for capital improvement eligibility except when 
        initially installed as part of a structure or where the 50% 
        rule is met. Thus, for example, the conversion of a dormitory 
        to guest lodging, though costing millions of dollars, would not 
        necessarily be considered a capital improvement eligible for 
        LSI treatment. In that case, only if the conversion cost 
        represented at least 50% of the pre-conversion value using a 
        replacement cost standard would LSI treatment be accorded to 
        the conversion. This limitation has been termed the ``50% 
        Rule''. Thus, common--and sorely needed--renovations, 
        rehabilitations, and other capital improvement projects in our 
        National Parks often would not qualify for LSI treatment. 
        Fortunately, the discussions of the task force convened by the 
        Board indicate that both NPS and the concessioners are in 
        agreement that the 50% Rule should be eliminated. NPHA wants to 
        ensure that this change and related changes to Section 51.51--
        51.66 of the Regulations are made in a more permanent manner 
        through modification of the Regulations and Standard Contract 
        language, rather than through a less permanent solution such as 
        a Director's Order, the solution preferred by the NPS. 
        Employing a Director's Order in the face of published 
        regulations that reach an inconsistent result would at best 
        create ambiguity and confusion and at worst be void as being a 
        policy position that is inconsistent with the published 
        regulations. Moreover, a Director's Order can be easily 
        modified by the NPS without notice and comment rulemaking and 
        thus may only be a temporary accommodation. A temporary 
        solution is unacceptable to the NPHA, since our membership 
        could not rely upon it. Although the NPHA acknowledges that 
        modification of the Regulations will entail additional effort 
        and time, it is critical that the published Regulations in the 
        C.F.R. are clear, workable, well-reasoned, and in compliance 
        with the law. Therefore, we are against efforts to solve any of 
        these issues through Director's Orders where they have already 
        been addressed by Regulations.
    b. Prevailing cost ceiling
        1. LThe Regulations also purport to restrict the LSI values to 
        ``amounts that are no higher than those prevailing in the 
        locality of the project'', which is not a requirement of the 
        1998 Act. This means the NPS could set LSI values on the basis 
        of lower construction costs in metropolitan communities outside 
        the National Parks, even though the cost of construction in 
        remote park areas could be much higher. The litigation 
        established that this limitation only pertains to a comparison 
        with other in-park projects, which of course are already 
        subject to strict regulation by the NPS. Thus the limitation in 
        the Regulations doesn't make sense. Since concessioners have no 
        incentive to ``overpay'' for a project in the hopes of 
        receiving LSI that will only grow by CPI, this restriction will 
        only serve to impose a needless bureaucratic step for each 
        project and create confusion and disagreement between the 
        parties. It should be eliminated.
    c. LSI credit for amounts funded through Reserve Accounts
        1. LThere has been considerable discussion about whether 
        capital improvements, determined in accordance with GAAP but 
        which are funded from reserve accounts established under new 
        contracts to fund key renovation projects, should be accorded 
        LSI treatment. The statute requires that all in-park capital 
        improvements funded by a concessioner be entitled to LSI. The 
        NPS position (evidently supported by its consultant, 
        PricewaterhouseCoopers (``PwC'')) is that moneys spent out of 
        reserve accounts should not be entitled to LSI since they 
        should, theoretically at least, be identified in the prospectus 
        as likely to occur during the contract term. We believe PwC's 
        position to be that any dollars invested through a reserve 
        account have been theoretically factored into their financial 
        analysis when modeling the final scenario that goes to bid. To 
        us, that is a different issue than whether the expenditures are 
        entitled to LSI. Under the 1998 Act, capital improvements made 
        by concessioners are entitled to LSI credit without regard to 
        how concessioner funds may be segregated under the contract. 
        Although a bidder indeed will make projections relating to all 
        recurring and non-recurring expenditures, whether capital in 
        nature or not, to the extent that a contract would attempt to 
        deprive capital investment of LSI credit, the result would be 
        lower bids (or none at all if the contract could not be 
        economically justified as a result). If an investment is funded 
        by concessioners and it qualifies under GAAP as a capital 
        improvement, NPHA believes it should be assigned LSI just like 
        any other investment. We have no objection to the NPS 
        establishing reasonable reserves, but they should be generally 
        limited to repair and maintenance expenditures that are not 
        capitalized under GAAP. In cases where the NPS would also 
        require reserves for capital items, which generally is not a 
        good idea because this would increase financing costs under the 
        contract since they would not result in collateral to the 
        lender, they should be separate from the repair and maintenance 
        reserve.
        2. LIn our on-going discussions, NPS has emphasized that there 
        should only be occasional or isolated instances where an LSI 
        determination needs to occur. On the other hand, NPHA believes 
        these instances will occur on a more routine basis as capital 
        investment generally occurs throughout a contract term. Since a 
        consistent approach across all contracts would be desirable, 
        NPHA believes that a framework should be set up to resolve 
        these instances simply and efficiently. Possibly a recognized 
        accounting firm such as PwC, acting both in a dual role as NPS' 
        asset manager and as an independent financial expert, could 
        serve to confirm that the costs that are capitalized by 
        concessioners under GAAP are in fact entitled to LSI. This 
        could lead to long-term consistency and stability so that both 
        NPS and concessioners would benefit from having a hopefully 
        simple set of procedures that would be used to evaluate these 
        critical on-going decisions for both parties.

C. Cross-collateralization
    1. LCross-collateralization means the use of multiple assets or 
contracts to provide security for a single or separate loans made by a 
single lender for the purchase or other investment in (or to provide 
working capital for) those or other assets. It reduces a borrower's 
financing costs through the more efficient use of assets by allowing a 
lender to diversify its collateral and reduce its risk.
    2. LNPHA, NPS, and PwC have had many discussions over the financial 
benefit to the concession system of allowing concessioners with 
multiple contracts to finance them through a ``bundled'' approach, 
thereby lowering the cost of borrowing to the concessioners. All 
parties appear to be in agreement that this is desirable. However, 
although not prohibited by the 1998 Act, NPHA believes that Section 
51.87 of the Regulations may prohibit this. NPS has proposed issuing a 
Director's Order that would clarify that this is permissible, but since 
the Regulations could override this Order if NPS changed its mind in 
the future, NPHA believes this should be clarified and memorialized in 
an amended Regulation.

D. Shareholder Level Transactions
    1. LThis issue is also of critical importance to any concessioner 
that is part of an affiliated group of companies or that engages in 
businesses other than National Park concessions.
    2. LAlthough, it may be understandable for the NPS to want as broad 
approval rights as possible over transactions involving changes in 
ownership of concessioners and their owners, Congress recognized that 
regulating shareholder behavior would reduce bidding interest and 
create enormous risks to affiliated organizations. NPS and NPHA have 
been working to clarify under what conditions approval by NPS is 
necessary. There is agreement that clarification is advisable and the 
NPHA is optimistic that the NPS will ultimately agree on a solution 
that complies with the law. However, NPS again prefers to issue a 
Director's Order that would provide guidance, whereas the NPHA believes 
that the Regulations should be amended to remove the sections that 
exceed the scope of NPS authority under the 1998 Act.

E. Rate Simplification
    1. The statute requires that the rate approval process ``shall be 
as prompt and as unburdensome to the concessioner as possible''. Some 
progress is being made in the area, most notably the food service 
``core menu'' concept. This concept provides that a key list of items 
should be included in a concessioner's menu and reviewed by NPS to 
ensure that they are priced appropriately. For all other menu 
offerings, the concessioner would have the flexibility to design the 
offering and establish a reasonable price. This would allow for more 
variety and innovation in menus since there would be no administrative 
overhead outside the core menu requirements.
    2. Very preliminary discussions have begun on how this ``core'' 
concept might be applied to lodging, but nothing firm has been 
determined. The NPHA has long argued that the current ``comparability'' 
approach employed by the NPS is seriously flawed. If a ``core'' concept 
can be implemented that would permit non-core lodging units to better 
reflect market conditions, both the NPS and concessioners would 
benefit, and bureaucracy can be virtually eliminated in this 
contentious area.
    3. Discussions are also underway on how retail pricing mechanisms 
might be improved to streamline this process as well.

F. Unprofitable Concession Contracts and Fee Reductions
    1. The NPHA is concerned about the viability of visitor services 
at some of the smaller parks. Lower visitation, coupled with dramatic 
increased in operating expenses such as the cost of energy, 
administrative requirements under our contracts and all forms of 
insurance, have made many concession operations unprofitable. Normally 
a concessioner would be able to bid a lower fee upon renewal to 
compensate for these problems, but this does not provide relief under 
an existing contract. The contracting backlog has resulted in countless 
extensions of the old contracts. For example, my company's contract at 
Stovepipe Wells in Death Valley, California expired in 1985 and is 
presently still operating on a year-to-year extension. Of course, a 
concessioner could simply walk away from an unprofitable expired 
contract, as occurred at Oregon Caves, but then that would leave the 
NPS in a difficult situation to try and find a temporary operator for 
an unprofitable concession contract. However, most concessioners are 
not looking to dissolve the long-term relationships they've established 
with visitors, their employees, and the NPS. Nonetheless, years of net 
losses at operations such as Stovepipe Wells, combined with significant 
Concessioner investment under the pre-1998 Act contracts, even where 
the Concessioner doesn't have possessory interest in the improvements, 
has created an untenable situation.
    2. The NPHA understands that the contract backlog will not be 
cleared for some time, and we believe the volume of open RFPs should be 
maintained at a manageable level. Therefore, in the interim we think it 
would be in the mutual interest of concessioners and NPS to review the 
fees paid at parks such as Death Valley, Petrified Forest, Everglades, 
and other unprofitable parks to determine whether fee relief would be 
appropriate during the extension period. The involvement of PwC could 
be very helpful in designing a streamlined process that would be 
efficient, fair, and consistent.
    3. In some cases fee relief alone may not be enough. Appropriated 
funds are needed to address deferred maintenance at government owned 
facilities such as Flamingo Lodge in the Everglades. Contractually 
required concessioner capital (that would be entitled to LSI credit) 
may be able to address some of the deficiencies at these parks, but the 
economics of many of these properties may nevertheless produce 
insufficient returns to attract an operator, even with no fee. In those 
cases, government appropriations to make necessary improvements may be 
the only solution, unless private donations could be found.
    Thank you for the opportunity to participate in this important 
hearing.
                                 ______
                                 
    Mr. Radanovich. You're welcome. And we'll have a chance to 
talk about other things during the Q&A, too, if there is 
something that's missing there.
    Mr. Fears from Delaware North. Welcome. Please begin your 
testimony. You have 5 minutes.

    STATEMENT OF BRUCE W. FEARS, PRESIDENT, DELAWARE NORTH 
               COMPANIES PARKS AND RESORTS, INC.

    Mr. Fears. Mr. Chairman and members of the Subcommittee, 
thank you for giving me the opportunity to testify on the 
status of the National Park Concessions Management Program.
    My name is Bruce Fears. I am the president of Delaware 
North Companies Parks & Resorts, Inc., a subsidiary of Delaware 
North Companies, Inc., a Buffalo, NY based company that 
provides food service, hospitality and recreation services as 
parks, attractions, professional sports facilities and 
airports. As such, I oversee a $300 million operation which 
includes contracts at four national parks: Yosemite, Sequoia, 
Grand Canyon and Yellowstone, as well as the Kennedy Space 
Center, the U.S. Mint, and various state parks throughout the 
United States. Delaware North also owns and operates several 
resort properties.
    My experience with national parks spans more than 30 years. 
I grew up near Shenandoah National Park where my mother and 
father earned their livelihood working for a small company that 
managed the park's concessions. When my brothers and I were old 
enough, we helped them, learning the business from the ground 
up. Following my graduation from college, I joined ARAMARK, 
where I spent 20 years in concessions management, including 
working with many National Park Service contracts. I came to 
Delaware North as vice president of operations in 1996, just 
several years after the company entered the parks concessions 
business.
    This afternoon, I would like to speak about the effect that 
the National Park Service Concessions Management Improvement 
Act of 1998 and the resulting increased competition for 
national park contracts have had on the quality of the bids 
that are being presented.
    Yosemite was Delaware North's first national park contract. 
Then legislation gave preferential right of renewal to 
incumbent concessionaires. However, through an unusual set of 
circumstances, the contract was open to bids. Delaware North 
competed against four other companies, winning the bid and 
entering into a partnership with the National Park Service that 
became not only a model, but also the impetus for change.
    Through our work at Yosemite, Delaware North demonstrated 
it was possible to enhance visitor services, protect public 
lands, and provide an attractive rate of return to the 
government. Indeed, in less than 10 years of operation at 
Yosemite, we have spent approximately $140 million on capital 
improvements and buyout of the previous concessionaire's 
possessory interest. In all, we have returned about 17 percent 
of revenues to the National Park Service. The previous 
concessionaire was returning less than 1 percent.
    The story is similar at Sequoia, where in the first 4 years 
of operation, Delaware North reinvested an astounding 77 
percent of revenues, including a $14 million investment in the 
design and construction of Wuksachi Lodge.
    Our dedication to the national parks in our care transcends 
our financial contributions in a most profound way. GreenPath, 
our system of environmental management, is a clear indication 
of the importance we place on environmental stewardship. 
GreenPath has won awards and earned registration to the 
rigorous standards established by the International 
Organization for Standardization, a first for a U.S. 
hospitality company or park concessionaire. We are proud of our 
accomplishments and prouder still that we have inspired some of 
our competitors to follow suit.
    Using these examples and others like them to support our 
claim, we lobbied for the National Park Service Concessions 
Management Improvement Act of 1998. Since its passage, we have 
seen many cases in which the National Park Service is being 
offered stronger, more competitive bids. I might add that these 
bids did not always unseat the incumbent or benefit Delaware 
North, for that matter. But they did give interested parties an 
opportunity to bid, and the National Park Service a choice.
    For example, Delaware North and two other companies pursued 
the Crater Lake contract. Delaware North did not win the bid. 
Two companies bid on the Acadia contract, which the incumbent 
retained. Interestingly, Delaware North was considering the 
request for proposal, but after reviewing the work that was 
being done at Acadia, we decided there was little we could do 
to improve on the current concessionaire's performance. 
Finally, there were three bids for Yellowstone's retail 
contract, which Delaware North subsequently won.
    I cannot speak about our competitors' bids because I am not 
privy to them, but I can tell you that Delaware North won the 
Yellowstone contract as a result of a fair and aggressive rate 
of return to the government, our record of environmental 
management, and a plan that includes extensive renovation and 
restoration of the park's retail stores.
    As a result of the National Park Service Concessions 
Management Act of 1998, we now have better proposals, where 
capital improvement funds, fair rates of return, and innovative 
interpretive and environmental management programs are the 
norm. Our current climate encourages qualified bidders to 
invest the time and money necessary to prepare a competitive 
bid, whereas the preferential right to renew proviso contained 
in 16 USC was a disincentive.
    Incidentally, we are comfortable with the protection given 
to concessionaires with contract valued at $500,000 or less, 
understanding that it helps establish a level playing field for 
all. Conversely, there are many contracts valued at less than 
$5 million that are controlled by large corporations and should 
be put out to bid in the interest of giving the National Park 
Service solid, competitive bids.
    Professionally and personally, we believe strongly in the 
importance of sharing National Park Service business with many 
companies, large and small, and awarding contracts based on the 
strength of the bids and on the ability of each concessionaire 
to respond to the unique needs of each park. No National Park 
Service effort, or legislation in its behalf, has brought more 
to bear on the level of returns to the U.S. Government and its 
taxpayers, or on the preservation and enhancement of our 
national treasures.
    Thank you for your time and attention. I am happy to answer 
questions.
    [The prepared statement of Mr. Fears follows:]

                Statement of Bruce W. Fears, President, 
             Delaware North Companies Parks & Resorts, Inc.

    Mr. Chairman and members of the Subcommittee, thank you for giving 
me the opportunity to testify on the status of the National Park 
Service concessions management program. My name is Bruce Fears. I am 
the president of Delaware North Companies Parks & Resorts, Inc., a 
subsidiary of Delaware North Companies, Inc., a Buffalo, N.Y.-based 
company that provides food service, hospitality and recreation services 
at parks, attractions, professional sports facilities and airports. As 
such, I oversee a $300 million operation that includes contracts at 
four national parks: Yosemite, Sequoia, Grand Canyon and Yellowstone, 
as well as at Kennedy Space Center, the U.S. Mint and various state 
parks throughout the United States. Delaware North also owns and 
operates several resort properties.
    My experience with national parks spans more than 30 years. I grew 
up near Shenandoah National Park where my father and mother earned 
their livelihood working for a small company that managed the park's 
concessions. When my brothers and I were old enough, we helped them, 
learning the business from the ground up. Following my graduation from 
college, I joined ARAMARK where I spent 20 years in concessions 
management, including working with many National Park Service 
contracts. I came to Delaware North as Vice President of Operations in 
1996, just several years after the company entered the parks 
concessions business.
    This afternoon, I would like to speak about the effect that the 
National Park Service Concessions Management Improvement Act of 1998 
and the resulting increased competition for national park contracts 
have had on the quality of the bids that are being presented.
    Yosemite was Delaware North's first national park contract. Then 
legislation gave preferential right of renewal to incumbent 
concessionaires. However, through an unusual set of circumstances, the 
contract was open to bids. Delaware North competed against four other 
companies, winning the bid and entering into a partnership with the 
National Park Service that became not only a model, but also the 
impetus for change.
    Through our work at Yosemite, Delaware North demonstrated that it 
was possible to enhance visitor services, protect public lands and 
provide an attractive rate of return to the government. Indeed, in less 
than 10 years of operation at Yosemite, we spent approximately $140 
million on capital improvements and buyout of the previous 
concessionaire's possessory interest. In all, we returned about 17 
percent of revenues to the National Park Service. The previous 
concessionaire was returning less than 1 percent. The story is similar 
at Sequoia, where in the first four years of operation, Delaware North 
reinvested an astounding 77 percent of revenues, including a $14 
million investment in the design and construction of the Wuksachi 
Lodge.
    Our dedication to the national parks in our care transcends our 
financial contributions in a most profound way. GreenPath, our system 
of environmental management, is a clear indication of the importance we 
place on environmental stewardship. GreenPath has won awards and earned 
registration to the rigorous standards established by the International 
Organization for Standardization, a first for a U.S. hospitality 
company or parks concessionaire. We are proud of our accomplishments 
and prouder still that we have inspired some of our competitors to 
follow suit.
    Using these examples and others like them to support our claim, we 
lobbied for the National Park Service Concessions Management 
Improvement Act of 1998. Since its passage, we've seen many cases in 
which the National Park Service is being offered stronger, more 
competitive bids. I might add that these bids did not always unseat the 
incumbent or benefit Delaware North, for that matter. But they did give 
interested parties an opportunity to bid, and the National Park 
Service, a choice.
    For example, Delaware North and two other companies pursued the 
Crater Lake contract. Delaware North did not win the bid. Two companies 
bid on the Acadia contract, which the incumbent retained. 
Interestingly, Delaware North was considering the Request for Proposal, 
but after reviewing the work that was being done at Acadia, we decided 
there was little that we could do to improve on the current 
concessionaire's performance. Finally, there were three bids for 
Yellowstone's retail contract, which Delaware North subsequently won.
    I cannot speak about our competitors' bids because I am not privy 
to them, but I can tell you that Delaware North won the Yellowstone 
contract as a result of a fair and aggressive rate of return to the 
government, our record of environmental management, and a plan that 
includes extensive renovation and restoration of the park's retail 
stores.
    As a result of the National Park Service Concessions Management Act 
of 1998, we now have better proposals, where capital improvement funds, 
fair rates of return, and innovative interpretive and environmental 
management programs are the norm. Our current climate encourages 
qualified bidders to invest the time and money necessary to prepare a 
competitive bid, whereas the preferential right to renew proviso 
contained in 16 USC was a disincentive. Incidentally, we are 
comfortable with the protection given to concessionaires with contracts 
valued at $500,000 or less, understanding that it helps establish a 
level playing field for all. Conversely, there are many contracts 
valued at less than $5 million that are controlled by large 
corporations and should be put out to bid in the interest of giving the 
National Park Service solid, competitive bids.
    Professionally and personally, we believe strongly in the 
importance of sharing National Park Service business with many 
companies--large and small--and awarding contracts based on the 
strength of the bids and on the ability of each concessionaire to 
respond to the unique needs of each park. No National Park Service 
effort--or legislation in its behalf--has brought more to bear on the 
level of returns to the U.S. government and its taxpayers, or on the 
preservation and enhancement of our national treasures.
    Thank you for your time and attention. I am happy to respond to 
questions.
                                 ______
                                 
    Mr. Radanovich. Thank you, Mr. Fears. We'll keep questions 
for the whole panel after everybody has been given a chance to 
speak.
    Up next is Mr. David Woodside, president and general 
manager of Acadia Corporation, Bar Harbor, ME. Mr. Woodside, 
welcome, and please begin.

 STATEMENT OF DAVID B. WOODSIDE, VICE CHAIRMAN, NATIONAL PARK 
HOSPITALITY ASSOCIATION AND PRESIDENT AND GENERAL MANAGER, THE 
                       ACADIA CORPORATION

    Mr. Woodside. Thank you.
    Mr. Chairman and members of the Committee, my name is Dave 
Woodside. I am the president and general manager of the Acadia 
Corporation, a small, locally owned company which has operated 
concessions in Acadia National Park since 1932. My company 
recently received a new 10 year contract that was awarded in a 
competitive bid under the new guidelines established in the 
1998 Concessions Act.
    As a small concessions and officer of the National Park 
Association, I am here to testify on behalf of the small, 
independent, locally owned concessioners. With the passage of 
the new law in 1998, and the loss of preference for companies 
over $500,000 in revenues, many small companies in the one to 
five million dollar range question whether Congress and the 
National Park Service envision any future for them in the 
concessions business.
    The 1998 Concessions Act has created many new challenges 
for small concessioners, including competitive bidding, an 
unpredictable, costly and labor-intensive contract proposal 
process, and a loss of investment security.
    Out of the 590 concession contracts, less than 50 exceed $5 
million in gross revenues. With the granting of renewal 
preference to those contracts under $500,000 in annual 
revenues, a number of small, locally owned concessioners were 
left in the gap between those over $5 million and those under 
$500,000. Five million dollars of revenues is not a large 
business by any stretch of the imagination. I would advocate 
allowing the National Park Service the option of granting a 
renewal preference to small, local concessioners who have 
demonstrated a high degree of competency in operating their 
park concession.
    The current contracting process has occurred on a very 
unpredictable schedule. In my own case, I received a 1-month 
notice that our contract prospectus was to be released, 
followed by 60 short days, in the height of our operating 
season, to prepare our response. In order to provide all the 
required information, our response exceeded 700 pages. The 
magnitude of the response effort, coupled with the short 
response time, is very daunting to any bidder, but is 
especially difficult for smaller operators who have limited 
managerial personnel to prepare a bid. I would advocate a more 
streamlined contract response, a definitive contract 
publication and release schedule giving concessioners 
sufficient advance of solicitation release, and an adequate 
off-season response time for smaller contracts.
    New contract requirements for additional investments are 
subject to the cumbersome process of the Leasehold Surrender 
Interest provisions of the National Park Service regulations, 
which in most cases do not reflect terms of the 1998 law. 
Clearly, these regulations do not follow the guidance that 
Congress set forth in the law, indicating that the National 
Park Service should institute procedures that are as 
unburdensome and efficient as possible.
    Simply tying LSI value to those that are capitalized under 
Generally Accepted Accounting Principles is consistent with the 
law, consistent with a concessioner's financial reporting 
procedures, and would be easily understood and administered 
both by the concessioners and the National Park Service. In 
order for smaller concessioners to carry on their park 
operations, a fair, equitable and less complex system is needed 
to secure concessioners' investments.
    I firmly believe that there is a role in national park 
concessions for business diversity through small, well-managed, 
locally based companies. Companies whose interests reside in 
the local park and communities, where decisions are made onsite 
and the overall good of the park is paramount.
    Thank you for the opportunity to testify before your 
Committee. I will be happy to answer any questions.
    [The prepared statement of Mr. Woodside follows:]

     Statement of David B. Woodside, Vice-Chairman, National Park 
Hospitality Association, and President and General Manager, The Acadia 
                              Corporation

    Mr. Chairman and Members of the Committee, my name is Dave 
Woodside. I am the President and General Manager of the Acadia 
Corporation, a small locally-owned company which has operated 
concessions in Acadia National Park since 1932. My company recently 
received a new ten-year contract that was awarded in a competitive bid 
under the new guidelines established of the 1998 Concessions Act.
    As a small concessions and officer of the National Park Hospitality 
Association, I am here to testify on behalf of the small, independent, 
locally-owned concessioners. With the passage of the new law in 1998 
and the loss of preference for companies over $500,000 in revenues, 
many small companies in the $1 to $5 million range question whether 
Congress and the National Park Service envision any future for them in 
the concessions business.
    The 1998 Concessions Act has created many new challenges for small 
concessioners including competitive bidding, an unpredictable, costly 
and labor-intensive contract proposal process, and a loss of investment 
security.
    Out of the 590 concession contracts, less than 50 exceed $5 million 
in gross revenues. With the granting of renewal preference to those 
contracts under $500,000 in annual revenues, a number of small locally-
owned concessioners were left in the gap between those over $5 million 
and those under $500,000.
    Five million dollars of revenues is not a large business by any 
stretch of the imagination. I would advocate allowing the National Park 
Service the option of granting a renewal preference to small, local 
concessioners who have demonstrated a high degree of competency in 
operating their park concession.
    The current contracting process has occurred on a very 
unpredictable schedule. In my own case, I received a one month notice 
that our contract prospectus was to be released followed by sixty short 
days in the height of our operating season to prepare our response. In 
order to provide all the required information, our response exceeded 
seven hundred pages. The magnitude of the response effort coupled with 
the short response time is very daunting to any bidder but is 
especially difficult for smaller operators who have limited managerial 
personnel to prepare a bid. I would advocate a more streamlined 
contract response, a definitive contract publication and release 
schedule giving concessioners sufficient advance of solicitation 
release, and an adequate off-season response time for smaller 
contracts.
    New contract requirements for additional investments are subject to 
the cumbersome process of the leasehold surrender interest (LSI) 
provisions of the NPS regulations, which in most cases do not reflect 
terms of the 1998 law. Clearly these regulations do not follow the 
guidance that Congress set forth in the law indicating that the NPS 
should institute procedures that are as un-burdensome and efficient as 
possible. Simply tying LSI value to those costs that are capitalized 
under Generally Accepted Accounting Principles (GAAP) is consistent 
with the law, consistent with a concessioner's financial reporting 
procedures and would be easily understood and administered both by 
concessioners and the NPS. In order for smaller concessioners to carry 
on their park operations, a fair, equitable, and less complex system is 
needed to secure concessioners' investments.
    I firmly believe that there is a role in national park concessions 
for business diversity through small, well-managed, locally-based 
companies. Companies whose interests reside in the local park and 
communities, where decisions are made on site, and the overall good of 
the park is paramount.
    Thank you for the opportunity to testify before your Committee, I 
would be happy to answer any questions.
                                 ______
                                 
    Mrs. Cubin. [Presiding.] Thank you, Mr. Woodside.
    It is now my pleasure to introduce a Wyoming constituent, 
Jennifer Lamb, representing the National Outdoor Leadership 
Schools, or NOLS as we call it, which is headquartered in 
Lander, WY.
    Back in 1965, the founder of NOLS, Paul Petzoldt, saw the 
need for a school that specifically trained people to be 
skilled outdoor leaders and educators. With hard work and great 
determination, this small businessman from Wyoming built a 
global network of wilderness training, growing from 100 
students in 1965 to over 3,000 this past year. In the last 37 
years, NOLS has become the worldwide leader in wilderness 
education, as the largest back country permit holder in the 
United states, running courses on five continents.
    In 2001, the crew from the space shuttle Columbia spent 11 
wonderful days hiking through Wyoming's Wind River Mountains, 
learning the lessons of wilderness and teamwork through a 
partnership between NASA and NOLS. The heroic crew left behind 
a patch at the top of the Wind River Peak memorializing their 
visit. They also left behind new friends at NOLS, who will 
never forget them. I know Jennifer can address that experience 
a lot better.
    Mr. Petzoldt's vision from 1965 is still true today: take 
ordinary people into the back country for a lengthy period of 
time, teach them the skills that are required of a strong 
leader, and when their time is over, they will take the lessons 
they learned in the wilderness back to their jobs and families 
and they'll be stronger and better people and leaders for that. 
This is the experience that NOLS provides every day to its 
students.
    I really look forward to your testimony, Jennifer, and I 
would now like to recognize Ms. Lamb.

 STATEMENT OF JENNIFER LAMB, PUBLIC POLICY DIRECTOR, NATIONAL 
                   OUTDOOR LEADERSHIP SCHOOL

    Ms. Lamb. Mrs. Cubin, thank you very much for that kind 
introduction. Mr. Souder, I thank you for allowing me the 
opportunity to be here today. Good afternoon.
    My name is Jennifer Lamb and I represent the National 
Outdoor Leadership School, as Mrs. Cubin just described. I 
appreciate the opportunity to be here. NOLS is a nonprofit, 
experiential education institution, and for 38 years, as you 
mentioned, we have conducted extended back country expeditions 
for students of all ages, teaching outdoor leadership skills. 
We have been fortunate to run almost all of our programs on 
public land. Parks and forests are our classrooms.
    Like our partner organizations, such as Outward Bound, NOLS 
is a permitted fee-paying commercial operator, with programs in 
21 national parks. We have vast experience working with a wide 
array of Park Service permit systems and procedures.
    I am here today to share our perspective as a smaller back 
country, nonprofit operator. I will briefly highlight what we 
think is working with the program, and then spend a little bit 
of time talking about some of the things we would like to see 
improve.
    What's working well. First, the National Park Service has 
demonstrated a willingness to work in partnership with 
organizations like NOLS to create high quality visitor 
education programs. We have supported their mission, as they 
have supported ours.
    Second, the agency is making progress on establishing 
guidance for the authorization of small commercial operators, 
(something Mr. Jones referred to in his testimony) including 
nonprofit organizations. This is something we've been hoping to 
see for quite some time and we're pleased that it's now moving 
forward.
    Third, the agency has remained committed, we believe, 
through statute, policy and regulation, to protecting the 
natural resources it manages. We completely respect and support 
that commitment.
    There are three main areas we think need improvement. 
First, we would like to see contract and permit terms that 
encourage a stable and viable business climate. To back country 
outfitters, this means reasonable term lengths for permits that 
will ensure business stability and encourage investment in a 
program. It means performance-based renewal preferences for 
operators that consistently comply and provide high-quality 
service. It means adequate notification of contract award and 
changes in procedures--something other testifiers have referred 
to--and it means reasonable fees.
    By way of example, late last year the agency proposed new 
regulations regarding small commercial use authorizations. 
These are not concessions, per se, but they are authorized 
under the '98 Act. As proposed, the rule will allocate use by 
selecting small commercial operators on a random basis, 
assigning 2-year terms and offering no preference for renewal 
to incumbents. Given the investment that organizations like 
NOLS make to establish a program, this would be a nearly 
impossible environment for us to work in. We wouldn't invest 
resources to run a program that we weren't sure could persist 
past 2 years.
    We suggested an alternative to agency concession staff that 
involves a performance-based renewal system. Performance-based 
renewal will reward operators for the right reasons--because 
they meet and maintain high service and permit standards. It 
will encourage outfitters to continue to improve, to consider 
the impact of their operation on the resource, and to be 
accountable.
    The agency has heard our concerns, as Mr. Jones referred to 
earlier, and has invited us to participate in a stake-holder's 
working group to reevaluate this commercial use authorization 
rule. We appreciate that invitation and we look forward to 
working with the agency on that.
    Second on our list if things we would like to see change is 
the issue of program consistency. In the 20 units in which NOLS 
operates, our use is generally similar in type and scope. Even 
so, from park to park we face a pretty wide variety of permit 
mechanisms. Because of significant differences in individual 
park procedures, our field staff manage each park separately 
regarding permits, payment of fees, operating procedures, and 
reporting. We think there are more efficient ways to go about 
doing that.
    Another consistency issue relates to how the agency 
determines whether to award a concession contract or a 
commercial use authorization. We have a tendency to have some 
of each and the program is not always clear about when which 
tool is appropriate. The statute specifies criteria, but the 
regulations seem to leave the ultimate decision to the park. We 
would like to better understand the basis for the decision and 
we would certainly like to hold more concession agreements.
    Finally, on the consistency topic is an issue that has 
plagued the concessions program for some time, and that is the 
treatment of nonprofit operators. Neither the '98 Act nor the 
final rule on concessions address this topic in adequate 
detail, but we are pleased to see that the recently proposed 
commercial use authorization rule, though it has some issues, 
begins to deal more directly with nonprofits. We look forward 
to clarifying that.
    Finally, I will speak briefly on fee structures. I want to 
be clear that we do not object to reasonable fees. We have paid 
fees for many years and we agree that fees should provide the 
agency with a fair return for the privilege of operating in 
parks. However, there are three things we would like to see 
changed regarding fees.
    We would like to see the agency discourage fee bidding. We 
would like to see the agency minimize the layering of fees that 
was referred to earlier. And we would like to see fees kept in 
the field, to see that they be used to supplement rather than 
supplant congressional appropriations.
    We feel strongly that the agency should avoid resorting to 
a system based on competitive fee bidding. While such a system 
may benefit agency revenue, it is contrary, we think, to the 
language in the Act and, in the end, would be harmful to the 
resource and to operators.
    We experience a plethora of fee structures and layers. In 
some parks, we pay an application fee and an annual fee for 
access. In others, we pay an application fee, a monitoring fee, 
a per-person special use fee, and a park entrance fee, just to 
name some of the varieties. The sum of fee layers within each 
park generally amounts to about three to 6 percent of our park-
based revenue. At one park, however, I know that Outward Bound 
pays roughly 12 percent of its revenue after all the layers are 
consolidated. We ask that the agency to adopt a standard 
approach to fees that will minimize this kind of layering and 
will consider the cumulative fee burden that's associated with 
each permit. Perhaps a fee cap is warranted in some cases.
    I appreciate the opportunity to be here today. NOLS deeply 
appreciates the partnership we have built and continue to build 
with the Park Service. I look forward to answering your 
questions at the end of the panel.
    [The prepared statement of Ms. Lamb follows:]

 Statement of Jennifer Lamb, Public Policy Director, National Outdoor 
                           Leadership School

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to address the Subcommittee this afternoon regarding 
concessions management in the National Park Service (NPS).
    The National Outdoor Leadership School (NOLS) is a non-profit 
education institution that teaches outdoor skills and leadership to 
more than 8,800 students each year. Founded in 1965 and headquartered 
in Lander, Wyoming, NOLS employs more than 800 instructors and staff at 
nine branches and two professional institutes worldwide. NOLS' mission 
is to be the leading source and teacher of wilderness skills and 
leadership that serve people and the environment.
    I speak to you today as a wilderness educator, but also as an 
outfitter--NOLS, like its partner organization, Outward Bound, is a 
permitted, fee-paying, commercial operator on public lands. In 
comparison to others you have heard from today, we are a smaller, non-
profit, backcountry educator. It is this perspective that I would like 
to share with you. I will offer our experience with concessions 
management, placing some emphasis on the aspect of the regulations that 
we deal with most closely as a smaller operator, commercial use 
authorizations.
    For more than 35 years, NOLS has invested in a strong working 
relationship and effective partnership with the NPS, and we are pleased 
to have the opportunity to assist with improving and refining the 
concessions program. NOLS has considerable experience working with the 
agency and with its wide array of permit systems, policies and 
procedures. We hold three concession agreements and 18 Incidental 
Business Permits to operate in 20 parks.
    Overall, we believe that there is much about the concessions 
program that is working well. Other aspects need improvement. On the 
positive side, we highlight the following:
     The NPS has demonstrated a willingness to work in 
partnership with organizations like NOLS to bring high-quality 
education programs to park visitors.
     The agency is making progress on establishing guidance 
for the authorization of small commercial operators, including non-
profit organizations.
     The agency has remained committed, through statute, 
policy and regulation, to protecting the natural resources they are 
charged with managing. We respect and support that commitment and 
encourage the agency to continue to place the highest priority on the 
health of the resource.
    What needs to change? Having been involved with the evolution of 
the agency's concession program for many years, NOLS has experienced 
directly the effects of a system that lacks procedural consistency and 
clarity and does not yet place a high enough priority on creating a 
positive business climate for its commercial partners. We know that the 
NPS seeks to address these concerns and hope that our comments provide 
constructive feedback and suggestions for improvement of the program.
    Our specific comments are summarized in the following five points:
     Procedural consistency and clarity
     Stewardship and partnership incentives
     Viable business climate
     Commercial use authorizations
     Fees

1. Consistency and clarity
    In the 20 units in which we operate, NOLS' use is generally similar 
in type and scope. Even so, from park to park, a wide variety of permit 
mechanisms and procedures are applied to our use. Because of 
significant differences in individual park procedures, our field staff 
monitor and manage each park separately regarding permits, payment of 
fees, operating procedures and reporting. In some cases, this makes 
sense; for example, it is logical that specific operating procedures 
for mountaineering activity in Grand Teton National Park would differ 
from those related to water travel in Dinosaur National Monument. In 
other instances, it amounts to unnecessary expenditure of time for both 
NOLS and the agency.
    Historically, concession agreements have been granted for larger-
scale activities that occur within park boundaries, while Incidental 
Business Permits (IBP) were issued on a short-term basis to smaller 
operations that pass through a park. In NOLS' experience, however, and 
in the language of the Concessions Contracts final rule, the 
delineation remains unclear. The language in Section 51.17 of the rule, 
``necessary and appropriate'', seems to be the only guidance provided 
for determining, within each park, whether a concession agreement or an 
IBP is the appropriate management tool. Both NOLS and Outward Bound 
have held concession agreements for many years and would like to 
continue to do so.
    The confusion between the two permit mechanisms continues in the 
recently proposed rule regarding Commercial Use Authorizations (CUA), 
which is authorized by the 1998 National Parks Omnibus Management Act 
and will replace the existing IBP system. The proposed CUA rule, 
published in the Federal Register on November 27, 2002, states that, 
``Concession contracts may be issued to authorize the provision of 
services to visitors rather than a commercial use authorization even 
though the proposed services may be suitable to authorization under a 
commercial use authorization.'' NOLS assumes that this leaves the 
discretion to the park superintendent--the park defines which permit 
mechanism is appropriate given its mission. While we generally support 
this kind of local decision making, in this situation, it can lead to 
inconsistency in implementation across the agency and confusion for 
commercial operators trying to understand and comply with the system.
    An issue that has plagued the concessions program for some time is 
the treatment of non-profit organizations. Neither the 1998 Act nor the 
final rule on concessions addressed this topic in adequate detail. We 
are pleased that the recently released proposed CUA rule begins to deal 
more specifically with this issue. There remain some gaps and concerns 
regarding non-profit management that we addressed in our comments on 
the proposed CUA rule. These comments are included with this testimony 
as Appendix A. We look forward to continuing to work with the agency on 
the question of non-profit management.

2. Performance incentives
    We strongly encourage the NPS not to overlook the capability of 
wilderness educators and outfitters and guides to contribute to the 
protection of park resources and the fulfillment of the agency's 
mission. By establishing permit mechanisms that reward good performance 
and encourage partnership, the agency can provide operators with the 
incentive to offer programs that are compatible with park objectives.
    NOLS has experienced significant positive outcomes for both our 
students and the agency in parks where we have been able to engage land 
managers in a partnership. For example, each year in Dinosaur National 
Monument, Park Biologists meet with our students to talk about the 
issue of invasive species management--a significant issue along the 
Green River corridor. Students then participate in weed eradication 
projects--hands-on learning about stewardship that offers them valuable 
experience while providing a benefit to the resource and park 
management. These relationships encourage our continued investment in 
the park and offer great rewards both to our students and to other park 
visitors.
    We recommend that the agency identify and promote commercial 
operators who demonstrate a commitment to:
     Team with the agency to provide high-quality visitor 
services and protect the resource.
     Team with the agency to provide educational and 
interpretive services.
     Team with the agency to develop programs that meet park 
objectives regarding visitor diversity.
     Provide a reasonable return to the agency.
    The concessions program should create incentives for sound resource 
management and stewardship. Incorporation of resource protection and 
visitor education and diversity elements in performance standards will 
establish permittees as partners in ensuring the future health of the 
resource.
    Permitted wilderness educators such as NOLS and Outward Bound 
provide a valuable service to the public. Our education programs are of 
the highest quality in the country. We set the industry standard for 
both Leave No Trace technique and visitor safety in the backcountry. We 
raise and spend hundreds of thousands of dollars each year to expand 
the cultural diversity of our student population. We work as partners 
with the NPS and are committed to resource protection. We encourage the 
agency to promote a culture that recognizes permittees as legitimate 
partners in achieving agency objectives and providing visitors with 
great opportunities to enjoy the outdoors.

3. Viable business climate
    In order to promote and support healthy partnerships and good 
visitor service, the concessions program must recognize the commercial 
operator's need for a stable and viable business climate. Components of 
a program that will support healthy operators in the parks include:
     Reasonable terms for permits that will ensure business 
stability and planning,
     Performance-based renewal preferences for operators that 
consistently provide high-quality service and are responsive to the 
agency,
     Adequate notification of permit award and changes in 
permit procedures, and
     Reasonable fees.
    The concessions regulations stipulate a standard term of ten years 
for concession contracts, with deviation from that term to be 
determined by the Director or an authorized representative. This term 
adequately acknowledges a concessionaire's need for time to make long-
term investments in a park.
    Not all agreements are managed this way, however. In many cases, 
this makes sense, since the vast majority of commercial operators do 
not make large capital investments in parks or have significant 
possessory interest. Nonetheless, an adequate term is critical. One of 
NOLS' concession permits is renewed every ten years--an optimal term in 
our opinion--while the others are currently reviewed on an annual 
basis. All of our Incidental Business Permits are awarded for a period 
of one or two years. I will address this issue, along with performance-
based renewal, in the following section regarding Commercial Use 
Authorizations.
    To maintain high-quality visitor programs, commercial operators 
need adequate notice regarding the issuance of prospectuses and the 
final decision to award an agreement. Ideally, a prospectus would be 
issued at least 16 months in advance of the expected start date and 
award would occur nine to 12 months in advance. In some cases, the 
permit award happens only weeks or days prior to the start of an 
operator's program. Adequate timing respects the need for operators to 
plan, advertise, enroll courses, develop curriculum, engage instructors 
and define logistics that will ensure a safe and high-quality program.

4. Commercial use authorizations
    Historically, the concessions reform discussion has focused on the 
large concessions contracts that provide hospitality-based services in 
the parks. In reality, the vast majority of commercial operations are 
small, often family-owned businesses governed by the Incidental 
Business Permit system that issues short-term permits with no 
Congressional authority. In previous testimony, both NOLS and Outward 
Bound have expressed concern that the 1998 Act and ensuing concession 
regulations do not address adequately the agency's authorization of 
small commercial operators.
    As a result, we are very glad to see that the agency is now making 
progress on this topic through the creation of guidance for issuing 
Commercial Use Authorizations (CUAs), which are designed to replace the 
IBP system. On November 27, 2002, the NPS released a proposed rule 
under Section 418 of the 1998 Act and requested public comment. Along 
with many others, NOLS evaluated the rule and submitted written 
feedback to the agency (please see Appendix A). We have since learned 
that the agency will soon form a working group of stakeholders to help 
shape the final regulation. We look forward to working with the NPS as 
part of this group.
    While it is not appropriate to repeat the detail of our comments on 
the proposed CUA rule here, I will highlight two primary concerns that 
relate directly to this testimony.
     Permit term and the random selection of small commercial 
operators
    This issue relates to the question discussed earlier in this 
testimony of maintaining a viable business climate for commercial 
operators. The proposed CUA rule provides the Director with the 
authority to limit the number of CUAs issued for a particular type of 
service. As proposed, permit award will be accomplished by random 
selection and incumbent holders will have no right or preference for 
renewal. NOLS supports use allocation for the purpose of resource 
protection and we appreciate the difficulty the agency faces in 
developing a system for allocating commercial use that attains its goal 
of protecting the resource while being equitable and encouraging 
investment in high-quality programs. However, a system, such as the 
proposed rule, that combines random selection of CUA holders with a 
short, two-year term and no renewal preference will strongly discourage 
smaller commercial operators or non-profit educators like NOLS.
    NOLS invests a substantial amount of time developing education and 
wilderness skills programs that are specific to the unique 
characteristics of a park unit or geographical area. Development of a 
program involves considerable research, site visits, and building 
relationships with local land managers who often help us design and 
implement volunteer service projects for our students inside the park. 
We are reticent to go to these lengths when we are uncertain that the 
program will continue for more than two years. The combination of the 
three factors for managing CUAs as proposed--random selection, no right 
of renewal, and a two-year term--gave us cause for great concern, which 
we expressed directly to the NPS concessions program staff. They heard 
our concerns and have offered us an opportunity to be involved in 
discussions to re-evaluate the rule.
     Performance-based incentives
    As an alternative to a system that offers no renewal preference for 
CUA holders, NOLS encouraged the agency to adopt a performance-based 
renewal system that rewards operators who meet and maintain high 
service and permit standards. We believe that such a system will 
encourage outfitters to continue to learn, to consider the impact of 
their operation on the resource, to be accountable, and to establish 
good working relationships with park managers. It rewards commercial 
operators for the right reasons. Though it would undoubtedly introduce 
some additional administrative burden, we believe that a performance-
based permit renewal system, would best serve the public, the resource, 
the agencies and commercial operators.
    As mentioned earlier, NOLS is pleased that the NPS has begun the 
process of defining guidance for the management of small commercial 
operators. This development fills a critical gap in the concession 
regulations. We look forward to assisting with the effort.

5. Fees
    In the past, both NOLS and Outward Bound have provided testimony on 
the topic of fees for concessions. Our comments today remain consistent 
with past testimony and are summarized in the following four brief 
statements.
     Fees should provide a fair return for the privilege of 
operating in the parks
    NOLS does not object to paying reasonable fees for the opportunity 
to teach students in the national parks. We have paid fees for more 
than 35 years and support the agency's goal of earning a fair return 
from commercial operators. That said, we also support the stipulation 
in Section 51.17 of the concessions regulations that ``consideration of 
revenue to the United States will be subordinate to the objectives of 
protecting, conserving and preserving resources of the park area and of 
providing necessary and appropriate visitor services to the public at 
reasonable rates.''
    We feel strongly that the agency should avoid resorting to a system 
based on competitive fee bidding. While such a system may benefit 
agency revenue, it is contrary to the regulation language above and, in 
the long term, would likely be harmful to the resource and to small 
commercial and non-profit educational operators.
     Fees should be consistent
    As mentioned earlier in this testimony, NOLS is accustomed to a 
wide variety of permit terms and procedures across the 20 parks in 
which we operate. Fee terms are no exception. In Dinosaur National 
Monument, for example, we pay three percent of our gross revenue earned 
within the park under our concession agreement each year. In Grand 
Teton, we pay ten percent of gross revenue for a concession agreement. 
Our IBP fees range from an annual fee of $300 in Glen Canyon National 
Recreation Area to three percent of gross revenue in Olympic National 
Park, which, in 2002, amounted to $6,600 for that park alone.
    In addition to the variance in fee amounts, we experience a 
plethora of fee structures. In some parks, we pay an application fee 
and a base fee for access, while in others, our fee burden is multi-
faceted and open-ended. In Mount Rainier National Park for example, we 
pay an application fee, a monitoring fee, a per-person special use fee 
and a park entrance fee.
    Generally the sum of fee layers within each park amounts to three 
to six percent of our park-based revenue. At one park in Colorado, 
however, Outward Bound pays 12 percent of its revenue after all the fee 
layers are consolidated. Depending upon what happens to fees over time, 
the cumulative impact of such layered fees could become substantial.
    We encourage the agency to consider a standard approach to fees 
that will minimize layering, consider the cumulative fee burden for 
each permit, and make the system easier to understand, implement and 
comply with.
     Fees should be clearly defined in advance
    When finalized, the CUA rule will grant the NPS full legal 
authority to implement the CUA system, including greater flexibility, 
more control, and the ability to collect more in fees than the current 
IBP system allows.
    NOLS supports the codification of the system. We also support the 
agency's objective to charge a ``reasonable'' fee for commercial use. 
We have asked, however, that the agency carefully consider the 
potential impact of a fee increase, and that ample notification be 
provided so that permittees know what kind of an increase to expect and 
when to expect it. Because NOLS holds permits in so many units of the 
park system, an increase in fees, depending upon its size, may have a 
significant impact on our operation and its financial picture. As a 
non-profit educational institution, we struggle to keep our tuition 
affordable to a diverse group of students--any cost increases that we 
incur must be passed on to them. We ask the agency to consider placing 
a cap on the amount of fees, whether it be a set dollar amount or 
percentage-based fee.
    The proposed CUA rule states that the fee for a CUA ``may also 
include the costs for the maintenance and repair of park area resources 
impacted by the holder's activities.'' Without further definition, this 
statement seems unreasonably open ended. NOLS recommends that CUA 
agreements clearly define expectations and performance standards and 
that any potential impacts and remediation requirements be identified 
at the start of the permit term. Ideally, the NPS and the operator will 
communicate with regularity to ensure that both sides are satisfied 
with the expectations and performance of the operator.
     Fees should supplement rather than supplant adequate 
congressional appropriations for parks and should be retained in the 
field
    The proposed CUA rule states that all fees paid for CUAs will be 
expended in the park where collected to pay for management and 
administrative costs associated with CUAs. Under the premise that the 
primary purpose of a fee is to generate funds for maintaining the 
quality of the natural resource, NOLS supports a fee system that keeps 
revenues in the units that generate them rather than returning income 
to the general treasury.
    In closing, we reiterate that effective and efficient concessions 
management should work to strengthen relationships and partnerships by 
recognizing and sustaining the highest quality visitor services while 
preserving the resource for the future. We encourage the NPS to strive 
for high-quality visitor services through incentives and performance-
based permit management.
    The Concessions Management Act states that, ``The National Park 
Service shall utilize and encourage concessions to play an essential 
role to protect park resources and provide for their enjoyment.'' This 
language clearly portrays the intent of Congress to include commercial 
operators in fulfilling the agency mission. As an educator, commercial 
operator, and agency partner, NOLS appreciates and supports this 
philosophy.
    Thank you for this opportunity. NOLS appreciates deeply the 
partnership we have built and continue to build with the Park Service. 
We look forward to working with the agency to further define and 
enhance the concessions program.
                                 ______
                                 

                               APPENDIX A

January 22, 2003

Cynthia Orlando
Concessions Program Manager
National Park Service
1849 C Street, NW
Washington, DC 20240

Via Email: [email protected]

Dear Ms. Orlando,

    I am writing on behalf of the National Outdoor Leadership School 
(NOLS) in response to the National Park Service's (NPS) request for 
comments on the proposed rule to establish regulations concerning 
commercial use authorizations as outlined in the Federal Register (RIN 
1024-AC85).
    NOLS is a non-profit organization that teaches outdoor skills, 
leadership and environmental ethics to 9,000 students each year. 
Founded in 1965 and headquartered in Lander, Wyoming, NOLS employs more 
than 800 instructors and staff at nine locations and two professional 
institutes worldwide. Our annual revenues exceed $19 million. NOLS' 
mission is to be the leading source and teacher of wilderness skills 
and leadership that serve people and the environment. The core of our 
educational programs includes extended backcountry expeditions of 28 to 
93 days in length.
    In the U.S., NOLS is a permitted commercial operator in 21 National 
Parks and Preserves. Three of these agreements are concession contracts 
(Grand Teton National Park, Denali National Park and Dinosaur National 
Monument). The balance of our agreements with the agency are Incidental 
Business Permits (IBPs). We have held many of these agreements for 
several decades. As a result, our program management staff has 
considerable experience working with NPS permitting and fee operations.
    NOLS has worked closely with the agency's existing IBP system. 
Apart from some inconsistencies and layering of fees that cause 
periodic confusion, we believe this system has worked well for us. The 
Federal Register states that the proposed rule generally codifies the 
requirements of the IBP system under the Commercial Use Authorization 
(CUA) title. While this is true in some ways, we believe there are 
several significant changes described in the proposed rule that we 
would like to clarify. They are listed below with reference to the 
relevant sections of the Federal Register.

Concession agreement versus CUA
    Section 52.1 states that the Director may at any time choose to 
issue a concession contract, even though the proposed services may be 
subject to authorization under a CUA. Under what circumstances might an 
operator, whose services are appropriate for a CUA, be managed as a 
concession? We find the language in the proposal, as well as the 
language in the Concessions Contracts Final Rule (36 CFR Part 51), 
regarding the differences between concessions and CUAs to be somewhat 
confusing.
Commercial Use Authorizations for non profits
    Section 52.7 of the proposed rule explains clearly that non-profit 
organizations, unless otherwise authorized, must obtain a CUA in order 
to conduct visitor-related activities in a park. NOLS fully supports 
the agency's desire to establish agreements with all groups operating 
within park areas, non-profits included. As a 501(c) 3 organization, we 
have held permits for more than 35 years and we believe that permits 
establish an important relationship between operators and land managers 
that is critical to the stability of the operator's service and the 
protection of the resource.
    Within the structure of the proposed CUA system, however, it is 
unclear whether an organization like NOLS would be managed with an 
incidental activity CUA or a Special Park Use permit. It appears as 
though the distinction is based upon whether the operator earns taxable 
income. NOLS derives a very small portion of income from the sale of 
gear to our students. This income is taxable. However, in several 
recent conversations with NPS staff members, in the field and in the 
Washington office, we have learned that this income, because it is not 
pertinent to the activities covered by our permits, would not be 
relevant. We would therefore fall into the Special Park Use category. 
It would be helpful if the final rule could better clarify the 
distinction between these two permit tools.

Permit term and the random selection of commercial operators
    Section 52.13 states that if the Director chooses to limit the 
number of CUAs issued for a particular type of service, the issuance 
will be accomplished by random selection and incumbent holders will 
have no right or preference. We appreciate the difficulty the agency 
faces in developing a system for allocating commercial use that attains 
its goal of protecting the resource while being equitable and 
encouraging investment in high-quality programs and services. We prefer 
a system based on random issuance to one that relies on a competitive 
bidding process. However, a system, such as the proposed rule, that 
combines random selection of CUA holders with a short two-year term and 
no renewal preference will likely discourage smaller commercial or non-
profit operators like NOLS.
    NOLS invests a substantial amount of time developing education and 
wilderness skills programs that are specific to the unique 
characteristics of a park unit or geographical area. Development of a 
program involves considerable research, site visits, and building 
relationships with local land managers who often help us design and 
implement volunteer service projects for our students inside the park. 
We are reticent to go to these lengths when we are uncertain that the 
program will continue for more than two years. The combination of the 
three factors for managing CUAs as proposed in this rule--random 
selection, no right of renewal, and a two-year term--gives us cause for 
great concern. One of the three factors would need to be modified for 
us to comfortably support this rule. For example, lengthen the permit 
term or offer performance-based renewal opportunities to incumbent 
permittees, described in the following paragraph.
    As an alternative to a system that offers no renewal preference for 
CUA holders, we encourage the agency to consider a performance-based 
renewal system that rewards operators that meet and maintain high 
service and permit standards. Such a system will encourage outfitters 
to continue to learn, to consider the impact of their operation on the 
resource, to be accountable and to establish good working relationships 
with land managers. It rewards commercial operators for the right 
reasons. Though it would undoubtedly introduce some additional 
administrative burden, we believe that a performance-based permit 
renewal system, would best serve the public, the resource, the agencies 
and the commercial operators.

Permit fees
    a) Fee authority: This rule, when finalized, will grant the NPS 
full legal authority to implement the CUA system. This authority will 
give the agency greater flexibility, more control, and the ability to 
collect more in fees than the IBP system currently allows.
    NOLS supports the codification of the system. We also support the 
agency's objective to charge a ``reasonable'' fee for commercial use. 
We ask, however, that the agency carefully consider the potential 
impact of a fee increase, and that ample notification be provided so 
that permittees know what kind of an increase to expect and when to 
expect it. Because NOLS holds permits in so many units of the park 
system, an increase in fees, depending upon its size, may have a 
significant impact on our operation and its financial picture. As a 
non-profit educational institution, we struggle to keep our tuition 
affordable to a diverse group of students--any cost increases that we 
incur must be passed on to them. We ask the agency to consider placing 
a cap on the amount of the fee, whether it be a set dollar amount or 
percentage-based.
    b) Impact fees: Section 52.16 states that the fee for a CUA ``may 
also include the costs for the maintenance and repair of park area 
resources impacted by the holder's activities.'' Without further 
definition, this statement seems unreasonably open ended. NOLS 
recommends that CUA agreements clearly define expectations and 
performance standards and that any potential impacts and remediation 
requirements be identified at the start of the permit term. Ideally, 
the NPS and the operator will communicate with regularity to ensure 
that both sides are satisfied with the expectations and performance of 
the operator.
    c) Fee consistency: While most parks follow the IBP structure of 
charging operators an application fee, a management fee and a 
monitoring fee, we hold some agreements that charge based on a 
percentage of our gross earnings within the park. For example, NOLS 
pays $300 each year for a permit to operate in the Glen Canyon National 
Recreation Area, but at Olympic National Park, we pay three percent of 
our gross operating revenue (in 2002, this amounted to $6,600). We 
encourage the agency to consider a standard approach to CUA fees to 
make the system easier to understand and comply with.
    On the whole, the structure of fees and the efficiency and ease of 
working with the system is more important than the actual amount of the 
fee, assuming that the fees are reasonable and we know what to expect 
in advance of the charge.
    d) Fee retention: Section 52.17 states that all fees paid for CUAs 
will be expended in the park where collected to pay for management and 
administrative costs associated with CUAs. Under the premise that the 
primary purpose of a fee is to generate funds for maintaining the 
quality of the natural resource, NOLS supports a fee system that keeps 
revenues in the units that generate them rather than returning income 
to the general treasury.
Simplifying the system
    As expressed in point number two above, we are confused about the 
difference between a CUA for non-profit operators and a Special Park 
Use Permit. This leads us to think that perhaps both the agency and 
operators would be better served by a simpler system that involves one 
type of permit rather than two. For example, could a lower-fee or non-
fee CUA for non-profit organizations take the place of the Special Park 
Use permit?
    Thank you very much for the opportunity to help refine the agency's 
permit regulations. We hope that our input is helpful. If you have any 
questions or need additional information, please contact me at the 
number below.

Best regards,

Jennifer Lamb
Public Policy Director
(307) 335-2262
[email protected]
                                 ______
                                 
    Mrs. Cubin. Thank you.
    I would now like to recognize Mr. Philip Voorhees, vice 
president, Park Funding and Management, National Parks 
Conservation Association, Washington, D.C.
    Mr. Voorhees.

 STATEMENT OF PHILIP H. VOORHEES, VICE PRESIDENT, PARK FUNDING 
    AND MANAGEMENT, NATIONAL PARKS CONSERVATION ASSOCIATION

    Mr. Voorhees. Thank you very much.
    You have my written comments. I'll be substantially briefer 
than the others today. There are only a few key points that I 
think I would like to make here.
    Specifically, NPCA has been involved in the issue of 
concessions for more than a generation, literally since 
Congress, I think, began considering problems that were 
emerging in the management and operation of concessions way 
back in the 1970's. I am happy to say that, although it's an 
extremely complex climate to try to manage, in that concessions 
operations in the parks are in many respects unique subaspects 
or a subset of the hospitality industry, that an awful lot of 
progress is now being made.
    The first step in making the change toward good productive 
progress I think was the passage of the 1998 Act, which opened 
the door to competition that was referenced earlier in the 
testimony.
    The second step, though, is a more complex step to be able 
to take, and that deals specifically with the capacity of the 
Park Service to manage the program itself. Changing the law and 
implementing regulations that are responsive, that I think 
generally they are, in one thing. Trying to bring the 
bureaucracy up to task in ably managing the program under its 
responsibility is another.
    I am very pleased to say, though, that although it has 
taken a fair amount of time, 5 years now, to be able to bring 
the program up to where it needs to be, the concessions program 
of the Park Service, an awful lot of very strong progress is 
being made. In the past, part of the problem in dealing with 
concessions, which I think is the basis of some of the comments 
earlier today, has been the ability of the Park Service to be 
truly responsive to the concerns of the concessioners.
    It's a very fair point. They are now in a position where 
they are hiring outside counsel on a variety of different areas 
that bring their level of understanding of what the real needs 
of concessioners and real issues are at hand to a completely 
different level than they've had before.
    I sit on the National Park's Concessions Management 
Advisory Board, although I'm testifying for the National Parks 
Conservation Association today. I will say, though, that in 
that venue, I have been extremely pleased with the level of 
discussions and interchange between concessioners expressing 
their concerns, the advice that's being provided in response to 
those concerns to the Park Service from PricewaterhouseCoopers 
and other consultants, and the general discussion in the room 
about what the real issues are and how to deal with them. There 
is a lot more openness, there is a lot more flexibility that's 
being expressed than I think was possible more than 5 years ago 
before the law passed.
    My point really here to make is that I think, overall, the 
law is working very well. The regulations, though cumbersome, 
and subject to some further interpretation, are working well as 
well. It is another 4 years, I think, before it may be time to 
reconsider Leasehold Surrender Interest and a variety of other 
issues that might be at hand for the regulations and for the 
law, since that's the time clock that was set by Congress 5 
years ago when it passed the law.
    I would urge this Committee to wait until that time is up. 
This is a learning process for the Park Service. I think in 
large measure it's a learning process for the concessioners 
involved, working their way into fairly complex new territory. 
But in light of all that, there really is a spirit of 
partnership that is reemerging that I haven't seen for quite a 
long time. Prior to the law's passage, many parties were at 
loggerheads, and many of the positions were highly political. I 
don't believe that that's true at all any longer. And I'm glad 
to see it. The conversations are much more substantive, they're 
based on thoughtful problems and gray areas that clearly need 
to be addressed.
    I think with the spirit of partnership, with the kind of 
structure that's provided by the advisory board and other side 
conversations that are actively happening all the time, a lot 
of the gray area issues can be easily resolved without 
reopening the regulations, and especially reopening the law.
    That's all I have to say. Thank you.
    [The prepared statement of Mr. Voorhees follows:]

    Statement of Philip H. Voorhees, Vice President, Park Funding & 
          Management, National Parks Conservation Association

    Mr. Chairman, and members of the Subcommittee, my name is Phil 
Voorhees. I represent the National Parks Conservation Association 
(NPCA). I also serve as a member of the National Park Service 
Concessions Management Advisory Board. NPCA is America's only private, 
nonprofit advocacy organization dedicated solely to protecting, 
preserving, and enhancing the National Park System. NPCA was founded in 
1919 and today has approximately 300,000 members.
    I am pleased to offer testimony today that reflects NPCA's view 
that very substantial progress is being made by the National Park 
Service in the area of concessions management. For many years, NPCA has 
been a strong advocate of ensuring that concessioners operating within 
the national park system do so in a manner that reflects standard 
industry practices in state parks, local parks and within the 
hospitality industry in general. The road to ensuring this has been 
long and involved and the agency has not finished its work as yet, but 
very substantial progress is clear. Many concessioners are welcoming 
the transition from a broken system to a more normal business-like 
partnership with the NPS

Points of Progress Since 1998
    Five years ago, Congress passed into law the Omnibus Parks Act (PL 
105-391) that encapsulated significant changes for the management of 
concessions in national parks. Prior to passage, concessions were 
operated on a substantially non-competitive basis. As evidence of this, 
according to an analysis performed by NPS in the mid-1990s, from 1963 
to 1993, only seven of the approximately 1,900 contracts executed were 
awarded to businesses that competed against the incumbent concessioner. 
Also, prior to 1998, the small amount of franchise fees generated by 
the concessions program were deposited in the general Treasury instead 
of contributing to the upkeep of the parks. Finally, the former law 
provided concessioners with an opportunity to capture a significant 
increase in value in the buildings and structures built by 
concessioners, resulting almost entirely from Federal investments in 
the parks themselves and simple increases in tourism unrelated to the 
performance of the concessioners. As a result of the 1998 reforms, 
parks are now able to retain concessions fees, concessions contract 
opportunities are generating substantial competition, and ``blue sky 
value'' once afforded concessioner-built structures is being more 
closely controlled. These changes are both good for the visitor and 
good for the taxpayer.
    With the passage of Omnibus Parks Act, however, another problem 
emerged that was hidden by the old concessions law. Passage of the new 
law meant that the Park Service had to work harder to produce strong 
financially feasible concessions bid proposals and manage the daily 
operations of concessioners. For the past five years, the Park Service 
concessions program has struggled to operate in a more effective, 
professional and responsive manner. To the agency's great credit, they 
have supported the goal of professionalization at all levels and have 
allocated the resources to contract with PricewaterhouseCoopers to 
provide generalized support, training and contract analysis. The agency 
has openly explored best practice models of concessions management in 
the military and the general hospitality industry, has developed a 
comprehensive training program with Northern Arizona University, and 
has responded to a broad variety of recommendations for improvement 
made by the Concessions Management Advisory Board. Without the personal 
support of former director Bob Stanton, and especially Director Fran 
Mainella, the Service would not be making the strong, steady progress 
that it is today.

Issues Remaining to be Addressed
    Beyond the particulars of concessions reform enacted by the 105th 
Congress, the law was developed with the understanding and goal that 
the Park Service and the concessioners would need to operate on a level 
playing field if visitors and taxpayers were to receive high quality 
service at reasonable cost. The law put in place many of the critical 
changes to make that possible. Unfortunately, it takes time for a 
system so far out of balance to find itself again in equilibrium. And 
it takes patience on the part of all parties to allow for the kind of 
professional trust that is necessary for business-based partnerships to 
reestablish themselves. Thus far, to its credit, Congress has been 
patient. Concessioners have been generally patient with improvements 
making their way through the concessions management program. And 
concessions staff have been patient with complications involved in 
moving change through a complex bureaucracy. Slowly, steadily, the 
agency is putting in place an effective and fair concessioner 
performance evaluation system, a uniform rate approval process, a core 
menu concept and other improvements. Many of the changes, like the core 
menu concept, are designed to reduce bureaucracy and improve 
concessioners' operating flexibility. Slowly, professional trust and 
the spirit of partnership is reemerging, in pace with the improvement 
in the professional capacity of the concessions program itself.

Encouraging the Process of Continuous Improvement
    After five years and counting, improvements in the management of 
concessions in national parks are well on their way. The 1998 law is a 
very significant improvement over the preceding 1965 Concessions Policy 
Act. Regulations designed to realize the intent of the law were 
drafted, reviewed and finalized. They are lengthy and--like nearly all 
regulations--imperfect. But they are a sufficient base for steering the 
concessions program in the correct direction: toward better visitor 
service, fair and vigorous competition for concessions contracts, 
improved ability to maintain the substantial asset base of concessions 
structures, and most important, toward a kind of business equilibrium 
between concessioner and concessions manager that will rebuild the 
spirit of partnership and benefit all concerned.
    Some concessioners have asserted that the regulations resulting 
from the law are convoluted and in parts confusing. NPCA agrees. We 
disagree however, on the appropriate solution. Some have argued that 
the law must change to provide additional guidance or technical 
correction to various points of interpretation. Some have advocated 
that the regulations be reopened and amended to make more significant 
changes. Both avenues carry considerable complications and are 
unnecessary.
    The focus of complaint, it seems, is the treatment of Leasehold 
Surrender Interest, the law's replacement for Possessory Interest. In 
NPCA's view, changing the regulations in any way with regard to this 
structure would cause many more problems that it could solve. One 
unavoidable complication of reopening the regulations is further delay. 
While all parties have been patient with slow but steady progress in 
contracts management, reopening the regulations would have the 
inevitable result of stopping progress in its tracks while all wait for 
a new final rule to emerge. The delay could last two years, burning 
time that would be better spent building productive business 
partnerships and improving competition for contracts that benefit the 
visitor. In addition, it seems to make little sense to reopen the 
regulations on this issue especially. The Omnibus parks Act provides 
for reevaluation and reconsideration of the concept of Leasehold 
Surrender Interest nine years after enactment, or four years from now. 
If a reconsideration is to be made, it would seem prudent to wait the 
full nine years for the requisite base of experience with the current 
regulations to build as it pertains to Leasehold Surrender Interest.
    The National Park Service has repeatedly demonstrated its 
willingness to hear all points of view and consider reinterpretation of 
points of law, if that reinterpretation aligns with standard business 
practice outside the parks. In addition, the National Park Service 
Concessions Management Advisory Board was specifically designed to 
review and resolve complications and air concessioner concerns. Having 
met nearly a dozen times in five years, the Board makes a special point 
in each meeting to hear residual concessioner concerns and provide a 
forum for balanced discussion. Concessioner concerns are being heard, 
not ignored.
    The most appropriate solution for continued concessioner 
grievances, is continuation of the process that is already in place in 
the parks. In our view, the regulations need not be reopened at this 
time and the law certainly does not bear amendment. For changes in 
interpretation that result from discussion and evaluation of 
concessioner concerns, the agency has at its disposal Directors Orders 
that provide direction to field managers on how laws, regulations and 
other requirements must be followed. This is the correct venue for 
delivering guidance and direction to the field, not changes in the base 
law or regulation. To do otherwise would risk further upsetting the 
equilibrium in concessions management that is slowly but surely 
establishing itself to the benefit of the visitor, the taxpayer, the 
parks and the concessioners themselves.
                                 ______
                                 
    Mrs. Cubin. Thank you very much.
    I will begin the questioning with Mr. Todd. In your 
testimony you mentioned that you and many of your colleagues 
enjoy a better relationship with the Park Service than you had 
before. Could you elaborate on that? And when you said 
``before'', I assume you mean from the last administration?
    Mr. Todd. Correct. Actually, since the Bush administration 
with the appointment of Gale Norton and subsequently Fran 
Mainella. I think concessioners in general definitely see more 
willingness to revitalize the old partnership that used to 
exist between the two parties, the private sector and the 
public, to work out issues in a manner that's beneficial to 
both sides and a win-win situation. So Fran Mainella has 
definitely shown a very improved atmosphere for discussing 
topics and resolving problems than previously had been 
happening.
    Mrs. Cubin. I know the answer to this, but these are some 
questions that we just want to have on the record.
    Do you believe that the Park Service correctly interpreted 
the intent of Congress when it published its regulations on 
Leasehold Surrender Interest, and if not, why not?
    Mr. Todd. I guess the answer is no. I think the intent of 
Congress was to simply provide concessionaires a CPI return on 
dollars invested in capital improvements, in accordance with 
the same way the private sector determines capital investment 
via GAAP. I feel that the Park Service drafted regulations that 
dilute that intent and consequently dilute the amount of return 
to concessionaires for their investing of capital in the parks.
    Mrs. Cubin. Would you respond to Mr. Voorhees' proposal--
and if I word it incorrectly, please tell me--that rather than 
amending the law now, that we should sit with the regulations 
as they are for the next 4 years and then do a reauthorization 
in regular order?
    Mr. Todd. I know that if I wasn't an operator in the parks 
and didn't know what you have to experience and what kind of 
risk you have to take and make decisions, and if I was sitting 
in his shoes as someone who is not an operator, it's easy to 
say wait for 4 years. If you're the party making investments in 
the parks, now and in the next 4 years, and wondering if you're 
going to get a return on your investment as stipulated in the 
'98 Act, it's pretty hard to sit back and hope that, you know, 
you're treated fairly in the interim when, in fact, the 
regulations have diluted that mechanism in the law. So, to me, 
4 years is waiting way too long.
    With all the contracts that come out to bid between now and 
then, plus the ones that are already out, the newer contracts, 
for example, like I know that my company has signed, and others 
on the panel have signed, that's a lot of uncertainty during 
that next 4 years, wondering when you make million dollar 
investments, wondering whether you're going to get credit for 
them or not. So, to me, 4 years is too long to wait in an 
attempt to look at an issue that was, to me, improperly 
interpreted clear back in '98. We've already had 5 years pass 
since then, so I can't imagine waiting four more, a total of 9 
years, to fix something.
    Mrs. Cubin. Would each one of the rest of the panel respond 
to that as well?
    Mr. Fears. I think the process that the Director set up, 
this working group--and most of the panel here have attended 
the first two sessions--I think you can work through a lot of 
the issues that are in question. I know the 50 percent rule for 
leaseholder improvement, it is tough for private enterprise. 
But I think we can work through that issue.
    The reason it's tough, I can give you an example. If you 
have a 10-year contract and say you're at seven, you have a 
restaurant that you want to remodel--and it's more than just 
putting in equipment or changing menu boards; you have to move 
walls and the electrical--in year seven, if you put that 
investment in, you deserve to recoup more than 50 percent of 
that in the last 3 years. You definitely want to incentivize 
private business to invest in a park from day one until the end 
of your contract.
    Mrs. Cubin. So you would like us to amend the law now?
    Mr. Fears. I'm not saying amend the law. I think this 
working group that we're doing--I mean, that's one of the areas 
we're looking at. I think we have had a lot of great dialog to 
try to come up with some sort of conclusion to that.
    Mrs. Cubin. Mr. Woodside?
    Mr. Woodside. Yes, I would like to see some means derived 
to change the current proposal and not wait another 4 years. In 
our case, we're just beginning a new contract, but we were in 
the midst of a building improvement program when our last 
contract ended, and the new contract does not make provisions 
for continuing those building improvements. So right now it 
probably would be affected by the 50 percent rule. So what will 
happen is those improvements simply will not be made and I 
think the visitor will suffer because of that.
    Mrs. Cubin. Miss Lamb?
    Ms. Lamb. As a back country operator, NOLS' programs really 
don't delve into possessory interest in capital investments. As 
far as we're concerned, we see some positive things happening 
with the '98 Act, issuing regs, and now this development with 
commercial use authorizations. We would be comfortable waiting 
to see how things move.
    Mrs. Cubin. Thank you.
    Mr. Fears, is it your understanding from the regulations 
that the ability to utilize cross collateralization is 
dependent upon whether there's an associated LSI?
    Mr. Fears. Could you restate the question? I'm sorry.
    Mrs. Cubin. Sure. Is it your opinion that the regulations--
let me just read this. Is it your understanding from the 
regulations that the ability to utilize cross collateralization 
is dependent upon whether there is an associated LSI?
    Mr. Fears. I'm not sure if I quite understand the question.
    Mrs. Cubin. It's our understanding that they won't allow 
cross collateralization if LSI is involved. Is that a correct 
assumption or understanding?
    Mr. Fears. I'm still not sure I can answer your question.
    Mrs. Cubin. Can someone else on the panel?
    Mr. Todd. I think the progress that's been made so far is 
that the Park Service is willing to allow cross 
collateralization. It wouldn't always entirely be if you have 
LSI or not. You could have contracts that don't have LSI, but 
you still want to pledge those contracts as security on a loan 
to a lender.
    I think what you're getting at, though, I think the Park 
Service has made great strides in that, and the question now 
becomes how do you fix that. Is it via Director's order saying 
you can do that, or via a regulation change.
    Mrs. Cubin. OK. Thank you.
    Miss Lamb, do you believe the commercial use authorization 
proposed rule encourages long-term development for small 
commercial concerns and for nonprofits?
    Ms. Lamb. There is a piece of the rule, as proposed, that 
is counter to that, and that is the piece I spoke about in my 
oral testimony and written which has to do with a short, 2-year 
term assigned on a random basis to operators with no right of 
preference for renewal, which we now have under the incidental 
business permit system.
    I completely understand why the Park Service is going 
there, and I certainly support allocation of use, particularly 
in places where it's needed to protect the resource. But I do 
have some issues with no right of preference for operators who 
have shown commitment to the agency's programs and mission and 
who have provided high-quality service. So we have expressed 
that and, hopefully, we'll have an opportunity to delve into 
that when the working group is pulled together.
    Mrs. Cubin. Thank you.
    I would now like to recognize Mr. Souder for his 
questioning.
    Mr. Souder. Thank you. I wanted to make a couple of 
comments first.
    One, I think the biggest threat to concessionaires has been 
the hostility to concessionaires, visitation in particular, and 
a view that often they're the threat to the park, the visitors 
themselves.
    That said, as we work through this process of how to 
protect the parks and how best to serve the visitors, a couple 
of things jump out. I wrestle, as do Members of Congress, 
anybody who has visited the park, with this tradeoff. In other 
words, our responsibility isn't to benefit the concessionaires 
and to preserve people who have been there for a long time, who 
are from the local community. Quite frankly, our 
responsibility, point blank, is to provide the best service for 
the visitors.
    Since it's a socialist, in a sense, situation, not a 
capitalist situation, the government is now intervening to make 
decisions, and making the decisions based on visitor services. 
We tried to make bidding contracts more flexible and so on, but 
part of when you're in that kind of decision--because I've 
talked to many of the small contractors, too. The families that 
have been there for a long time; the continuity of service is 
of value; they're a proven performer. Part of it is their 
willingness to be invested in the park long term rather than 
just take the money out, and their willingness to investment 
their capital.
    The Delaware North Hamilton Stores type of debate at 
Yellowstone is a classic example. I mean, to be real blunt, I 
was there and you could see that Hamilton Stores were not 
providing the same services in what gifts they were offering 
and other things, and in a purely competitive environment, they 
probably would have been weakened. But it wasn't a purely 
competitive environment. On the other hand, they're one of the 
longest serving institutions in the Park Service, so how do we 
resolve those kinds of questions in this interim, as opposed to 
the real small type thing.
    Is it the goal here to protect the concessionaires, or is 
it to make sure that some of the services are updated, whether 
it be boat trips, riding, innovations, other things that are 
offered to consumers? Where this becomes a question, like 
everything else in society, the larger corporations are likely 
to be able to offer more things at a lower cost and better 
bids. Particularly with cross collateralization and other types 
of things, you can spread your costs more. That's a fact of 
life. We can only do so much protecting the smaller, and at the 
same time say that, oh, what about Wuksachi Lodge, which needs 
to stay open in the winter and you're not getting any guests 
there. You have to be able to spread your losses if you're 
going to do that type of thing.
    I wanted to follow up particularly with Mr. Todd on some of 
these difficult questions, like the Flamingo Lodge at 
Everglades and Stovepipe Wells. Because this is what would 
happen normally in the private sector, do you see that we may 
have to get in a situation--because in these parks there's a 
proliferation of providers--that I presume at Everglades, some 
of the services that are offered there are making money, and 
that in order to provide the lodging, if there wasn't any 
lodging, they might not be able to have anybody staying there 
and doing that.
    Do you see that in parks which aren't losing money, which 
you referred to in your written testimony, that we might be 
able, rather than having the Federal Government make the 
outlay, a merger of saying, OK, you're going to be the service 
provider for multiple services at parks where we can't make 
some money? In other words, are there some parts of Death 
Valley that are making money but Stovepipe Wells isn't, or some 
parts of the Everglades that are making money but not Flamingo 
Lodge, and we may have to do some bundling, which would be the 
normal way we would respond in a capitalist system?
    Mr. Todd. Certainly, as you said, you have to value the 
economics of the entire operation. Stovepipe Wells is a remote 
location and there's really not much else you can bundle there. 
We providing the lodging, the retail, the food and beverage--
    Mr. Souder. Say if you wanted Furnace Creek, you had to 
take Stovepipe Wells and they were going to be part of the same 
bid, not separate.
    Mr. Todd. Right. You could, although Furnace Creek is owned 
in fee. It's not a park contract, so you really couldn't merge 
a private deal with a public deal. But certainly, yes. They 
discussed, for example, merging Stovepipe Wells and Scotty's 
Castle, which are currently separate contracts, but both in 
Death Valley, both of which my company operates. That's the 
kind of thing they're looking at doing. But even doing that, in 
some cases, if they're both losing money and you combine the 
two of them, you don't solve the problem.
    That's why at times many of these small contracts--I mean, 
the larger ones have been under 1-year extensions for several 
years, so each time we get ready to sign an extension, we ask 
ourselves--of course, you know, I get critiqued by some of the 
owners of the company, saying why would you sign that? You're 
losing money on the deal. And then in some cases we ask for fee 
relief during the extension period, saying look, we're losing 
money on this. We're paying a 5-percent of revenue fee and want 
to lower the fee to 2 percent so that we can at least break 
even or make a minimal profit. So far there hasn't been much 
receptivity toward that.
    All I can think of, assuming we're the sole party putting 
money in the deal, you just have to make it attractive to us. 
Just like when it goes out for rebid, obviously, if they don't 
change anything and offer the same fee, will we rebid again to 
lose money? Not likely. I don't know of anybody else that 
would, either.
    Mr. Souder. Have you seen examples of this contract 
bundling, where you would bundle something--obviously, not two 
unprofitable things--but where you might consolidate some of 
the contracts in order to take some of the losses--For example, 
Everglades might be one. Could you comment at the same time on 
the concept of bundling profitable parks with unprofitable 
parks.
    Mr. Todd. You could certainly do that. I don't know if 
you're referring to different geographic regions, where you 
could say OK, we're going to give you this park that's 
unprofitable, versus this other park ten States over that's 
profitable, you could try that. I don't know what your bidding 
response would be.
    Quite frankly, you might end up making it more beneficial 
to the larger concessionaires, who are willing to lose money on 
one park to get another one. I mean, some of the small guys, of 
course, who are only going to bid on a small park to begin 
with, who could do that operation and might have bid on that 
park, once you throw in another one, they might say we don't 
have the organizational infrastructure and corporate level 
services necessary to do two big parks. We can do one, or one 
small park, but you give us two of them in two different 
geographic areas, you might end up eliminating some prospective 
bidders.
    Mr. Souder. Is that what happened--one last question for 
Mr. Fears. Isn't that kind of what happened at Sequoian Kings 
Canyon, that it wasn't viewed as profitable and then a small 
group took over?
    Mr. Fears. That's right. The decision was made to move the 
operation out of the Sequoia area and to move it to a different 
location. They ended up putting that contract out three times. 
The first two times they didn't receive any bids, and then the 
third time they received two or three bids. We decided to put 
the investment in.
    To be honest with you, when you talk about bundling, one of 
the reasons we did that is because we operate at Yosemite 
National Park and we can use the same reservation center. There 
are a lot of marketing efficiencies there. So I think the idea 
of bundling some of these parks--I mean, you brought up 
Glacier. Glacier is a tough concession contract. You're looking 
for private enterprise to fix those hotels up. I think it's a 
tough deal. There has got to be some sort of government money 
or something that has to come in.
    You have the same problem at Crater Lake. You have a great 
hotel there, but private enterprise wasn't able to come in and 
put the investment. And you also have Oregon Caves, which we 
operated for a year. It's a great hotel. It needs a lot of work 
on it, but it's just not profitable for private enterprise. The 
economic model just doesn't work. They also have short seasons. 
Glacier is 100 days and Oregon Caves is 100 days.
    Mr. Souder. Thank you all very much.
    Mr. Radanovich. [Presiding.] Thank you, Mark.
    I have a couple of questions. I think we can wrap up with a 
general question. Mr. Woodside, I would like to get you to 
comment on this question.
    Since the passage of the 1998 Act and subsequent 2000 
regulations, a number of small concessionaires have continued 
to raise serious concerns about the threshold of $500,000 for 
preferential right of renewal. In response, legislation was 
introduced in the 107th Congress to raise the bar to $5 
million, as you may know, and while no action is taken on the 
legislation, interest still remains high for many 
concessionaires.
    As a small concessioner and a member of the National Park 
Hospitality Association, if the law were to be amended, what do 
you think the threshold should be, and why? Usually the 
response I get is a dollar above the concessionaire's gross 
revenue.
    [Laughter.]
    Mr. Woodside. You took away my answer.
    It is very difficult to come up with a definitive dollar 
amount. I definitely think $500,000 is too small. Five million 
could be too big. By the way, we're about four million, so--
    [Laughter.]
    So five million is very self-serving.
    One of the interesting things is Pricewaterhouse has 
separated out the contracts as those above three million and 
below and called the below three million the smaller contracts. 
They don't attach any great significance to that, but I think 
three million is a number that maybe should be looked at, 
because roughly the top 50 contracts--I think it's actually 
52--are over three million and the rest are below that. So 
there are somewhere about 40 or 50 contracts that would be 
between $500,000 and $3 million.
    What I suggested throughout as a proposal is that perhaps 
the Park Service be given the option to give some form of 
preference to the smaller local companies that are continuing 
on under that threshold, be it five million or three million, 
just to give an opportunity for those smaller companies that 
have operated for so long a chance to continue.
    Mr. Radanovich. Thank you.
    Mr. Voorhees, I have a question regarding the concessions 
working group, and perhaps a consensus on changes to Leasehold 
Surrender Interest. At this point, there seems to be two 
options: one being a direct order, and the other just modifying 
the 2000 regulations.
    According to your testimony, you would oppose the change 
through Director's order, through regulations, and yet that 
would seem to be the best way of instilling predictability of 
the marketplace in an era in which the service is moving toward 
better business practices.
    Would you not agree, should the changes be made through a 
direct order, that an incoming Director could then change again 
how the Leasehold Surrender Interests were to be implemented 
and wouldn't a Director's order approach add regulatory 
uncertainty within the industry?
    Mr. Voorhees. Considering where we are in the process with 
the law, and the opportunity, I guess, 9 years out from the 
passage of the law, it strikes me that to take the approach at 
this point to change the regulation as opposed to issuing 
something which is arguably a little bit more flexible, like a 
Director's order, which nonetheless provides the appropriate 
guidance to be able to work your way through that time, would 
do little more than put a monkey wrench in the gears of trying 
to establish a level of progress in dealing with contracts, in 
improving the Park Service's response to concessionaires 
overall.
    It just strikes me that, instead of accelerating the 
process, you really would be putting a wrench in it, and it's a 
wrench that I think is unnecessary, given that there has 
clearly been a generous amount of conversation and 
consideration to what are the options to work your way through 
some of the gray areas. And there are gray areas, about how do 
you identify what an improvement is, or how do you define an 
improvement in this circumstance or that.
    It just seems to me that to move forward with the thought 
that the best answer is to reopen the regulations would, in the 
end, provoke kind of a converse response that everybody wants.
    Mr. Radanovich. Thank you.
    To sum up, I would like to ask any of the witness who may 
wish to speak regarding this, if you would like to comment on 
any point that has been made by Deputy Jones in his prior 
testimony that hasn't been brought out. I want to give 
everybody the opportunity to do that before we close the 
hearing. Is there anybody who wants to take that on?
    Bruce?
    Mr. Fears. I would just like to make a comment about this 
$4 million threshold. There's a lot of contracts that fall in 
between the $2-$5 million threshold that are controlled by big 
corporations, and they're very profitable contracts. I can cite 
a number of them, from Trailridge Store in Rocky Mountain 
National Park to Carlsbad Caverns in New Mexico, Mirror Woods 
in San Francisco, Claylock Lodge in Olympic Peninsula in 
Washington State, that if you put them out to bid, you might 
get a lot of small companies that would bid on these. Claylock 
Lodge and Mirror Woods is operated by an $8 billion company. 
This contract should come out to bid.
    I guess the last point I would like to make, I agree with 
Phil. I think you are too early in the process to open up the 
regulations. I think it's working and I think you're getting 
competitive bids. I think you're getting good bids, people that 
are willing to come in and put passion and investment in these 
operations, and I think you're too early in the process to open 
them up.
    Mr. Radanovich. Thank you, sir.
    Mr. Todd. I guess, to comment in terms of the threshold, as 
the Chairman of the National Park Hospitality Association, of 
course, I get the same input as you. You talk to one 
concessioner who is at $5 million and he'll say, gee, it should 
be $5 million, and somebody else says mine is at $6 million, 
why not go to $6 million. So I don't know how you win that 
battle.
    The other thing, quite frankly, I don't know how you can 
differentiate a large family owned business, like Hamilton 
Stores was, for example, why they wouldn't get the same right 
as somebody who is at $4 million. They could both give you the 
same theory, that it's been in the family forever, we're not a 
big conglomerate, we're a family owned business, and we have so 
much more at stake than the smaller guy because we have all 
this infrastructure, hundreds of employees.
    I just don't know how you ever get to the point where you 
say that you deserve it, Mr. Two Million, but you, Mr. Six, 
don't. I just don't know how you can reach a conclusion on 
that, unless the objective is simply that you want to have 
small guys in the parks, period. If that's the objective, then 
you definitely could do it, because you will certainly 
eliminate a lot of bigger guys from bidding because you don't 
want to go through the whole process, only to be matched by 
somebody else. But I just don't know how you can figure out 
what level is fair.
    In terms of the issue on the regulations, waiting for four 
more years, I'm adamant that that's a mistake because, No. 1, 
the provision to look at the law 9 years after 1998, the issue 
was then to look at depreciation and possible amortization of 
Leasehold Surrender Interest. It was not to open up the whole 
regs for everything. It was simply one issue in the law that 
said, if it doesn't work now, to grow it by LSI and 9 years 
hence of '98 you can go back and decide--the Park Service can 
look to see if they want to consider depreciating values. So to 
say you're going to mix apples and oranges with some issue of 
basic LSI, you know, to 4 years later, it ends up giving you an 
entire period of 9 years of uncertainty.
    For those who are in contracts now, like we are and others, 
you're in the middle of a contract, you're still wanting to 
know, as you put money in the next 4 years, are you getting 
credit for it or not. It's millions of dollars. To say we'll 
keep our fingers crossed and wait for something to happen a few 
years from now just doesn't make any sense. Plus if you issue a 
Director's order now, in essence, the Director's order is going 
to contradict the existing regulation, which, to me, makes even 
more ambiguity.
    Mr. Radanovich. Thank you. Does anybody else wish to 
comment? OK. Thank you very much for coming to Washington and 
being part of this hearing. You have given us valuable 
information on the record which will help us establish, we hope 
through the working committees and, if not, then through the 
legislation here, some answers to some of your questions. I 
really appreciate it very much.
    This hearing is closed.
    [Whereupon, at 4:50 p.m., the Subcommittee adjourned.]

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