[Senate Report 106-477]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 926
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-477

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



 
               FORT SUMTER NATIONAL MONUMENT CONCESSIONS

                                _______
                                

   October, 3 (legislative day, September 22), 2000.--Ordered to be 
                                printed

                                _______
                                

  Mr. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 2331]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 2331) to direct the Secretary of the 
Interior to recalculate the franchise fee owed by Ford Sumter 
Tours, Inc., a concessioner providing service to Fort Sumter 
National Monument, South Carolina, having considered the same, 
reports favorably thereon with an amendment and an amendment to 
the title and recommends that the bill, as amended, do pass.
    The amendments are as follows:
    1. Strike out all after the enacting clause and insert in 
lieu thereof the following:

SECTION 1. ARBITRATION REQUIREMENT.

    The Secretary of the Interior (in this Act referred to as the 
`Secretary') shall, upon the request of Fort Sumter Tours, Inc. (in 
this Act referred to as the `Concessioner'), agree to binding 
arbitration to determine the franchise fee payable under the contract 
executed on June 13, 1986 by the Concessioner and the National Park 
Service, under which the Concessioner provides passenger boat service 
to Fort Sumter National Monument in Charleston Harbor, South Carolina 
(in this Act referred to as `the Contract').

SEC. 2. APPOINTMENT OF THE ARBITRATOR.

    (a) Mutual Agreement.--Not later than 90 days after the date of 
enactment of this Act, The Secretary and the Concessioner shall jointly 
select a single arbitrator to conduct the arbitration under this Act.
    (b) Failure to Agree.--If the Secretary and the Concessioner are 
unable to agree on the selection of a single arbitrator within 90 days 
after the date of enactment of this Act, within 30 days thereafter the 
Secretary and the Concessioner shall each select an arbitrator, the two 
arbitrators selected by the Secretary and the Concessioner shall 
jointly select a third arbitrator, and the three arbitrators shall 
jointly conduct the arbitration.
    (c) Qualifications.--Any arbitrator selected under either 
subsection (a) or subsection (b) shall be a neutral who meets the 
criteria of section 573 of title 5, United States Code.
    (d) Payment of Expenses.--The Secretary and Concessioner shall 
share equally the expenses of the arbitration.
    (e) Defintion.--As used in this Act, the term ``arbitrator'' either 
a single arbitrator selected under subsection (a) or a three-member 
panel of arbitrators selected under subsection (b).

SEC. 3. SCOPE OF THE ARBITRATION.

    (a) Sole Issue to be Decided.--The arbitrator shall determine--
          (1) the appropriate amount of the franchise fee under the 
        Contract for the period from June 13, 1991 through December 31, 
        2000 in accordance with the terms of the Contract; and
          (2) any interest or penalties on the amount owed under 
        paragraph (1).
    (b) De Novo Decision.--The arbitrator shall not be bound by any 
prior determination of the appropriate amount of the fee by the 
Secretary.
    (c) Basis for Decision.--The arbitrator shall determine the 
appropriate amount of the fee based upon the law in effect on the 
effective date of the Contract and the terms of section 9 of the 
Contract.

SEC. 4. EFFECT OF DECISION.

    (a) Retroactive Effect.--The amount of the fee determined by the 
arbitrator under section 3(a) shall be retroactive to June 13, 1991.
    (b) No Further Review.--Notwithstanding subchapter IV of title 5, 
United States Code (commonly known as the Administrative Dispute 
Resolution Act), the decision of the arbitrator shall be final and 
conclusive upon the Secretary and the Concessioner and shall not be 
subject to judicial review.

SEC. 5. GENERAL AUTHORITY.

    Except to the extent inconsistent with this Act, the arbitration 
under this Act shall be conducted in accordance with subchapter IV of 
title 5, United States Code.

SEC. 6. ENFORCEMENT.

    A party aggrieved by the alleged failure, neglect, or refusal of 
another to arbitrate under this Act, or by any unreasonable delay in 
the appointment of the arbitrator or the conduct of the arbitration, 
may petition the United States District Court for the District of South 
Carolina or the United States District Court for the District of 
Columbia for an order directing that the arbitration proceed in the 
manner provided by this Act.''.

    2. Amend the title so as to read: ``To require the 
Secretary of the Interior to submit the dispute over the 
franchise fee owed by Fort Sumter Tours, Inc. to binding 
arbitration.''.

                         purpose of the measure

    The purpose of S. 2331 is to direct the Secretary of the 
Interior to submit a dispute between the National Park Service 
and Fort Sumter Tours, Inc. to binding arbitration to determine 
the appropriate concession franchise fee at Fort Sumter 
National Monument.

                          background and need

    Fort Sumter Tours, Inc. (FST) is a privately owned and 
operated business that provides boat transportation services at 
Fort Sumter National Monument under the terms of a concessions 
contract with the National Park Service. The contract, which 
was signed in 1986 and for a period of 15 years, provides FST 
the exclusive right to transport visitors by boat to Fort 
Sumter National Monument. The franchise fee for the first five 
years of the contract was set at 4.25 percent of FST's gross 
annual receipts.
    Consistent with the Concessions Policy Act of 1965 (the law 
in effect when the contract was entered into), the contract 
contained a provision allowing the National Park Service to 
reconsider the franchise fee every five years to determine 
whether the fee reflected the probable value of the contract. 
In 1991, the franchise fee analysis performed by the National 
Park Service determined that the fee should be increased to 12 
percent. In 1992, the National Park Service notified FST that 
it intended to increase the fee and that the concessioner had a 
contractual right to seek advisory arbitration.
    In response, Fort Sumter Tours filed suit against the 
National Park Service in Federal District Court in 1993, on the 
basis that it believed the Park Service did not have the right 
to unilaterally increase the franchise fee. After failing to 
win its claim in the United States District Court for the 
District of South Carolina, FST appealed to the U.S. Court of 
Appeals for the Fourth Circuit, but again did not prevail. Fort 
Sumter Tours Inc. also filed suit against the National Park 
Service in the U.S. District Court for the District of 
Columbia. That court also ruled in favor of the Park Service, 
and the decision was affirmed by the U.S. Court of Appeals for 
the District of Columbia. In 1996, the Supreme Court rejected 
FST's attempt to seek a review of the decision of the lower 
courts decisions in favor of the National Park Service.
    Notwithstanding its setbacks in court, Fort Sumter Tours, 
Inc. believes that the decision by the National Park Service to 
increase the franchise fee was based on flawed decisions and 
data. FST contends that the National Park Service is trying to 
charge on a punitive franchise fee based on: (1) unjustified 
changes to FST's audited financial statements; (2) unreliable 
industry statistical data; (3) a refusal to engage in 
substantive discussions about the fairness of the fee increase; 
and (4) a refusal to allow independent review of the merits of 
the fee increase.

                          legislative history

    S. 2331 was introduced by Senator Hollings on March 30, 
2000. The Subcommittee on National Parks, Historic Preservation 
and Recreation held a hearing on S. 2331 on July 13, 2000. At 
the business meeting on September 20, 2000, the Committee on 
Energy and Natural Resources ordered S. 2331, as amended, 
favorably reported.

                        committee recommendation

    The Committee on Energy and Natural Resources, in open 
business session on September 20, 2000, by a majority voice 
vote of a quorum present, recommends that the Senate pass S. 
2331, if amended as described herein.

                          committee amendment

    During the consideration of S. 2331, the Committee adopted 
an amendment in the nature of a substitute and an amendment to 
the title. The substitute amendment removed a provision in the 
bill as introduced that would have required the Secretary of 
the Interior to recalculate the franchise fee as the initial 
step in resolving the dispute. It also removed a provision that 
would have required the Federal Government to compensate Fort 
Sumter Tours, Inc. for attorneys fees and other costs 
associated with all proceedings involving the dispute if Fort 
Sumter tours, Inc. is the prevailing party in arbitration. 
Finally, the amendment removed a provision that would have 
prohibited the Secretary from advertising or accepting bids for 
the passenger boat service at Fort Sumter, and required that 
Fort Sumter Tours, Inc. be offered annual extensions of the 
current concessions contract until the dispute is resolved.

                      section-by-section analysis

    Section 1 requires the Secretary of the Interior 
(Secretary), at the request of Fort Sumter Tours, Inc. 
(Concessioner), to agree to binding arbitration to resolve the 
franchise fee dispute pursuant to the contract under which the 
Concessioner provides passenger boat service at Fort Sumter 
National Monument.
    Section 2 describes the procedures concerning the selection 
of an arbitrator and requires the Secretary and the 
Concessioner to share equally in the expenses of the 
arbitration.
    Section 3 describes the scope of the arbitration and 
requires the arbitrator to determine the appropriate franchise 
fee based on the terms of the contract and the law that was in 
effect at the time the contract was signed.
    Section 4 requires that the fee established by the 
arbitrator will be retroactive to June 13, 1991, and that the 
decision will be final and not subject to review.
    Section 5 requires that the arbitration be conducted in 
accordance with the Administrative Dispute Resolution Act, 
except to the extent that it is inconsistent with this Act.
    Section 6 allows either party, if aggrieved by the failure, 
neglect, or refusal of the other party to arbitrate, to 
petition the U.S. District Court for the District of South 
Carolina or for the District of Columbia for an order directing 
that the arbitration proceed.

                   cost and budgetary considerations

    The following estimate of the cost of this measure has been 
provided by the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 2, 2000.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2331, a bill to 
require the Secretary of the Interior to submit the dispute 
over the franchise fee owed by Fort Sumter Tours, Inc. to 
binding arbitration.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

               Congressional Budget Office Cost Estimate

S. 2331--A bill to require the Secretary of the Interior to submit the 
        dispute over the franchise fee owed by Fort Sumter Tours, Inc. 
        to binding arbitration

    S. 2331 would require the National Park Service (NPS) to 
have the franchise fee that it charges to Fort Sumter Tours, 
Inc. (FST) determined by binding arbitration. (FST is a 
concessioner providing transportation to visitors at Fort 
Sumter National Monument.) The arbitrator would determine the 
appropriate fee applicable to the period between June 13, 1991, 
and December 31, 2000, including possible interest and 
penalties.
    CBO cannot estimate the budgetary impact of S. 2331 because 
it would depend on the outcome of a legal proceeding that has 
not yet occurred. We expect that the arbitrator would choose a 
franchise fee of between 4.25 percent (which is what the 
company currently pays the NPS) and 12 percent (which is the 
adjusted rate established by the agency in 1991).
    Under the higher rate of 12 percent, the federal government 
could receive about $3 million in fees, interest, and penalties 
owed by FST since 1991. This amount could be collected--and 
spent--in the absence of legislation because the NPS has 
recently begun administrative action to collect it. If the 
lower rate would be chosen by an arbitration, the government 
would lose the $3 million owed to it, reducing both offsetting 
receipts and direct spending by that amount in fiscal year 2001 
or 2002.
    What would happen to annual franchise fees after 
arbitration is also uncertain, CBO expects that by the time an 
arbitration decision would be reached, the FST concession 
contract will be expired. Annual offsetting receipts (and 
associated direct spending) from franchise fees after 2001 
would depend on the outcome of competitive bidding for the 
concession.
    S. 2331 could affect offsetting receipts (a credit against 
direct spending) and the spending of those receipts; therefore, 
pay-as-you-go procedures would apply. CBO estimates, however, 
that because the NPS would probably have been allowed to spend 
the amounts that it would have received in the absence of 
arbitration, the loss of any such amounts would have no net 
impact on the federal budget.
    The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Deborah Reis. 
The estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                      regulatory impact evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 2331. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 2331, as ordered reported.

                        executive communications

    On July 17, 2000, the Committee on Energy and Natural 
Resources requested legislative reports from the Department of 
the Interior and the Office of Management and Budget setting 
forth Executive agency recommendations on S. 2331. These 
reports had not been received at the time the report on S. 2331 
was filed. When the reports become available, the Chairman will 
request that they be printed in the Congressional Record for 
the advice of the Senate. The testimony provided by the 
National Park Service at the Subcommittee hearing follows:

Statement of Denis P. Galvin, National Park Service, Department of the 
                                Interior

    Thank you for the opportunity to present the position of 
the Department of the Interior on S. 2331, a bill to direct the 
Secretary of the Interior to recalculate the franchise fee owed 
by Fort Sumter Tours, Inc., a concessioner providing service to 
Fort Sumter National Monument in South Carolina.
    The Department of the Interior strongly opposes S. 2331 and 
the Secretary would recommend that the President veto this bill 
if passed by Congress.
    S. 2331 would require the Secretary of the Interior to 
recalculate the fees owed by Fort Sumter Tours pursuant to its 
concesssions contract with the National Park Service. If the 
recalculated fee is unacceptable to Fort Sumter Tours, it would 
have the right to go through a binding arbitration process with 
the Secretary to determine the appropriate fee. The arbitrators 
would be prohibited from taking into account any previous 
judicial decisions on this issue, and Fort Sumter Tours would 
be entitled to collect attorneys fees for the legal expenses it 
has incurred litigating against the government.
    S. 2331 is essentially a private relief bill that would 
undermine the authority of the federal judiciary by nullifying 
the decisions of five courts over the past seven years that 
have ruled against Fort Sumter Tours. In addition, S. 2331 
would demean a fundamental principle that underlies these 
decisions--the importance of living up to one's contractual 
responsibilities.
    Fort Sumter Tours presently owes over $2,200,000 in fees, 
penalties and interest to the National Park Service under the 
contract that it entered into in 1986. This debt has been 
accumulating since 1991. When this contract was signed, it 
called for Fort Sumter Tours to pay a 4.25 percent franchise 
fee of gross annual receipts to the government in exchange for 
the exclusive right to transport visitors by boat to Fort 
Sumter National Monument. This fee was not set through an 
unfettered competitive process, as the law under which this 
contract was executed, the Concessions Policy Act of 1965 
(repealed in 1998), contained provisions that discouraged 
outside businesses from applying for concessions contracts. The 
Concessions Policy Act balanced these anti-competitive 
provisions with a provision that required NPS to review the 
franchise fee under every contract every five years to 
determine whether it reflected the probable value of the 
contract. This fee reconsideration provision is reflected in 
section 9(e) of the standard concessions contract. Section 9(e) 
of the contract also provides for an arbitration process to 
resolve disputes over the adjusted fee.
    Fort Sumter Tours agreed to these terms when it entered 
into its contract in 1986. A franchise fee analysis performed 
in 1991 showed that the probable value of the privileges under 
the Fort Sumter contract warranted a fee of 12 percent, and 
that with a 12 percent fee Fort Sumter Tours would have a 
reasonable opportunity for profit. This analysis, like the type 
of analysis NPS performs under every concessions contract, 
compared the financial records and the business opportunity of 
Fort Sumter Tours, to those of similarly situated businesses, 
using industry statistics. Analyses have been performed on 
other contracts that involve services similar to those provided 
by Fort Sumter Tours. NPS financial analyses have resulted in 
fees of 12 percent and 13 percent for operators in Golden Gate 
National Recreation Area and the Statue of Liberty that 
transport park visitors by boat to park sites. These 
concessions operate profitably, and have not contested their 
fees.
    In 1992, NPS notified Fort Sumter Tours that it was 
reconsidering its fee of 4.25 percent, and of its contractual 
right to seek advisory arbitration over the reconsidered fee. 
NPS also offered to discuss its financial analysis of the 
contract with Fort Sumter Tours with the intent that the 
parties could reach agreement over the fee. Fort Sumter Tours 
rejected these offers and opted instead to ignore the dispute 
resolution process it had agreed to in the contract and sued 
the National Park Service in Federal Court. Since Fort Sumter 
Tours first filed suit against the National Park Service in 
1993, the four courts have examined its claims, the United 
States District Court for the District of South Carolina, the 
United States Court of Appeals for the Fourth Circuit, the 
United States District Court for the District of Columbia, and 
the United States Court of Appeals for the District of 
Columbia, have found that the National Park Service acted 
appropriately in instituting a 12 percent fee under the Fort 
Sumter Tours contract. In addition, in 1996, the United States 
Supreme Court rejected Fort Sumter Tours attempt to seek 
Supreme Court review of the decision of the U.S. Court of 
Appeals for the Fourth Circuit. Despite these defeats, Fort 
Sumter Tours has continued to refuse to pay its contractually 
obligated franchise fee, and is seeking through S. 2331, to 
nullify these judicial decisions.
    These decisions have been based on substantive, rather than 
procedural grounds. One of the primary issues before each court 
involved the principle that parties to a contract should be 
bound by the terms of their agreement. By signing its 
concessions contract, Fort Sumter Tours agreed to the dispute 
resolution process of Section 9(e), thereby committing itself 
to a process involving negotiation and, if necessary, advisory 
arbitration, to resolve any disputes relating to the fee. Fort 
Sumter Tours made a legal and business decision that it would 
not engage in this process. This is a matter of substance, 
rather than procedure, as the dispute resolution language was a 
substantive part of the Fort Sumter contract. As the Court of 
Appeals for the District of Columbia recently stated: ``Fort 
Sumter Tours chose to ignore the contractual requirements and 
went directly to the courts. Like the District Court, we find 
the contract unambiguous and plaintiff's failure to abide by 
its terms fatal to its cause.''
    Fort Sumter Tours is the only concessioner out of more than 
600 that has refused to abide by section 9(e) of the 
concessions contract. Of the concessioners that have contested 
franchise fee reconsideration, all but three came to agreement 
with NPS without employing the arbitration procedures of 
section 9(e). The three concessioners that could not reach 
agreement with NPS by negotiation, successfully utilized the 
section 9(e) advisory arbitration process to resolve the 
dispute. While this process did result in an increased fee in 
each of these instances, each of these concessioners continues 
to operate profitably.
    The extraordinary degree of harmony between NPS and its 
concessioners that is reflected by a track record that shows 
very few fee disputes is understandable, given the benefits 
that businesses receive in operating under a NPS concessions 
contract. As is the case under the Fort Sumter Tours 
concessions contract, the overwhelming majority of these 
businesses are given the exclusive opportunity to serve a 
market that is often captive and must use the services of a 
given concessioner. The beneficial nature of the opportunities 
presented by these contracts has been commented on extensively 
in at least 5 studies conducted by the GAO and the Inspector 
General's office of the Department of the Interior over the 
past 10 years. These studies have concluded as a general rule 
that the NPS charges fees that are far lower than the market 
value of their corresponding contracts. It is therefore not 
surprising that there is no shortage of businesses that wish to 
apply for concessions contracts, and that the overwhelming 
majority of concessioners strive to abide by the terms of their 
contracts, including the advisory arbitration process in 
section 9(e).
    The courts have looked closely at the substance of how NPS 
arrived at its fee. Both the district and appellate courts have 
found the Secretary's decision to be proper, and the subsequent 
court opinions have supported the finding of the first court 
that reviewed this matter, the United States District Court for 
the District of South Carolina, which stated, ``the resulting 
franchise fee is not excessive as to preclude a reasonable 
opportunity for profit.'' These courts have noted that the 
provision that allows NPS to review fees during the course of a 
contract is not unfair, since NPS's fee must, as a matter of 
law, allow a concessioner a reasonable opportunity for profit.
    We understand that it has been reported to the committee 
that the National Park Service took into account non-concession 
revenue when calculating the profit that Fort Sumter Tours 
makes under this contract. We have stated that on page 2 of the 
1992 NPS franchise fee analysis, non-concession income was 
included in the initial determination of the minimum and 
maximum franchise fee. However, as we have also stated, this 
inclusion was a harmless oversight that had no impact on the 
franchise fee determination. Again, the courts fully reviewed 
the reconsideration of the franchise fee and determined that we 
acted reasonably in setting this fee. Fort Sumpter Tours has 
had countless opportunities to convince the courts that this 
information warranted the reversal of NPS's fee determination. 
They have been unsuccessful at every turn.
    S. 2331 would also require the taxpayer to reimburse Fort 
Sumter Tours for the expenses it has incurred in litigation 
against the government. This is extremely unfair to the 
taxpayer, as current law grants prevailing parties against the 
United States the opportunity to be reimbursed for reasonable 
attorney fees. However, in this case, the legislation would 
grant attorneys fees to an individual who did not prevail in 
any of the five courts that reviewed this concessioner's 
claims.
    In addition, there is no guarantee that S. 2331 would 
satisfy Fort Sumter Tours. If the Secretary prevailed in the 
binding arbitration under S. 2331--that is, if the panel 
established a franchise fee of 12%--Fort Sumter Tours would 
still have the right to appeal this decision to a federal 
judge.
    Moreover, subsection 1(d) of S. 2331 would prevent the 
National Park Service from awarding a new contract for the tour 
boat services at Fort Sumter Park National Monument until this 
matter was completely resolved and no longer subject to appeal. 
The present contract for these services expires on December 31, 
2000. We expect to issue a prospectus for this contract prior 
to the end of this year. The language in subsection 1(d) would 
put this process on hold for an indefinite time period, as the 
appeal process could run for a considerable length of time--as 
long as 8 years if the present appeals process is an accurate 
indicator. This would prevent the National Park Service from 
advertising the contract to the business community, and seeking 
a fee that represents the true market value of the contract. In 
fact, as we fully expect that the market will determine a fee 
for this contract that is substantially equal to or greater 
than the fee that is in dispute under the present contract, any 
effort to freeze the fee during a pending arbitration and its 
subsequent appeal process could shortchange the taxpayer out of 
a just return under the contract. It would also prevent other 
businesses, several of which have already expressed interest in 
the new contract, from applying for this lucrative opportunity. 
As a government contract, this opportunity should be available 
through a fair competitive process to the tax-paying business 
community at large, rather than frozen for the benefit of one 
business until the appeals process runs its course.
    There is no question that the dispute between Fort Sumter 
Tours and the United States Government involves an amount of 
money--approximately $2,200,000--that is considered significant 
by the concessioner and the NPS. But beyond the financial 
obligation, enactment of S. 2331 would send a message that no 
legal dispute with the United States Government is over, even 
if all judicial remedies have been exhausted. S. 2331 would 
also send a message that demeans the importance of requiring 
parties to live up to their obligations under commercial 
contracts, a principle that underlies each of the court 
decisions that has gone against Fort Sumter Tours. It is with 
these premises in mind that we would recommend that the 
President veto this bill if it is passed by Congress.
    I would also like to note, in closing, that the NPS has 
attempted to settle this dispute with Fort Sumter Tours on 
several occasions, and, through the Department of Justice, 
remains open to any reasonable settlement offer from Fort 
Sumter Tours.
    This concludes my testimony. I would be happy to answer any 
of your questions.

                        changes in existing law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the bill S. 2331, as 
ordered reported.

                                  
