[Senate Report 110-319]
[From the U.S. Government Publishing Office]
Calendar No. 671
110th Congress Report
SENATE
2d Session 110-319
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SUBCONTRACTORS PAYMENT AUTHORIZATION FOR SERVICES AT THE GRAND CANYON
NATIONAL PARK
_______
April 10, 2008.--Ordered to be printed
_______
Mr. Bingaman, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany H.R. 1191]
The Committee on Energy and Natural Resources, to which was
referred the Act (H.R. 1191) to authorize the National Park
Service to pay for services rendered by subcontractors under a
General Services Administration Indefinite Deliver/Indefinite
Quantity Contract issued for work to be completed at the Grand
Canyon National Park, having considered the same, reports
favorably thereon without amendment and recommends that the Act
do pass.
PURPOSE
The purpose of H.R. 1191 is to authorize the Secretary of
the Interior to make payments to subcontractors who performed
work at Grand Canyon National Park in 2002 and 2003 but were
not paid by the primary contractor.
BACKGROUND AND NEED
H.R. 1191 would authorize the Secretary of the Interior to
pay approximately $1.4 million from appropriated funds to
subcontractors who worked on authorized construction projects
at Grand Canyon National Park in 2002 and 2003, but who were
not paid by the primary contractor, Pacific General, Inc.
(PGI). After working on several projects for the park, PGI
defaulted, leaving many of its subcontractors unpaid. Although
PGI certified that it was making payments to its
subcontractors, approximately $1.4 million was never paid.
National Park Service contracting policy required PGI to obtain
payment and performance bonds; however it never did so.
The National Park Service paid PGI in full for all of the
work orders. The Park Service contends that because it has made
payment, and because it has no direct contractual relationship
with the subcontractors, it has no legal authority to make
additional payments to the subcontractors. Most of the
subcontractors are small businesses and default has caused them
significant economic hardship. In light of the equitable
circumstances, H.R. 1191 would authorize the Secretary of the
Interior to pay all of the subcontractors the remaining unpaid
amounts.
LEGISLATIVE HISTORY
H.R. 1191, sponsored by Congressman Renzi, passed the House
of Representatives by voice vote on April 17, 2007. (S. Hrg.
110-282.) The House of Representatives passed a similar measure
in the 109th Congress, H.R. 3961. That bill was not considered
in the Senate.
The Subcommittee on National Parks held a hearing on H.R.
1191 on November 8, 2007. At its business meeting on January
30, 2008, the Committee on Energy and Natural Resources ordered
H.R. 1191 favorably reported, without amendment.
COMMITTEE RECOMMENDATION
The Committee on Energy and Natural Resources, in open
business session on January 30, 2008, by a voice vote of a
quorum present, recommends that the Senate pass H.R. 1191.
SECTION-BY-SECTION ANALYSIS
Section 1 defines key terms used in the bill.
Section 2 authorizes the Secretary of the Interior, subject
to the appropriation of such funds as may be necessary, to pay
the amount owed to subcontractors of Pacific General, Inc. for
work performed at Grand Canyon National Park in 2002 and 2003,
if the primary construction contract between the Park Service
and PGI is terminated; if the amount owed to the subcontractors
is verified; where the subcontractors have exhausted all
reasonable legal avenues to recover the amounts owed directly
from PGI; and where the subcontractors provide a written
statement that the verified amount due represents payment in
full for the work performed.
COST AND BUDGETARY CONSIDERATIONS
The following estimate of costs of this measure has been
provided by the Congressional Budget Office:
H.R. 1191--An act to authorize the National Park Service to pay for
services rendered by subcontractors under a General Services
Administration Indefinite Deliver/Indefinite Quantity Contract
issued for work to be completed at the Grand Canyon National
Park
H.R. 1191 would allow the National Park Service (NPS) to
make payments to certain subcontractors associated with Pacific
General, Inc. (PGI), a California-based firm for construction
work performed in 2002 and 2003. The NPS has paid about $10
million to PGI through a General Services Administration
contract for numerous construction projects in Grand Canyon
National Park; $1.4 million of that amount was owed but not
paid to the firm's subcontractors. PGI has since gone out of
business. The legislation would authorize the appropriation of
such sums as may be necessary to pay the amount owed to the
subcontractors.
Assuming the availability of appropriated funds, CBO
estimates that implementing the legislation would cost the NPS
$1.4 million in 2008 to pay the subcontractors for their
previous work. The legislation would not affect direct spending
or revenues. The legislation contains no intergovernmental or
private-sector mandates as defined in the Unfunded Mandates
Reform Act and would not affect the budgets of state, local, or
tribal governments.
The CBO staff contact for this estimate is Matthew
Pickford. The estimate was approved by Theresa Gullo, 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 H.R. 1191. The Act 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 H.R. 1191, as ordered reported.
CONGRESSIONALLY DIRECTED SPENDING
H.R. 1191, as reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined by rule XLIV of the
Standing Rules of the Senate.
EXECUTIVE COMMUNICATIONS
The testimony provided by the National Park Service at the
November 8, 2007 subcommittee hearing on H.R. 1191 follows:
Statement of Katherine H. Stevenson, Acting Assistant Director,
Business Services, National Park Service, Department of the Interior
Mr. Chairman, thank you for the opportunity to present the
views of the Department of the Interior on H.R. 1191, a bill
that would authorize the National Park Service to pay for
services rendered by subcontractors under a General Services
Administration Indefinite Deliver Indefinite Quantity Contract
issued for work to be completed at the Grand Canyon National
Park.
The Department appreciates the subcommittee's efforts to
address this situation but opposes H.R. 1191. The Department
also testified in opposition to H.R. 3961, a similar bill, in
testimony before the House Subcommittee on National Parks on
March 30, 2006.
H.R. 1191 would authorize payment, through the
appropriation of such funds as are necessary, to subcontractors
who completed work under task orders to Pacific General,
Incorporated (PGI) for which PGI was paid, but subcontractors
were not. The work was completed under National Park Service
(NPS) task orders issued against PGI's Indefinite Deliver
Indefinite Quantity (IDIQ) contract with the General Services
Administration.
PGI's default has created a financial burden on the
affected firms. The NPS had a contractual relationship with the
prime contractor, PGI. The NPS does not have a contractual
relationship with the subcontractors and NPS does not have the
legal authority to pay subcontractors who completed work under
PGI's IDIQ contract for which PGI failed to render payment.
H.R. 1191 would authorize the Secretary to pay these
subcontractors under certain conditions. The bill would
authorize payment if: 1) the task orders issued to PGI by NPS
have been terminated, 2) the amount owed to the subcontractors
is verified, 3) all reasonable legal avenues or recourse have
been exhausted by the subcontractors to recoup amounts owed
directly from PGI, and 4) the subcontractors provide a written
statement that payment of the amount verified represents
payment in full by the United States for all work performed at
the park under PGI task orders issued by NPS between Fiscal
Years 2002 and 2003.
Between Fiscal Years 2002 and 2003, the Grand Canyon
National Park (park) issued approximately 40 task orders to PGI
under this IDIQ contract. Those task orders totaled an
estimated $17 million for various construction projects
throughout the park. Invoices sent to the park indicated that
PGI certified payments were being sent to subcontractors and
suppliers. The NPS paid more than $10 million to PGI, of which
approximately $1.4 million, based on our most recent estimates,
was owed, but never paid, to subcontractors. PGI has been
indicted by the U.S. District Attorney's Office in Arizona on
26 counts of fraud involved with these task orders.
In January 2004, the park began receiving complaints from
subcontractors citing lack of payment by PGI. In February 2004,
the NPS suspended further payment to PGI and issued a
suspension notice ordering PGI to cease activity, followed by
termination for default of 17 remaining task orders. PGI has
had every reasonable opportunity to resolve the situation, but
has since ceased doing business.
Following PGI's default, the NPS withheld payment to PGI
and began paying subcontractors directly for work completed on
PGI task orders, valued at $906,335. Contract law generally
prohibits payments directly to subcontractors because of the
lack of a direct, contractual relationship between the parties.
However, in this case, NPS consulted with the Government
Accountability Office (GAO) and with their approval, began
paying subcontractors directly for these claims. NPS has used
approximately 92% of the withheld funds to pay 41 claims of an
estimated total of 76 claims submitted.
The impact of PGI's default was compounded by lapses in the
contracting operations at Grand Canyon National Park. An
acquisition management review conducted by the NPS Washington
Contracting and Procurement Office, determined that the park
had failed to obtain payment and performance bonds from PGI
required by the IDIQ contract and the Miller Act (40 U.S.C.
Sec. 3131). To prevent future lapses, we have strengthened
internal controls both at the park and regional level. For
example, the park superintendent is now annually evaluated for
management of the park's contracting program. In addition, the
NPS Intermountain Region will be conducting periodic
acquisition management reviews of the Grand Canyon contracting
program.
The Department understands the hardships PGI's default and
NPS' actions have placed upon the involved subcontractors. The
payment bonds required of the contractor under the Miller Act
are designed to protect subcontractors who do not have the
recourse of placing a lien on the property at issue, since
liens cannot be placed on government property. The courts have
held that, while the contractor has an obligation to provide
such bonds, the Miller Act places no affirmative obligation on
the federal government to ensure the bonds have been obtained.
The Department recognizes that H.R. 1191 is intended to be an
equitable resolution to a difficult situation. However, it
singles out one situation for relief not available to others
under the Miller Act and would effectively have NPS pay for the
same services twice.
Although we are sympathetic about the position of the
subcontractors, the Administration is concerned about the
precedent that would be set by requiring the federal government
to assume the liability for the contractor's default,
particularly in a situation where no contractual relationship
exists.
Mr. Chairman, this concludes my prepared remarks. I will be
happy to answer any questions you or other members of the
subcommittee might have.
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 Act H.R. 1191, as
ordered reported.