[Federal Register Volume 60, Number 10 (Tuesday, January 17, 1995)]
[Notices]
[Pages 3435-3436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1042]



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DEPARTMENT OF THE INTERIOR

Concession Contract Policies

AGENCY: National Park Service, Interior.

ACTION: Notice of Intent.

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SUMMARY: The National Park Service (NPS) is undertaking a review of its 
policies concerning concession management activities. Pending 
completion of this review, the following interim measures are under 
consideration. Particularly, NPS proposes to amend several specific 
policies regarding concession contracts as follows: (1) Its current 
system for determining concessioner franchise fees by eliminating a 
policy which indicates that a concessioner's franchise fee usually 
should not exceed 50% of the concessioner's pre-tax, pre-franchise fee 
profit; (2) eliminating the policy that provides that franchise fees 
should not be collected with respect to the sale of Native American 
handicrafts; and (3) revising portions of the NPS rate approval system. 
Although not required by law to seek public comments on these policy 
amendments, NPS will consider all comments received in a timely manner 
in its final decisions on these matters.

COMMENT DATE: Comments must be received on or before February 16, 1995.

ADDRESSES: Comments should be made to Robert Yearout, Chief, 
Concessions Division, National Park Service, P.O. Box 37127, 
Washington, D.C. 20013-7127.

SUPPLEMENTARY INFORMATION:

1. Franchise Fees

    On December 31, 1986, NPS adopted a system for determining 
concessioner franchise fees to be used in awarding new and renewed 
concession contracts and for renegotiating franchise fees under 
existing contracts. The system generally calls for estimating 
concessioner returns on gross receipts and equity and then making a 
judgment, in part by comparison to returns in similar businesses, as to 
what level of franchise fee would allow the concessioner a reasonable 
opportunity to make a profit. An overriding policy in this regard is 
that, by law, consideration of revenue to the United States from 
franchise fees is subordinate to the objectives of providing 
appropriate service to park visitors.
    One element of the current system is a policy which states that 
generally a franchise fee is not to be established which would exceed 
50% of the pre-tax, pre-franchise fee profits of the concessioner. 
Experience has shown that this policy lacks a sound basis, and, in 
fact, favors the more profitable concessioners. In one case, an NPS 
franchise fee has recently been calculated at 12.7% of gross receipts 
from 18% upon application of the 50% policy. The difference over a five 
year period is estimated to be $1.8 million (money not to be paid to 
the United States). Another actual example is an NPS franchise fee that 
was calculated at 8%, reduced from 14% upon application of the 50% 
policy. This resulted in a possible five year loss to the United States 
of over $500,000.
    Accordingly, NPS proposes to eliminate this policy (as now stated 
in NPS-48, Chapter 24) so that franchise fees may in all cases exceed 
50% of pre-tax, pre-franchise fee profit where such a fee is otherwise 
consistent with a reasonable opportunity for profit and the objectives 
of providing adequate and appropriate service to park visitors. This 
policy, when finalized, will apply to all new concession contracts and 
all franchise fee reconsiderations not yet completed by a formal 
contract amendment.

2. Native American Handicrafts

    For many years, NPS has had a policy which excludes from franchise 
fee computation the proceeds to concessioners generated by the sale of 
Native American handicrafts. The purpose of the policy was to encourage 
the sale of such handicrafts by making their sale more profitable to 
concessioners. However, experience has shown that concessioners 
generally are not encouraged to stock and sell more Native American 
handicrafts as a result of this policy than they would in its absence. 
Consequently, the exemption from franchise fees constitutes a windfall 
to concessioners with no overriding benefits to Native Americans.
    According to a recent report from the Department of the Interior 
Inspector General, this exemption reduced NPS franchise fee revenues by 
over $2.7 million from 1988 through 1992 from 55 concessions in 43 
parks. In addition, the Inspector General criticized NPS for not 
adequately monitoring merchandising procedures with respect to sale of 
Native American handicrafts and stated that NPS personnel often did not 
have the expertise to verify handicraft authenticity. The Inspector 
General recommended the elimination of the policy of exempting sales of 
Native American handicrafts from franchise fee calculations.
    For these reasons, NPS intends to eliminate this exemption from the 
Standard NPS Concession Contract and to remove it from Chapter 10 of 
NPS Management Policies.

3. Rate Approval System

    Under Sec. 3(c) of the Concessions Policies Act of 1965 (16 U.S.C. 
20b(c)), NPS determines the reasonableness of a concessioner's rates to 
the public, unless otherwise stated in the contract, primarily by 
comparison with those current for facilities and services of comparable 
character under similar conditions, with due consideration for length 
of season, provision for peakloads, average percentage of occupancy, 
accessibility, availability and costs of labor and materials, type of 
patronage, and other factors deemed significant by the Secretary. In 
addition, NPS exercises its authority with respect to concession 
matters, including rate approvals, in a manner consistent with a 
reasonable (and, concomitantly, not unreasonable) opportunity for a 
concessioner to realize a profit on its operation as a whole 
commensurate with the capital invested and the obligations assumed.
    The NPS rate approval system is contained in Chapter 18 of NPS-48. 
[[Page 3436]] NPS proposes to amend Chapter 18 to make clear that 
allowing an interim rate schedule is discretionary and to eliminate the 
interim appeal right of concessioners regarding selection of 
comparables.
    For these reasons, NPS proposes to amend Chapter 18 by--
    (1) Amending the first sentence of the last paragraph of Paragraph 
D.1.c. to read as follows:
    When this situation occurs, the concessioner may, if NPS has reason 
to consider that a rate increase is warranted under the policies and 
procedures set forth herein, be allowed a rate based on the previous 
year's rates, with consideration being given for known cost increases 
or decreases, i.e., labor costs, or by other expected increases or 
decreases.
    (2) Amending the first paragraph of Paragraph D.2. to read:
    In situations where a concessioner is not satisfied with the rates 
approved by the Superintendent or the adjustment for recouping utility 
costs, the concessioner may appeal the Superintendent's decision. If 
not settled at the park level, the concessioner may appeal to the 
Regional Director.

    Dated: January 6, 1995.
Roger G. Kennedy,
Director, National Park Service.
[FR Doc. 95-1042 Filed 1-12-95; 8:45 am]
BILLING CODE 4310-70-M