[Federal Register Volume 60, Number 14 (Monday, January 23, 1995)]
[Notices]
[Pages 4406-4408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1578]



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DEPARTMENT OF EDUCATION

Arbitration Panel Decision Under the Randolph-Sheppard Act

AGENCY: Department of Education.

ACTION: Notice of Arbitration Panel Decision Under the Randolph-
Sheppard Act.

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SUMMARY: Notice is hereby given that on August 15, 1991, an arbitration 
panel rendered a decision in the matter of Florida Department of 
Education, Massachusetts Commission for the Blind, and Virginia 
Department for the Blind and Visually Handicapped v. United States 
Department of Defense, (Docket Nos. R-S/85-8, 87-1, and 87-4). This 
panel was convened by the Secretary of the U. S. Department of 
Education pursuant to 20 U.S.C. 107d-1(b). The Randolph-Sheppard Act 
(the Act) creates a priority for blind vendors to operate vending 
facilities on Federal property. Under this section of the Act, the 
State licensing agency (SLA) may file a complaint with the Secretary if 
the SLA determines that an agency managing or controlling Federal 
property fails to comply with the Act or regulations implementing the 
Act. The Secretary then is required to convene an arbitration panel to 
resolve the dispute.

FOR FURTHER INFORMATION CONTACT: A copy of the full text of the 
arbitration panel decision may be obtained from George F. Arsnow, U.S. 
Department of Education, 600 Independence Avenue, S.W., Room 3230, Mary 
E. Switzer Building, Washington, D.C. 20202-2738. Telephone: (202) 205-
9317. Individuals who use a telecommunications device for the deaf 
(TDD) may call the TDD number at (202) 205-8298.

SUPPLEMENTARY INFORMATION: Pursuant to the Randolph-Sheppard Act (20 
U.S.C. 107d-2(c)), the Secretary publishes a synopsis of arbitration 
panel decisions affecting the administration of vending facilities on 
Federal and other property. [[Page 4407]] 

Background

    In 1984 the Department of Defense, through its agents and officers, 
solicited proposals for fast food hamburger operations. The Army and 
Air Force Exchange Service (AAFES) and the Navy Resale and Services 
Support Office (NAVRESSO) subsequently signed contracts with two 
national fast food companies, McDonald's Corporation and Burger King 
Corporation. By a contract dated August 7, 1984, the Navy awarded to 
McDonald's Corporation exclusive rights to operate fast food hamburger 
facilities on naval installations for a period of 10 years. The 
contract signed by the Navy involved an exclusive franchise effort 
consisting of the construction and operation of a minimum of 40 and a 
maximum of 300 fast food facilities. These facilities would be owned 
and operated by the McDonald's Corporation. On May 15, 1984, AAFES 
purchased a franchise from the Burger King Corporation. The AAFES 
contract involved the construction of 185 franchised facilities. Under 
the terms of the AAFES contract, the Burger King facilities were to be 
operated by AAFES, with a portion of the profits being remitted to 
Burger King.
    The SLAs in the four States initially protested the preceding fast 
food contracts. They were in Florida, Massachusetts, Virginia, and 
Kansas. The Kansas Department of Rehabilitative Services subsequently 
withdrew its request for arbitration.
    These SLAs, through representative organizations, brought two 
actions in United States District Court for the District of Columbia 
regarding the alleged violations of the Act by the Secretary of Defense 
and the Secretaries of Navy, Army, and Air Force, along with NAVRESSO 
and AAFES personnel. The SLAs requested the Court to terminate the 
contracts with McDonald's and Burger King Corporations.
    The Court held that the Act did not apply to the disputed 
contracts. Randolph-Sheppard Vendors of America v. Weinberger, 602 F. 
Supp. 1007 (D.D.C. 1985). On appeal, the United States Court of Appeals 
for the District of Columbia Circuit held that plaintiffs were required 
to first pursue and exhaust any available remedies under the Act before 
seeking judicial relief. Randolph-Sheppard Vendors of America v. 
Weinberger, 795 F.2d. 90 (D.C. Cir. 1986).
    On April 5, 1985, the Florida Department of Education, the SLA, 
requested the Secretary of Education to convene an arbitration panel 
concerning the McDonald's contract with the Department of Navy. On 
December 31, 1986, this request was amended to include the Burger King 
Corporation contract. The SLA alleged that the Department of Defense 
(DOD) failed to give notice to any SLA regarding the solicitation of 
proposals for fast food service on Navy, Army, and Air Force 
installations and that the awarding of the contracts to McDonald's and 
Burger King Corporations without regard to the priority given to blind 
vendors by Congress was a violation of the Act.
    In addition, the Florida Department of Education alleged that the 
McDonald's and Burger King franchises on military installations placed 
a limitation upon the placement of blind vending facilities and that by 
imposing such a limitation DOD failed to submit a justification in 
writing to the Secretary of Education seeking a Secretarial 
Determination pursuant to 20 U.S.C. 107(b).
    On October 21, 1986, the Massachusetts Commission for the Blind 
requested arbitration concerning McDonald's contract with the 
Department of the Navy and on March 25, 1987, amended its request to 
include the Burger King Corporation contract with AAFES. Similarly, on 
November 28, 1986, the Virginia Department for the Blind and Visually 
Handicapped requested arbitration concerning McDonald's Corporation 
contract with the Department of Navy and on August 5, 1988, amended its 
complaint to include the Burger King Corporation contract with AAFES.
    By letter dated April 24, 1987, the arbitration complaints of 
Florida, Massachusetts, and Virginia were consolidated into one 
complaint, and hearings were held by the arbitration panel on July 20, 
1988 and November 15, 1988 at the United States Department of Education 
Headquarters Office in Washington, D.C.

Arbitration Panel Decision

    In an Interim Award dated January 31, 1990, the arbitration panel 
found that DOD violated the Randolph-Sheppard Act and applicable 
regulations.
    The panel concluded that DOD failed to notify the SLAs of its 
intention to solicit bids for vending facilities. DOD contended that it 
was not obligated to notify the SLAs. The panel ruled that the explicit 
notice requirements established by Congress in 34 CFR 395.31(c) are 
evidence of Congressional intent that SLAs be afforded adequate 
opportunity to protect their interests by receiving advance 
notification of the Federal Government's plans to purchase, lease, 
renovate, or otherwise acquire property that might trigger an 
obligation to provide priority for blind vendors.
    Finally, the arbitration panel found that DOD failed to meet the 
requirements of section 107b, which states in relevant part that ``Any 
limitation on the placement or operation of a vending facility based on 
a finding that such placement or operation would adversely affect the 
interests of the United States shall be fully justified to the 
Secretary, who shall determine whether such limitation is justified.'' 
The arbitration panel concluded that, whether or not DOD believed it 
would gain approval from the Secretary of Education regarding its 
limitation request, DOD was required to seek the Secretary's approval 
pursuant to section 107b.
    In dissent one panel member agreed with the District Court 
interpretation of the statutory meaning of the words ``priority'' and 
``limitation.'' That panel member stated that DOD's solicitation for 
fast food operations does not come within the statutory or regulatory 
definition of cafeteria and that, therefore, no violation of the Act 
and regulations occurred.
    The arbitration panel retained jurisdiction of the complaint for 
the purpose of determining remedy and other remaining aspects of the 
dispute. On August 15, 1991, the arbitration panel rendered its final 
award and opinion on remedy.
    The panel ruled that AAFES should contact the petitioner SLAs in 
each State where a Burger King facility now exists and should establish 
a procedure acceptable to the SLAs for identifying, training, and 
installing blind vendors as managers of all current and future Burger 
King operations conducted within their jurisdiction pursuant to the 
disputed contract. Additionally, DOD should give the SLAs 120 days 
written notice of any new Burger King operations to be established. The 
SLA and DOD would arrange for remuneration of the blind vendor 
consistent with custom and practice of other SLA-sponsored food 
facilities under the Act. Any dislocation of persons currently managing 
these facilities would be at the discretion of AAFES provided that the 
management of the facility would be transferred to the blind vendor 
upon successful completion of training.
    Regarding the NAVRESSO contract with McDonald's Corporation, DOD 
would provide to the appropriate SLA no less than 120 days notice of 
any new McDonald's facility to be established. The SLA then would 
determine whether it wished to exercise its priority and to 
[[Page 4408]] provide funds to build and operate a new McDonald's 
facility within its jurisdiction. If timely notice were delivered in 
writing to DOD within 60 days after receipt by the SLA, a priority 
right to operate the McDonald's franchise would be given to the SLA and 
to a competent, qualified manager recommended by the SLA.
    Further, NAVRESSO within 60 days must communicate to the SLAs 
involved in the dispute a plan for establishing the priority of blind 
vendors pursuant to the Act in the event that another McDonald's 
restaurant would be established within the jurisdiction of these SLAs. 
The parties also would draft procedures for communicating notice of 
intent to operate McDonald's restaurants within the jurisdiction and 
determine criteria for selecting competent blind managers.
    Subsequently, concurrent court proceedings before the United States 
District Court for the District of Columbia regarding this dispute have 
been cancelled, and the case has been dismissed.
    The views and opinions expressed by the panel do not necessarily 
represent the views and opinions of the U.S. Department of Education.

    Dated: January 11, 1995.
Judith E. Heumann,
Assistant Secretary for Special Education and Rehabilitative Services.
[FR Doc. 95-1578 Filed 1-20-95; 8:45 am]
BILLING CODE 4000-01-P