[Federal Register Volume 60, Number 139 (Thursday, July 20, 1995)]
[Notices]
[Pages 37469-37470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17917]



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DEPARTMENT OF THE INTERIOR

Revision of Certain Concession Policies

AGENCY: National Park Service, Interior.

ACTION: Revision of certain concession policies.

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SUMMARY: The National Park Service (NPS) authorizes private businesses 
known as concessioners to provide necessary and appropriate visitor 
facilities and services in areas of the National Park System. NPS is 
undertaking a review of its policies concerning concession management 
activities. Pending completion of a full review, NPS has amended 
certain 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 percent of the concessioner's pre-tax, 
pre-franchise fee profit; and (2) revising portions of the NPS rate 
approval system. NPS had also proposed an amendment to eliminate the 
policy that franchise fees should not be collected with respect to the 
sale of Native American handicrafts. However, due to a technical 
oversight, NPS has determined that it is appropriate to seek additional 
comments on this policy proposal under a separate notice to assure that 
all potentially affected parties have an adequate opportunity to 
comment.

EFFECTIVE DATE: July 20, 1995.

FOR FURTHER INFORMATION CONTACT: Robert Yearout, Chief, Concessions 
Division, National Park Service, PO Box 37127, Washington, DC 20013-
7127, Tele. (202) 343-3784.

SUPPLEMENTARY INFORMATION: On January 17, 1995, NPS published for 
public comment in the Federal Register proposed amendments to the 
concession policies described above. Although not required by law to 
seek public comments on these policy amendments, NPS wished to afford 
all potentially affected or interested parties an opportunity to 
comment before making its final decisions on these matters.
    NPS received 11 comments concerning their proposal to amend certain 
management policies. Eight of these comments came from NPS 
concessioners or associated companies, two from associations 
representing groups of NPS concessioners, and one comment from an 
interested environmental organization.

Analysis of Comments

    The following is an analysis of comments received on the two policy 
proposals NPS is adopting under this notice.

1. Franchise Fees

    With respect to the elimination of the policy which indicates that 
a concessioner's franchise fee usually should not exceed 50 percent of 
the concessioner's pre-tax, pre-franchise fee profit (the 50 percent 
policy), the majority of those commenting opposed this proposal. This 
opposition was based on their belief that this change is contrary to 
the intent of the Concession Policy Act of 1965 and that elimination of 
the policy would remove needed safeguards from the franchise fee 
process. Franchise fees would rise, they believe, to inappropriate 
levels and the subsequent reduced profits would adversely impact 
services to the visitor, the availability of funds for needed 
maintenance and improvements, and the incentive to actively participate 
in the bidding process.
    According to statute, franchise fees are to be based on the 
probable value of the privileges granted by the particular 
authorization in question, but are secondary to the protection and 
preservation of the areas and of providing adequate and appropriate 
services to visitors at reasonable rates. Of primary importance to this 
process, the statute also requires that franchise fees must be 
consistent with a reasonable opportunity for the concessioner to 
realize a profit on the investment.
    The 50 percent policy was originally intended as a ``shorthand'' 
mathematical approximation of the upper limit on franchise fees and was 
not intended to obstruct the assignment of probable value fees. As this 
formula had neither an empirical nor theoretical basis, the results of 
analyses have shown that this 50 percent policy can restrict the 
assignment of probable value fees and, therefore, does not function in 
the manner intended. This change in policy simply removes the use of 
the faulty mathematical approximation and leaves the remaining aspects 
of the franchise fee process in place. The statutory mandate of a 
reasonable opportunity for profit in coordination with the probable 
value determination process provides a powerful safeguard against 
arbitrary fees. As such, the fears of inappropriately rising fees and 
bankrupt concessioners would not be possible given these procedural 
checks and balances.
    There were also comments that this change was unnecessary due to 
the increased professionalism of National Park Service employees and 
because the current policy allows the setting of fees above this limit. 
It is this increased professionalism that allows the National Park 
Service to eliminate this arbitrary and fundamentally unsound policy 
and still assure concessioners a reasonable opportunity for profit as 
required by statute. Furthermore, while the policy was originally 
intended to be used as a guideline to aid in the setting of franchise 
fees, it has often been interpreted by various parties to the fee 
setting process as a firm cap. This view has led to confusion and the 
setting of fees below the probable value of the authorizations 
involved. The elimination of this policy will end this confusion. 
Finally, one commenter indicated that the elimination of the 50 percent 
policy could adversely impact small concessioners if adequate 
safeguards do not exist. It was suggested that the 50 percent policy be 
retained for those concessioners under $1 million in annual gross 
receipts and that safeguards be established to include the 

[[Page 37470]]
provision that individual concessioner cash needs be taken into account 
in the fee process, that 5-year averages be used to lessen the weight 
of abnormal years, and that fixed fee percentages cannot be applied 
across the board to all concessioners.
    While experience has shown that the 50 percent policy has been more 
of a problem with larger concessioners, it still can result in the 
application of less than probable value franchise fees for smaller 
concessioners. In other words, the arbitrary 50 percent policy does not 
meet statutory requirements for any size of concessioner. Moreover, the 
suggested safeguards presently exist in the current franchise fee 
determination system. It should also be noted that in order to secure 
additional safeguards for the smallest concessioners, concessioners 
under $100,000 in annual gross receipts pay only 2 percent of gross 
receipts, and this policy would be unaffected by this change.
    One commenter strongly supported the NPS proposal.
    In consideration of the foregoing, the 50 percent policy is 
eliminated.

2. Rate Approval System

    With regard to the proposal to amend existing guidelines to make 
clear that allowing an interim rate schedule is discretionary, 2 
commenters expressed concern that tour operators and individual 
travelers are asking for rates and booking travel well over a year in 
advance, and the current rate approval system places NPS concessioners 
at a disadvantage in addressing these advance requests. Current 
procedures regarding the honoring of rates, contained in Chapter 29 of 
NPS-48 allow concessioners to accept deposits for individual 
reservations without securing the rates for the facility or service 
reserved if the confirmation notice states in bold print that ``Rates 
are subject to change without notice and are not guaranteed.'' NPS 
believes that this concept can be applied to increase rates as a result 
of increased costs.
    One commenter objected to the change of the word ``should'' to 
``may''. NPS regards this change in wording as a matter of 
clarification rather than a change in policy. The previous wording was 
not considered by NPS to limit discretion in the approval of interim 
rate schedules. The word change does not preclude a rate increase. If 
NPS determines that an interim rate schedule is justified, it will be 
approved.
    With regard to the elimination of the interim appeal right of 
concessioners regarding the selection of comparables, 5 commenters 
objected to this proposal. In addition, one commenter added that 
delaying the appeal until the whole process had run its course would 
defeat the real justice of an appeal. It should be noted that the 
approval of rates and the appeal process applies to all rates, interim 
or otherwise. NPS recognizes that the selection of comparables plays an 
integral part in approving rates. However, the crux of the issue is the 
rate that NPS approves. Any appeal will center on the approved rate and 
the manner in which it was determined. The selection of comparables may 
be a part of a rate appeal. However, the existing language would permit 
a concessioner to appeal on the selection of comparables, and if this 
proved unsuccessful, to then appeal the approved rate. Conversely, if a 
concessioner's appeal of an approved rate were unsuccessful, it could 
then appeal on the basis of the comparables selected. The intent of the 
amended language is to remove this duplicative appeal tier. NPS 
believes that the approved rate and the selection of comparables are 
part of the entire rate approval process, and should not be treated as 
separate processes for the purpose of appeals. NPS also feels that 
combining appeals for approved rates and selection of comparables will 
significantly expedite the entire rate appeal process.
    One commenter supported the changes in the rate approval system.
    In consideration of the foregoing, the rate approval system policy 
amendments are adopted.

    Dated: July 3, 1995.
John Reynolds,
Acting Director, National Park Service.
[FR Doc. 95-17917 Filed 7-19-95; 8:45 am]
BILLING CODE 4310-70-P