[Federal Register Volume 64, Number 224 (Monday, November 22, 1999)]
[Proposed Rules]
[Pages 63775-63778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30292]
[[Page 63775]]
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DEPARTMENT OF THE INTERIOR
National Park Service
36 CFR Part 51
RIN 1024-AC72
Economic Analysis of Proposed Concession Contracting Regulations
AGENCY: National Park Service, Interior.
ACTION: Proposed rule.
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SUMMARY: With this notice, the National Park Service (``NPS'')
addresses the economic impacts of its proposed concession contracting
regulation, which NPS published pursuant to Title IV of the National
Park Omnibus Management Act of 1998.
DATES: NPS will accept written comments, suggestions or objections
until December 22, 1999.
FOR FURTHER INFORMATION CONTACT: Wendelin Mann, Concession Program,
National Park Service, 1849 ``C'' Street, NW, Washington, DC 20240
(202/565-1219).
Background
Concession contracts are the form of governmental authorization
used to permit private businesses (``concessioners'') to provide
visitor services in areas of the national park system. Visitor services
include lodging, food service, merchandising, transportation,
outfitting and guiding and similar activities.
NPS has been awarding and administering concession contracts in
various forms since its establishment in 1916. In 1965, Congress
formally established by the Concession Policies Act of 1965 (the ``1965
Act'') a number of policies and procedures regarding concession
contracts. 36 CFR part 51 as it presently exists implemented the 1965
law. On November 13, 1998, the Congress substantially reformed these
policies and procedures by passage of Title IV of Act of 1998 (the
``1998 Act'').
The 1998 Act requires NPS to promulgate regulations appropriate for
its implementation. On June 30, 1999, NPS published proposed
regulations for public comment in the Federal Register. The deadline
for submission of public comments was October 15, 1999. NPS is
currently considering the public comments received.
The June 30, 1999, Federal Register proposed regulation stated that
NPS would publish in the Federal Register a related initial regulatory
flexibility analysis and invite public comment on it. Because the
proposed concession contracting regulations address contracts and
public property (park areas), they are not subject to the notice and
comment provisions of 5 U.S.C. 553. This conclusion is not affected by
the fact that section 417 of the 1998 Act requires NPS to promulgate
regulations appropriate for its implementation, as the 1998 Act does
not require that this be done through a general notice of proposed
rulemaking. Accordingly, the proposed regulations were published for
public comment as a matter of policy. NPS has preliminarily determined
that because the regulations are exempt from the notice and comment
provisions of 5 U.S.C. 553, they appear not to be subject to the
Regulatory Flexibility Act. The Regulatory Flexibility Act is only
applicable to rules and regulations that are required by 5 U.S.C. 553
or other law to be promulgated after publication of a general notice of
proposed rulemaking. As indicated above there is no such notice and
comment requirement for the concession contracting regulations.
Accordingly, the NPS believes there may be no requirement that an
initial regulatory analysis is required.
Nevertheless, NPS has chosen as a matter of policy to prepare an
analysis that meets the requirements of the Regulatory Flexibility Act.
This analysis has concluded at this juncture that these proposed
regulations would not have a significant economic impact on a
substantial number of small entities. Public comment is invited on the
content of this discussion, as well as the question of whether the
proposed concession regulations are in fact subject to the Regulatory
Flexibility Act. Upon consideration of the public comments received,
NPS will take appropriate final action with respect to any applicable
requirements of the Regulatory Flexibility Act by the date of
publication of the final concession contracting regulations. The
publication of the following analysis is not to be construed as
indicating that NPS necessarily considers that it is required by the
Regulatory Flexibility Act to prepare an initial regulatory flexibility
analysis for the proposed concession contracting regulations.
As a final background note, NPS points out that the preamble to the
proposed concession regulations included a statement to the effect that
it is likely that the number of concession contracts and permits may
decrease to as few as 360 because alternative authorities are now
available to NPS. This statement was erroneously included in the
preamble after it had been determined by NPS to be incorrect.
Accordingly, this statement in the preamble to the proposed regulations
should be disregarded and the preamble to the proposed regulations is
hereby amended to delete this statement.
General Content of the Proposed Regulations
The proposed concession regulations establish the procedures under
which NPS is to administer concession contracts and certain terms and
conditions of concession contracts in furtherance of the requirements
and policies of the 1998 Act.
The proposed regulations have two major purposes. The first is to
set forth procedures as to how concession contracts are to be solicited
and awarded by the National Park Service under the 1998 Act. With
certain exceptions, the 1998 Act requires competitive awards of
concession contracts. In some circumstances, an existing satisfactory
concessioner may have a right to match the terms of a competing
proposal for a new concession contract.
Second, unlike the existing 36 CFR part 51, the proposed regulation
sets forth in detail the nature of the compensatory interest in capital
improvements a concessioner may construct on park lands under the terms
of a concession contract. This interest, called a ``leasehold surrender
interest,'' is described at length in the 1998 Act. It is the intention
of NPS to establish appropriate contract terms and conditions for
leasehold surrender interests by the proposed regulations so as to
assure that the requirements of the 1998 Act are strictly followed.
Content of Subparts of the Proposed Regulations
Subpart A. Authority and Purpose
Subpart A of the regulation describes the authority for the
proposed regulations, their scope, and the scope of concession
contracts in general. It also describes the statutory policies that
underlie concession contracts.
Subpart B. General Definitions
Subpart B provides a number of definitions of terms that are used
throughout the proposed regulations.
Subpart C. Solicitation, Selection and Award Procedures
Subpart C describes general procedures for competitive
solicitation, selection and award of concession contracts in compliance
with the 1998 Act. Except as described in subpart D, NPS must award all
concession contracts on a competitive basis.
[[Page 63776]]
Subpart D. Non-Competitive Award of Concession Contracts
Subpart D describes the three limited situations in which NPS may
make non-competitive awards of concession contracts as expressly
authorized by the 1998 Act. NPS may extend a concession contract for up
to three years on a non-competitive basis, may award a temporary
contract for a term of no more than three years on a non-competitive
basis, and, may award a concession contract on a non-competitive basis
in extraordinary circumstances if certain findings are made and special
procedures followed.
Subpart E. Right of Preference
Subpart E describes the right of preference to a new concession
contract that may be obtained by certain existing satisfactory
concessioners. Only satisfactory outfitter and guide concessioners or
satisfactory concessioners annually grossing under $500,000 are
eligible for the preference. If a concessioner is eligible for the
preference, it must submit a responsive offer pursuant to the
prospectus issued for the new contract. If the concessioner does so, it
is entitled under specified conditions to match the terms of a better
proposal for the concession contract.
Subpart F. Leasehold Surrender Interest
Subpart F first defines a number of terms necessary to understand
the leasehold surrender provisions of the regulation. Subpart F then
sets forth the terms and conditions of leasehold surrender interests
which may be obtained under a concession contract. Generally, a
leasehold surrender interest constitutes a right of a concessioner to
receive payment for capital improvements a concessioner makes on park
area lands.
Subpart G. Possessory Interest
Subpart G sets forth transition procedures with respect to the form
of compensatory interest (``possessory interest'') obtained by
concessioners under certain concession contracts entered into under the
1965 Act and concession contracts to be entered into under the 1998
Act. In general terms, a 1965 Act concessioner may either receive full
compensation for existing possessory interest as described in the
applicable contract or convert the possessory interest to a leasehold
surrender interest if it seeks and is awarded a new concession
contract.
Subpart H. Concession Contract Provisions
Subpart H describes in general the terms of certain concession
contract provisions that reflect the policies and procedures of the
1998 Act.
Subpart I. Assignment or Encumbrance of Concession Contracts
Subpart I sets forth the standards and procedures applicable to NPS
approval of assignments of concession contracts and encumbrance of
concessioner assets.
Subpart J. Information and Access to Information
Subpart J describes the types of records a concessioner must retain
for the purposes of NPS concession contract administration, the access
rights of the government to the records, and the types of concessioner
information that are made available to the public.
Subpart K
Subpart K describes the effect of the 1998 Act's repeal of the 1965
Act by the 1998 Act.
Subpart L
Subpart L sets forth information collection requirements of the
proposed regulations.
Impacts of the Proposed Regulations on Small Businesses
NPS considers that the fundamental policy objective of the 1998 Act
was to make the award of larger NPS concession contracts more
competitive by generally repealing the preference in renewal granted to
all concessioners by the terms of the 1965 Act.
The preference in renewal granted all concessioners under the 1965
Act resulted in more than 99% of concession contract renewals being
awarded to the incumbent concessioner. This was because the preference
in renewal gave the incumbent concessioner the right to match the terms
and conditions of any better offer made for the contract by a
competitor. Because of the renewal preference, no competing offers at
all were received for concession contract renewals in the vast majority
of cases under the 1965 Act. Potential competitors generally considered
it pointless to go to the effort of submitting a competing offer that
was subject to being matched by the incumbent concessioner. The 1965
Act's preference in renewal created an enormous entry barrier to
persons that wished to become NPS concessioners.
The 1998 Act requires full competition, with no advantage to an
incumbent, for the award of most concession contracts with annual gross
receipts in excess of $500,000. The exception is outfitting and guide
concession contracts. Approximately 175 of the existing 630 NPS
concession contracts will be subject to open competition upon renewal.
(This analysis assumes that the repeal applies to existing concession
contract renewals as well as to the renewal of concession contracts
entered into after the effective date of the 1998 Act. NPS is presently
considering this issue in promulgating the proposed concession
contracting regulations. However, the premises of the analysis remain
the same no matter when the repeal takes effect.)
The greatest effects of the 1998 Act are likely to occur because of
the 175 concessioners that will no longer receive a renewal preference.
Currently, 142 of the operations of these concessioners generate gross
receipts under $5 million annually. The effects of ending renewal
preferences will be experienced by incumbent firms who will face
competition in the solicitation process for a new contract,
particularly those that do not win the new contract. Incumbent firms
will experience the effects of having to prepare competitive proposals.
In order to win, they may have to take efficiency measures or trim
profits. Those incumbent firms that do not win will experience the
effects of losing business volume. Non-incumbent firms that choose to
submit a proposal but do not win will experience the costs of bid
preparation without any increase in their business volume. Non-
incumbent firms that win contracts will experience an increase in their
business volume. It should be emphasized that these are the normal
effects of competition in the U.S. economy.
The NPS has no basis at this time for predicting the number of non-
incumbent firms that will submit proposals or win no-preference
concession contracts, nor does the NPS have a basis for predicting the
extent of the changes that incumbents will make in order to win new
contracts. It is possible however to illustrate reasonable bounds on
the resulting effects. If each of the 142 concession contracts held by
incumbents generating gross receipts of less than $5 million were to
face 2 new proposals, the total number of firms (of all sizes) that
would be affected would be 426. If, despite the competitive process,
the incumbents were all to obtain the new contracts, then only the 142
incumbents would experience any effects other than the cost of
preparing proposals. If all 142 were to be replaced by new firms, then
284 firms would experience effects of changes in business volume, half-
losing, half-gaining. On this basis and in light of the great number of
firms in the food service, lodging, merchandising, marina and guide
industries in the United
[[Page 63777]]
States, it does not appear that a substantial number of small entities
will experience significant effects.
NPS considers that the preference in renewal reform contained in
the 1998 Act will have a beneficial economic impact on small businesses
as it eliminates for most larger concession contracts the entry barrier
resulting from the preference in renewal.
NPS does not consider that any other provisions of the 1998 Act, or
the proposed regulations, will have a significant impact on small
businesses. In fact, for the most part, the proposed regulations do not
``regulate'' businesses at all in the usual meaning of that term. The
proposed regulations in general merely describe the procedures under
which concession contracts are to be awarded, describe the nature and
extent of leasehold surrender interest that may be obtained by a
concessioner under the terms of a concession contract, and describe
various provisions that NPS must include in concession contracts.
No business of any size is under any obligation to comply with the
proposed regulations unless it chooses to apply for a concession
contract.
Analysis
The following analysis covers the matters that would be addressed
in an initial regulatory flexibility analysis if the Regulatory
Flexibility Act applies. They are as follows, together with the NPS
discussion:
(1) A description of the reasons why the action is being
considered;
The NPS is promulgating the proposed concession regulations in
compliance with section 417 of the 1998 Act.
(2) A succinct statement of the objectives of, and legal basis for,
the proposed regulation;
The objective of the proposed concession regulations is to provide
regulatory implementation for applicable concession contracting
provisions of the 1998 Act. The legal authority for the proposed
concession regulations is section 417 of the 1998 Act.
(3) A description of, and, where feasible, an estimate of the
number of small entities to which the proposed regulation will apply;
The proposed concession regulations, when finalized, will apply to
all persons holding NPS concession contracts, and, in part, to persons
who seek to become an NPS concessioner by submitting a contract
proposal. As of September 1999, there are approximately 630 NPS
concessioners operating in 127 park areas (out of the 378 park areas
NPS administers). Of this number, there are approximately 113 food
service concessioners (providing food services ranging from prepackaged
food items to full service restaurants), 71 lodging concessioners
(providing lodging ranging from rustic cabins to hotels), 180
merchandising concessioners (providing merchandise ranging from
campstores to souvenir shops) and 41 marina concessioners. Most other
concessioners are outfitters and guides, including hunting, fishing,
hiking, and mountain climbing guides, guided trail rides, river
runners, boat/canoe rental, snowmobile rental and bicycle rental
operators. NPS generally characterizes concessioners by the primary
service provided. However, most larger concessioners provide a
combination of services (for example, lodging, food service,
merchandising and service stations).
The application procedures of the proposed regulations apply to any
person who chooses to submit a proposal for a concession contract. The
number of such persons is unlimited.
In 1997 (the latest year for which complete data is available), all
but 33 of the 630 concessioners had gross receipts of less than $5
million. NPS considers a concessioner with gross receipts of $5 million
or less to be a small business for purposes of this analysis.
Businesses that apply for concession contracts may be of any size.
(4) A description of the projected reporting, recordkeeping and
other compliance requirements of the proposed regulation, including an
estimate of the classes of small entities which will be subject to the
requirements and the type of professional skills necessary for
preparation of the report or record;
The proposed concession regulations contain three classes of
reporting, recordkeeping and other compliance requirements. They are
applicable only to persons holding concession contracts. These are (1)
the recordkeeping requirements (Sec. 51.111 of the proposed
regulations) mandated by section 411 of the 1998 Act; (2) the
information submission requirements (Sec. 51.100 of the proposed
regulations) necessary for NPS to approve a sale or transfer of a
concession contract pursuant to section 408 of the 1998 Act; and (3)
the submission and recordkeeping requirements regarding leasehold
surrender interests under concession contracts (subpart F of the
proposed regulations) necessary for implementation of section 405 of
the 1998 Act.
All new concession contracts will contain provisions concerning the
first the first two classes of requirements. Only persons that obtain
new concession contracts that provide for construction of improvements
on park land will be required to comply with the third class of
requirements. It is estimated that less than 150 concession contracts
will provide for construction of improvements.
The type of professional skills which will be required for
compliance are accounting, and in limited circumstances, legal.
(5) An identification, to the extent practicable, of all relevant
federal regulations that may duplicate, overlap, or conflict with the
proposed regulation.
There are no federal regulations which duplicate, overlap, or
conflict with the proposed concession contracting regulations.
(6) A description of any significant alternatives the proposed
regulation, that accomplish the stated objectives of applicable
statutes and that minimize any significant economic impact of the
proposed regulation on small entities.
The proposed regulations implement express, detailed provisions of
the 1998 Act. Given the specificity of the 1998 Act, NPS has little
flexibility as to significant alternatives to the provisions of the
proposed regulations which would accomplish the objectives of the 1998
Act and which would minimize any impact of the proposed regulations on
small businesses. NPS anticipates that public comment on the proposed
regulations may result in adoption in the final regulation of
alternative procedures in some circumstances. However, in developing
the proposed concession regulations, NPS considered and adopted several
alternatives for implementing provisions of the 1998 Act consistent
with the spirit of the Regulatory Flexibility Act, as follows:
(1) Section 51.13 of the proposed concession regulations authorizes
NPS to include in concession contract prospectuses additional
solicitation or selection procedures in the interests of enhancing
competition. Such additional procedures may include, but are not
limited to, issuance of a two-phase prospectus--a qualifications phase
and a proposal phase--and, use of a lottery system to select proposals
where two or more proposals are determined to be of equal merit. This
authority to utilize additional solicitation or selection procedures
gives NPS administrative discretion to tailor the solicitation and
award of concession contracts in a flexible manner to meet the
circumstances of a particular concession opportunity. The result will
be a more competitive process in special circumstances.
[[Page 63778]]
(2) Section 51.13 also authorizes NPS to include simplified
solicitation or information requirements in concession prospectuses
when it is considered that the concession contract is likely to be
awarded to a sole proprietorship. This non-regulatory administrative
flexibility will allow NPS to reduce the paperwork or procedural steps
generally required by the regulations for many smaller concession
contract opportunities.
(3) Section 406 of the 1998 Act requires that the rates charged
visitors by concessioners be reasonable and appropriate and makes the
rates subject to approval by NPS. NPS, in developing the proposed
concession regulations, chose not to implement these requirements by
regulation. Rather, the NPS rate approval process will continue to be
established administratively, giving NPS more flexibility in its
implementation. In this connection, NPS in recent years has been
seeking to reduce paperwork and procedural steps in its rate approval
process. It will continue to do so with an intention to rely on market
forces to control rates whenever possible.
(7) A discussion of certain possible significant alternatives
consistent with the stated objectives of applicable statutes. The
specific significant alternatives considered are set forth below
together with NPS' analysis:
(1) The establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
As stated above, all but approximately 33 of the some 630
businesses to which the proposed concession regulations will apply are
small businesses within the meaning of the Regulatory Flexibility Act.
Accordingly, NPS has made the regulations' requirements equally
applicable to both small and large businesses.
In this connection, the recordkeeping requirements set forth in
Sec. 51.111 of the proposed regulations, although required to carry out
the mandate of section 411 of the 1998 Act, do not prescribe any
particular records that a concessioner must maintain as a regulatory
compliance matter. Rather, the regulation gives NPS the authority to
prescribe recordkeeping requirements administratively. This will occur
in the form of requirements of particular concession contracts.
It is NPS policy to have less burdensome recordkeeping requirements
for smaller concessioners. NPS policy under consideration requires an
audited financial report to be submitted to NPS only by concessioners
with annual gross receipts of more than 1 million. Concessioners with
annual gross receipts between $250,000 and $1 million need only include
a financial review with their annual report financial report and
concessioners with gross receipts of less than $250,000 are not
required to submit any form of independent verification of their annual
financial reports.
The information that a concessioner is to submit to NPS under
Sec. 51.100 of the proposed regulations (regarding sale or transfer of
a concession contract) is not necessarily mandatory. Section 51.101 of
the proposed regulations permits NPS to waive these information
requirements in circumstances where particular information is
considered unnecessary.
The information and recordkeeping requirements of subpart F of the
proposed regulations are applicable only to those concessioners that
that have leasehold surrender interests. However, although mandatory,
in fact the proposed regulations only mandate what a prudent
concessioner would have to do in order to make sure that it receives
credit for all the leasehold surrender interest to which the
concessioner is entitled. This is because, under section 405 of the
1998 Act, a concessioner generally obtains leasehold surrender interest
in buildings it constructs on park area lands in the amount of their
initial construction cost inflated by CPI. In order to keep track of
this amount, a concessioner would have to maintain the records that
subpart F requires as a matter of prudent business practice. Subpart F
also requires a concessioner to submit to NPS for approval plans and
specifications of buildings it propose to build on park lands. This
requirement is necessary in order for NPS to carry out its
responsibilities under section 402 of the 1998 Act. Section 402
requires that the development of concession facilities in a park area
be limited to those that are necessary and appropriate for public use
and enjoyment of the park area and that are consistent to the highest
practicable degree with the preservation and conservation of the
resources and values of the park area.
(2) The clarification, consolidation, or simplification of
compliance and reporting requirements under the regulation for small
entities;
NPS considers that the compliance and reporting requirement of the
proposed regulations are quite clear. However, NPS anticipates that the
clarity of the proposed regulations will be improved in the final
regulations as a result of the consideration of public comments. NPS
considers that the location of the compliance and reporting
requirements of the proposed regulations (in three different subparts)
is appropriate as the requirements reflect the specific substantive
provisions of the subpart. To consolidate them in one location would
make them less clear as they would not be in context. NPS considers
that the proposed regulations are as simple as possible in light of the
many statutory requirements applicable to concession contracts under
the terms of the 1998 Act. However, NPS anticipates that public comment
may contain good suggestions for further simplification that will be
reflected in the final regulations.
(3) The use of performance rather than design standards;
The proposed regulations do not dictate standards for reporting or
information requirements.
(4) An exemption from coverage of the regulation, or any part
thereof, for small entities.
As discussed above, almost all NPS concessioners are small
businesses within the meaning of the Regulatory Flexibility Act. The
proposed regulations, accordingly, do not exempt small businesses from
their application.
Initial Conclusion
NPS, based on the above considerations, does not consider that the
proposed concession contracting regulations, even if they are subject
to the Regulatory Flexibility Act, will have a significant impact on a
substantial number of small businesses, within the meaning of the
Regulatory Flexibility Act. These initial determinations will be
reviewed by NPS in the course of considering public comments on this
analysis. As indicated above, NPS will then take appropriate final
action with respect to any applicable requirements of the Regulatory
Flexibility Act by the date of publication of the final concession
contracting regulations. No final administrative decision on the
applicability of the Regulatory Flexibility Act to the proposed
concession contracting regulations or their impact will be made until
after consideration of public comments received in response to this
notice.
Linda Canzanelli,
Acting Associate Director, Park Operations and Education.
[FR Doc. 99-30292 Filed 11-19-99; 8:45 am]
BILLING CODE 4310-70-P