[Federal Register Volume 65, Number 74 (Monday, April 17, 2000)]
[Rules and Regulations]
[Pages 20630-20684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9289]



[[Page 20629]]

-----------------------------------------------------------------------

Part III





Department of the Interior





-----------------------------------------------------------------------



National Park Service



-----------------------------------------------------------------------



36 CFR Part 51



Concession Contracts; Final Rule

  Federal Register / Vol. 65, No. 74 / Monday, April 17, 2000 / Rules 
and Regulations  

[[Page 20630]]


-----------------------------------------------------------------------

DEPARTMENT OF THE INTERIOR

National Park Service

36 CFR Part 51

RIN 1024-AC72


Concession Contracts

AGENCY: National Park Service, Interior.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule amends 36 CFR Part 51, the National Park Service 
(NPS) regulations concerning NPS concession contracts, to comply with 
the requirements of Title IV of the National Parks Omnibus Management 
Act of 1998 (the 1998 Act). The 1998 Act provides new legislative 
authorities, policies and procedures for the solicitation, award and 
administration of concession contracts by NPS. This rule was published 
as proposed for public comment in the Federal Register as a matter of 
policy on June 30, 1999. NPS provided a 60-day public comment period on 
the proposed rule. This was extended by 45 days upon public request. 
NPS has fully considered all public comments received and considers 
this final rule to be lawful, consistent with the policies of Congress 
as expressed in the 1998 Act, and as accommodating to the concerns of 
commenters as possible in light of the legal and administrative 
responsibilities of NPS under the 1998 Act and other applicable 
authorities.

EFFECTIVE DATE: May 17, 2000.

FOR FURTHER INFORMATION CONTACT: Wendelin Mann, Concession Program, 
National Park Service, 1849 C Street, NW, Washington, DC 20240 (202/
565-1219).

SUPPLEMENTARY INFORMATION: The 1998 Act has established a new statutory 
framework for the solicitation, award and administration of NPS 
concession contracts. Concession contracts are the form of governmental 
authorization used to permit persons (concessioners) to provide 
accommodations, facilities, and services to visitors to areas of the 
national park system. These services include, for example, lodging, 
food, merchandising, transportation, outfitting and guiding, and 
similar activities.
    NPS has been awarding and administering concession contracts for 
this purpose in various forms since 1916 under the terms of 16 USC 1 et 
seq., the NPS ``Organic Act.'' In 1965, Congress formally established 
by the Concession Policies Act of 1965, 16 USC 20 et seq. (the 1965 
Act), a number of policies and procedures regarding concession 
contracts. NPS regulations contained in 36 CFR Part 51 implemented the 
1965 law. On November 13, 1998, the Congress substantially revised 
these policies and procedures by passage of the 1998 Act. Many of the 
policies and procedures adopted by NPS in 36 CFR Part 51, as amended, 
and standard NPS concession contracts developed under the 1965 Act are 
reflected in the terms of the 1998 Act.
    The Congress had two primary objectives in revising the 1965 Act: 
making the NPS concession management program more efficient and 
enhancing competition in NPS concession contracting.
    The first objective is reflected in provisions of the 1998 Act that 
call, among other matters, for contracting to private businesses 
certain aspects of NPS concessions management and the establishment of 
an NPS Concessions Management Advisory Board to advise NPS on the 
conduct of its concessions management program. These provisions, 
although very important, will be implemented administratively by NPS 
rather than through program regulations.
    The second objective, enhancement of competition in NPS concession 
contracting, is reflected in the 1998 Act in a number of ways. 
Primarily, however, the 1998 Act achieves greater competition in two 
ways.
    First, to achieve greater competition, the 1998 Act repealed, 
except for smaller and outfitter and guide concession contracts, the 
``preference in renewal'' provision of the 1965 Act. The 1965 Act's 
preference in renewal provision required NPS to give existing 
satisfactory concessioners a preference in the renewal of their 
concession contracts, if the contract was to be continued after its 
expiration. This preference required NPS to permit existing 
satisfactory concessioners to meet the better terms and conditions of 
the best competing proposal for the renewal of its concession contract. 
Because of this preference, NPS estimated in 1993 that since 1965 over 
99.9% of the renewals of NPS concession contracts had been awarded to 
the existing concessioner. In fact, from 1965 to 1993, only seven NPS 
concession contracts out of approximately 1900 awarded were not awarded 
to the incumbent concessioner (where the incumbent sought the 
contract). True competition simply did not exist.
    The legislative history of the 1998 Act states as follows in 
connection with the repea1 of the preference in renewal:

    Under the 1965 Act, all satisfactory concessioners are entitled 
to preference in renewal of their concession contracts or permits. 
However, in light of the current circumstances of units of the 
National Park System and in recognition of present business 
conditions, the Committee considers that generally there is now no 
need to continue to provide a preferential right of renewal to 
concessioners in order to obtain qualified operators. Accordingly, 
to foster appropriate competition in the award of National Park 
Service concession contracts, the preferential right of renewal 
provided as a statutory right to existing satisfactory concessioners 
is repealed by the S. 1693 [the bill that became the 1998 Act]. S. 
Rep. No. 105-202, at p.31 (1998).

    The 1998 Act's other primary means to enhance competition in 
concession contracting was its reform of the 1965 Act's ``possessory 
interest'' concept. Under the 1965 Act, a concessioner that constructed 
real property improvements on park area lands under the terms of a 
concession contract obtained a compensable interest in the improvements 
in the form of a ``possessory interest.'' The value of the possessory 
interest as of the date of the expiration or other termination of the 
concession contract was the ``sound value'' of the improvements to 
which the possessory interest related, but, not to exceed the ``fair 
market value of the improvements,'' unless NPS and the concessioner 
agreed to an alternative value.
    The Congress in considering S. 1693 noted that possessory interest 
under the 1965 Act was frequently criticized as ``anti-competitive'' 
because ``the value of an existing concessioner's possessory interest 
was difficult to establish, thereby discouraging submittal of 
competitive offers for renewal of concession contracts.'' S. Rep. No. 
105-202, at p. 35 (1998).
    The 1998 Act reformed the possessory interest provisions of the 
1965 Act through the leasehold surrender interest concept. Instead of 
obtaining a possessory interest in real property improvements as 
provided by the 1965 Act, the 1998 Act provides a ``leasehold surrender 
interest'' in ``capital improvements'' a concessioner constructs on 
park area lands ``under the terms of a concession contract.'' The 
legislative history states as follows about the purposes of leasehold 
surrender interest:

    The Committee considers that the leasehold surrender interest 
described by this section will provide concessioners with adequate 
security for investments in capital improvements they make. This 
will assist in encouraging such investment in visitor facilities in 
the National Park System. However, the value of a leasehold 
surrender interest, i.e., the original construction cost, less 
depreciation as evidenced by physical

[[Page 20631]]

condition and prospective serviceability, plus what amounts to 
interest on the investment based on the Consumer Price Index, should 
accurately reflect the real value of the improvements and should not 
result in undue compensation to a concessioner upon expiration of a 
concession contract. Additionally, the value of the leasehold 
surrender interest will be relatively easy to estimate so that a 
prospective new concessioner and the Secretary [of the Interior] can 
accurately calculate the amount for purposes of competitive 
solicitation of concession contracts. Id.

    This final rule has three major purposes. The first is to set forth 
procedures as to how concession contracts are to be solicited and 
awarded by NPS under the 1998 Act. With certain exceptions, the 1998 
Act requires competitive award of concession contracts. In some 
circumstances, an existing satisfactory concessioner may have a right 
to match the terms of a better competing proposal for a new concession 
contract. In fact, although the preference in renewal was the most 
mentioned issue in the comments received, more than 75% of the some 630 
current NPS concessioners will continue to benefit from a preference in 
the renewal of their concession contracts. This is because the 1998 Act 
extends a preference in renewal to concessioners with contracts that 
have gross receipts of less than $500,000 or are outfitter and guide 
concessioners (more than 75% of the total).
    Second, unlike the existing 36 CFR Part 51, the final rule 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 leasehold surrender interest is defined 
in general terms in the 1998 Act. This rule establishes appropriate 
specific terms and conditions for leasehold surrender interests under 
the authority of the 1998 Act. Clarity as to the scope of leasehold 
surrender interest is important to both NPS and concessioners. 
Accordingly, the leasehold surrender interest subpart of this rule is 
lengthy. However, concession contracts will be proportionately shorter 
as for the most part they will refer to this rule with respect to 
leasehold surrender interest terms and conditions.
    Finally, the rule descibes a number of provisions that concession 
contracts will contain in implementation of the 1998 Act.
    The final rule reflects NPS's interpretation of the various 
provisions of the 1998 Act to appropriately administer the Act's 
requirements and purposes that are suitable for regulatory 
implementation. Section 417 of the 1998 Act requires NPS to promulgate 
regulations ``appropriate for its implementation.''
    A. Response to Public Comments
    NPS responds to public comments as follows. The symbol ``***'' 
under a section heading indicates that no (non-duplicative) comments 
requiring a response expressly addressed the section.

Scope of Comments

    NPS received 125 public comments on the proposed rule. Of these, 
the vast majority were from existing concessioners, attorneys 
representing existing concessioners, or existing concessioner 
organizations. Several organizations with members that are existing NPS 
concessioners commented on the proposed regulations. Most of these 
organizations are generally interested in ``outfitter and guide'' 
concession contracts. One organization, referred to in the discussion 
below as the ``general concessioner organization,'' is an organization 
with more than 150 existing concessioner members (according to its 
comment). Several of the members of this organization submitted 
separate comments that endorsed the comments of the general 
concessioner organization. Where NPS states below that the general 
concessioner organization or other organizations made comments, this 
refers collectively to the comments of the organization and comments 
separately submitted in support of the organization's views.
    Only a handful of ``non-incumbent concessioner'' individuals and 
groups commented on the proposed regulations. The vast majority of 
comments received were from existing concessioners or concessioner 
organizations. Nonetheless, NPS has taken into account in developing 
the final rule the interests of the general public and non-incumbent 
concessioners, i.e., persons that may now seek to become concessioners 
under the more competitive terms of the 1998 Act. NPS has an obligation 
to consider these interests under the mandates of the 1998 Act and 16 
U.S.C. 1 et seq., the NPS Organic Act, which requires NPS to preserve 
the resources of the national park system and to provide for their 
enjoyment by visitors by such means as will leave them unimpaired for 
the enjoyment of future generations.

1. General Comments

Repeal of the 1965 Act's Preference in Renewal
    The major concern of existing concessioners was the 1998 Act's 
repeal of the 1965 Act's preference in renewal. Some existing 
concessioners consider it unfair (and illegal) to deprive them of a 
preference in the renewal of their existing contracts or permits (1965 
Act concession contracts). Many commenters criticized NPS in this 
regard, although the repeal of the preference in renewal was by 
statute. The basis for this criticism is the perception that NPS has 
discretion to determine that the 1998 Act's repeal of the 1965 Act's 
preference in renewal is not applicable to the renewal of 1965 Act 
concession contracts. This is not the case.
    Section 415(a) of the 1998 Act expressly repealed the 1965 Act, 
including its Section 5 (16 U.S.C. 20d) which required NPS to give 
existing satisfactory concessioners a preference in renewal of their 
contracts. In addition, Section 403(7) of the 1998 Act states that, 
except as provided in the express circumstances set forth in the 1998 
Act, NPS ``shall not grant a concessioner a preferential right to renew 
a concession contract, or any form of preference to a concession 
contract.''
    NPS has fully reviewed the legal arguments made by existing 
concessioners and their attorneys. NPS considers, however, that nothing 
contained in these arguments provides it with a reasonable basis to 
conclude that the 1998 Act's repeal of the 1965 Act's preference in 
renewal is not applicable to NPS 1965 Act concession contracts or 
permits. NPS also points out that a contrary interpretation would be in 
direct conflict with the 1998 Act's purpose of enhancing competition in 
concession contracting.
    In this connection, one commenter on the proposed regulations, a 
major existing concessioner (that looks forward to the opportunity to 
compete freely for additional NPS concession contracts) submitted an 
opinion of counsel along with its comments on the regulations. The 
opinion of counsel supports the views of NPS on this issue.
    The NPS position is based on the express terms of the 1998 Act and 
the fact that standard 1965 Act concession contracts do not refer to a 
preference in renewal.
    In this connection, Section 415(a) of the 1998 Act states that the 
Act is applicable to 1965 Act concession contracts, as follows:


[[Page 20632]]


    (a) Repeal.--Public Law 89-249 (commonly known as the National 
Park Service Concession Policy Act; 16 U.S.C. 20 et seq.) is 
repealed. The repeal of such Act shall not affect the validity of 
any concessions contract or permit entered into under such Act, but 
the provisions of this title shall apply to any such contract or 
permit except to the extent such provisions are inconsistent with 
the terms and conditions of any such contract or permit. References 
in this title to concessions contracts awarded under authority of 
such Act also apply to concessions permits awarded under such 
authority.

    Accordingly, unless the provisions of the 1998 Act are 
``inconsistent with the terms and conditions'' of a 1965 Act concession 
contract, the 1998 Act applies in full to 1965 Act concession 
contracts.
    NPS points out that standard 1965 Act concession contracts make no 
reference to a preference in renewal. The reason for this is that the 
preference in renewal provision contained in the 1965 Act did not 
establish the preference in renewal as a contract right. Section 5 of 
the 1965 Act states as follows in pertinent part:

    The Secretary shall encourage continuity of operation and 
facilities and services by giving preference in the renewal of 
contracts or permits and in the negotiation of new contracts or 
permits to the concessioners who have performed their obligations 
under prior contracts or permits to the satisfaction of the 
Secretary.

    This provision does not state that an existing satisfactory 
concessioner has a right to a preference in renewal of an existing 
concession contract as a contract right or otherwise. It also does not 
authorize NPS to grant such a contract right. Rather, it imposes a 
statutory obligation on NPS (acting for the Secretary of the Interior) 
to give preference in the renewal of concession contracts to existing 
satisfactory concessioners.
    In contrast, other provisions of the 1965 Act state that they 
authorize NPS to grant contract rights. Section 3(a) of the 1965 Act 
states that the Secretary ``may include in [concession] contracts * * * 
such terms and conditions as, in his judgment, are required to assure 
the concessioner of adequate protection against loss of investment * * 
* resulting from the discretionary acts, policies, or decisions of the 
Secretary occurring after the contract has become effective.  * * *'' 
(Emphasis added.)
    In addition, Section 4 of the 1965 Act states that the Secretary 
``may grant to such concessioners a preferential right to provide such 
new or additional accommodations, facilities or services as the 
Secretary may consider necessary or desirable for the accommodation and 
convenience of the public.'' (Emphasis added.) Prior to 1979, standard 
NPS concession contracts contained an express provision that provided a 
preferential right to additional services.
    The 1965 Act, accordingly, clearly distinguished among its 
provisions that were intended to authorize the establishment of 
contract rights and provisions that were intended to impose a statutory 
obligation on the Secretary without establishing a contract right. In 
furtherance of these authorities and this distinction, existing 1965 
Act concession contracts contain a number of contractual provisions 
authorized by Section 3(a) and Section 4 of the 1965 Act, but make no 
reference to a preference in contract renewal.
    In this connection, NPS notes that, although not required by law to 
do so, NPS published for public comment in both 1979 and 1992 revisions 
to its standard concession contract, and, published the final new 
standard concession contracts in the Federal Register. Neither of these 
standard concession contracts includes a term or condition regarding 
preference in renewal or even refers to a preference in renewal. Prior 
standard concession contracts, going back to the passage of the 1965 
Act, also do not refer to a preference in renewal.
    Accordingly, the 1998 Act's repeal of the 1965 Act's preference in 
renewal is not ``inconsistent with the terms and conditions'' of NPS 
standard concession contracts. Rather, the 1998 Act repeals a statutory 
requirement obliging the government to give concessioners a preference 
in renewal.
    There is also the matter of congressional understanding of the 
application of Section 415(a) of the 1998 Act to the 1965 Act's 
preference in renewal. The legislative history of the 1998 Act set 
forth above (from both the Senate and House of Representatives) 
expressly describes the 1965 Act's preference in renewal as a 
``statutory right'' and states that it is repealed by S. 1693. There is 
no suggestion in the 1998 Act's legislative history that the repeal 
does not apply to existing concession contracts.
    In this connection, Congress must be presumed to know that the 1965 
Act described the preference in renewal as a statutory obligation for 
the Secretary to perform and that 1965 Act concession contracts, 
formally published in the Federal Register in 1979 and 1993, do not 
provide or refer to a preference in renewal.
    The fundamental argument of incumbent concessioners as to why they 
retain a preference in renewal of their existing contracts is that the 
contracts contain an implied term granting a preference in renewal. NPS 
has duly this position. NPS considers this position wrong for three 
basic reasons.
    First, it is firmly established that a ``promise'' contained in a 
statute is not binding on the government (or analogous to a contractual 
promise), since it is presumed that laws are always susceptible to 
change by future legislatures. As the Supreme Court has put it, the 
presumption is that a ``law is not intended to create private 
contractual vested rights, but merely declares a policy to be pursued 
until the legislature shall ordain otherwise.'' National R.R. Passenger 
Corp. v. Atchinson Topeka and Santa Fe Ry. Co., 470 U.S. 451, 466 
(1985) (quoting Dodge v. Board of Education, 302 U.S. 74, 79 (1937)).

    This well-established presumption is grounded in the elementary 
proposition that the principal function of the legislature is not to 
make contracts, but to make laws that establish the policy of the 
state. Policies, unlike contracts, are inherently subject to 
revision and repeal, and to construe laws as contracts when the 
obligation is not clearly and unequivocally expressed would be to 
limit drastically the essential powers of the legislative body. 
National RR Passenger Corp., 470 U.S. 451, 465 (internal citations 
omitted).

    The Supreme Court has consistently rejected the argument that the 
statutory or regulatory regime existing at the time of contract 
formation is implicitly written into the contract by force of law. To 
the contrary, the Court has always insisted that, regardless of the 
state of the law at the time of the contract, the contract itself must 
affirmatively promise future regulatory treatment in order to create an 
enforceable obligation against the government to provide such future 
treatment. As stated in Bowen v. Public Agencies Opposed to Social Sec. 
Entrapment, 477 U.S. 41, 52-53 (1986), with respect to commercial 
contracts, absent an ``unmistakable'' contract provision, ``contractual 
arrangements, including those to which a sovereign itself is a party, 
`remain subject to subsequent legislation' by the sovereign.'' Id. at 
52 (quoting Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 147 
(1982)).
    NPS also notes that the 1965 Act's preference in renewal imposed a 
statutory obligation on the Secretary to give existing concessioners a 
preference in renewal. Section 5, however, unlike Sections 3(a) and (4) 
of the 1965 Act, makes no mention of any authority to grant 
concessioners a preference in renewal as a contract right. Authority 
for a government official to turn a statutory obligation of the 
official into a contractual right must be provided by

[[Page 20633]]

the legislative branch in clear and unmistakable terms. Home Telegraph 
& Telephone Co. v. Los Angeles, 211 U.S. 265, 277 (1908). Section 5 of 
the 1965 Act by no means meets this test.
    Finally, even if these considerations are not controlling law, the 
argument that an implied provision of NPS concession contracts gives 
the concessioner a contractual right to a preference in renewal is 
inconsistent with the express terms of almost all current NPS 
concession contracts and permits with annual gross receipts in excess 
of $500,000. Almost all of such contracts expressly state (or state in 
analogous terms) that:

    This Contract [or permit] and the administration of it by the 
Secretary shall be subject to the laws of Congress governing the 
Area and rules, regulations and policies whether now in force or 
hereafter enacted or promulgated. (Emphasis added.)

    Accordingly, almost all NPS concession contracts and permits with 
annual gross receipts in excess of $500,000 expressly state that they 
are subject to changes in law. The existing concessioners' implied 
contractual right argument, even if it were otherwise of legal merit, 
fails under these express terms of NPS concession contracts and 
permits.
    NPS notes that the comments of the general concessioner 
organization point out that the version of Section 415 of S. 1693 (the 
bill that became the 1998 Act) that initially passed the Senate 
referred to ``express'' terms and conditions of 1965 Act concession 
contracts while the bill as reported out of the House of 
Representatives and ultimately enacted did not contain the word 
``express.'' The comments suggest that this means that Congress 
intended Section 415 of the 1998 Act to apply to implied, as well as 
express, terms of 1965 Act concession contracts.
    NPS notes, however, that the legislative history of the 1998 Act 
provides no guidance as to the intentions of the Congress in deleting 
the word ``express'' from S. 1693. In fact, Senator Thomas, the 
principal author of S. 1693, in commenting on the competitive results 
of the bill after the unexplained deletion of the word ``express,'' 
stated as follows:

    We have eliminated the preferential right of renewal so that 
there is competition for those services as they are renewed. Cong. 
Rec., S. 12540, Daily Ed., October 14, 1998. (Emphasis added.)

    Clearly, Senator Thomas considered that S. 1693's repeal of the 
preference in renewal was of immediate and comprehensive effect.
    NPS also notes Section 419 of the 1998 Act (described in the 1998 
Act as a ``savings provision''). Section 419 was included in S. 1693 at 
the same time the word ``express'' was deleted from Section 415. 
Section 419(a) ``grandfathered'' certain existing prospectuses for 
cruise ship concession permits for Glacier Bay National Park, requiring 
their award ``under provisions of existing law.'' Section 419(b) then 
requires that:

    Notwithstanding any provision of this title, the Secretary, in 
awarding future Glacier Bay cruise ship concession permits for which 
a preferential right of renewal existed prior to the effective date 
of this title, shall provide for such cruise ship entries a 
preferential right of renewal, as described in subparagraphs (C) and 
(D) of section 403(7). (Emphasis added).

    This ``savings'' provision clearly indicates that the 1965 Act's 
preference in renewal no longer existed as of the passage of the 1998 
Act. Moreover, if 1965 Act concession contracts had an implied 
contractual right of preference in renewal, as argued by existing 
concessioners, there would have been no need for the Congress to 
include Section 419(b) in the 1998 Act, that is, to provide a further 
preference in renewal after the effective date of the 1998 Act for 
concession contracts that were to be awarded ``under provisions of 
existing law.'' The general concessioner organization's argument as to 
the intention of Congress in deleting the word ``express'' from S. 1693 
is contradicted by the terms of Section 419.
    For these reasons, NPS concludes that it is not authorized under 
the 1998 Act to promulgate concession regulations that implement a 
preference in renewal except as expressly authorized by Sections 403(7) 
and (8) of the 1998 Act. However, the final rule, generally tracking a 
similar provision in the proposed rule, permits any existing 
concessioner holding a 1965 Act concession contract that makes express 
reference to a preference in renewal to request the Director to 
determine whether such express reference may result in a continuing 
preference in renewal by operation of law. This right of appeal is 
discussed further under Section 51.116.
Evaluation of Proposals
    Another general concern of commenters was the method contained in 
the proposed regulations for evaluating concession contract proposals 
and selecting the best proposal. The commenters objected to the lack of 
a numerical evaluation method and to the fact that environmental 
considerations and the amount of franchise fee offered were ``tie-
breakers'' in the evaluation system. The commenters argued that these 
provisions were in conflict with the intent of Congress that 
consideration of revenue to the United States is subordinate to 
protection of resources and providing quality visitor services.
    NPS does not agree with these perceptions of the consequences of 
the proposed rule. NPS, however, in the final rule, has accommodated 
these concerns through several incremental changes, including 
incorporation of a numerical scoring system into the narrative 
evaluation methodology contemplated by the proposed rule and by 
changing the ``tie-breaker'' provision to track the terms of the 1998 
Act. The modifications are discussed below in the section-by-section 
analysis.
Leasehold Surrender Interest
    A further general concern was the terms and conditions of leasehold 
surrender interest. Commenters considered several of the provisions of 
the proposed regulations to be inconsistent with the 1998 Act and to 
give NPS too much authority to determine the scope of a concessioner's 
leasehold surrender interest. NPS, in the final rule, has made a number 
of incremental changes to the leasehold surrender interest provisions 
of the regulations to accommodate the commenters' concerns. These are 
also discussed in the section-by-section analysis. The general 
concessioner organization and others also made the point that it is not 
clear which provisions of the regulations regarding leasehold surrender 
interest will be incorporated as terms and conditions of concession 
contracts and not be subject to modification by amended regulations or 
changes in law. The new NPS standard concession contract will make this 
clear.

2. Section by Section Analysis of Public Comments and Description of 
Changes in the Final Rule

Subpart A--Authority and Purpose

Section 51.1  What Does This Part Cover?

    (a) This subsection has been modified to more closely track the 
language of the 1998 Act with regard to the purpose of concession 
contracts and, in response to comments, to reference Section 415(c) of 
the 1998 Act which states that the 1998 Act does not supersede the 
requirements of 16 USC 3101 in regard to revenue producing visitor 
services in Alaska park areas.

[[Page 20634]]

    (b) A number of comments mentioned commercial use authorizations as 
described by Section 418 of the 1998 Act and stated that the 
regulations should have encompassed them. However, the proposed 
regulations referenced the separate authority of NPS to issue 
commercial use authorizations. NPS is in the process of drafting 
regulations for commercial use authorizations and intends to publish 
proposed regulations for public comment as a matter of policy. These 
regulations will also address the scope of the statutory exemption 
granted non-profit organizations by Section 418 of the 1998 Act, an 
issue mentioned in several comments.
    A comment also stated that the term ``incidental visitor services'' 
should be defined. NPS considers incidental visitor services to be 
supporting services that must be provided to program participants in 
order to conduct a related interpretive program.
    An individual expressed concern that NPS should not allow non-
profit organizations to compete with concessioners. However, some 
competition of this nature does exist and the 1998 Act does not 
preclude non-profit organizations from being concessioners. In fact, 
several existing NPS concessioners are non-profit organizations.
    An individual commented on the sentence in this section that states 
that the Director may not authorize the conduct of visitor services by 
any means other than a concession contract except as may otherwise be 
authorized by law. The individual interprets this to mean that under 
this section visitor services may not be authorized under an historic 
lease entered into pursuant to Section 111 of the National Historic 
Preservation Act, as amended. The individual objects to this result. 
However, the sentence to which the individual objects reflects an 
express statutory requirement contained in Section 403 of the Act. NPS 
points out that many historic buildings in areas of the national park 
system are utilized for visitor service purposes by concessioners. NPS 
also notes that it is in the process of drafting regulations for the 
leasing of property under Section 802 of the 1998 Act. These 
regulations, which NPS intends, as a matter of policy, to publish for 
public comment, will address the scope of activities that may be 
authorized under NPS leases as opposed to concession contracts.
    This subsection also has been modified to more closely track the 
language of the 1998 Act with respect to the fact that, unless 
otherwise authorized by law, concession contracts are to be utilized to 
authorize the provision of necessary and appropriate accommodations, 
facilities and services to park area visitors (``visitor services'').

Section 51.2  What Is the Policy Underlying Concession Contracts?

    A comment stated that the policies for permitting visitor services 
in park areas should require a ``balanced and diverse mix'' of prices 
for services. NPS supports the concept that visitor services should 
encompass a mix of services (e.g., moderate and low cost accommodations 
in addition to more expensive facilities). However, Section 51.2 as 
written paraphrases the statutory policies on visitor services set 
forth in Section 402 of the Act. NPS considers that decisions as to the 
scope of services to be authorized under concession contracts should be 
developed on a case-by-case basis through planning under the general 
guidance of Section 402 of the Act.
    Another comment stated that Section 51.2 should require 
consideration of the factors specific to the park area to be affected. 
NPS considers that this thought is implicit in Section 51.2, as the 
findings required by Section 402 of the Act necessarily must be made on 
a park-by-park basis.
    An individual commented that removal of concession facilities from 
a park area might damage the park more than leaving the facility there. 
Again, NPS considers that determinations as to what are necessary and 
appropriate visitor services, including the possible removal of 
existing facilities, must be made on a case-by-case basis.
    A comment stated that there is no clear definition of visitor 
services contained in the regulations. However, NPS considers that the 
visitor services definition (as modified) contained in Section 51.3 in 
the final rule provides a clear definition of visitor services. The 
comment also states that a United States Post Office should be 
considered as providing visitor services and therefore, apparently must 
be awarded a concession contract. NPS, however, does not consider Post 
Offices as concession operations within the meaning of the 1998 Act. 
Finally, the comment states that non-profit cooperating associations 
that provide visitor services should be subject to the requirements of 
Section 51.2. NPS notes that all visitor services provided in park 
areas under the authority of the 1998 Act are subject to the 
requirements of Section 51.2.
Subpart B--General Definitions

Section 51.3  How Are Terms Defined in This Part?

    A number of comments were made concerning the definition of terms 
used in the regulations. Some of these comments, however, in fact were 
directed at underlying substantive issues, particularly the repeal of 
the 1965 Act's preference in renewal (discussed under General Comments) 
and the scope of a preference in renewal under the 1998 Act (discussed 
under Subpart E). The comments that specifically concerned the wording 
of the definitions per se are as follows.
The ``1965 Act''
    A comment stated that the words ``as amended'' should be added. 
However, the 1965 Act, although repealed by the 1998 Act, was never 
amended.
``Concession Contract (or Contract)''
    The general concessioner organization requested clarification of 
this definition with respect to when a concession contract can be 
something other than a written agreement. NPS has deleted the phrase 
``unless otherwise indicated in this part'' in response to this 
comment.
    The general concessioner organization also asked NPS to clarify its 
position regarding circumstances where an existing concessioner may 
continue to operate after the expiration of a concession contract. 
Particularly, the comment requested NPS to make clear that (i) an 
incumbent concessioner is not required to continue to operate after the 
expiration of its contract; (ii) that if the concessioner does not 
choose to continue to operate, NPS must honor the obligations of the 
expired contract; (iii) that if the concessioner does continue to 
operate the continuation is to be on the same terms and conditions as 
the expired contract unless otherwise agreed by the parties; and (iv) 
the concessioner, if it continues to operate, ``shall not be placed in 
any worse economic position upon the commencement of the new contract 
than the concessioner would have been had the new contract commenced 
upon the original expiration date of the prior contract.''
    NPS considers that the first three statements must be examined in 
the context of particular contracts and need no amplification in the 
regulations. The last point seems to suggest that a concessioner that 
continues to operate after the expiration or other termination of a 
concession contract may be harmed economically by this action. However, 
as a concessioner is not obliged to continue operations upon the 
expiration

[[Page 20635]]

or other termination of a concession contract (unless the terms of a 
concession contract otherwise provide), a concessioner's decision to 
continue operations would seem to obviate any concerns about possible 
``economic harm'' resulting from the continued operations. In any 
event, NPS does not consider that changes to the definition of 
``concession contract (or contract)'' are warranted on the basis of 
these comments. (NPS points out that it uses the phrase ``expiration or 
other termination'' of a concession contract in this paragraph as the 
1965 Act utilizes this terminology. Under the 1965 Act, the 
``expiration'' of a concession contract is considered a form of 
contract termination.)
    Several comments also objected to the statement in this definition 
that concession contracts are not contracts within the meaning of 41 
USC 601 et seq. (the Contract Disputes Act) and are not service or 
procurement contracts within the meaning of statutes, regulations, or 
policies that apply only to federal service contracts or other types of 
federal procurement actions.
    NPS has fully considered these views and disagrees with their 
conclusions. The Contract Disputes Act, by its terms, applies to 
procurement contracts. A procurement contract is a contract under which 
the government bargains for, pays for, and receives goods or services. 
YRT Services Corporation v. United States, 28 Fed. Cl. 366, 392, n.23 
(1993).
    The court in YRT Services concluded that an NPS concession contract 
for lodging facilities ``did not constitute a procurement'' as NPS is 
not paying for the [concessioner's] services but is ``collecting fees 
in exchange for granting a permit to operate a concession business.'' 
Id.
    Several comments on this issue discussed a series of Interior 
Department Board of Contract Appeals (IBCA) decisions that held that 
NPS concession contracts are subject to the Contract Disputes Act as 
procurement contracts. However, several General Accounting Office 
decisions take a contrary view. NPS has reviewed the IBCA decisions and 
notes that all but one preceded the decision of the Court of Claims in 
YRT Services, and all concern 1965 Act concession contracts, not 1998 
Act concession contracts. (This final rule, issued under the terms of 
the 1998 Act, supercedes these IBCA decisions.)
    NPS points out that the 1998 Act, unlike the 1965 Act, contains an 
express statement as to the purposes of NPS concession contracts:

    In furtherance of the findings and policy stated in Section 402, 
and except as provided by this title or otherwise authorized by law, 
the Secretary shall utilize concession contracts to authorize a 
person, corporation or other entity to provide accommodations, 
facilities and services to visitors to units of the national park 
system. (Section 403 of the 1998 Act. Emphasis added.)

    This statutory provision tracks the reasoning in YRT Services as to 
why 1965 Act concession contracts are not procurement contracts. The 
purpose of concession contracts is not to procure goods or services for 
the government. Furthermore, NPS notes that the existing 36 CFR Part 
51, the NPS regulations that implemented the 1965 Act, expressly state 
that concession contracts ``are not Federal procurement contracts or 
permits within the meaning of statutory or regulatory requirements 
applicable to Federal procurement actions.'' (36 CFR 51.1.) The 
Congress, in passing the 1998 Act, must be presumed to have been aware 
of this regulatory interpretation and the decision of the court in YRT 
Services. In fact, it appears that the inclusion of the sentence in 
Section 403 of the 1998 Act to the effect that concession contracts are 
contracts that ``authorize a person to provide accommodations, 
facilities and services'' to park area visitors is a direct 
confirmation of the position of the court in YRT Services and the NPS 
interpretation of the 1965 Act contained in the existing 36 CFR Part 
51.1. NPS concession contracts do not procure services for the 
government; rather, they authorize third parties to provide services to 
park area visitors.
    The NPS Organic Act, 16 USC 1 et seq., also expressly recognizes 
this distinction. 16 USC 17b provides that the Secretary of the 
Interior is authorized to contract with persons that provide services 
or other accommodations to the public in national parks to furnish such 
services or accommodations to the Government without compliance with 
the 41 USC 5. 41 USC 5 is the title of the United States Code that 
establishes procurement contract requirements. Accordingly 16 USC 17b 
makes clear that if the government contracts with a concessioner to 
provide services and accommodations to the Government (that the 
concessioner is authorized to provide to the public), the contract is a 
procurement of services to the government otherwise subject to 41 USC 
5. In addition, by implication, this authority also makes clear that a 
concessioner's authorization to provide goods and services to park 
visitors is not a procurement contract as the goods and services are 
not provided to the Government.
    NPS, in reviewing this issue, did consider the fact that concession 
contracts in one sense could be argued to result in ``services'' to the 
government, i.e., that concession contracts may require the 
concessioner to repair and maintain government property assigned to a 
concessioner under the terms of a concession contract. However, these 
services (repair and maintenance of government property) flow from the 
assignment (the equivalent of a lease of government property) of 
property to a concessioner for use in concession operations.
    In this connection, the 1998 Act expressly exempts NPS concession 
contracts from the application of Section 321 of the Act of June 30, 
1932 (40 USC 303b), ``relating to the leasing of buildings and 
properties of the United States,'' thereby permitting NPS to accept the 
repair, maintenance and improvement of government property from a 
concessioner instead of collecting cash rent for the use of the 
property. The legislative history of the 1965 Act (and a related 1962 
law) indicates that this provision was included in the 1965 Act (and a 
related 1962 law) in response to a Comptroller General Opinion that 
concession contracts are leases. Accordingly, to the extent that the 
repair and maintenance of assigned property may be considered as 
``services'' to the government, these services are recognized by the 
1998 Act as an authorized function of the assignment of government 
property under concession contracts, not as a procurement of services 
for the government.
    For these reasons, NPS does not consider that NPS concession 
contracts are subject to the Contract Disputes Act or to other statutes 
that apply only to federal procurement contracts. Accordingly, it has 
left this statement in the final rule. NPS also points out that it does 
not consider the solicitation of NPS concession contracts to be subject 
to the Competition in Contracting Act (``CICA'') as it applies to 
procurement contracts. YRT Services at p. 392. In any event, even if it 
were determined that NPS concession contracts are subject to CICA, the 
express provisions of the 1998 Act describing mandatory NPS concession 
contracting procedures make CICA inapplicable to NPS concession 
contract under its own terms. 41 USC 253(a)(1)(1988).
    A comment asked whether the term ``concession contract'' refers to 
``concession permits'' awarded under the 1965 Act. It does, as 
indicated in the definition of ``concession contract.''

[[Page 20636]]

    A sentence has been added to this definition in the final rule to 
clarify that concession contracts must include terms and conditions as 
are required by law, this part, or are otherwise appropriate in 
furtherance of the purposes of this part and the 1998 Act.
``Concessioner''
    The definition of concessioner has been modified in the final rule 
to track the terms of the 1998 Act.
    A comment submitted by a municipality that holds a concession 
contract suggested that this definition be modified to make clear that 
municipalities may be concessioners. This is clear under the definition 
in the final rule. The municipality also offered to pay a higher than 
minimum franchise fee in consideration of not being required to compete 
for the award of concession contracts. NPS has not accepted this 
suggestion, as it is impermissible under the terms of the 1998 Act.
``Director''
    The term ``Director'' has been modified in the final rule in 
response to comments that expressed concern that the ``Director'' would 
be the decision-maker on an appeal from a decision of the ``Director.'' 
The term Director as used in the regulations applies to the Director 
personally and duly delegated subordinates of the Director. In 
circumstances where the rule calls for an appeal to the Director, the 
appeal must be to a higher authority than the initial deciding 
official.
``Franchise Fee''
    Several comments requested that the term ``and rights'' be included 
in this definition after the word ``privilege.'' NPS has not made this 
change as the definition of franchise fee contained in the final rule 
tracks the terms of the 1998 Act.
``Offeror''
    The definition of the term ``offeror'' has been modified in order 
to make clear that an organization does not have to be formally in 
existence as of the time of submission of a proposal for a concession 
contract in order for the proposal to be considered by NPS.
``Possessory Interest''
    A comment took issue with the sentence of this definition that 
states that possessory interest does not include any interest in 
personal property even though a prior concession contract may have 
provided a compensable interest in personal property described as 
``possessory interest.'' The comment makes the point that ``this is 
true only to the extent that such property does not come within the 
definition of possessory interest'' as set forth in the 1965 Act. NPS 
agrees with this latter statement and has modified the definition 
accordingly. The comment also suggests that the regulations address the 
circumstances of the disposition of personal property when a new 
concessioner is selected for award of an existing concession contract. 
NPS has done this in Section 51.68 of the final rule.
    Other comments objected to the fact that NPS generally does not 
intend to include in new concession contracts provisions that require a 
new concessioner to purchase the personal property of a prior 
concessioner. NPS considers that such provisions in concession 
contracts are a barrier to competition as a new concessioner is 
required to buy equipment that it may not need and that may not be in 
good condition. NPS considers that the marketplace should control in 
this situation. A prior concessioner may sell its personal property to 
a new concessioner on a mutually agreeable basis. If agreement cannot 
be reached, the prior concessioner is free to sell its personal 
property on the open market. A commenter stated in this connection that 
the 1965 Act required that new concessioners purchase the personal 
property of prior concessioners. This was not the case.
``Preferred Offeror''
    The general concessioner organization stated that the words ``the 
Director has determined'' should be stricken from this definition. The 
basis of the comment is that the existence of a concessioner's status 
as a preferred offeror is not always subject to the Director's 
discretion. However, NPS considers that the definition is accurate. The 
main body of the regulations describes the circumstances under which 
the Director may determine an existing concessioner to be a preferred 
offeror. A comment asked whether there ever may be more than one 
preferred offeror for a qualified concession contract. The answer is no 
as only one entity can be a concessioner under the terms of a 
concession contract as of its termination or expiration.
``Prior Concession Contract'' and ``Prior Concessioner''
    Several comments suggested changes to these definitions. However, 
in consideration of these comments, NPS has determined that these 
definitions are not needed to understand the final rule. The 
definitions have been deleted in the final rule.
``Qualified Concession Contract''
    NPS has included in the general definitions section of the final 
rule for the sake of clarity the definition of a ``qualified concession 
contract'' as set forth in the text of the regulation.
``Qualified Person''
    One comment suggested adding the word ``conserve'' to the phrase 
``protect and preserve'' as used in this definition. The request is 
based on the statement that the word ``conserve'' reflects language of 
the 1998 Act and also points out that hunting and fishing, authorized 
uses in certain park areas, are not considered by some to be consistent 
with the concept of ``preservation.'' NPS has not made this change as 
this definition tracks the statutory description of a qualified person 
contained in Section 403(4)(B) of the 1998 Act. In any event, NPS 
considers that the statutory language was not intended to alter park 
area uses such as hunting and fishing where such uses are otherwise 
permissible.
    The definition of ``qualified person'' in the final rule has been 
modified in accordance with the changes to the definition of the term 
``concessioner'' and shortened without changing its meaning.
``Right of Preference''
    NPS has modified the definition of ``right of preference'' to more 
closely track Section 403(7)(C) of the 1998 Act in response to comments 
concerning the right of preference as described in the proposed 
regulations.
    A comment suggested deletion of the last sentence of this 
definition, stating that it suggests that NPS can ``defeat'' a right of 
preference by changing contract terms and conditions. NPS has not made 
the requested change. The questioned sentence only states that a right 
of preference does not give a preferred offeror the right to establish 
or negotiate the terms of a new concession contract. See the discussion 
under Section 51.33 with respect to the right of NPS to establish the 
terms and conditions of new concession contracts.
``Visitor Services''
    A comment asked NPS to explain why this definition is limited to 
accommodations, facilities and services that are provided for a fee or 
charge as this limitation suggests that services provided free to 
guests are not permissible. This was not the intention of the 
definition and it has been clarified accordingly. The definition

[[Page 20637]]

also has been clarified to state that activities that are ``necessary 
and appropriate'' are to be determined by the Director under the 
guidance of Section 402 of the Act. The definition has been further 
modified to more closely track the terms of the 1998 Act and to clarify 
that NPS itself may provide ``visitor services,'' e.g., operate 
campgrounds for visitors, as indicated in this section in the proposed 
regulations.
    Another comment suggested that the regulations should contain 
language that advises NPS managers as to how the courts have 
interpreted the term ``necessary and appropriate'' as used in this 
definition in litigation concerning the 1965 Act. NPS has not accepted 
this suggestion. Decisions as to what visitor services are ``necessary 
and appropriate'' for a particular area are necessarily made on a case-
by-case basis by NPS with public participation in planning processes as 
appropriate. NPS takes into account relevant judicial decisions in its 
planning decisions. However, planning decisions are fact driven. Every 
park area is different with respect to resources and the types of 
visitors and visitor needs and desires.
``Responsive Proposal''
    NPS has moved the definition of ``responsive proposal'' from 
Section 51.15 of the proposed regulations to the general definitions 
section of the final rule for the sake of clarity. It has also modified 
the definition of ``responsive proposal'' to make clear that the 
determination is made by the Director.
Subpart C--Solicitation, Selection and Award Procedures

Section 51.4  How Will the Director Invite the Public To Apply for the 
Award of a Concession Contract?

    One comment suggested that the regulations should include 
procedures and guidelines regarding the contents and scope of a 
prospectus. NPS considers that the regulations, in accordance with the 
requirements of the 1998 Act, adequately describe the contents of 
prospectuses.
    This section, in response to a comment from an attorney who argued 
that rights of an existing concessioner may be impacted by the issuance 
of a prospectus, has been modified by NPS to clarify that the 
determinations contained in prospectuses and/or in proposed concession 
contracts published with prospectuses do not become final NPS 
administrative decisions until such time as a concession contract is 
awarded in accordance with this part. NPS also notes that Section 51.47 
in the final rule provides an appeal right for concessioners regarding 
preferred offeror status. Finally, the final rule precludes issuance of 
a prospectus for a new concession contract earlier than eighteen months 
prior to the expiration of an existing concession contract that the new 
contract is to replace, thereby assuring that an existing concessioner 
does not have to compete for a new contract in circumstances where 
assessment of the feasibility of the terms and conditions of the new 
contract would be unduly speculative.

Section 51.5  What Information Will the Prospectus Include?

    The general concessioner organization requested that the words 
``and enhancement'' be deleted from this section for the reasons 
discussed in the commenter's statements under sections 51.20 and 51.21. 
In those sections, the commenter generally objected to the use of 
environmental enhancement measures as a factor in the selection of 
concession contract proposals. For the reasons discussed by NPS under 
those sections, NPS does not agree with the position of the commenter. 
However, NPS has modified this section to delete references to 
environmental ``enhancement.''
    The general concessioner organization objected to the use of the 
term ``minimum'' as to the capital investment required by an offeror as 
referred to in Subsection (a)(5) on the grounds that the 1998 Act does 
not contain this modifier and its use suggests that NPS is providing 
itself discretion, ``contrary to the law,'' to accept proposals that 
offer a higher capital investment than the ``minimum.''
    The comment is correct in stating that the 1998 Act does not 
contain the word ``minimum.'' Rather, the Act states as follows in 
pertinent part: ``any facilities, services, or capital investment 
required to be provided by the concessioner.'' NPS does not consider 
that this section of the Act, referring to capital investment required 
to be provided by the concessioner, may reasonably be interpreted as 
forbidding NPS from taking into account in the selection of proposals 
for a concession contract the relative amount of capital investment an 
offeror may be willing to provide. Moreover, the amount of capital an 
offeror is prepared to invest in the park is demonstrably an 
appropriate proposal selection concern. The level of concessioner 
investment in many cases may directly relate to the quality of the 
visitor facilities to be provided or measures to be taken with respect 
to the protection, conservation and preservation of the resources of 
the park area.
    NPS has included the phrase ``if any'' in the final rule in 
response to a comment that stated that many NPS concession contracts do 
not require capital investment by the concessioner.
    A comment suggested that the term ``fixed'' be included with 
respect to ``minimum'' franchise fees. NPS has not made this change. A 
franchise fee can be in the form of a fixed fee, a percentage of gross 
receipts, or other measures as may be described in a concession 
contract. The regulation does not need to amplify this further.
    A comment suggested that the word ``ensure'' be changed to 
``assure'' in Section 51.5(a)(4). NPS has not made this change as the 
word ``ensure'' comes from Section 403 of the 1998 Act.
    A comment stated that subsection (e) should make clear that any 
subfactor set forth in a prospectus must be a subset of the principal 
selection factor to which it relates. NPS agrees with this comment but 
considers the regulation is clear in this regard.
    A comment suggested that subsection (f) be clarified to acknowledge 
that some information provided to the Director by concessioners is not 
subject to public release as confidential. NPS has not accepted this 
suggestion for the reasons discussed under section 51.113. However, NPS 
has amended this subsection to fully track Section 403(3)(G) of the 
1998 Act that requires NPS to include in concession contract 
prospectuses:

    Such other information related to the proposed concession 
operation as is provided to the Secretary pursuant to a concession 
contract or is otherwise available to the Secretary, as the 
Secretary determines is necessary to allow for the submission of 
competitive proposals.

    In addition, NPS has moved to this subsection from Section 51.113 
(which has been deleted in the final rule), certain information that 
NPS considers is necessary (where applicable) to allow for the 
submission of competitive proposals.
    A comment suggested that the ``estimate'' of leasehold surrender 
interest value to be contained in a prospectus should be provided by 
the existing concessioner. NPS has not accepted this suggestion. It 
would be an obvious conflict of interest for an existing concessioner 
to estimate the value of its own leasehold surrender interest for 
competitive selection purposes.
    A comment suggested that prospectuses should set forth all of the 
fees a concessioner may be required to pay, not just franchise fees. 
NPS

[[Page 20638]]

considers that this section, which refers to franchise fees and other 
forms of consideration to be paid to NPS under the new contract, meets 
the concerns of this comment.
    NPS has modified this section in the final rule to make clear that 
concession contracts may contain terms, where appropriate, 
incorporating measurable performance standards as suggested in general 
terms by commenters.

Section 51.6  Will a Concession Contract be Developed for a Particular 
Potential Offeror?

    A law firm suggested a change to this section. However, as the 
comment refers to the ``last paragraph'' of this section and the 
section only contains one sentence, it appears that the reference to 
Section 51.6 was in error. NPS was not able to identify the section to 
which the comment was intended to apply.
    A comment suggested that this section be amended to make clear that 
it does not preclude consultation with an existing concessioner as to 
the proposed content of a prospectus. NPS has amended this section to 
indicate that consultations with an existing concessioner may occur but 
that the concessioner may not be provided any information as to the 
content of a proposed or issued prospectus that is not available to the 
general public.
    A comment suggested that the phrase ``as they relate to the visitor 
services to be provided'' be added after ``requirements of the 
Director'' in this section. NPS has not made this change. The term 
``requirements'' as used in this section is not limited to visitor 
services requirements.

Section 51.7  How Will Information Be Provided to a Potential Offeror 
After the Prospectus Is Issued?

    A comment suggested that NPS should hold meetings with potential 
offerors as a means to ensure that information is equally shared. NPS, 
in fact, routinely does hold offeror information meetings after the 
issuance of concession contract prospectuses, particularly with respect 
to larger contracts. This practice will continue under the final rule, 
subject to applicable administrative guidelines.

Section 51.8  Where Will the Director Publish the Notice of 
Availability of the Prospectus?

    A comment suggested that NPS should also provide notice ``directly 
to the existing concessioner, both because such concessioner is a 
logical bidder and because a smooth bidding process requires the 
incumbent to be apprised of the timing and particulars of the 
offering.''
    NPS is unaware of any occasion where an existing concessioner was 
not aware of the issuance of a prospectus concerning the continuation 
of the concessioner's operations. NPS, therefore, does not see a need 
to make this change even if it was otherwise considered appropriate.
    A comment suggested that the word ``may'' in this section be 
changed to ``shall'' in order to ensure even-handed solicitation 
practices. NPS has not made this change as the decision is 
discretionary.
    A comment suggested that notice of the concession opportunity also 
be included in the Federal Register. NPS has not accepted this 
suggestion. Federal Register publication is expensive and may not 
significantly increase public awareness of the concession offering. The 
costs of publication outweigh the limited benefits of publication.
    A comment suggested that NPS should maintain a list and notify 
persons who have expressed interest in concession opportunities. NPS 
does this now and intends to continue to do so as a matter of 
administrative practice.

Section 51.9  How Do I Get a Copy of the Prospectus?

    A comment suggested that the word ``may'' in this section be 
changed to ``shall.'' NPS has not accepted this suggestion as it 
generally intends to impose a fee for prospectuses only when it 
anticipates that a large number of requests for copies of a prospectus 
will be received.

Section 51.10  How Long Will I Have To Submit My Proposal?

    A comment suggested that this section should contain guidance as to 
what constitutes circumstances that would make a shorter than normal 
response time appropriate. As circumstances may vary greatly, NPS has 
not made this change. However, in general, a shorter time period is 
appropriate for smaller concession contracts where potential offerors 
are likely to be local to the park area and familiar with the 
circumstances of the concession opportunity.
    A comment also suggested that the sixty-day usual response time for 
submission of proposals be changed to ninety days. Another comment 
recommended one hundred and twenty days. NPS has not accepted these 
suggestions as it considers that sixty days is a reasonable response 
time for routine NPS concession contracting opportunities and does not 
wish to unduly expand the length of the concession contracting process. 
In addition, NPS may, under the terms of this section, increase the 
time if determined appropriate.

Section 51.11  May the Director Amend, Extend, or Terminate a 
Prospectus or Solicitation?

    Several comments addressed this section. They criticize the fact 
that the Director's right to cancel a concession contract solicitation 
at any time prior to award of the contract contains no guidelines as to 
when such a cancellation may occur and that an explanation of a 
cancellation is not required. One suggested that a cancellation should 
be only ``for cause.'' The comments also requested an ``appeal right'' 
in the event of a cancellation. In response to these comments, NPS has 
included in this section a sentence describing the circumstances under 
which a concession contract solicitation may be cancelled. NPS has not 
accepted the suggestion of an ``appeal right.'' NPS does not consider 
that any person has an entitlement to the issuance of a concession 
contract solicitation and that, therefore, the cancellation of a 
solicitation in and of itself, a discretionary decision by NPS as 
indicated in the final rule, does not affect the rights of any person. 
(NPS has changed the term ``termination'' of a solicitation to 
``cancellation'' in the final rule as ``cancellation'' is the usual 
terminology.)

Section 51.12  Do I Have Any Rights If the Director Amends, Extends or 
Terminates a Prospectus or Solicitation?

    Several comments addressed this section. One suggested that an 
amendment to a concession contract solicitation should only be for 
``cause.'' This, of course, is the case. An amendment would be made by 
NPS only if circumstances called for an amendment. Another comment 
suggested that the phrase ``except for any existing rights'' be 
included at the beginning of this section. However, NPS does not 
consider that this section as written could be construed as affecting 
the existing legal rights of any person, as discussed under the 
previous section.
    The final rule has combined Section 51.12 with Section 51.11 for 
the sake of clarity. Section 51.12 has been deleted in the final rule.

[[Page 20639]]

Section 51.13 (Section 51.12 in the final rule) Are There Any Other 
Procedures That I Must Follow or That Apply to the Solicitation or to 
the Selection of the Best Proposal?

    Several comments expressed concern that NPS, by referencing a 
lottery system in this section, intended to generally select 
concessioners by lottery. This is not the case. The use of a lottery 
was intended to apply only in very limited circumstances. However, in 
light of other changes made in the regulations with respect to 
selection procedures (discussed in the next several paragraphs), NPS 
does not consider that mention of a lottery system is appropriate in 
the final rule. Reference to it has been deleted from the regulations.
    A number of comments criticized NPS for not including in the 
proposed regulations ``simplified procedures for small, individually-
owned, concession contracts'' as called for by Section 403(1) of the 
1998 Act. This section of the proposed regulations, however, did 
incorporate such simplified procedures, stating that the Director will 
include simplified solicitation and/or information requirements in 
prospectuses for concession contracts that are likely to be awarded to 
a sole proprietorship. NPS notes that, because of the express statutory 
requirements of the 1998 Act prescribing concession contract 
solicitation procedures, it is not possible to establish in general a 
greatly simplified regulatory solicitation procedure for smaller 
concession contracts. NPS does not consider that Section 403(1) was 
intended to repeal by implication the numerous statutory requirements 
regarding the selection process set forth in the 1998 Act. Rather, NPS 
considers that the simplified procedures referred to in the 1998 Act 
relate to administrative practices utilized by NPS and any regulatory 
procedures NPS may adopt in furtherance of the 1998 Act. In any event, 
NPS considers that the basic elements of the 1998 Act with respect to 
solicitation procedures, i.e., issuance of a prospectus, evaluation of 
proposals under specified criteria, and selection of the best proposal, 
necessarily have to be contained in any selection process, whether or 
not legally required. Accordingly, the greatest opportunity for 
simplified procedures is with respect to the information requirements 
of prospectuses.
    NPS, in the development of prospectuses for smaller concession 
contracts, intends to limit as appropriate the information that needs 
to be submitted by offerors and the number of subfactors and related 
information requirements applicable to the principal selection factors. 
In this way, although the solicitation process will follow the 
statutory requirements for concession contracting, the paperwork burden 
will be significantly reduced for smaller concession opportunities.
    In addition, NPS has provided for the possible elimination with 
respect to smaller concession contracts of the secondary selection 
factor (quality of environmental program) contained in Section 
51.17(b)(1) of the final rule, thereby simplifying the selection 
procedures for smaller concession contracts. NPS has made corresponding 
changes to Section 51.12 in the final rule to make clear its intentions 
with respect to simplified procedures for smaller concession contracts.
    A municipality that holds a concession contract suggested that the 
term sole proprietorship be amended to include local governments. NPS 
does not consider this lawful under the Act as the term ``individually 
owned'' clearly refers to a business, not a governmental unit.

Section 51.14 (Section 51.13 in the final rule) When Will the Director 
Determine If Proposals Are Responsive?

    A comment suggested that a time limit be adopted as to when NPS 
must determine a proposal to be non-responsive. NPS has not accepted 
this suggestion in light of the varying complexity of concession 
contract proposals. This section has been changed in the final rule to 
make clear that a determination of responsiveness must be made prior to 
or as of the selection of the best proposal.

Section 51.15 (Deleted in the final rule) What Is A ``Responsive 
Proposal?''

    A comment suggested that the definition of a responsive proposal 
needs to be more clearly articulated. NPS has made a change to the 
definition (discussed under Section 51.3). The commenter's real 
concern, however, appears to be that the commenter considers that the 
requirement for submission of a responsive proposal deprives offerors 
of the ability to object to any of the terms of the solicitation or to 
submit a conditional proposal. The commenter objected to this as it 
wishes to have the right to disagree with the terms of the solicitation 
or the new concession contract, in other words, to disagree with the 
minimum requirements of the prospectus. NPS does not agree with this 
point of view. NPS determines the nature and scope of proposed new 
concession opportunities. They are not a matter of negotiation with 
prospective offerors. This is made clear by Section 403(3)(A) of the 
1998 Act that states that a prospectus shall include the ``minimum 
requirements'' of the solicited contract. The 1998 Act also describes 
certain of these ``minimum requirements'' in Section 403(3).
    However, NPS, in response to this comment, has added a sentence to 
Section 51.15 in the final rule that makes clear that offerors are 
permitted to suggest changes to the terms and conditions of a 
concession contract so long as they agree to be bound by the terms and 
conditions of the solicitation.
    NPS has moved the definition of ``responsive proposal'' in the 
final rule to the general ``definitions'' section, Section 51.3, and 
deleted this section in the final rule.

Section 51.16 (Section 51.14 in the final rule) What Happens If No 
Responsive Proposals Are Submitted?

* * * * *

Section 51.17 (Section 51.15 in the final rule) May I Clarify, Amend or 
Supplement my Responsive Proposal After It Is Submitted?

    A comment suggested that this section be amended to delete the word 
``responsive.'' The word has been eliminated from the first sentence. 
NPS considers, in agreement with the comment, that the Director should 
have the discretion (but not the obligation) to allow an offeror to 
clarify a non-responsive proposal. NPS has added a sentence to this 
section explaining that ``clarification'' of a proposal refers to 
making clear any ambiguities that may have been contained in a 
proposal, not a right to substantively amend or supplement the terms of 
a proposal.
    A comment suggested that permitting amendment of proposals after 
the submission date may lead to an auction of concession contracts. NPS 
has not changed the regulation in response to this comment as the 
overall terms of the regulations preclude an ``auction'' of concession 
contracts. However, in response to this comment, NPS has added a 
sentence to clarify that permitted amendments of proposals are limited 
to correcting aspects of proposals resulting from a general failure of 
offerors to understand requirements of the prospectus or to generally 
fail to submit required information. Amendments are not permitted for 
the purpose of allowing a particular offeror or offerors to correct 
proposal deficiencies that were not generally common to all proposals 
received.

[[Page 20640]]

Section 51.18 (Deleted in the final rule) How Will the Director Select 
an Offeror for Award of the Concession Contract?

    As discussed in the response to ``General Comments,'' a number of 
comments were received that criticized the evaluation and selection 
process that was contained in the proposed regulations. The comments 
generally focused on three concerns. The first was that the evaluation 
was not based on a numerical rating system. The second was that the 
``tie-breaker'' concept was inappropriate and inconsistent with the 
intentions of the 1998 Act with respect to franchise fees. The third 
was that the proposed regulations gave environmental aspects of 
proposals undue weight in the selection process. NPS has modified the 
regulations to accommodate all of these concerns as discussed below.
    In this connection, Section 51.18 has been deleted in the final 
rule. The method under which the Director will select the best proposal 
in response to a prospectus is contained in Section 51.16 in the final 
rule (as discussed further under Section 51.21).
    A comment suggested that NPS should not permit members of 
evaluation panels to be NPS officials that are acquainted with the 
incumbent concessioner. NPS has not accepted this suggestion. NPS 
evaluation panels usually include officials from the applicable park 
area in order to ensure that the circumstances of the park area are 
understood in the evaluation process. The fact that an official may be 
acquainted with the existing concessioner is not considered 
inappropriate by NPS. The contract is awarded to the offeror that 
submits the best overall proposal.

Section 51.19 (Deleted in the final rule) How Will the Director Select 
the Best Proposal?

    This section also has been deleted in the final rule. Section 51.16 
of the final rule describes the method for selecting the best proposal.

Section 51.20 (Section 51.17 in the final rule) What Are the Five 
Principal Selection Factors?

    Several comments objected to the fact that this section and other 
sections refer to five principal selection factors instead of four as 
mentioned in the 1998 Act.
    The regulations encompass five principal selection factors because 
one of the statutory factors, Section 403(5)(i), is, in fact, a double 
factor. This selection factor in the 1998 Act refers to ``the 
responsiveness of the proposal to the objectives of protecting, 
conserving, and preserving resources of the unit of the National Park 
System and of providing necessary and appropriate facilities and 
services to the public at reasonable rates.'' (Emphasis added). There 
are unmistakably two distinct factors here, resource preservation and 
appropriate visitor services. For the sake of clarity, the regulations 
separate them. To the extent that the commenters may consider that this 
clarification somehow results in a change to the relative weight of the 
selection factors, NPS notes that the 1998 Act gives NPS discretion to 
weight the principal selection factors. NPS could have achieved the 
same result as splitting selection factor (1) into two factors by 
doubling the weight given to principal selection factor one so that 
both of its distinct elements would be of equal weight to the other 
selection factors. NPS considers, however, that better clarity is 
achieved by separating principal selection factor (1) into two factors. 
NPS has changed this section to refer to selection factors in general 
to conform to changes made to the secondary factor section of the 
proposed rule in response to public comments.
    This section has also been changed in the final rule to delete 
reference to environmental enhancement as an element of principal 
selection factor (1) as requested by several comments. As discussed 
below, the matter of the ``environmental enhancement'' content of 
proposals is an element of a secondary factor in the final rule, also 
as requested by several commenters. See Section 51.17(b)(1). NPS has 
also made a change to this secondary factor by permitting it to be 
excluded from prospectuses in certain circumstances. See the discussion 
under Section 51.13. It has also rephrased the term ``environmental 
enhancement'' programs for clarification purposes. NPS considers that a 
secondary selection factor that is concerned with the conservation of 
resources in general is appropriate. Park areas are not immune from 
general environmental impacts. Progressive environmental management 
practices such as energy conservation and recycling ultimately assist 
in the preservation of park resources as well as in general 
environmental enhancement.
    This section has also been changed in the final rule to delete the 
word ``quality'' in selection factor two as suggested by a commenter as 
the word ``quality'' is not contained in the related statutory 
provision. NPS, however, does not consider that this change results in 
any change in the meaning of the selection factor.
    NPS, in response to a comment, included the phrase ``if any,'' 
after the term franchise fee in the text of principal selection factor 
(5) to reflect the fact that it is possible that a concession contract 
will not call for a franchise fee in special circumstances. NPS did not 
add the phrase ``and/or other forms of financial consideration'' to the 
last two sentences of this selection factor as requested by a commenter 
as this would be inconsistent with the statutory provision concerning 
franchise fees.
    A comment requested that the word ``facilities'' be included in the 
selection factor concerning past experience. NPS has not made this 
change as the term used in the regulation, ``visitor services,'' is 
defined in Section 51.3 as including ``facilities.''
    NPS has modified Section 51.20(a)(5) (Section 51.17(a)(5) in the 
final rule) to delete its last two sentences as unnecessary in light of 
the terms of principal selection factor (5) (which repeat the statutory 
mandate of Section 403(5)(iv) of the 1998 Act regarding consideration 
of franchise fees in awarding concession contracts).
    A comment suggested that the term ``park area'' is ambiguous as 
used in this section, i.e., that it is not clear whether it refers to 
areas outside of park boundaries. NPS has not made a change in response 
to this comment. The term is generally intended to apply to property 
within park boundaries.
    A commenter suggested that an offeror should be rated on its 
commitment to further the goals of the park area and to operate in a 
manner that is supportive of the ideals of the park. NPS considers that 
these interests are implicit in the established selection criteria.
    Finally, several comments requested changes in the wording of the 
principal selection factors to reflect particular interests such as 
historic preservation, environmental enhancement and the circumstances 
of particular park areas. NPS, however, has retained the terms used by 
the statute as appropriate for the general regulations. Particular 
prospectuses can address special concerns and the circumstances of the 
applicable park area through subfactors or secondary factors.

Section 51.21 (Section 51.16 in the final rule) How Will the Director 
Apply the Five Selection Factors and Select the Best Proposal?

    This section has been modified by NPS to incorporate a numerical 
scoring system while retaining the basic approach of evaluating on the 
basis of narrative analysis. A numerical scoring system was recommended 
by a number of commenters (discussed under

[[Page 20641]]

``General Comments''). Under the numerical scoring system, the first 
four principal selection factors may score as high as five points each. 
The fifth principal selection factor, the franchise fee offered, may 
only receive up to four points, reflecting that, pursuant to the 1998 
Act, revenue to the United States is subordinate to the objectives of 
protecting, conserving, and preserving resources of the park area and 
of providing necessary and appropriate visitor services to the public 
at reasonable rates. The secondary factor concerning ``environmental 
enhancement'' activities (rephrased for clarification in the final 
rule) may receive up to three points. Any additional secondary factors 
contained in a prospectus may not have an aggregate score of more than 
three total points.
    One comment suggested that the basis of a numerical point score 
system should be 100 points. However, NPS considers that evaluation of 
proposals on the basis of such a large scale results in scores that are 
difficult to explain, e.g., why did this proposal get rated as 74 while 
this one received a score of 76? NPS believes that scoring proposals on 
a lower scale such as contained in the final rule, based on the 
required narrative explanation of the basis for the score, leads to 
more credible, objective evaluations. However, the point score system 
described in the final rule does permit an evaluation panel to award 
whole number or fractional points, e.g., 2 points, 2.5 points, etc., as 
appropriate in the circumstances of a particular evaluation. A comment 
suggested that the same member of an evaluation panel evaluate all 
proposals with respect to particular selection factors. NPS has not 
accepted this suggestion. To the contrary, it may be better to have 
several persons evaluate varying elements of a proposal.
    Another comment suggested that the franchise fee offered not be 
considered in an evaluation of proposals unless two or more proposals 
were determined as substantially equal. This suggestion has not been 
accepted as contrary to the intentions of the 1998 Act.

Section 51.22 (Deleted in the final rule) When Will the Director Apply 
Secondary Factors?

    This section has been deleted from the final regulations as 
unnecessary in light of the changes made to sections 51.20 and 51.21. 
However, the last sentence of this section has been included in Section 
51.17(b)(2) in the final rule. In addition, NPS has included reference 
to minority and women-owned businesses in this section in the final 
rule consistent with NPS policy and in response to a suggestion to this 
effect from a commenter. In connection with this section, NPS 
recognizes that minority, women and Native American-owned businesses 
are severely under-represented in the concessioner community. To remedy 
this, NPS strongly encourages minority, women and Native American-owned 
businesses to apply for concession contracts. In order to encourage 
this, NPS will provide interested persons and firms maximum allowable 
information and assistance by:
    (1) Making reasonable efforts to include on all source lists of 
potential concessioners, minority, women and Native American-owned 
firms that have expressed interest in becoming a concessioner;
    (2) Seeking the advice and assistance of the Minority Business 
Development Agency in locating and counseling these firms, as well as 
providing public information on concession opportunities to these 
firms; and
    (3) Providing advice and counseling to these firms on how to 
participate in concession contract opportunities.

Section 51.23 (Deleted in the final rule) How Will the Director Select 
the Best Proposal If Two or More Proposals Are Assessed as 
Substantially Equal after the Director Has Applied the Principal and 
Secondary Factors?

    This section has been deleted from the final regulations in light 
of the changes made to Sections 51.20 and 51.21. Section 51.16(c) of 
the final rule describes how the Director will select the best proposal 
in the event that two or more proposals receive the same highest score 
after evaluation under Section 51.16(a) and (b).
    NPS notes, as discussed in ``General Comments,'' that a number of 
comments objected to the ``tie-breaker'' concept contained in this and 
other sections of the proposed regulations. A concern in this 
connection was that the tiebreaker concept might lead to franchise fee 
bidding. The tiebreaker concept has been deleted from the final rule, 
both with respect to environmental enhancement and franchise fee 
considerations. In the event that two or more proposals receive the 
same highest numerical score after evaluation by NPS, the final rule 
provides that the Director will select as the best proposal the 
proposal (among those with the same highest score) that the Director 
considers will, on an overall basis, best achieve the purposes of the 
1998 Act. This change is consistent with Section 403(5) of the 1998 Act 
that calls for NPS to select the best proposal after considering the 
statutory principal selection factors and any secondary factors that 
may be included in a prospectus.

Section 51.24 (Section 51.18 in the final rule and retitled) What 
Happens If a Proposal Is Rated as ``Unacceptable'' Under Any of the 
First Four Principal Selection Factors or If the Offeror Is Not a 
Qualified Person?

    A comment suggested that this section should expound upon or give 
examples as to when a proposal may be considered unacceptable.
    NPS, in response to this and other criticisms, has modified this 
section in the final rule to delete its first sentence and to add to it 
the balance of the provisions of Section 403(4)(B) of the 1998 Act, 
i.e., that a proposal must be rejected if it is not responsive to the 
general objectives of resource protection and proper visitor service. 
The modified provision, in addition to inclusion of the responsive 
proposal requirement, contains only the requirements of Section 
403(4)(B) of the 1998 Act. NPS does not consider that further 
amplification of this statutory provision is necessary.

Section 51.25 (Section 51.19 in the final rule) Must the Director Award 
the Concession Contract That Is Set Forth in the Prospectus?

    A comment made the point that the 1998 Act does not permit material 
amendments to the terms and conditions of a concession contract as set 
forth in the prospectus. NPS has amended this section in the final rule 
to reflect this comment.

Section 51.26 (Section 51.20 in the final rule) Does This Part Limit 
the Authority of the Director?

    Several comments expressed concern about this section, asserting 
that the Director should not have unconditioned authority to determine 
when to solicit or award a concession contract, to cancel a 
solicitation, or to terminate a concession contract in accordance with 
its terms. NPS, however, considers that the provision is a proper 
statement of its authority and responsibility for the administration of 
concession contracts under the terms of the 1998 Act. Section 404(10) 
of the 1998 Act states that ``nothing in this title shall be construed 
as limiting the authority of the Secretary to determine whether to 
issue a concession contract or to establish its terms and conditions in 
furtherance of the policies expressed in this title.''

[[Page 20642]]

Section 51.27 (Section 51.21 in the final rule.) When Must the Selected 
Offeror Execute the Concession Contract?

    A comment suggested that the time frame for execution of the 
concession contract by the concessioner should be specified as thirty 
days in all cases. NPS does not agree with this, as, given the varying 
type and scope of concession contracts, it needs to retain flexibility 
as to the time for execution by the selected offeror.
    A comment suggested that if the selected concessioner does not 
receive a concession contract from NPS within ninety days from the date 
of the selection of the best proposal, or within ten days of the 
commencement of the contract period, whichever is later, it should have 
the right to withdraw its proposal. NPS has not included the ninety-day 
suggestion in the final rule because there may be circumstances in 
which NPS would not be able to issue a final contract in the specified 
time.

Section 51.28 (Section 51.22 in the final rule and retitled.) After the 
Selected Offeror Executes the Concession Contract, When May the 
Director Execute the Concession Contract?

    A comment asked whether the gross receipts referred to in this 
section are the gross receipts of the concessioner or the franchise 
fees received by NPS from concessioners. The gross receipts referred to 
in this section are the gross receipts of the concessioner.
    A sentence has been added to this section in the final rule stating 
that the NPS may execute a concession contract that is not required to 
be submitted to the Congress at any time after selection of the best 
proposal and execution by the concessioner.
Subpart D--Non-Competitive Award of Concession Contracts

Section 51.29 (Section 51.23 in the final rule) May the Director Extend 
an Existing Concession Contract Without a Public Solicitation?

    A comment stated that this section should not be used to delay 
competitive bidding for existing contracts that have already been 
extended. NPS notes, however, that it does not intend to unduly delay 
competitive solicitations of concession contract proposals for a 
concession contract and that the extension authority provided by this 
section is limited as to when it may be exercised, i.e., that the 
extension is necessary to avoid interruption of visitor services. NPS, 
however, has added a sentence to this section making clear that 
extensions under the 1998 Act in excess of an aggregate of three years 
are not permissible. It has also added a sentence requiring that notice 
of an extension be must published in the Federal Register thirty days 
in advance of the award of the extension (except in emergency 
situations).
    Another comment suggested that this section be amended to provide 
the public with an opportunity to comment on the proposed extension of 
any concession contract. NPS notes that the 1998 Act does not require 
public notice in these circumstances. Moreover, NPS considers that 
public comment is not appropriate in light of the limited term of 
extensions and the limited circumstances in which a concession contract 
may be extended non-competitively.

Section 51.30 (Section 51.24 in the final rule) May the Director Award 
a Temporary Concession Contract Without a Public Solicitation?

    A comment made the same point discussed above regarding public 
notice of an intention to extend concession contracts. NPS has also 
accepted the suggestion of requiring public notice of an intention to 
award a temporary concession contract. A sentence to this effect has 
been included in the final rule.
    NPS has also clarified this section to make clear that that 
temporary concession contracts cannot be extended and may be issued for 
only a three year term in the aggregate with no ability to issue 
further temporary contracts for the continuation of the related visitor 
services. In addition, this section has been clarified to make clear 
that temporary concession contracts may not be awarded to continue to 
authorize the continuation of visitor services provided under an 
extended concession contract.
    However, Subsection (b) of this section in the final rule makes a 
special exception to this latter requirement. It permits the Director 
to award a temporary concession contract to continue the visitor 
services provided by an extended concession contract if the concession 
contract was in effect as of November 13, 1998, and had been extended 
by that date or was due to expire by its terms by December 31, 1998, 
and was subsequently extended. This special rule is needed because more 
than 280 NPS concession contracts in effect as of November 13, 1998, 
were already extended or were due to expire by December 31, 1998. Due 
to limited resources, it may not be possible for NPS to award new 
concession contracts to replace all of these extended contracts within 
the three year extension period permitted by the 1998 Act. The 
Director, however, may not award a temporary concession contract in 
these circumstances unless the Director personally determines that the 
award is necessary to avoid interruption of visitor services and that 
all reasonable alternatives to the award of the temporary contract have 
been considered and found infeasible. The section in the final rule 
also requires the Director to follow the notice procedures set forth in 
51.29 in the final regulations before awarding a temporary concession 
contract in these circumstances
    The general concessioner organization objected to the last sentence 
of this section that concerns the status of the holder of a temporary 
concession contract with respect to a preference in renewal. The 
comment stated that this section should be amended to state that if a 
``permanent'' concessioner is extended on a temporary basis by a 
temporary concession contract that its right of preference, if any, 
will be recognized when the temporary contract expires. NPS concurs 
with this suggestion (except for its anomalous reference to a 
``permanent'' concessioner) and has amended this section accordingly.

Section 51.31 (Section 51.25 in the final rule) Are There Any 
Circumstances in Which the Director May Award a Concession Contract 
Without Public Solicitation?

    A comment stated that NPS should include a substantive discussion 
as to how it intends to interpret and administer this section. NPS 
notes in this connection that the language of the section tracks a 
related statutory provision, Section 403(11)(C) of the 1998 Act. Given 
that it is impossible to describe prospectively what ``extraordinary 
circumstances'' may exist under which ``compelling and equitable 
considerations'' require the award of a concession contract to a 
particular person in the public interest, thereby permitting the non-
competitive award of a full term concession contract, NPS does not 
believe that further regulatory guidance is generally practicable. 
However, NPS notes that the legislative history of the related 
statutory provision makes clear that the occasions when NPS determines 
that compelling equitable circumstance warrant award of a concession 
contract to a particular party should be extremely rare. The 
legislative history further states that ``indisputable equitable 
concerns are to be the determinant of such circumstances.'' S. Rep. 
No.105-202, at p. 33 (1998).
    NPS has included this last sentence in the final rule. It has also 
made a change

[[Page 20643]]

to clarify that the required notice must identify the person to whom 
the contract is to be awarded. In addition, it has changed the notice 
period in the final rule to sixty days. Finally, the final rule 
requires that the Secretary of the Interior approve any such contract 
award in addition to the Director.
    A local government that is a concessioner (along with numerous 
comments from individuals in support of the position of the local 
government) suggested that this section be amended to permit non-
competitive awards of concession contracts to governmental entities. 
NPS does not consider this to be within its legal authority under the 
Act even if otherwise appropriate.
    Another comment requested that this section be clarified to make 
clear what official initiates a determination to award a concession 
contract under this authority. Under current internal delegations, the 
initiating official generally would be the Superintendent of the park 
area in question. However, no amendment is needed in this regard, as 
the regulations make clear that the term ``Director'' applies to 
subordinates of the Director with appropriate delegated authority.
    One commenter requested that a clear direction be given as to whom 
it should contact in order to obtain the award of a concession contract 
under this section. The comment implies that a person has a right to a 
non-competitive award of a concession contract. This is not the case. 
The award of a contract under this section is in the discretion of NPS 
under the limited circumstances described in this section.
Subpart E--Right of Preference
    As discussed above, a number of comments were received concerning 
this subpart to the effect that it fails to recognize that existing 
concessioners have a contractual right to a preference in renewal under 
1965 Act concession contracts. The following discussion of comments 
relates only to the substance of procedures relating to a right of 
preference under the 1998 Act, not as to whether existing satisfactory 
concessioners under 1965 Act concession contracts have a contractual 
right of preference in renewal (discussed under ``General Comments'').
    NPS has added in the final rule for clarity a new section (Section 
51.27) explaining what a right of preference is under the 1998 Act (in 
accordance with the definitions in Section 51.3). NPS has also split 
Subpart E of the proposed regulations into two subparts in the final 
rule, Subpart E concerning the operation of a right of preference and 
Subpart F describing how a concessioner obtains a right of preference. 
NPS has also rearranged the order of the sections as contained in the 
proposed regulations to conform to the content of the new subparts as 
contained in the final rule. These changes are editorial, not 
substantive.

Section 51.32 (Section 51.50 in the final rule and retitled) Does the 
Existence of a Preferred Offeror and a Possible Right of Preference 
Limit the Authority of the Director to Establish the Terms of a 
Concession Contract?

    A comment stated that this section gives NPS unilateral authority 
to modify the terms of existing concession contracts. NPS considers 
this an obvious misreading of this section but has added the word 
``new'' to this section to resolve any ambiguity in this connection.

Section 51.33 (Section 51.36 in the final rule) What Three Conditions 
Must Be Met Before the Director Determines That a Prior Concessioner is 
a Preferred Offeror?

    Several comments expressed concerns about this section to the 
effect that it provides NPS the ability to deprive a concessioner of a 
right of preference by amending the facilities and services authorized 
by a new concession contract to materially differ from those authorized 
by the prior concession contract. Although this was not the intention 
of NPS, the concern has been addressed in the final rule.
    To understand the issue, the relevant provisions of the 1998 Act 
must be examined. The 1998 Act states as follows in pertinent part 
about the right of preference:

    As used in this title, the term preferential right of renewal 
[''right of preference'' as defined in the proposed regulations and 
final rule] means that the Secretary of the Interior, subject to a 
determination by the Secretary that the facilities or services 
authorized by a prior concession contract continue to be necessary 
and appropriate within the meaning of section 402, shall allow a 
concessioner qualifying for a preferential right of renewal the 
opportunity to match the terms and conditions of any competing 
proposal which the Secretary determines to be the best proposal for 
a proposed new concession contract which authorizes the continuation 
of the facilities and services provided by the concessioner under 
its prior contract. Section 403(7)(c) of the 1998 Act. (Emphasis 
added).

    In addition, Section 403(10) of the 1998 Act states:

    (10) Nothing in this section shall be construed as limiting the 
authority of the Secretary of the Interior to determine whether to 
issue a concession contract or to establish its terms and conditions 
in furtherance of the policies expressed in this title.

    Accordingly, a right of preference under the 1998 Act only exists 
if the new concession contract ``continues'' the facilities and 
services provided under a prior concession contract. In this 
connection, NPS clearly has the authority under Section 403(10) of the 
1998 Act to establish the terms and conditions of new concession 
contracts in furtherance of the purposes of the 1998 Act, even if any 
changes made may mean that the facilities and services authorized under 
a prior concession contract are not continued under a new concession 
contract. The concern of the commenters is that NPS will abuse this 
authority in order to deprive incumbent concessioners of a right of 
preference.
    The proposed regulations state in Section 51.33(a) that in order 
for an otherwise eligible prior concessioner to obtain a right of 
preference to a new concession contract, the new concession contract 
must provide only for the continuation of the visitor services 
authorized under the prior concession contract. In addition in this 
connection, the proposed regulations state that the visitor services to 
be continued under the new contract may be expanded or diminished in 
scope but may not materially differ in nature and type from those 
authorized under the prior concession contract. NPS considers that this 
section properly reflects the intentions of the 1998 Act and properly 
reflects the discretion vested in NPS under the 1998 Act in this 
connection.
    However, in response to the comments of existing concessioners, NPS 
has deleted the word ``only'' from Section 51.33(a) in conformance with 
Section 403(7)(C) of the 1998 Act.
    This change appears in Section 51.37 in the final rule. NPS, for 
editorial purposes, has moved the right of preference condition 
regarding continuation of visitor services in a new concession contract 
from this section to Section 51.37. This is because the nature of the 
new concession contract (i.e., whether it ``continues'' the previous 
visitor services) is more logically an element of determining what 
contracts are qualified new concession contracts. Moving this 
requirement to Section 51.37 in the final rule did not alter its 
meaning with respect to the circumstances in which an existing 
concessioner is entitled to a right of preference.
    As a conforming amendment, Section 51.36 in the final rule has been 
clarified to state affirmatively that to be a preferred offeror the 
applicable new concession contract must be a qualified

[[Page 20644]]

concession contract. NPS has also modified this section in the final 
rule to clarify that a qualified prior concession contract for purposes 
of this section refers only to whether the prior concession contract 
was an outfitter and guide concession contract in accordance with the 
terms of the 1998 Act, not to the level of its gross receipts. It is 
possible that a prior concession contract with annual gross receipts in 
excess of $500,000 may be estimated to have less than $500,000 in 
annual gross receipts under the new concession contract, thereby 
providing a right of preference to the holder of the prior contract if 
otherwise qualified.
    The general concessioner organization requested that a 50% test be 
incorporated into the regulations, i.e., that if the new contract 
authorized the continuation of no less than 50% of the facilities and 
services of the prior concession contract, that the right of preference 
would obtain. NPS does not consider this suggestion to be within its 
authority under the 1998 Act as the 1998 Act states that there must be 
a continuation of the facilities and services, not a continuation of 
half of the facilities and services. Even if this change were within 
its authority under the 1998 Act, however, NPS considers that it would 
be inappropriate in light of the policies of the 1998 Act regarding 
competitive award of concession contracts.
    NPS considers that the changes made to Section 51.33(a) in the 
final rule duly accommodate the concerns of the commenters.

Section 51.34 (Section 51.37 in the final rule) How Will the Director 
Determine That a Concession Contract Is a Qualified Concession 
Contract?

    One comment suggested that the $500,000 figure contained in this 
section be subject to upward adjustment based on inflation as measured 
by the Consumer Price Index. However, the 1998 Act states the $500,000 
figure with no reference to inflation while elsewhere the Act specifies 
that inflation is to be taken into account in the calculation of 
certain figures. NPS considers that adding an inflation adjuster to the 
$500,000 figure is not authorized by the 1998 Act. If it were 
authorized, NPS considers that such a change would be inappropriate in 
light of the competitive award objectives of the 1998 Act.
    Another comment stated that the term ``first calendar year'' as 
used in this section is ambiguous, e.g., if a contract is awarded mid-
year, one may construe the period for calculating the gross annual 
receipts to be less than one full year. The comment suggested that the 
term the ``first twelve months'' be used instead of the ``first 
calendar year.'' NPS has made this change.
    Two comments were concerned about the fact that the period for 
which the $500,000 figure will be determined is the first year of the 
new contract rather than the entirety of the term of the new contract. 
The 1998 Act provides no express guidance in this connection. NPS has 
considered this comment but continues to believe that, in light of the 
difficulty in accurately projecting future revenues, limiting the 
determination of gross receipts to the first year of the new contract 
is reasonable.
    The comments also suggest that if a concession contract that is to 
be continued under a new concession contract had gross revenues in 
excess of $500,000 in its last year, that it automatically should be 
considered that the new concession contract will have revenues in 
excess of $500,000 in the first year of a new contract. NPS considers 
that, although the revenues of a prior contract must be taken into 
account in determining the projected revenues of the new contract, the 
1998 Act clearly indicates that the $500,000 figure relates to the 
revenues of the new concession contract, not to the revenues of the 
prior concession contract.
    Another comment suggested that the $500,000 figure is arbitrary. 
NPS notes that the figure was set by the 1998 Act. The same comment 
objected to the fact that NPS is to determine whether prospective 
concession contract will have gross receipts in excess of $500,000, 
suggesting that the decision should be based on submittals to NPS under 
the prior concession contract. Further, the comment suggested that an 
existing concessioner should be consulted by NPS and provided an appeal 
if the concessioner disagrees with the decision of NPS. NPS has not 
accepted these suggestions in general, although it notes that a 
concessioner has an appeal right under Section 51.47 in the final rule 
as to a determination, among other matters, that a new contract will 
have gross receipts in excess of $500,000. In addition, a major basis 
of determining the gross receipts of a new concession contract will be 
the annual financial reports submitted under the previous concession 
contract. NPS considers that the procedures set forth in the final rule 
are appropriate and that further procedures regarding the determination 
of the gross receipts of a new concession contract are unnecessary.

Section 51.35 (Section 51.38 in the final rule) How Will the Director 
Determine That a Concession Contract Is an ``Outfitter and Guide'' 
Concession Contract?

    Several comments expressed a concern about this section. One asked 
why outfitters and guides have a preference in renewal. Outfitters and 
guides have a preference in renewal under Section 403(8) of the 1998 
Act.
    Other comments focused on the phrase ``solely authorizes'' in this 
section. The comments suggest in general that minor or incidental 
services additional to outfitter and guide services should be permitted 
by NPS without loss of a right of preference by an outfitter and guide 
concessioner. However, NPS notes that Section 403(8) of the1998 Act 
contains the ``solely authorizes'' phrase which is merely repeated in 
the regulations. NPS, accordingly, has not made the suggested changes. 
However, a further discussion of a related issue is contained under 
Section 51.37.

Section 51.36 (Section 51.39 in the final rule) What Are Some Examples 
of Outfitter and Guide Concession Contracts?

    A comment suggested that these examples include educational 
activities conducted by non-profit organizations. NPS has not accepted 
this suggestion as the examples given are of activities that are 
applicable whether or not the concessioner is a profit or non-profit 
organization.
    Other comments suggested that guided mountain biking, float trips 
and other activities be added to the list of examples of outfitter and 
guide concession contracts. NPS has not done this, as the listed 
activities are only examples and not meant to be exclusive. Inclusion 
or exclusion of an activity as an example does not necessarily indicate 
that a particular related concession contract will be determined to be 
an outfitter and guide contract.

Section 51.37 (Deleted in the final rule) What Facts and Circumstances 
Will the Director Take Into Account When Determining if a Concession 
Contract Is an Outfitter and Guide Concession Contract?

    A number of comments criticized this section with respect to its 
third and fourth sentences. Rather than modify these two sentences, NPS 
has deleted this section in light of the description of outfitter and 
guide concession concession contracts contained elsewhere in this 
subpart.
    A concern was also expressed that activities of an outfitter and 
guide

[[Page 20645]]

concessioner outside of a park area should not be relevant in 
determining whether the concession contract is an outfitter and guide 
concession contract. NPS notes, however, that the relevant test is not 
whether activities take place outside of park area boundaries but 
whether activities are authorized by a concession contract. In any 
event, this issue is academic in light of the deletion of this section 
in the final rule.

Section 51.38 (Section 51.40 in the final rule and retitled) What Are 
Some Circumstances That Will Indicate That Outfitter and Guide 
Operations Are Conducted in the Backcountry?

    A commenter was concerned that ferry boat service to an island in 
an urban setting might be considered as a ``backcountry activity'' 
within the meaning of this section as the service occurs in an area 
``remote from roads.'' The comment requested clarification in the 
regulations in this respect. NPS does not consider that this section 
needs clarification as it is meant to be applied on a case-by-case 
basis.
    Another comment suggested that this section be changed to state 
that if an activity met any one of the factors stated in this section 
that it should be considered as a backcountry activity. NPS has not 
accepted this suggestion. The determination of whether outfitter and 
guide operations are conducted in the backcountry of a park area must 
be made on a case-by-case basis. There are no precise definitions of 
backcountry. Accordingly, while the regulations provide some factors 
that generally indicate that outfitter and guide operations are 
conducted in the backcountry of a park area, none of these factors can 
be considered as individually determinative of the issue. This section 
also has been modified to make clear that the determination of 
``backcountry'' is to be made on a park-by-park basis taking into 
account the particular geographical circumstances of the relevant park 
area and the general factors identified.
    The same comment suggested that the phrase that operations occur 
``in areas remote from roads and developed areas'' be changed to ``in 
areas not readily accessible to the public.'' NPS did not accept this 
suggestion as it considers that the term backcountry as used in the 
1998 Act relates to more remote areas of a park rather than areas ``not 
generally accessible to the public.''
    The same comment also suggested that a sentence be added to this 
section to the effect that a concession contract's operations may be 
determined to be conducted in the backcountry even if none of the 
circumstances specified in this section were met. NPS considers that 
the section makes this clear, particularly as amended in the final 
rule.
    A comment stated that the term ``backcountry'' might describe an 
experience rather than actual physical setting, suggesting that rock 
climbing in a front country location should be considered as a 
backcountry activity. NPS has not made this change as NPS considers 
that the 1998 Act's reference to backcountry relates to physical 
location, not the nature of an experience.
    Another comment suggested three revisions to this section:
    1. The phrase regarding search and rescue should be deleted on the 
basis that search and rescue could be necessary even in park areas next 
to a parking lot;
    2. The section should state that the health and safety of park 
visitors is more readily ensured by the supervision of experienced 
outfitter and guide services, regardless of the proximity to developed 
areas of a park; and
    3. The role of outfitters and guides in protecting park resources 
by supervising visitation and reducing impacts should be recognized by 
adding the statement ``the operations assist in dispersing visitors 
away from signature resources, features and other areas of intense 
visitation.''
    NPS has not accepted these suggestions. With respect to the first, 
although it is true that in certain cases search and rescue many be 
necessary even in close proximity to a parking lot, this is not 
relevant to the meaning of backcountry in this part.
    NPS considers the second two suggestions to be policy positions 
that are not relevant to the determination of what is backcountry 
within the meaning of the 1998 Act.

Section 51.39 (Section 51.41 in the final rule) If the Concession 
Contract Grants a Compensable Interest in Real Property Improvements, 
Will the Director Find That the Concession Contract Is an Outfitter and 
Guide Concession Contract?

* * * * *

Section 51.40 (Section 51.42 in the final rule) Are There Exceptions to 
This Compensable Interest Prohibition?

* * * * *

Section 51.41 (Section 51.43 in the final rule) Who Will Make the 
Determination That a Concession Contract Is an Outfitter and Guide 
Contract?

    A comment objected to the fact that only the Director personally, 
or a Deputy or Associate Director, may make the determination as to 
what concession contracts are outfitter and guide concession contracts. 
The commenter suggests that these decisions should be made at the field 
level under appropriate guidance. NPS, however, has not accepted this 
change. Given the varied nature of each park area and the judgmental 
factors that must be considered in making these determinations, NPS 
considers that making them on a national level is necessary for the 
sake of consistency. The term ``Director'' has been deleted from this 
section in the final rule to make clear that the Director is able to 
consider appeals under this section.

Section 51.42 (Section 51.44 in the final rule) How Will the Director 
Determine If a Prior Concessioner Was Satisfactory for the Purposes of 
This Part?

    A number of comments were received in response to this section. The 
majority of the comments, including several from existing 
concessioners, supported the general intention of this section to the 
effect that a track record of satisfactory operations by an incumbent 
concessioner is a necessary precondition to entitlement to a right of 
preference. This intention reflects the requirements of Sections 
403(8)(B)(ii) and 403(8)(C)(i) of the 1998 Act which states that an 
incumbent concessioner, if otherwise qualified, is entitled to a right 
of preference only if ``the Secretary of the Interior has determined 
that the concessioner has operated satisfactorily during the term of 
the contract (including any extensions thereof).'' Several comments 
stated that NPS has no authority under the 1998 Act to condition a 
right of preference on satisfactory performance. This view is clearly 
in conflict with the terms of the 1998 Act.
    A comment objected to the phrase ``and other relevant facts and 
circumstances'' in subsection (a) and ``among other considerations'' in 
subsection (b) as being too vague. NPS has deleted the second phrase in 
the final rule in response to this comment but has left the first 
phrase. This is because there may be occasions when NPS becomes aware 
of actions of a concessioner that may result in a determination of less 
than satisfactory performance that were not revealed in a annual 
evaluations.
    The general concessioner organization objected to subsection (b) on 
the grounds that a concessioner can be found to be less than 
satisfactory for any two years of the term of the contract and 
therefore lose its potential right of preference without an opportunity 
to

[[Page 20646]]

recapture the opportunity. To the contrary, another concessioner 
organization stated that this provision is ``reasonable and promotes 
diligence to achieve acceptable performance standards.'' Another 
concessioner organization stated that the provision is ``fair and 
appropriate to both the goals of performance-based renewal and 
provision of quality services.''
    Several comments suggested that two years of less than satisfactory 
performance should not automatically mean that a concessioner is 
determined as not satisfactory for purposes of a right of preference, 
i.e., that the concessioner should be given an opportunity to correct 
less than satisfactory performance. NPS has not made this change as 
less than satisfactory annual evaluations are not a surprise to 
concessioners. There is ample opportunity to correct deficiencies that 
may result in less than satisfactory performance.
    NPS, however, in this section in the final rule, also has made 
clear that the determination of unsatisfactory operation that 
automatically results from two or more less than satisfactory annual 
evaluations is not to be applied retroactively. This does not 
necessarily mean that a concessioner that had less than satisfactory 
evaluations prior to the effective date of the final rule may not be 
determined to have operated unsatisfactorily over the term of its 
contract. Rather, it only means that such a result is not required.
    One comment suggested that ``unsatisfactory'' performance be 
defined as an unsatisfactory rating that is not corrected and, that, 
during the term of the prior concession contract, the overall rating as 
satisfactory or unsatisfactory be determined by averaging each year's 
performance rating. NPS considers these suggestions inappropriate, as 
they would encourage marginal or unsatisfactory performance by 
concessioners.
    For these reasons, NPS has not changed the two-year track record 
requirement of this section in the final rule.
    However, a number of comments particularly objected to the 
requirement of subsection (b) to the effect that less than satisfactory 
performance in either of the last two years of the term of a concession 
contract results in the loss of a right of preference. The comments 
considered this unfair. NPS has deleted the final sentence of this 
section in the final regulations. It agrees that the two-year less than 
satisfactory performance requirement should be the same with respect to 
all years of a contract.
    A comment from a concessioner organization stated that, ``overall, 
the Park Service has done an admirable and dedicated job'' with respect 
to its annual performance evaluations. However, the comment, and 
others, suggested that the regulations should provide guidance as to 
the standards to be applied in annual concessioner evaluations. NPS has 
not accepted this suggestion. It would not be practical to include in 
the regulations generic standards for annual evaluations beyond the 
statutory standard of satisfactory performance under the terms of the 
applicable concession contract. NPS does point out, however, that its 
annual evaluation program permits a concessioner that receives a less 
than satisfactory rating to appeal this determination to the applicable 
NPS Regional Director.
    NPS also notes that it is the process of considering revisions to 
its existing evaluation program in light of the 1998 Act and in light 
of NPS's intention to implement further ``performance-based'' 
contracting with respect to concession contracts.

Section 51.43 (Section 51.45 in the final rule) Will a Prior 
Concessioner That Has Operated for Less Than the Entire Term of a 
Concession Contract Be Considered a Satisfactory Operator?

    A number of comments objected to this section and several 
questioned its legal basis.
    The legal basis for this section is found in Sections 403(8)(B)(ii) 
and 403(8)(C)(i) of the Act which require as a condition to a right of 
preference that the Secretary determine that ``the concessioner has 
operated satisfactorily during the term of the contract (including any 
extensions thereof).'' The intention of these sections is clear. A 
right of preference, which amounts to a statutory right to have greater 
rights to the award of a government contract than the general public, 
must be earned through satisfactory performance. If NPS adopted the 
position espoused by several of the commenters, a business could 
purchase a concession contract on the very last day of the term of a 
concession contract and thereby obtain the statutory right of 
preference with no demonstration whatsoever of satisfactory 
performance. NPS does not consider this to be the intention of the 1998 
Act or sound public policy.
    NPS, however, in response to these comments, has made changes to 
this section in the final rule. Particularly, instead of requiring that 
a new concessioner operate satisfactorily for two years under a 
contract with a term of ten years or less or four years under a 
contract with a term of more than ten years, NPS has reduced these 
``track record'' periods to one year for concession contracts with a 
term of five years or less and two years for concession contracts with 
a term of more than five years. NPS notes that the final rule in this 
respect is less restrictive than the comparable rule contained in 36 
CFR 51.5(a) in effect prior to this final rule.
    NPS considers that these changes will alleviate concerns about the 
ability to sell concession contracts toward the end of a contract term 
(in accordance with Section 408 of the 1988 Act) while providing a 
sufficient demonstration of satisfactory performance upon which to base 
a determination of a right of preference.
    One comment suggested that the ``track record'' period of 
satisfactory performance under this section should not apply to 
contract extensions. However, the sections of the 1998 Act quoted above 
clearly reference extensions in this connection. In addition, the 
existing 36 CFR 51.5 contains these same types of ``track record'' 
requirements regarding the granting of a preference in renewal to 
existing concessioners. Congress must be presumed to have been aware of 
these existing requirements while considering the legislation that 
became the 1998 Act.
    The same comment suggested that this section be amended to state 
that the first day of operation for purposes of the section be changed 
from the date of approval of the assignment of the concession contract 
until the first day of actual operations by the new concessioner. NPS 
has not made this change as a new concessioner lawfully cannot begin to 
operate prior to the approval of a contract assignment by NPS and, once 
the assignment is approved, the new concessioner automatically is the 
lawful operator of the concessioner. The final rule has also been 
clarified by expressly stating that the two-year track record 
requirement applies to new concessioners that result from assignments, 
including assignments of controlling interests in concessioners, as 
defined in this part.

Section 51.44 (Section 51.46 in the final rule) May the Director 
Determine That a Prior Concessioner Has Not Operated Satisfactorily 
After a Prospectus Is Issued?

    A comment suggested that NPS delete this section, and, if NPS 
determines that performance has substantially degenerated after a 
prospectus is issued, that NPS terminate the contract and bring in an 
operator on a temporary basis. NPS, however, considers that this

[[Page 20647]]

section is necessary for the reasons stated in the next several 
paragraphs, and, with respect to the latter suggestion, considers it 
impracticable in light of the time it takes to terminate a contract for 
unsatisfactory performance. Other comments repeated the position that 
any requirement regarding satisfactory performance in order to obtain a 
right of preference is unlawful. NPS disagrees for the reasons 
discussed in the previous several paragraphs.
    The intention of this section is to permit a determination that a 
concessioner has not operated satisfactorily after the date a 
prospectus is issued and prior to the award of a contract. It was 
intended to apply to situations where, after a prospectus is issued, a 
second less than satisfactory annual evaluation is made that precludes 
a preference in renewal, or, previously unknown information becomes 
available which causes NPS to withdraw a previous determination of 
satisfactory performance. The provision is necessary to avoid a less 
than satisfactory concessioner from exercising a right of preference by 
virtue of fortuitous timing of performance evaluations or by lack of 
knowledge by NPS of relevant information.
    However, NPS has changed this section in response to the comments 
received to make clear the limited circumstances in which it is meant 
to apply.
    As part of this change, NPS has included a provision that permits a 
performance evaluation for right of preference purposes after issuance 
of a prospectus on the basis of a shortened operating year if necessary 
to make a last evaluation of satisfactory performance for right of 
preference purposes prior to the selection of the best proposal 
submitted in response to a prospectus.

Section 51.45 (Section 51.48 in the final rule) What Happens to a Right 
of Preference in Case of Termination of a Concession Contract for 
Unsatisfactory Performance or Other Breach?

    One commenter provided combined comments directed to this section 
and Section 51.44 but it appears that the comments were in fact 
directed to Sections 51.42 and 51.43. They have been responded to under 
those sections.
    A comment requested that the last sentence of this section be 
``conformed in accordance with our comments on Section 51.44.'' NPS 
reviewed those comments but considers that the last sentence of Section 
51.45 is necessary to make clear that termination of a concession 
contract is normally a ``last resort'' remedy for NPS and that, 
therefore, the fact that NPS may not have terminated a concession 
contract for unsatisfactory performance does not limit the authority of 
NPS to determine that a concessioner nonetheless operated less than 
satisfactorily.

Section 51.46 (Section 51.49 in the final rule) May the Director Grant 
a Right of Preference Except in Accordance With This Part?

    The last two sentences of this section have been deleted as 
unnecessary.

Section 51.47 (Section 51.29 in the final rule) How Will I Know If a 
Preferred Offeror Exists?

    The final regulation contains a new section 51.28 that describes 
when NPS will determine that a preferred offeror exists.

Section 51.48 (Section 51.26 in the final rule) What Solicitation, 
Selection and Award Procedures Described in This Part Will Apply to the 
Solicitation?

    One comment was directed to this section but it clearly pertained 
to Section 51.84, not 51.48.

Section 51.49 (Section 51.30 in the final rule) What Must a Preferred 
Offeror Do Before He or She May Exercise a Right of Preference?

    The general concessioner organization took the position that an 
existing concessioner under a 1965 Act concession contract not only has 
a ``continuing contractual right of preference'' but also has a 
contractual right to exercise the right of preference even if the 
concessioner chooses not to submit a responsive proposal in response to 
a prospectus. The organization makes this argument despite the fact 
that Sections 403(8)(B)(iii) and 403(8)(C)(ii) of the 1998 Act 
expressly state that in order for an incumbent concessioner to exercise 
a right of preference it must have ``submitted a responsive proposal 
for a proposed new concession contract which satisfies the minimum 
requirements established by the Secretary pursuant to paragraph (4).'' 
The commenter does not explain the basis of its position, other than to 
say that the requirement for submission of a responsive proposal was 
not included in the 1965 Act.
    NPS considers this position baseless for several reasons in 
addition to the fact that it is in direct contradiction of the express 
terms of the 1998 Act.
    The first reason is that the responsive proposal requirement of the 
1998 Act reflects the terms of 36 CFR part 51 in effect prior to the 
passage of the 1998 Act. 36 CFR part 51 required, prior to this 
amendment, the submission of a responsive proposal by an existing 
satisfactory concessioner in order to be given a preference in renewal 
by NPS under the 1965 Act. In fact, the 1998 Act codifies the prior 36 
CFR Part 51 in this respect.
    In 1995, an incumbent concessioner challenged the validity of the 
responsive proposal requirement of 36 CFR part 51 after refusing to 
meet the minimum investment requirements of a prospectus for a new 
concession contract. Hotcaveg v. Kennedy, 883 F. Supp. 428, (E.D. Mo. 
1995), aff'd, 72 F. 3rd 133 (8th Cir. 1995). The district court in 
Hotcaveg held that the responsive proposal requirement was not a 
violation of the 1965 Act, stating that:

    Requiring concessioners to meet minimum standards to improve the 
quality of facilities in national parks is a reasonable 
interpretation of the role of the National Park Service. The 
Secretary is carrying out his duty mandated by statute. Id. at 429.

    Congress must be presumed to have been aware of the NPS regulatory 
requirement regarding submission of responsive proposals when it was 
considering the 1998 Act and also aware of the fact that the 8th 
Circuit had upheld this requirement in 1995 as an appropriate 
implementation of the 1965 Act. NPS points out that the general 
concessioner organization filed an amicus brief in Hotcaveg on behalf 
of the plaintiff and also objected to, as unlawful, the responsive 
proposal requirement of 36 CFR part 51 at the time it was proposed by 
NPS.
    Secondly, 1965 Act concession contracts, of course, make no 
reference to a contractual right to not be obliged to submit a 
responsive proposal as a condition to being given a preference in 
renewal. Accordingly, NPS has rejected the commenter's position that 
the responsive proposal requirements of the 1998 Act do not apply to 
1965 Act contracts because of Section 415 of the 1998 Act.
    Further, such an interpretation would clearly frustrate the 1998 
Act's goal of enhancing competition in concession contracting. If 
existing concessioners with a preference in renewal are not required to 
submit responsive proposals, prospective competitors will rightly 
conclude that submission of a competing proposal is a waste of time as 
the incumbent concessioner has a ``lock'' on the award of the new 
contract, evidenced by the fact that the incumbent, unlike the 
competitor, is not even required to submit a responsive proposal in 
order to compete for the contract.

[[Page 20648]]

Section 51.50 (Section 51.31 in the final rule) What Happens If a 
Preferred Offeror Does Not Submit a Responsive Proposal?

    A comment repeated the argument regarding submission of a 
responsive proposal. This issue is responded to under Section 51.49.

Section 51.51 (Section 51.32 in the final rule) What Is the Process If 
the Director Determines That the Best Responsive Proposal Was Not 
Submitted by a Preferred Offeror?

    One comment suggested that this section should make clear that NPS 
must advise the preferred offeror as to the specific areas in which it 
must amend its proposal to meet the better terms and conditions of the 
best proposal. NPS considers that this requirement is implicit in this 
section. However, NPS has made the requested change.

Section 51.52 (Section 51.33 in the final rule) What If the Preferred 
Offeror Does Not Timely Amend Its Proposal To Meet the Terms and 
Conditions of the Best Proposal or Is Not a Qualified Person To Carry 
Out the Terms of the Amended Proposal?

    A comment was directed to Section 51.51 but NPS considers based on 
its content that it was intended to be directed to Section 51.52. The 
comment suggests that it is unlawful for the NPS to require 
``requalification'' of a preferred offeror if it exercises a right of 
preference by matching the terms and conditions of a better proposal. 
NPS disagrees with this as Section 403(4)(B) of the 1998 Act states:

    (B) The Secretary shall reject any proposal, regardless of the 
franchise fee offered, if the Secretary determines that the person, 
corporation or entity is not qualified, is not likely to provide 
satisfactory service, or that the proposal is not responsive to the 
objectives of protecting and preserving resources of the unit of the 
National Park System and of providing necessary and appropriate 
facilities and services to the public at reasonable rates.

    NPS considers that this section of law requires that an award of a 
concession contract, whether or not through the exercise of a 
preference in renewal, must be to a qualified person within the meaning 
of the statute. Congress could not possibly have intended the right of 
preference to require award of a concession contract to an unqualified 
entity.
    However, NPS has modified this section in the final rule to delete 
express reference to the qualified offeror requirement of the 1998 Act 
as it would at best rarely occur that an amended proposal from a 
preferred offeror would need to be rejected by NPS on the basis of the 
qualified offeror requirement of the 1998 Act.

Section 51.53 (Section 51.34 in the final rule) What Will the Director 
Do If a Selected Preferred Offeror Does Not Timely Execute the New 
Concession Contract?

    A comment appears to have been made in reference to this section. 
It suggests that it is not proper to require a preferred offeror to 
execute a concession contract within the period specified by the 
Director. The comment suggests that the language of the contract may 
differ from the prospectus or the proposal (an event not permissible 
under the statute and the regulations). NPS disagrees and notes that 
the requirement is equally applicable to all selected offerors, whether 
or not a preferred offeror.

Section 51.54 (Section 51.35 in the final rule,) What Happens to a 
Possible Right of Preference If the Director Receives No Responsive 
Proposals?

    The general concessioner organization agreed with the intentions of 
this section but suggested that the word ``different'' be substituted 
for ``more favorable'' as it may be difficult to establish whether it 
is more or less favorable than the prior prospectus. NPS has not made 
the requested change to this section. This is because the new 
prospectus would necessarily be different from the old prospectus, 
e.g., at the least, the commencement date of the new contract would 
very likely change in a new prospectus because of the passage of time.

Section 51.55 (Section 51.47 in the final rule and retitled,) How Do I 
Appeal a Decision That a Prior Concessioner Is Not a Preferred Offeror?

    Several comments stated that thirty days is not sufficient time to 
prepare an appeal. (One comment suggested a sixty-day period.) In 
response to these comments, NPS has provided in the final rule that NPS 
may extend this period upon request by the concessioner if NPS 
determines that the concessioner demonstrates good cause for an 
extension. NPS has also included a requirement in the final rule that 
an appeal must specify the grounds for the appeal. In addition, in 
response to comments encouraging competition in concession contracting, 
NPS has expanded the administrative appeal right contained in the 
proposed regulations to permit a person an administrative appeal with 
respect to a determination by the Director that a concessioner is a 
preferred offeror. NPS considers, in light of the anti-competitive 
consequences of preferred offeror status, that potential competitors 
should have a right of administrative appeal with respect to such 
determinations.
    A comment suggested that the appeal should not be considered by the 
Director personally (or a Deputy or Associate Director) as called for 
by this section. The concern is that these individuals may be too busy 
to timely consider an appeal. However, NPS considers that these 
officials will be able to make timely appeal decisions. Moreover, the 
fact that an appeal must be considered by the highest levels of NPS is 
for the benefit of concessioners as it ensures national consistency on 
the important issue of right of preference.
    Another comment suggested, without amplification, that the appeal 
process contained in this section is ``illusory.'' NPS disagrees. The 
Director (or a Deputy or Associate Director) will be fully accountable 
for their appeal decisions.
    The general concessioner organization submitted extensive comments 
on this section. NPS responds below. However, NPS first notes that the 
underlying premise of the comments is that it is illegal for NPS to 
require concessioners that, allegedly, have a contractual right of 
preference under 1965 Act concession contracts, to submit a responsive 
proposal in order to exercise this right. As a consequence of this 
argument, the commenter describes a number of hypothetical 
consequential inequities resulting from this section. The issue of 
whether a concessioner with a ``contractual right of preference'' has 
to submit a responsive proposal as required by the statute is addressed 
under Section 51.49. NPS responds here only to other aspects of the 
comment's criticisms of this section.
    The general concessioner organization's first specific point is 
that NPS must make the internal decision as to whether the existing 
concessioner is a ``preferred offeror'' before issuing a prospectus. 
This is not the case. NPS notes that in most cases an existing 
concessioner will know that it is a satisfactory concessioner for 
purposes of a preference in renewal in advance of the issuance of a 
prospectus. However, NPS will not necessarily make final decisions 
affecting the existence of a preferred offeror regarding the terms of 
the new concession contract (i.e., will it have gross receipts of less 
than $500,000, will it be an outfitter and guide contract, will it 
continue the previous visitor services), prior to the issuance of the 
prospectus.

[[Page 20649]]

    The comment goes on to argue that submitting a responsive proposal 
is a heavy burden that a concessioner should not have to bear prior to 
a decision as to whether it is a preferred offeror. This argument is 
posited on the notion that a concessioner with an asserted 
``contractual right of preference'' is not legally required to submit a 
responsive proposal in response to a prospectus in order to exercise a 
right of preference. As discussed under Section 51.49, this is not the 
law. The statutory requirement to submit a responsive proposal is not a 
burden imposed by this section. It is imposed by the 1998 Act.
    Several commenters suggested in effect that the regulations should 
make clear that a right of appeal is to be provided not only with 
respect to a concessioner's status as a preferred offeror but also with 
respect to whether a new concession contract is a qualified concession 
contract for purposes of a right of preference. NPS agrees with this 
suggestion and has clarified this section and other sections in the 
final rule to make clear that an appeal regarding whether a 
concessioner is a preferred offeror includes appeal as to whether a new 
concession contract is a qualified concession contract. NPS has made 
several other conforming amendments to sections of the final rule to 
reflect an appeal right for a determination that a new concession 
contract is not a qualified concession contract.
    NPS notes, however, that although the final rule expressly provides 
an appeal from a determination that a new concession contract is not a 
qualified concession contract, this does not establish an appeal with 
respect to the content of prospectuses or the terms and conditions of 
new concession contracts. The content of prospectuses and the terms and 
conditions of new concession contracts, except to the extent mandated 
by this part or the 1998 Act, are determined in the discretion of NPS. 
(See Section 403(10) of the 1998 Act: ``Nothing in this title shall be 
construed as limiting the authority of the Secretary to determine 
whether to issue a concession contract or to establish its terms and 
conditions in furtherance of the policies expressed in this title.'')
    In addition to these general comments, the general concessioner 
organization made a number of more specific arguments concerning this 
section, asserting for a variety of reasons that it is illegal. NPS 
responds to them as appropriate as follows.
    In its first specific comment, the general concessioner 
organization misreads Section 51.32 of the proposed regulations to 
interpret it to mean that NPS may unilaterally modify the terms and 
conditions of existing concession contracts. Section 51.32, of course, 
does not give NPS the authority to do this. NPS has amended Section 
51.32 in the final regulations to eliminate any ambiguity it may have 
contained in this regard.
    The commenter states that although the NPS now attempts to justify 
these additional procedural burdens in order to ensure that a right of 
preference cannot ``block policy,'' the commenter is ``not aware of any 
significant bidding scenario in the history of the NPS concession 
program in which a right of preference was successfully used to promote 
such interference.''
    NPS notes that the quoted words do not appear in the proposed 
regulations or in their preamble.
    The comments suggest that it is the intention of the proposed 
regulations that an appeal under this section is to be made to the 
initial decision-maker. This, of course, is not the case. The apparent 
confusion of the commenter is based on the fact that the regulations as 
a matter of form always refer to the ``Director'' as the responsible 
official. This is customary practice in NPS regulations and in many 
regulations of other federal agencies. In fact, it tracks the 1998 Act 
that always refers to the Secretary of the Interior as the responsible 
official even though, of course, the Secretary's responsibilities under 
the Act are delegated to subordinate officials. The proposed 
regulations were not intended to suggest that appeals from a deciding 
official would be directed to the deciding official. The proposed 
regulations state that the term ``Director'' means the Director of the 
National Park Service or an authorized representative of the Director, 
except where a particular official is specifically identified in this 
part.
    The comments suggest that this section is illegal in violation of 
the Administrative Procedures Act on the premise that ajudicatory 
proceedings must be utilized in such an appeal. However, the 
Administrative Procedures Act does not require ajudicative procedures 
in the type of determination at issue in this section. The procedures 
provided meet all legal requirements.
    The comments repeat the concern about an appeal to the deciding 
official and suggests that the appeal provided by this section fails to 
provide meaningful, timely relief. The basic argument is that it is 
improper for a solicitation to proceed while an appeal is ongoing. This 
argument, in turn, is premised on the notion that an incumbent 
concessioner with a ``contractual right of preference'' is not required 
to submit a responsive proposal (contrary to the express terms of the 
1998 Act). The argument is that the existing concessioner in these 
circumstances, if the appeal is not determined prior to the release of 
a prospectus, will be required to take an action (submission of a 
responsive proposal), that it is not otherwise legally required to do. 
NPS has not made this change as the 1998 Act requires submission of a 
responsive proposal.
    The comments assert that the fact that in this section the 
appellant only receives a ``possible'' right of preference if it wins 
an appeal does not ``guarantee'' that the concessioner will have a 
right of preference. But the term ``possible'' with respect to a right 
of preference only refers to the fact that a concessioner with a 
``possible'' right of preference must submit a responsive proposal, as 
expressly required by the 1998 Act, in order to have an unconditional 
right of preference. However, to avoid confusion, NPS has deleted 
reference to a ``possible'' right of preference in the final rule 
except in circumstances where clarity requires use of the word.
    The comments summarily allege that the appeal procedure contained 
in this section is illegal. NPS disagrees with this position. For the 
reasons discussed above, the administrative appeal provided by this 
section conforms with standard administrative practice, deprives no one 
of any constitutional rights, and is consistent with the purposes of 
the 1998 Act.
    The last specific comment of the general concessioner organization 
under this section is a restatement of its prior arguments, 
particularly the argument that an incumbent concessioner with a 
``contractual right of preference'' is not required to submit a 
responsive proposal to a concession contract prospectus in order to 
exercise the right of preference. The general concessioner 
organization's argument is baseless as discussed under Section 51.49.
Subpart F--Leasehold Surrender Interest (Subpart G in the final rule.)

Section 51.56 (Section 51.51 in the final rule.) What Special Terms 
Must I know To Understand This Part?

``Arbitration''
    For the purposes of clarity, NPS has added a definition of 
``arbitration'' and a description of arbitration procedures to this 
section in the final rule. This replaces the description of arbitration 
proceedings contained in Section 51.78 in the proposed regulations. See 
the

[[Page 20650]]

discussion under Section 51.78 as to how the final rule is changed with 
respect to arbitration procedures. Other references to arbitration in 
the final rule also refer to Section 51.51 of the final rule.
``Capital Improvement''
    The general concessioner organization objected to this definition 
because it differed from the definition of ``capital improvement'' 
contained in the 1998 Act. The comment states that ``NPS has no 
authority to use a different definition.'' This statement is incorrect. 
NPS, in drafting regulations to implement the 1998 Act, has clear 
authority to interpret the 1998 Act through appropriate definitions to 
set forth understandable and workable regulations consistent with the 
terms of the statute.
    NPS, however, in order to accommodate the concerns of the 
organization in this connection, has amended this definition in the 
final regulations to track the 1998 Act's definition. This amendment 
does not result in a substantive change to the meaning of ``capital 
improvement.''
    Several commenters suggested that this definition be clarified to 
make clear that it encompasses floating docks. NPS, because of the 
special circumstances of floating docks, has amended the definition of 
``fixtures'' in this connection and has also added the term ``barges'' 
to the capital improvement definition to make clear that barges are not 
floating docks. Floating docks are considered to be non-removable 
equipment under this part for leasehold surrender interest purposes 
only. This change should not be construed as indicating that NPS 
necessarily considers that possessory interest may be obtained in 
floating docks.
``Construction Cost''
    The general concessioner organization objected to the definition of 
``construction cost,'' stating that it does not cover all elements of 
construction cost. This comment is discussed below under ``Eligible 
Direct and Indirect Costs.''
    The commenter also requested deletion of the reference to a 
concessioner's income tax returns with respect to construction cost. 
NPS has done this in the final rule. In addition, as suggested by the 
general concessioner organization, the final rule states that 
construction costs must be capitalized by the concessioner in 
accordance with Generally Accepted Accounting Principles (GAAP).
    NPS did not remove the reference in this definition to ``approval 
by the Director'' as requested by a commenter. However, the approval 
process in the text of the final rule has been amended to reflect the 
commenter's concerns in this respect.
``Depreciation''
    The general concessioner organization objected to the inclusion of 
certain terms in the definition of ``depreciation'' as contained in the 
proposed regulations, arguing that obsolescence should not be an 
element of depreciation with respect to leasehold surrender interest 
capital improvements. However, the common definition of depreciation as 
used in the appraisal industry states that it is the loss of value in 
property from ``any cause'' and further states, in regard to 
improvements, that depreciation encompasses both ``deterioration and 
obsolescence.'' See the definition of ``depreciation'' in The 
Dictionary of Real Estate Appraisal, 3rd Edition (1993), published by 
the Appraisal Institute (hereinafter referred to as the ``3rd 
Edition''). NPS does not consider that there are significant 
differences, if any, between the depreciation terms of the 1998 Act and 
the definition of depreciation contained in the 3rd Edition. In this 
connection, the commenter elsewhere refers to the Appraisal Institute 
as an appropriate source of definitions regarding leasehold surrender 
interest terms. In any event, NPS, in the final rule, has deleted the 
terms to which the commenter objected as unnecessary.
    NPS notes that the House and Senate Committee Reports that 
accompanied S. 1693, in their general description of the bill, mention 
``wear and tear'' depreciation but in their section-by-section analyses 
discuss depreciation in terms of deterioration and prospective 
serviceability. NPS considers that the reference to ``wear and tear'' 
depreciation was off-hand and not meant to modify the statutory 
description of depreciation.
    Another commenter asked whether ``depreciation'' refers to 
depreciation for federal income tax purposes. It does not. It refers to 
the type of depreciation discussed above.
``Eligible Direct and Indirect Costs''
    NPS was surprised that several comments objected to the scope of 
construction costs (direct and indirect) contained in the proposed 
regulations. This is because the proposed regulations, to the benefit 
of concessioners, utilized a significantly more expansive definition of 
``construction cost'' than its usual meaning. Particularly, NPS 
included in the definition a number of indirect costs of a concessioner 
related to construction, e.g., architect's fees, environmental study 
costs, and on-site inspection expenses, even though the developer's 
costs related to construction are not generally considered to be 
``construction costs.''
    For example, The Dictionary of Architecture & Construction, Second 
Edition (1993), defines ``construction cost'' as:

    The cost of all the construction portions of a project, 
generally based upon the sum of the construction contract(s) and 
other direct construction costs; does not include the compensation 
paid to the architect and consultants, the cost of the land, right-
of-way, or other costs which are defined in the contract documents 
as being the responsibility of the owner.

    For another example, the 3rd Edition defines ``construction cost'' 
as:

    The cost to build, particularly an improvement; includes the 
direct costs of labor and materials plus the contractor's indirect 
costs. (Emphasis added.)

    The comment from the general concessioner organization took the 
position that the definition of ``construction cost'' should be that 
which is utilized in Chapter 16 (page 346) of the Eleventh Edition of 
``The Appraisal of Real Estate'' published by the Appraisal Institute 
(hereinafter referred to as the ``11th Edition'').
    NPS has reviewed the elements of construction cost that are 
contained in the 11th Edition. However, NPS notes that the context of 
the term ``construction cost'' as used in Chapter 16 of the 11th 
Edition is for purposes of appraising the fair market value of real 
estate by the reproduction or replacement cost method. For this reason, 
several costs of the owner (such as marketing expenses and post-
construction carrying costs) may be included as indirect costs for the 
purposes of a fair market value appraisal. The fact that ``construction 
cost'' has this broader meaning in Chapter 16 is apparent from the fact 
that the 3rd Edition, referenced above, the American Appraisal 
Institute's dictionary of appraisal terms, defines ``construction 
cost'' as the cost to build, including indirect costs of the 
contractor. No reference to the costs of the owner is made. The 3rd 
Edition is cited as a reference in the 11th Edition.
    Accordingly, NPS does not consider that the 11th Edition's 
description of ``construction cost'' for fair market value purposes is 
reflective of the meaning of the term as used in the 1998 Act. The 
following provision of the legislative history of the 1998 Act makes 
clear that

[[Page 20651]]

a ``fair market value'' definition of construction cost was not 
intended by the Congress:

    The Committee considers that the leasehold surrender interest 
described by this section will provide concessioners with adequate 
security for investments in capital improvements they make. This 
will assist in encouraging such investments in visitor facilities in 
the National Park System. However, the value of a leasehold 
surrender interest, i.e., the original construction cost, less 
depreciation as evidenced by physical condition and prospective 
serviceability, plus what amounts to interest on the investment 
based on the Consumer Price Index, should accurately reflect the 
real value of the improvements and should not result in any undue 
compensation to a concessioner upon expiration of a concession 
contract. Additionally, the value of the leasehold surrender 
interest will be relatively easy to estimate so that a prospective 
new concessioner and the Secretary can accurately calculate the 
amount for purposes of competitive solicitation of concession 
contracts. S. Rep. No. 105-202, at p. 35 (1998).

    NPS also notes that ``fair market value'' was an express element of 
the value of possessory interest under the 1965 Act. If Congress had 
intended the term construction cost to be construed in a fair market 
value context, it would have so stated consistent with the terms of the 
1965 Act. NPS considers that the definition of construction cost and of 
the terms ``eligible direct and indirect construction costs'' as set 
forth in the proposed regulations are appropriate interpretations of 
the term ``construction cost'' as used in the 1998 Act.
    However, in an effort to accommodate the reasonable concerns of the 
general concessioner organization, NPS in the final rule has included 
all the direct construction costs set forth in the 11th Edition. In 
addition, NPS has included in the final rule as many of the specific 
indirect costs mentioned in the 11th Edition as it considers reasonable 
in light of its understanding of the term ``construction cost'' as used 
in the 1998 Act.
    NPS has not included in the final rule the following indirect costs 
mentioned in the 11th Edition: marketing expenses; sales commissions; 
leasing commissions; legal fees; title transfers; the cost of carrying 
the investment after completion of construction; and tenant 
improvements (tenant improvements may be eligible direct costs).
    NPS also has not included as an indirect cost the cost of carrying 
the investment in land as mentioned in the 11th Edition, as a 
concessioner makes no investment in land.
    NPS particularly would like to comment on a concessioner's 
administrative expenses related to construction. The 11th Edition 
mentions the ``administrative expenses of the developer'' as possible 
indirect costs for fair market value appraisal purposes. NPS has not 
included this very broad item of indirect costs in the final rule, but, 
consistent with the proposed rule, has included administrative expenses 
of the concessioner related to direct, on-site construction inspection. 
NPS notes that, unlike the administrative expenses of a ``developer'' 
as contemplated by the 11th Edition, a concessioner's administrative 
expenses flow from all of its business activities. In any event, NPS 
does not consider that additional administrative expenses of a 
concessioner are appropriate to include as eligible indirect 
construction costs for the reasons discussed in the preceding 
paragraphs.
    The general concessioner organization also requested that 
``entrepreneurial profit'' be treated as a construction cost. However, 
the 11th Edition describes ``entrepreneurial profit'' as the difference 
between the ``cost of development'' and the ``value of the property'' 
after completion.'' 11th Edition, p. 346. Accordingly, entrepreneurial 
profit is not a direct or indirect construction cost even as described 
by the 11th Edition for fair market value appraisal purposes.
    NPS also has not accepted the commenter's suggestion that 
construction costs include ``extra costs'' associated with dealing with 
the NPS. The costs of the construction are what they are. Any ``extra'' 
construction costs that may exist (NPS does not agree that there are 
such ``extra'' costs) with respect to the fact that a concessioner's 
construction activities are subject to oversight by NPS are necessarily 
included within the actual construction cost.
    The general concessioner organization questioned the portion of 
this definition that limits construction costs to ``amounts no higher 
than those prevailing in the locality of the project.'' NPS considers 
this limitation necessary and has retained it in the final rule. This 
limitation is important in circumstances where construction work is 
performed directly by the concessioner, i.e., force account work, or 
performed by an affiliate of a concessioner. In this connection, a 
comment suggested that construction costs should include the costs of 
the concessioner when the concessioner acts as a contractor, e.g., 
constructs or installs a capital improvement with its own labor force. 
The definition of construction costs in the final rule makes this 
clear. NPS notes, however, that only actual expenses of the 
concessioner capitalized in accordance with Generally Accepted 
Accounting Principles are construction costs for leasehold surrender 
interest purposes.
    Another commenter, in addition to making generally the same 
suggestions as discussed above, requested that the cost definitions be 
amended to make clear that a current concessioner is not required to 
pay for environmental studies that are to be used by NPS to develop a 
prospectus. NPS has not made any changes in this connection as it 
considers that the regulations cannot be read to require a concessioner 
to pay for environmental studies in these circumstances.
    This commenter also suggested that costs of concessioner initiated 
studies that facilitate the work and enhance the environment should be 
eligible costs . NPS considers that the cost definitions in the final 
regulations achieve this objective to the extent consistent with the 
term ``construction cost'' as used in the 1998 Act.
``Fixtures and Non-Removable Equipment''
    The general concessioner organization objected to the second 
sentence of this definition as being too restrictive as to the meaning 
of these terms. It also suggested an alternative test. NPS has adopted 
as appropriate the alternative test in the final regulations and has 
deleted the examples to avoid possible confusion. To avoid unnecessary 
discussion, NPS deleted the examples of fixtures and non-removable 
equipment as several commenters objected to one or more of them as 
being incorrect. Their deletion, however, should not be considered as 
indicating that NPS necessarily considers any of the examples to be 
incorrect.
``Ineligible Costs''
    NPS has deleted this definition in the final rule as unnecessary. 
The deletion obviates concerns expressed about this definition.
``Leasehold Surrender Interest''
    One commenter asked whether ``related capital improvements'' as 
used in this definition may refer to improvements a concessioner makes 
that are not related to its operations. The definition contained in the 
proposed regulations relates only to capital improvements built on park 
lands under the terms and conditions of a concession contract. If a 
concessioner makes capital improvements to park lands under some other 
form of authorization, no leasehold surrender interest would be 
obtained.

[[Page 20652]]

    A comment (that attached a letter from a bank) suggested that banks 
will not lend money on the basis of a leasehold surrender interest 
under the limitations of the 1998 Act. NPS disagrees. The leasehold 
surrender interest concept will permit concessioners to obtain loans 
using leasehold surrender interest as collateral. NPS notes that the 
objections of the bank to leasehold surrender interest apply equally to 
possessory interest under the 1965 Act. Many lending institutions made 
loans to concessioners secured by possessory interest.
``Leasehold surrender interest value''
    NPS has added to the definition of leasehold surrender interest 
value in the final rule reference to Section 405(a)(4) of the 1998 Act 
that permits a different valuation of leasehold surrender interest in 
certain circumstances effective nine years after the effective date of 
the 1998 Act. It has also clarified the proposed rule in the final rule 
to indicate that, in the event a concessioner ceases to utilize a 
related capital improvement under the terms of a concession contract 
prior to the termination or expiration of a contract (e.g., where the 
Director takes a capital improvement out of service for resource 
protection purposes), the applicable depreciation and entitlement to 
payment of leasehold surrender interest value is established as of the 
date the concessioner ceases to utilize the related capital 
improvement.
``Major rehabilitation''
    NPS has modified the definition of ``major rehabilitation'' in the 
final rule to adopt a 50% test rather than a 100% test as discussed 
under Section 51.75.
``Related Capital Improvement or Fixture''
* * * * *
``Structure''
    A comment suggested that the term ``structure'' be amended to 
include landscaping and plantings that are installed as integral to the 
construction of a capital improvement. NPS has adopted this suggestion 
in the final rule to the extent that landscaping is an integral 
component of the construction of a structure. Landscaping includes 
necessary initial plantings but does not include ``re-landscaping'' 
(except as part of a major rehabilitation), landscape maintenance or 
subsequent plantings.
``Substantial Completion''
    For the purpose of clarity, NPS has added a definition of 
``substantial completion'' in the final rule. The definition tracks the 
definition of the term in the 3rd Edition. A commenter questioned the 
use of the term in the proposed regulations. The term is needed in 
order to establish the completion date of a capital improvement.

Section 51.57 (Renumbered as Section 51.52 in the final rule.) How Do I 
Obtain a Leasehold Surrender Interest?

    The general concessioner organization objected to the second 
sentence of this section, stating that ``NPS cannot qualify the right 
to leasehold surrender interest by contract, and to do so is 
inconsistent with the 1998 Act.''
    This position cannot be reconciled with the express language of 
Section 405 of the 1998 Act:

    (a) Leasehold Surrender Interests Under New Concession 
Contracts.--On or after the date of enactment of this title, a 
concessioner that constructs a capital improvement upon land owned 
by the United States within a unit of the National Park System 
pursuant to a concession contract shall have a leasehold surrender 
interest in such capital improvement subject to the following 
conditions. * * *  (Emphasis added).

    Under this authority, the terms and conditions of a concession 
contract may detail leasehold surrender interest requirements so long 
as the provisions are consistent with the 1998 Act. In this connection, 
Section 403(10) of the 1998 Act states that ``Nothing in this title 
shall be construed as limiting the authority of the Secretary to 
determine whether to issue a concession contract or to establish its 
terms and conditions in furtherance of the policies expressed in this 
Title.'' (Emphasis added.) Further, Section 417 of the 1998 Act 
requires the Secretary to promulgate regulations appropriate for 
implementation of the 1998 Act. There is nothing in the 1998 Act that 
suggests that such regulations may not place appropriate conditions on 
leasehold surrender interest.

Section 51.58 (Deleted in the final rule) If a Concessioner Does Not 
Comply with the Requirements of This Part or the Terms and Conditions 
of a Concession Contract, What Happens?

    The general concessioner organization objected to this section 
because ``a concessioner is entitled to a leasehold surrender interest 
in all capital improvements it constructs on park lands.'' This 
statement, however, leaves out the phrase of the 1998 Act discussed 
under the previous section that grants a leasehold surrender interest 
for capital improvements that are constructed ``pursuant to a 
concession contract.'' The commenter also argues that this section is 
vague in referring to the requirements of this part and the terms and 
conditions of the concession contract without further guidance. NPS 
does not consider that these regulations or its concession contracts 
are vague as to leasehold surrender interest requirements or otherwise. 
However, in consideration of comments in this connection, NPS has 
deleted this section in the final rule as unnecessary in light of the 
leasehold surrender interest terms of the 1998 Act, this part, and 
concession contract terms and conditions.
    Another commenter suggested that this section improperly gives NPS 
the ability to deprive a concessioner of leasehold surrender interest 
by determining that the concessioner had failed to meet the 
requirements of its concession contract. NPS considers that the 
commenter misconstrued the meaning of this section. In any event, the 
section has been deleted in the final rule.

Section 51.59 (Section 51.53 in the final rule and retitled) Why May 
the Director Authorize the Construction or Installation of a Capital 
Improvement?

    The general concessioner organization suggested in a comment on 
this section that the phrase ``under the terms of a concession 
contract'' be added after the first use of the word ``concessioner'' in 
this section. NPS has been made this change.

Section 51.60 (Section 51.54 in the final rule) What Must a 
Concessioner Do Before Beginning To Construct or Install Capital 
Improvements in Which The Concessioner Seeks a Leasehold Surrender 
Interest?

    Several comments were received objecting to the ability of NPS to 
determine that construction costs are ``unreasonable.'' In response to 
these comments, NPS has amended this section in the final rule to 
delete reference to disapproval of the construction of a capital 
improvement if NPS considers the costs unreasonable.
    Another commenter suggested that approvals under this section 
should be delegable to the park area superintendent. See the changes to 
the definition of Director in Section 51.3.

Section 51.61 (Section 51.55 in the final rule) What Must a 
Concessioner Do After Substantial Completion of The Capital 
Improvement?

    The general concessioner organization made several comments on this 
section.
    The first sentence of its comment on this section appears to be 
incomplete. NPS thinks the comment meant to say

[[Page 20653]]

that, although construction invoices should be available and a 
certification by certified public accountant is appropriate, the 
invoices should not be submitted to NPS but only be made available to 
NPS for inspection for a period of three years after project 
completion. This suggestion, if NPS has accurately interpreted it, is 
not acceptable to NPS. Other commenters made similar suggestions. The 
existence of a leasehold surrender interest in effect places on the 
government a burden to pay a concessioner, or require a third party to 
pay a concessioner, the construction cost of a building perhaps twenty 
or more years after the building is completed. This obligation, in the 
view of NPS, requires submission to NPS of the information required by 
this section in order to properly fulfill NPS's administrative 
responsibilities for this financial obligation.
    The comment also requested that the costs of obtaining the 
certified public accountant certification be a construction cost 
element for leasehold surrender interest purposes. NPS has not accepted 
this suggestion in light of the definition of ``construction cost'' set 
forth in Section 51.56.
    NPS has modified this section in the final rule to clarify that the 
construction cost of a project incurred after substantial completion of 
a project are included as construction cost for leasehold surrender 
interest purposes.

Section 51.62 (Section 51.56 in the final rule) How Will the Director 
Determine the Construction Cost for Purposes of Leasehold Surrender 
Interest Value?

    Several comments suggested in effect that this section provides NPS 
with undue latitude to define eligible construction costs for which a 
leasehold surrender interest will be obtained after construction is 
complete, thereby placing an undue risk on the concessioner. NPS has 
amended this section in the final rule to make clear that the review of 
constructions costs by NPS after project completion is limited to a 
determination that the construction costs claimed are eligible costs 
within the meaning of these regulations. NPS considers that this change 
will satisfy the concerns of the commenters in this connection. NPS 
feels strongly, however, that NPS review of submitted construction 
costs is an absolute requirement in light of the financial obligation 
leasehold surrender interest creates for the government or a successor 
concessioner.
    A comment objected to the fact that this section imposes no time 
constraints on the Director with respect to approval of leasehold 
surrender interest construction costs. NPS has not changed this section 
in response to this comment as it is impossible to state a standard 
time period for the review of construction costs in light of the fact 
that some projects may be for as little as $10,000 and others in excess 
of $10 million. This is likewise true with respect to a time limit for 
appeals under Section 51.63.

Section 51.63 (Section 51.57 in the final rule and retitled) May the 
Concessioner Appeal the Director's Determination of Construction Cost?

    Several comments objected to the appeal process provided by this 
section on the general grounds that it does not provide sufficient 
rights to the concessioner. NPS has changed this section in the final 
rule to make a dispute over construction cost subject to binding 
arbitration at the request of a concessioner.

Section 51.64 (Section 51.58 in the final rule) What Actions May or 
Must the Concessioner Take With Respect to a Leasehold Surrender 
Interest?

    The general concessioner organization objected to subsection (c) of 
this section with respect to its statement that a concessioner may 
agree to an alternative value for leasehold surrender interest. While 
not necessarily agreeing with this comment, NPS has deleted the phrase 
regarding alternative values in the final rule. Other comments 
suggested that this section should state that NPS cannot require waiver 
of a leasehold surrender interest. NPS has not changed this section in 
this respect as it merely repeats an express term of the 1998 Act.

Section 51.65 (Section 51.59 in the final rule) Will Leasehold 
Surrender Interest Be Extinguished by Expiration or Termination of a 
Concession Contract or May It Be Taken for Public Use?

    The general concessioner organization made a comment on this 
section that ``only payment pursuant to the 1998 Act constitutes just 
compensation for any purpose.'' NPS considers that the payment terms of 
the final rule are consistent with the 1998 Act regarding leasehold 
surrender interest. The commenter also made an argument under this 
section as to when payment for leasehold surrender interest must be 
made. This argument is addressed under Section 51.67.

Section 51.66 (Section 51.60 in the final rule) How Will a New 
Concession Contract Awarded to a Prior Concessioner Treat a Leasehold 
Surrender Interest Obtained Under a Prior Concession Contract?

    The general concessioner organization objected to this section on 
the same grounds as it objected to Section 51.65. NPS has modified this 
section (and Section 51.65) in the final regulations to delete as 
unnecessary the phrase ``the new concession contract'' and to replace 
it with ``this part.''

Section 51.67 (Section 51.61 in the final rule) How Is a Prior 
Concessioner That Is Not Awarded a New Concession Contract To Be Paid 
for a Leasehold Surrender Interest?

    Several comments objected to this section with respect to the 
timing of payment for leasehold surrender interest, particularly to the 
fact that the section does not necessarily require payment for a 
concessioner's leasehold surrender interest immediately upon expiration 
or termination of the concession contract. Rather, the proposed section 
permits payment within one year of contract expiration or termination 
if a successor concessioner is to acquire the leasehold surrender 
interest and two years if the payment is to be made by NPS.
    The comments of the general concessioner organization take the 
position that a concessioner has a right under the 1998 Act ``to 
continue to operate the facilities under the terms of the concession 
contract until it is paid for its leasehold surrender interest, as 
required by the 1998 Act.'' This position suggests that a concessioner 
that is providing unsatisfactory service to the public, is not 
maintaining its buildings, or, that is engaged in environmentally 
damaging activity, among other possibilities, has a right, paramount to 
the preservation and protection of the park area and its visitors, to 
continue to operate until leasehold surrender interest payment is 
received.
    This position is manifestly contrary to the purposes of the 1998 
Act.
    The position is also without legal merit. NPS points out that 
Section 405(a)(1) of the 1998 Act states that a concessioner has a 
leasehold surrender interest in capital improvements under a concession 
contract, ``consisting solely of a right to compensation for the 
capital improvement to the extent of the value of the concessioner's 
leasehold surrender interest in the capital improvement.'' (Emphasis 
added.) This provision makes no mention of a right to continue 
operations until the date of

[[Page 20654]]

payment as asserted by the general concessioner organization. NPS 
considers that such a right, that would be in stark conflict with the 
purposes of the 1998 Act as discussed further, cannot be read by 
implication into the 1998 Act as argued by the general concessioner 
organization.
    In addition, Section 405(a)(2)(C) of the 1998 Act states that a 
leasehold surrender interest ``shall not be extinguished by the 
expiration or other termination of a concession contract,'' a provision 
that is in direct conflict with the view that leasehold surrender 
interest value must be paid on the date of contract expiration or 
termination. (Emphasis added.) Finally, Section 405(c) of the 1998 Act 
states that, upon expiration of or termination of a 1998 Act concession 
contract, a concessioner shall be ``entitled'' under the terms of a 
concession contract to receive from the United States or a successor 
concessioner the value of any leasehold surrender interest. This value 
is to be calculated as of the date of expiration or termination. 
However, the statute does not state that the value must be paid on the 
date of termination or expiration of the contract. The statute also 
states that the entitlement is ``under the terms of the concession 
contract.''
    The regulations expressly establish in the concessioner, as of the 
date of contract expiration or termination, an unconditional 
entitlement under the terms of the concession contract to be paid its 
leasehold surrender interest value. The regulations also call for the 
leasehold surrender interest depreciation deduction to be calculated as 
of the date of contract expiration or termination (or, if applicable, 
as of a prior relinquishment date). These provisions appropriately 
implement the requirements of the 1998 Act.
    The general concessioner organization apparently reads the 1998 Act 
to mean that there is an absolute entitlement to payment of the 
leasehold surrender interest value on the date of expiration or 
termination, and, if payment is not received on that date, an 
entitlement to continue operations until payment is received. NPS 
disagrees with this interpretation on the basis of the text of the 
statute as discussed above. Further, such an interpretation of the 1998 
Act flies in the face of the overwhelming thrust of the 1998 Act that 
preservation of park area resources and protection of park area 
visitors is the paramount mandate with respect to visitor services in 
areas of the national park system.
    It is the primary responsibility of NPS to preserve and protect 
areas of the national park system and their visitors under both the NPS 
Organic Act (16 USC 1 et seq.) and the 1998 Act. The 1998 Act and the 
Organic Act state that the ``preservation and conservation of park 
resources and values require that such public accommodations facilities 
and services as have to be provided within [park areas] should be 
provided only under carefully controlled safeguards against unregulated 
and indiscriminate use.'' (Emphasis added.) Section 402(b)(2) of the 
1998 Act also states that:

    (b) Policy.--It is the policy of the Congress that that the 
development of public accommodations, facilities and services in 
units of the National Park System shall be limited to those 
accommodations, facilities, and services that are necessary and 
appropriate for public use and enjoyment of the unit of the National 
Park System in which they are located and are consistent to the 
highest practicable degree with the preservation and conservation of 
the resources and values of the unit.

    It is indisputable that there may be circumstances in which NPS 
must immediately terminate the operations of a concessioner in order to 
fulfill its statutory responsibilities to park areas and visitors. For 
example, an area of a park may be found to be endangered species 
habitat, requiring immediate cessation of human activity, or, the 
threat of natural disaster such as a threatened volcanic eruption may 
require that a concession operation be immediately terminated in the 
interest of public safety. In addition, there may be circumstances 
where NPS is forced to immediately close a concession operation because 
of environmental damage such as sewage leakage into a threatened cave 
system. Finally, there may be circumstances where the performance of a 
concessioner in breach of contract is so bad (e.g., life/health/safety 
violations) that the concession operations and the concession contract 
must be immediately terminated in the interest of public health or 
safety.
    The amount of money due the existing concessioner under a 
concession contract for a leasehold surrender interest could exceed 
available funds appropriated to NPS in any given fiscal year. It would 
not always be possible for NPS to obtain a new concessioner or make 
immediately available appropriated funds in these circumstances in 
order to pay leasehold surrender interest as a pre-condition to 
termination of the concession contract. NPS must have the ability to 
terminate concession contracts in order to carry out its statutory 
responsibilities to park areas and visitors.
    NPS, however, is aware of the business needs of concessioners to 
obtain timely payment for leasehold surrender interests. This is why 
NPS, through the proposed regulations, placed limitations on the time 
for payment, one year with respect to payment by a new concessioner (it 
takes approximately a year to prepare for, solicit and award a new 
concession contract) and two years for payment by the government (the 
two year period reflecting the federal budget cycle).
    Several other comments submitted by concessioners expressed concern 
about the timing of payment under this section but also made a 
practical suggestion. These comments suggested that the section be 
amended to provide interest during any period in which payment was 
delayed after the expiration or termination of a concession contract. 
NPS considers these suggestions as appropriate and has included an 
interest provision in this section in the final rule. NPS considers 
that the payment of interest (in addition to the CPI adjustment that 
continues until the date of payment) is fair and will be more than 
sufficient to encourage lenders to make loans against leasehold 
surrender interest, a concern raised by other comments in this 
connection. NPS notes that one commenter suggested that the timing of 
payments for leasehold surrender interest could result in a $100 
million effect on the economy. NPS believes this assertion to be 
unfounded, but, in any event, considers that the changes in the final 
rule eliminate any concerns in this respect.
    In addition, in order to further accommodate the concerns of 
commenters, NPS has modified this section in the final rule to state 
that the date of payment for a leasehold surrender interest, except in 
extraordinary circumstances beyond the control of NPS, is to be the 
date of expiration or termination of the concession contract. In 
addition, NPS has modified the final rule to require payment within one 
year of the expiration or termination of a concession contract.

Section 51.68 (Section 51.63 in the final rule) When a New Concessioner 
Pays a Prior Concessioner for a Leasehold Surrender Interest, What Is 
the Leasehold Surrender Interest in the Related Capital Improvements 
for the Purposes of a New Concession Contract?

    A new sentence has been added to this section in the final rule to 
expressly require a new concessioner to pay the previous concessioner 
for any leasehold surrender interest value that is due.

[[Page 20655]]

Section 51.69 (Renumbered as Section 51.62 in the final rule) What Is 
the Process To Determine the Leasehold Surrender Interest Value When a 
New Concessioner Is To Pay a Prior Concessioner for a Leasehold 
Surrender Interest?

    Several comments objected to elements of this section. The primary 
concern was that the arbitration to determine the leasehold surrender 
interest value when a new concessioner is to pay a prior concessioner 
for leasehold surrender interest was to be undertaken by the new 
concessioner and the prior concessioner. The commenters recommend that 
the arbitration be between the prior concessioner and NPS. NPS has 
concurred in this view. This section has been amended accordingly in 
the final regulations.
    Another comment objected to the fact that the arbitration is 
limited to establishing the depreciation deduction for purposes of 
leasehold surrender interest value and does not permit arbitration of 
the prior determination of construction cost required by this part. NPS 
has limited the arbitration issues in this manner because the final 
rule calls for arbitration of the construction cost after construction 
is completed. However, NPS, in response to this comment, has changed 
this section to include the calculation of the CPI as an additional 
subject of arbitration in the event of disagreement by the concessioner 
and NPS. This issue, as well as depreciation, will be current as of the 
time of the arbitration proceedings.
    Comments also stated that the arbitration should take place in 
advance of the expiration of the prior concession contract. NPS 
generally concurs in this suggestion but notes that it may not always 
be possible to conclude an arbitration prior to the expiration of a 
concession contract, and, of course, it is unlikely that an arbitration 
could be concluded prior to a termination of a concession contract for 
default (which could be immediate in certain circumstances). NPS has 
changed this section in the final regulations to provide for 
arbitration in advance of contract expiration or termination where 
possible.
    Several comments objected to this section with respect to the type 
of arbitration procedures it calls for. This issue is addressed under 
Section 51.78.

Section 51.70 (Section 51.64 in the final rule and retitled) May the 
Concessioner Gain Additional Leasehold Surrender Interest by Adding to 
a Structure in Which the Concessioner Has a Leasehold Surrender 
Interest?

    The general concessioner organization objected to this section by 
referencing related objections to other sections. Those objections are 
discussed under the relevant sections.
    NPS has modified this section in the final rule to include ``major 
rehabiliations'' within its scope. This permits deletion of Section 
51.72 of the proposed regulations in the final rule.

Section 51.71 (Section 51.65 in the final rule) May the Concessioner 
Gain Additional Leasehold Surrender Interest by Replacing a Fixture in 
Which the Concessioner Has a Leasehold Surrender Interest?

    The general concessioner organization objected to this section and 
stated that it is not supported by law on the grounds that when an 
existing fixture is replaced by the concessioner there can be no 
reduction of leasehold surrender interest based on the removal of the 
existing fixture.
    The flaw in this argument is apparent. Suppose a concessioner at 
the beginning of a concession contract with a twenty year term installs 
a furnace at a cost of $1,000. In ten years, the concessioner replaces 
the furnace with a new furnace, costing $1,200. At the expiration of 
the contract, the concessioner is entitled under this section and the 
1998 Act to be paid for the value of its leasehold surrender interest. 
However, the replaced furnace is gone. The 1998 Act does not 
contemplate that a new concessioner will pay a prior concessioner for a 
fixture that no longer exists. Under Section 405(a)(3) of the 1998 Act, 
the leasehold surrender interest value in a capital improvement is the 
initial construction cost of the capital improvement, in this case the 
cost of purchasing and installing the furnace, plus a CPI adjustment up 
to the time of payment for the leasehold surrender interest, less 
depreciation of the capital improvement as evidenced by its condition 
and prospective serviceability in comparison with a new unit of like 
kind. Under any real property appraisal practice, the depreciation of a 
furnace that was replaced ten years ago is 100%. There is no value to 
be paid.
    NPS has drafted this section carefully in order to fairly deal with 
the complicated circumstances of fixtures and non-removable equipment 
under the leasehold surrender interest concept. Under this section in 
the proposed regulations, if a concessioner replaces a fixture with a 
new fixture of like kind, there is no adjustment to the leasehold 
surrender interest in the fixture. Under the proposed regulations, the 
new fixture replaces the old one and the concessioner's leasehold 
surrender interest continues unchanged. However, if the new fixture is 
a substantial upgrade from the replaced fixture, and if the 
construction cost of the new fixture exceeds the construction cost of 
the fixture to be replaced, the increase is added to the concessioner's 
leasehold surrender interest.
    This has been changed in the final rule in order to accommodate to 
the extent reasonable the concerns of commenters. In the final rule, 
the entire construction cost of a new fixture is added to the leasehold 
surrender interest and the construction cost of the replaced fixture is 
subtracted.

Section 51.72 (Deleted in the final rule) Will a Concessioner That 
Undertakes a Major Rehabilitation of an Existing Structure in Which the 
Concessioner Has a Leasehold Surrender Interest Increase Its Leasehold 
Surrender Interest?

    Several comments objected to this section on the general grounds 
that additional leasehold surrender interest should be obtained for any 
additional construction work undertaken by a concessioner. NPS 
disagrees. This issue is discussed under Section 51.75.
    One comment requested additional guidance as to what constitutes a 
major rehabilitation. For example, the commenter asked, does adding an 
additional bathroom to a cabin constitute a major rehabilitation? A 
major rehabilitation is defined in Section 51.51 of the final rule. The 
construction of a second bathroom under this definition could be a 
major rehabilitation if its cost exceeds fifty percent of the pre-
rehabilitation value of the cabin. NPS considers that the definition of 
``major rehabilitation'' is clear. NPS, however, deleted as unnecessary 
in the final rule the second sentence in paragraph (2) of the 
definition of major rehabilitation.
    This section has been deleted in the final rule as its content is 
included in Section 51.64 of the final rule.

[[Page 20656]]

Section 51.73 (Section 51.66 in the final rule) In What Circumstances 
Will the Director Authorize a Concessioner To Obtain a Leasehold 
Surrender Interest in an Existing Capital Improvement in Which no 
Leasehold Surrender Interest Exists?

    Several comments objected to this section on the same general 
grounds, that all additional construction should obtain additional 
leasehold surrender interest. This issue is discussed under Section 
51.75.
    The general concessioner organization also objected to the last 
sentence of this section which stated that when an existing building in 
which a concessioner has no leasehold surrender interest undergoes a 
major rehabilitation, depreciation for the purposes of the leasehold 
surrender interest value will apply to the entire building. NPS has 
amended this sentence in response to the comment. It states in the 
final rule that depreciation will only apply to the elements of the 
major rehabilitation.
    Finally, for the sake of clarity, this section has been rephrased 
and split into two subsections in the final rule without a change in 
its meaning except as noted in the prior paragraphs.

Section 51.74 (Deleted in the final rule) Will a Concessioner Receive 
New or Additional Leasehold Surrender Interest as a Result of a 
Rehabilitation That Does Not Qualify as a Major Rehabilitation?

    Several comments objected to this section because ``all capital 
improvements qualify for leasehold surrender interest.'' This issue is 
discussed under Section 51.75. Section 51.74 has been deleted in the 
final rule as redundant in light of Section 51.64 in the final rule.

Section 51.75 (Section 51.67 in the final rule) Is a Concessioner 
Required To Repair and Maintain Capital Improvements, and, If So, Will 
the Concessioner Obtain Leasehold Surrender Interest as a Result?

    Several comments objected to this and other sections of the 
proposed regulations because, allegedly, ``all capital improvements 
qualify for leasehold surrender interest.'' In this connection, the 
general concessioner organization equates the construction of capital 
improvements with ``any repairs and maintenance'' of a building that 
are ``capitalized under GAAP.''
    In essence, the commenters seek leasehold surrender interest for 
the capitalized costs of repair and maintenance of an existing 
structure in addition to leasehold surrender interest resulting from 
the construction of the structure.
    Before discussing the fact that this position is inconsistent with 
the terms of the 1998 Act, NPS points out the administrative nightmare 
for both NPS and concessioners that would result if the commenters' 
position was adopted by NPS. Under the commenters' position, for 
example, every time a concessioner might replace a section of damaged 
drywall, or, replace missing shingles on a roof, a new leasehold 
surrender interest, including a new CPI calculation, would be 
established. For larger concession operations (one current operation 
utilizes almost 800 buildings), the number of these additional 
leasehold surrender interests could well be in the tens of thousands 
over the term of a twenty year concession contract. NPS does not 
consider that such a result, even if otherwise lawful, would be in the 
best interests of concessioners, NPS, or efficient management of the 
NPS concessions program.
    NPS also notes that the expenditures that a concessioner may make 
for repair and maintenance of existing structures are not lost to the 
concessioner. To the contrary, repair and maintenance expenditures will 
necessarily be reflected in a lower depreciation deduction when the 
final leasehold surrender interest value for the structure is 
calculated. The concessioner, accordingly, will be compensated for its 
expenditures for repair and maintenance of existing structures even 
though the 1998 Act does not permit recognition of leasehold surrender 
interest as a result of repair and maintenance.
    In any event, the view that additional leasehold surrender interest 
results from expenditures for repair and maintenance of existing 
structures is inconsistent with the express terms of the 1998 Act. 
Section 405(a) of the 1998 Act provides a leasehold surrender interest 
when a concessioner ``constructs'' a capital improvement upon land 
owned by the United States within a unit of the National Park System 
pursuant to a concession contract. The statute makes no mention of 
leasehold surrender interest resulting from the repair and maintenance 
of an existing capital improvement. ``Construction'' means ``the 
process or manner of building an improvement.'' 3rd Edition, page 73. 
``Repairs'' are ``current expenditures for general upkeep of a 
property's condition and efficiency.'' 3rd Edition, p. 303. 
``Maintenance'' means ``keeping a property in condition to perform its 
function.'' 3rd Edition, p. 217.
    In addition, Section 405(a)(1) of the 1998 Act states that a 
concessioner shall have a leasehold surrender interest in ``each 
capital improvement'' it constructs. Section 405(e)(2) of the 1998 Act 
in turn defines ``capital improvement'' as ``a structure, fixture, or 
non-removable equipment.'' In other words, the 1998 Act only provides a 
leasehold surrender interest in ``structures, fixtures, and non-
removable equipment'' that a concessioner ``constructs,'' i.e., builds, 
under the terms of a concession contract. The law does not suggest that 
the repair or maintenance of an existing structure results in leasehold 
surrender interest.
    NPS notes in this connection that Section 405(a)(5) of the 1998 Act 
states that when a concessioner that makes a ``capital improvement'' to 
an existing ``capital improvement'' in which the concessioner has a 
leasehold surrender interest, the cost of the additional capital 
improvement is to be added to the then current value of the 
concessioner's leasehold surrender interest. The proposed regulations 
and the final rule reflect this requirement by granting additional 
leasehold surrender interest for replacement of fixtures and non-
removable property, additions to existing structures, and/or the major 
rehabilitation of existing structures. What the statute does not 
permit, however, is additional leasehold surrender interest for the 
repair and maintenance of existing structures (unless a repair and 
maintenance project is a major rehabilitation as defined in the final 
rule).
    The position of the general concessioner organization, when reduced 
to its essentials, is that the 1998 Act, when stating that a leasehold 
surrender interest results from the ``construction'' of a 
``structure,'' means that every time a concessioner replaces a rotted 
beam or a damaged piece of drywall in a building, it has 
``constructed'' a ``structure'' within the meaning of the 1998 Act. 
This position is not credible.
    NPS considers, however, that providing leasehold surrender interest 
for the major rehabilitation of an existing structure is permissible 
under the terms of the 1998 Act as a major rehabilitation is defined in 
the final rule as a comprehensive rehabilitation of an existing 
structure the cost of which exceeds fifty percent of the pre-
rehabilitation value of the structure. NPS, accordingly, considers that 
a major rehabilitation is tantamount to the construction of a new 
structure (or the addition of a new structure to an

[[Page 20657]]

existing structure) in which leasehold surrender interest may be 
obtained within the leasehold surrender interest limitations of the 
1998 Act.
    NPS notes that it changed the definition of major rehabilitation in 
the final rule. In the proposed regulations, the construction cost had 
to exceed one hundred percent of the pre-rehabilitation value of the 
structure. The final rule changes this to fifty percent of the pre-
rehabilitation value. This change is intended to accommodate to the 
extent possible the concerns of commenters that seek leasehold 
surrender interest for repair and maintenance of structures, contrary 
to the terms of the 1998 Act. NPS considers that a rehabilitation of a 
structure where the cost exceeds fifty percent of the structure's pre-
rehabilitation value is tantamount to construction of a new structure 
within the meaning of the 1998 Act and therefore eligible for leasehold 
surrender interest.
    Likewise, the proposed regulations and final rule provide leasehold 
surrender interest for constructing an addition to an existing 
structure in which a concessioner has a leasehold surrender interest, 
e.g., a new wing to an existing building or an extension of an existing 
sidewalk. An addition is treated as a new structure for leasehold 
surrender interest purposes.
    The general concessioner organization suggested that this section 
be modified in effect to state that if a concession contract contains a 
repair and maintenance reserve provision that there would be no 
depreciation deduction for related leasehold surrender interest value. 
This suggestion is contrary to the 1998 Act's definition of the value 
of leasehold surrender interest (which requires a deduction for 
depreciation) and is not valid as a general business matter. The fact 
that a repair and maintenance reserve exists does not mean that a 
structure will not undergo deprecation. Even very well maintained 
buildings depreciate over time. However, NPS considers that the 
existence of a repair and maintenance reserve will lessen the 
depreciation deduction that will occur with respect to related 
leasehold surrender structures. The repair and maintenance reserve, 
accordingly, in addition to ensuring that concessioner facilities are 
well maintained, makes good business sense.
    The general concessioner organization also stated that any repair 
and maintenance reserve should be at levels that are commercially 
reasonable. NPS agrees and considers that the solicitation process for 
new concession contracts will ensure that any repair and maintenance 
requirements of the new contract will be reasonable.
    Finally, the general concessioner organization suggested that a 
repair and maintenance reserve provision contained in a concession 
contract should require that any balance in the reserve at the 
expiration of the contract should be retained by the incumbent 
concessioner. This matter will be addressed by NPS in the development 
of and consideration of public comments on its proposed standard 
concession contract.
    This section has been changed in the final rule to delete 
references to the obligations of a concessioner to repair and maintain 
property. The references have been included in Section 51.81 in the 
final rule.
Subpart G--Possessory Interest (Subpart H in the final rule)

Section 51. 76 (Section 51.68 in the final rule). If a Concessioner Is 
Not Awarded a New Concession Contract, How Will a Concessioner That Has 
a Possessory Interest Receive Compensation for Its Possessory Interest?

* * * * *

Section 51.77 (Section 51.70 in the final rule) If a Concessioner Is 
Awarded a New Concession Contract, What Happens to the Concessioner's 
Possessory Interest?

    Several comments objected to this section with respect to the fact 
that it contemplates NPS determining the value of the prior 
concessioner's possessory interest. However, NPS notes that the 
intention of the section was that the determination of the value by NPS 
is subject to the arbitration proceedings called for by Section 51.78 
of the proposed regulations. NPS has changed the section in the final 
regulations to reflect that a determination of value of a prior 
concessioner's possessory interest is, in the first instance, to be 
accomplished by mutual agreement of the parties, and, if that fails, 
through arbitration proceedings.
    The general concessioner organization objected to the element of 
this section that calls for the value of a prior concessioner's 
possessory interest to be determined on a unit by unit basis on the 
grounds that this may impact the overall value of an existing 
concessioner's possessory interest. NPS, in consideration of this 
comment, has changed this section in the final regulations to require 
allocation of possessory interest on a unit by unit basis if not 
determined initially on such basis. If negotiation of the allocation is 
not successful, it will be subject to arbitration. Allocation on a unit 
by unit basis is necessary in order to provide for depreciation 
determinations and possible relinquishment of leasehold surrender 
interest in particular structures.

Section 51.78 (Section 51.71 in the final rule) What Is The Process To 
Be Followed If There Is a Dispute Between the Prior Concessioner and 
the Director as to the Value of Possessory Interest?

    Several comments objected to elements of this section on the 
grounds that the limitations it places on the arbitration proceedings 
are unfair and unlawful. NPS has changed this section in the final 
regulations. The thrust of the changes is to require binding 
arbitration under procedures that are to be determined by the 
arbitration panel. The arbitration panel will adopt procedures it deems 
appropriate in the circumstances of the dispute in order to treat each 
party equally and to give each party the opportunity to be heard and a 
fair opportunity to present its case. The arbitration panel will 
utilize adjudicative procedures such as cross-examination of witnesses 
if the arbitration panel determines that adjudicative procedures are 
necessary in the particular circumstances of the dispute. The 
arbitration panel may also adopt appropriate provisions regarding 
confidentiality of information provided by the parties to the panel or 
to each other in connection with the arbitration proceeding.
    These changes are consistent with the commercial arbitration rules 
of the American Arbitration Association (``AAA'') which permit 
arbitration panels flexibility to adopt appropriate arbitration 
procedures so long as each party is treated equally and each party has 
the opportunity to be heard and a fair opportunity to present its case.
    NPS feels strongly that in most circumstances the establishment of 
the value of possessory interest or other related matters subject to 
arbitration under the regulations is best achieved with efficiency, 
economy, and fairness by informal proceedings rather that full-blown 
adjudicative procedures. NPS does not consider that it is in the best 
interests of concessioners, particularly smaller concessioners, or NPS, 
to have the arbitrated values of leasehold surrender or possessory 
interests influenced by the party with the more skillful attorneys 
rather than the party with the more persuasive appraisal. The final 
regulations, however, do not bind the arbitration panel in this matter. 
An arbitration panel may adopt whatever procedures it sees fit under 
the AAA

[[Page 20658]]

standard included in the regulations, including AAA or another 
arbitration organization's adjudicative procedures.
    NPS also feels strongly that the members of the arbitration panel 
should be qualified appraisers to ensure a professional determination 
on the appraisal issue. The general concessioner organization agreed 
with this view. However, the final regulations have been changed in 
this connection to require that only the neutral arbiter be a qualified 
appraiser so that a party may select their party arbiter as they see 
fit. In addition, NPS has deleted the requirement of this section 
regarding judicial review of an arbitration proceeding. The scope of 
judicial review will be determined by applicable law.
    Several comments suggested that it is unfair or unlawful for NPS to 
establish the terms of the arbitration without the agreement of the 
affected concessioner. The changes described above relieve those 
concerns as they provide that the arbitration panel will establish the 
procedures to be followed. In any event, the commenters are wrong in 
their presumption that the affected concessioner will not agree to the 
procedures. The procedures are only applicable under the terms of a 
concession contract a person may choose to enter into after the 
effective date of the final rule. They are not applicable to any 
existing concession contract.
    NPS also points out that the procedures described above are 
consistent with the applicable standard provision of NPS concession 
contracts entered into over at least the last thirty years. The 
standard provision calls for a dispute over the value of possessory 
interest to be determined by a panel of three appraisers after giving 
both parties an opportunity to be heard. All existing concessioners 
with possessory interest contract provisions have agreed to this 
provision under the terms of their concession contracts.
    Finally, several comments suggested that the proposed arbitration 
provisions are inconsistent with the terms of the Federal Arbitration 
Act, 9 U.S.C. 14 et seq., and the Alternative Disputes Act, 5 U.S.C. 
571 et seq. However, neither of these Acts by their terms is applicable 
to NPS concession contracts.
    NPS, for the sake of clarity, has moved the description of 
arbitration proceedings to Section 51.51 of the final rule.

Section 51.79 (Section 51.72 in the final rule) If a New Concessioner 
is Awarded the Contract, What Is the Relationship Between Leasehold 
Surrender Interest and Possessory Interest?

    Several comments suggested changing this section to eliminate 
reference to the possibility of the leasehold surrender interest being 
based on the actual payment to the prior concessioner by the new 
concessioner for the prior concessioner's possessory interest. NPS has 
made this suggested change in the final regulations.

Section 51.80 (Section 51.69 in the final rule) What Happens If There 
Is a Dispute Between the New Concessioner and a Prior Concessioner as 
to the Value of the Possessory Interest?

    Several comments objected to the fact that this section requires a 
new concessioner to obtain NPS approval before agreeing to the value of 
possessory interest with a prior concessioner and to allow NPS to 
assist it in any procedures for resolution of the possessory interest 
value. The comments suggest that this interferes with the rights of the 
prior concessioner. NPS disagrees. The section imposes no obligations 
on the prior concessioner nor does it restrict its rights to receive 
payment for its possessory interest in accordance with the terms of its 
contract. Further, it certainly is within the rights of a new 
concessioner to agree that a third party has prior approval rights over 
a negotiated purchase price and/or to assist it in a dispute resolution 
process.
    NPS notes that this provision is essential in order to ensure that 
the new concessioner negotiates or engages in dispute proceedings on an 
arm's length basis. Without the approval right of NPS or the right to 
assist in dispute proceedings, a new concessioner and a prior 
concessioner could collude to inflate the value of a possessory 
interest that NPS would indirectly be obliged to pay.
    This is because the amount of money that a new concessioner has to 
pay for a prior concessioner's possessory interest directly affects the 
amount of money the new concessioner will be able to make available as 
a business matter under the terms of the new concession contract (for 
new improvements, new equipment, franchise fees, etc).
    Several comments also suggested that a dispute about the amount of 
possessory interest compensation a concessioner is to obtain if it is 
not awarded a new concession contract should be resolved by the 
concessioner and NPS, not by the prior concessioner and the new 
concessioner. However, 1965 Act concession contracts call for dispute 
resolution between the new concessioner and the prior concessioner. NPS 
cannot change this provision without the agreement of the concessioner. 
NPS will consider resolving directly the value of a possessory interest 
with an existing concessioner at the request of the concessioner.
    A new sentence has been added to this section in the final rule 
making clear that nothing in this part is to be construed as 
authorizing a new concessioner to refuse to pay a prior concessioner 
for possessory interest in accordance with the terms of a possessory 
interest concession contract.
Subpart H--Concession Contract Provisions (Subpart I in the final rule)

Section 51.81 (Section 51.73 in the final rule) What Is the Term or 
Length of a Concession Contract?

    Several comments questioned the content of this section as changing 
the intent of Congress as expressed in Section 404 of the 1998 Act. In 
response, NPS has modified this section in the final rule to more 
closely reflect the terms of Section 404 and to make clear that it is 
NPS policy to establish the term of concession contracts to be as short 
as prudent in the circumstances of each concession contract. NPS 
considers that this policy is consistent with the purposes of the 1998 
Act, particularly its purpose of enhancing competition in concession 
contracts. Long term concession contracts (where a need for a long term 
does not exist) equate to less competition.
    A comment suggested that all outfitter and guide concession 
contracts should have a term of ten years on the basis of outside 
investments outfitter and guide concessioners may have to make. NPS has 
not accepted this suggestion. NPS will determine terms of outfitter and 
guide concession contracts on the same basis as other concession 
contracts, giving due consideration to the particular circumstances of 
each concession contract.

Section 51.82 (Section 51.74 in the final rule). When May a Concession 
Contract Be Terminated by the Director?

    A comment requested clarification as to what termination procedures 
will be included in concession contracts. The standard NPS concession 
contract published for comment on September 3, 1999, contains the 
termination clause NPS proposes to use in standard concession 
contracts. The comment also

[[Page 20659]]

asked NPS to explain why the concessioner is not afforded a right of 
termination in the event of default by NPS. This is because a 
concessioner has legal rights to terminate a concession contract in 
accordance with general contract law in the event of a material breach 
by NPS.
    Several comments objected to this section on the general grounds 
that it gives NPS too much authority to terminate concession contracts. 
NPS considers that having the ability to terminate a concession 
contract when necessary to achieve the purposes of the 1998 Act is 
necessary in order to properly carry out the purposes of the 1998 Act. 
NPS has changed this section in the final regulations to refer to the 
purposes of the 1998 Act rather than the purposes ``of this part.''
    Another comment suggested changes to this section to require a 
right to cure in case of default or unsatisfactory annual evaluations. 
The standard concession contract published for public comment describes 
the right to cure provisions in its termination clause.

Section 51.83 (Section 51.75 in the final rule) May the Director Split 
or Combine Concession Contracts?

    Several comments suggested that combining concession contracts 
should not be undertaken by NPS if the result would be the loss of a 
preference in renewal. NPS considers that the sentence to which the 
comments objected is appropriate. However, it has been deleted in the 
final rule as unnecessary.
    One comment suggested that this section misstates Section 417 of 
the 1998 Act by imposing a blanket prohibition on segmenting concession 
contracts if the result would be a concession contract with gross 
receipts under $500,000. Another comment questioned why this 
segmentation rule was applicable to outfitter and guide concession 
contracts when Section 417 only addresses concession contracts with 
gross receipts under $500,000.
    In response to these comments, NPS has amended this section to 
state that NPS will not segment concession contracts for the purpose of 
establishing a concession contract with gross receipts of less than 
$500,000.

Section 51.84 (Section 51.76 in the final rule) May the Director 
Include in a Concession Contract or Otherwise Grant a Concessioner a 
Preferential Right To Provide New or Additional Visitor Services?

    A number of comments were received that addressed this section. 
Almost all misunderstood it. Accordingly, NPS has clarified it in the 
final regulations. However, the section did and does not do what the 
comments perceived. The section only precludes the inclusion of a 
contractual right in a contract that requires that any new or 
additional services be offered to the incumbent concessioner. This 
tracks the requirements of Section 403(9) of the Act. Several comments 
also asked for amplification of the term ``new or additional 
services.'' NPS considers that further amplification is unnecessary in 
light of the clarifications made to this section in the final rule.
    NPS also notes that several commenters understood this section to 
have application to a right of preference to a new contract. This is 
not the case. The section only concerns the addition of new services 
under the terms of an existing concession contract.
    Several commenters understood this section to mean that a 
concession contract may not be amended to include additional services. 
This is not the case. NPS has added a sentence to this section in the 
final rule to permit by contract amendment minor additions to the 
visitor services authorized by a contract that are a reasonable 
extension of the existing services. This language tracks relevant 
legislative history. H.R. Rep. No.105-767 at p. 41(1998).

Section 51.85. (Section 51.77 in the final rule). Will a Concession 
Contract Provide a Concessioner an Exclusive Right to Provide Visitor 
Services?

    Several comments objected to this section on the grounds that 
concession contracts are intended to grant exclusive rights to provide 
specified visitor services. This is not the case. NPS concession 
contracts authorize concessioners to provide specified visitor services 
but do not grant exclusive rights.
    The general concessioner organization, although its comment 
indicated that it understood this section, objected to it on the 
grounds that it may be in the best interests of NPS to grant exclusive 
concession contracts. NPS does not consider this to be the case. An 
exclusive right establishes a monopoly situation that NPS considers 
contrary to the public interest.

Section 51.86 (Deleted in the final rule). Is There a Special Rule for 
Transportation Contracts?

    This section has been deleted in the final rule as unnecessary in 
light of Section 412 of the 1998 Act.

Section 51.87 (Deleted in the final rule). Where Will the Director 
Deposit Franchise Fees and How Will the Director Use the Franchise 
Fees?

    The general concessioner organization objected to the inclusion of 
``visitor support activities'' as an authorized use for expenditure of 
franchise fees by NPS. It objected because this category is not 
specified in the 1998 Act, and, because ``it could have a very broad 
meaning inconsistent with the intent of the 1998 Act.'' NPS disagrees 
with this view and notes that NPS may expend funds for needed visitor 
facilities in park areas from the franchise fee accounts established by 
the 1998 Act. This includes the construction of facilities (e.g., 
parking lots, access roads, and sewer systems) that directly support 
the operations of a concessioner. However, this section has been 
deleted in the final rule as unnecessary.

Section 51.88 (Section 51.78 in the final rule and retitled.) Will 
Franchise Fees be Subject to Renegotiation?

    Several comments suggested that this section be clarified to make 
clear that either the concessioner or NPS may request an adjustment of 
the franchise fee. This change has been made in the final rule, and, 
consistent with this change, the final rule also clarifies that a 
determination as to the existence of extraordinary, unanticipated 
changes must be made mutually by the concessioner and NPS.
    A commenter also objected to the last sentence of this section as 
it implies that a franchise fee adjustment is appropriate in all 
circumstances where an adjustment has been requested. This section has 
been clarified in the final regulations in accordance with these 
comments.
    A comment suggested that the phrase ``extraordinary, unanticipated 
changes'' be defined in the final rule. NPS has not accepted this 
suggestion in light of the wide variety of circumstances that may 
trigger a request for an adjustment of a franchise fee under this 
section.
    Another comment asked whether this section is applicable to 1965 
Act concession contracts. It is not, as 1965 Act concession contracts 
have a different franchise fee adjustment clause under a differing 
provision of the 1965 Act.
    NPS, in response to public comments, has also added a subsection 
(a) to this section to track the terms of Section 407(a) of the 1998 
Act regarding franchise fees.

[[Page 20660]]

Section 51.89 (Section 51.79 in the final rule) May the Director Waive 
Payment of Franchise Fees or Other Payments?

    Several comments objected to this section on the grounds NPS should 
have flexibility to waive franchisee fees.
    NPS generally does not consider waiver of franchise fees 
appropriate, especially in light of Section 407 of the Act. However, it 
has added a phrase to this section in the final rule that permits a 
limited partial waiver of franchise fees if permissible under 
established administrative guidelines for the purpose of recognizing 
exceptional concessioners.

Section 51.90 (Section 51.80 in the final rule) How Will the Director 
Establish Franchise Fees for Multiple Outfitter and Guide Concession 
Contracts in the Same Park Area?

    Several commenters objected to this section because it did not 
reflect their view that Section 411 of the 1998 Act exempts outfitter 
and guide concession contracts from competition under principal 
selection factor (5), the amount of the franchise fee offered in a 
concession contract proposal. However, Section 411 makes no mention of 
such an exemption. Rather, it states that where multiple outfitter and 
guide concession contracts are to be awarded in a particular park area 
concerning the same or similar services, NPS is to establish a 
comparable franchise fee for such contracts. NPS will do this on a 
park-by-park basis in the course of its development of franchise fees 
to be included in prospectuses for new concession contracts. This 
section was also criticized for failing to give sufficient guidance as 
to what services are the ``same or comparable.'' This is a matter that 
is best determined on a case-by-case basis.

Section 51.91 (Section 51.81 in the final rule). May the Director 
Include ``Special Account'' Provisions in Concession Contracts?

    The general concessioner organization, although not objecting to 
the concept of a repair and maintenance reserve as described in this 
section, repeated its objections directed to other sections to the 
effect that repair and maintenance of leasehold surrender interest 
capital improvements results in additional leasehold surrender 
interest. The commenter also reiterated its position that any 
expenditures from repair and maintenance reserves should be deducted 
from the depreciation element of leasehold surrender interest when 
valuing leasehold surrender interest. NPS disagrees for the reasons 
discussed under Section 51.75.
    A comment objected to the concept of repair and maintenance 
reserves because they allegedly will become a means for direct fee 
bidding in the prospectus process. NPS does not agree with this view 
and notes that required maintenance and repair reserves are a standard 
practice in the commercial real estate industry.
    A comment objected to the element of this section that requires the 
concessioner to repair and maintain all concessioner facilities 
assigned to it under the terms of the concession contract. The comment 
asked whether this includes infrastructure assigned to the concessioner 
and stated that basic infrastructure should be constructed and 
maintained by NPS. NPS notes that concessioners are assigned a variety 
of facilities for use in their operations, including, occasionally, 
basic infrastructure. This has been NPS practice for many years. NPS 
considers it appropriate that NPS concession contracts require a 
concessioner that utilizes government property in its business to 
maintain and repair the property.
    A comment suggested that all ``special accounts'' be forbidden, 
e.g., ``resource protection'' funds, as they are a means for NPS to 
indirectly engage in franchise fee bidding. NPS has not accepted this 
suggestion. In circumstances where it is otherwise permissible under 
the 1998 Act or other law, a provision in a concession contract 
requiring the concessioner to make expenditures from its gross receipts 
for specified purposes is an appropriate means to carry out the 
purposes of the 1998 Act.
    NPS has added to this section in the final rule the repair and 
maintenance obligations of concessioners set forth in Section 51.75 of 
the proposed regulations.
    NPS has also added a sentence to this section in the final rule to 
make clear that repair and maintenance reserve provisions are not to be 
included in concession contracts in lieu of a franchise fee and funds 
from such reserves are to be expended only for the repair and 
maintenance of real property improvements assigned to the concessioner 
for use in the concessioner's operations.

Section 51.92 (Section 51.83 in the final rule.) Handicrafts [Reserved]

    This section was reserved as NPS is in the process of developing 
regulatory guidelines for handicraft sales under Section 416 of the 
1998 Act with the advice of the National Park Service Concessions 
Management Advisory Board established by Section 409 of the Act.
    The general concessioner concessioner organization commented on 
this section, stating that it should have the right to comment on the 
proposed handicraft regulations prior to the finalization of the 
proposed general concession regulations. NPS has published these final 
regulations prior to the date of possible publication of proposed 
handicraft regulations. NPS did not consider it to be in the public 
interest to delay finalization of these general regulations as 
requested by the general concessioner organization. Numerous 
concessioners are currently operating under short term extensions of 
existing contracts. Any delay in the promulgation of the final general 
concession regulations would have a detrimental effect on not only park 
visitors but many concessioners as well.
Subpart I--Assignment or Encumbrance of Concession Contracts (Subpart J 
in the final rule)

Section 51.93 (Section 51.84 in the final rule) What Special Terms Do I 
Need To Know To Understand This Part?

    The comments received did not directly address the proposed 
definitions contained in this section. Several comments expressed 
concerns about some of the definitions indirectly. These comments are 
addressed under the relevant sections of this subpart.

Section 51.94 (Section 51.85 in the final rule) What Assignments 
Require the Approval of the Director?

    Comments stated that the 1998 Act does not allow approval of an 
encumbrance of a concessioner's revenue stream as contemplated by this 
section. NPS has deleted as unnecessary the reference to approval of 
revenue streams in the final rule. This section and other sections 
within this subpart have been amended accordingly. However, the 
treatment of revenue streams will necessarily be a consideration in the 
approval of encumbrances that must be approved in accordance with the 
requirements of this part under the final rule.
    Several comments stated that the 1998 Act does not address approval 
of a controlling interest in a concession contract, requesting that 
reference to approval of controlling interests be deleted from this and 
other sections of the proposed regulations.
    NPS has not made this requested change. Requiring approval of the 
assignment of controlling interests is essential in order to effectuate 
the purposes of the 1998 Act with respect

[[Page 20661]]

to its admonitions that only qualified persons are entitled to own NPS 
concessions.
    In this connection, Section 408(a) of the 1998 Act states as 
follows:

    (a) APPROVAL OF THE SECRETARY.--No concessions contract or 
leasehold surrender interest may be transferred, assigned, sold or 
otherwise conveyed or pledged by a concessioner without prior 
written notification to, and approval by, the Secretary. (Emphasis 
added).

    The ``controlling interest'' element of this section is generally 
directed to corporate concessioners. Basically, it recognizes that a 
concession contract may effectively be conveyed or pledged by a 
corporate concessioner (``otherwise conveyed or pledged'' under the 
terms of Section 408(a)) without any legal transfer, assignment or sale 
of a concession contract per se held by a corporate concessioner.
    If Section 408(a) of the 1998 Act were interpreted to forbid 
approvals of the transfer of a controlling interest in a corporation 
that holds a concession contract, only transfers of concession 
contracts that are held by individuals or partnerships would be subject 
to NPS approval. A corporate concessioner need only sell its stock to a 
new party (sale of a controlling interest) in order to effectuate a 
transfer of the concession contract. Congress did not intend such an 
anomalous result. Section 408(b) of the 1998 Act (set forth below) 
describes the statutory intentions for requiring the approval of the 
transfer of concession contracts by forbidding approval of a transfer 
by NPS if:

    (1) the individual, corporation or entity seeking to acquire a 
concession contract is not qualified or able to satisfy the terms 
and conditions of the concession contract;
    (2) such transfer or conveyance is not consistent with the 
objectives of protecting, conserving, and preserving the resources 
of the unit of the National Park System and of providing necessary 
and appropriate visitor services at reasonable rates and charges; or
    (3) the terms of such transfer or conveyance are likely, 
directly or indirectly, to reduce the concessioner's opportunity for 
a reasonable profit over the remaining term of the contract, 
adversely affect the quality of facilities and services provided by 
the concessioner, or result in a need for increased rates and 
charges to the public to maintain the quality of such facilities and 
services.

    The position of the comments concerning transfer of controlling 
interests in concession contracts would nullify these congressional 
intentions. This is not a hypothetical concern. Many NPS concessioners 
are corporations that hold a concession contract as their exclusive 
business activity. In addition, almost all of the largest NPS 
concessioners are wholly owned subsidiaries of larger corporations. If 
NPS accepted the position of the commenters, NPS would have no right of 
approval of the transfer by sale of stock of the Yosemite, Yellowstone, 
Grand Canyon, Grand Teton, Glen Canyon, Glacier, and Mesa Verde 
National Park concession contracts, among others.
    In any event, NPS considers that the phrase ``or otherwise conveyed 
or pledged'' directly encompasses the inclusion of controlling 
interests in this section. NPS also notes that the ``controlling 
interest'' concept was contained in 36 CFR Part 51 under the terms of 
the 1965 Act. Congress must be presumed to have been aware of this in 
considering the 1998 Act.
    Another commenter made essentially the same argument with respect 
to inclusion in the regulations of a right to approve management 
contracts a concessioner might enter into. NPS considers it must have 
the ability to review management contracts for the reasons discussed 
with respect to controlling interests. Congress did not intend that the 
most qualified offeror be selected for award of a concession contract 
only to permit the selected qualified concessioner to turn over 
management to a third party with no right of NPS to determine that the 
third party is qualified. NPS considers that it has ample authority to 
require approval of arrangements under which a third party is to 
operate a concession under the 1998 Act and 16 USC 1 et seq.
    NPS notes that Section 408(b) of the 1998 Act uses the word ``and'' 
instead of ``or'' between the second and third determinations that are 
required for approval of an assignment or encumberance. NPS has 
interpreted this in the regulations as ``or'' in light of the 
legislative history of this section and the fact that the word ``and,'' 
perhaps, and anomalously, could be read as requiring NPS to approve 
transactions that are detrimental to the resources of the park area or 
to park area visitors. No commenters on the proposed regulations 
questioned this interpretation.

Section 51.95 (Section 51.86 in the final rule) What Encumbrances 
Require the Approval of the Director?

    Several comments repeated under this section their similar 
objections directed to Section 51.94. The changes made to Section 51.94 
have also been made to this section in the final regulations. In 
addition, NPS has deleted subsection (f) of this section in the final 
regulations in response to public comments.

Section 51.96 (Section 51.87 in the final rule) Does the Concessioner 
Have an Unconditional Right To Receive the Director's Approval for an 
Assignment or Encumbrance?

    Several comments suggested that the preliminary language in this 
section be amended to more accurately reflect Section 408 of the 1998 
Act, that approval of an assignment or encumbrance is to be granted by 
NPS unless NPS makes a determination that the approval conditions 
contained in Section 408 are not met. NPS has made this change in the 
final rule.
    Several comments requested modification of the limitations on the 
purposes for which encumbrances may be approved. In this connection, 
Section 405(a)(2)(A) of the 1998 Act provides that a leasehold 
surrender interest:

    May be pledged as security for financing of a capital 
improvement or the acquisition of a concession contract when 
approved by the Secretary of the Interior pursuant to this section.

    The limited purposes for which a leasehold surrender interest may 
be pledged were the primary basis of the encumbrance limitations 
contained in the proposed regulations. In response to comments, this 
section has been modified in the final regulations to broaden the 
purposes for which encumbrances may be made consistent with the 
purposes and requirements of the 1998 Act.

Section 51.97 (Renumbered as Section 51.88 in the final rule) What 
Happens If an Assignment or Encumbrance Is Completed Without the 
Approval of the Director?

    NPS has deleted reference to concessioner revenues from this 
section in accordance with the discussion under Section 51.93.

Section 51.98 (Section 51.89 in the final rule) What Happens If There 
Is a Default on an Encumbrance Approved by the Director?

* * * * *

Section 51.99 (Section 51.90 in the final rule) How Does the 
Concessioner Get the Director's Approval Before Making an Assignment or 
Encumbrance?

    Several comments suggested that this section's prior approval 
requirements insert NPS into a concessioner's business transactions 
before the transaction is completed. However, Section 408 of the 1998 
Act requires written notification and approval before assignments and 
encumbrances are completed. The changes reducing the scope of 
transactions subject to NPS

[[Page 20662]]

approval under the final regulations will alleviate the concerns of the 
commenters.

Section 51.100 (Section 51.91 in the final rule) What Information Will 
the Director Require in the Application?

    A number of commenters complained that the information requirements 
imposed by this section are too burdensome. NPS, in response to these 
comments, has reduced the information described in this section and has 
worded the section so as to require submission of information only to 
the extent requested by NPS as necessary in the circumstances of a 
particular transaction. NPS, in response to comments, has also modified 
the scope of the information requirements in a number of respects and 
has deleted subsection (c) in the final regulations. NPS considers that 
the remaining information requirements are necessary in order to assist 
in making the determinations required by Section 408 of the 1998 Act. A 
comment suggested that the word ``reasonably'' be included in this 
section to limit what information the Director may request. NPS has not 
made this change because under applicable law, NPS decisions made 
pursuant to this part must have an appropriate basis.
    The general concessioner organization made a number of specific 
suggestions regarding the information requirements of this section. 
They are responded to as follows:
    The commenter suggested that NPS should not be provided the actual 
transaction documents regarding an assignment or encumbrance but should 
rely on a narrative description of the transaction to be submitted by 
the concessioner. NPS considers that it must have access to the actual 
transaction documents in order to be able to make the determinations 
required by Section 408 of the 1998 Act.
    The commenter requested that this section be limited to an opinion 
of counsel that only goes to the authority of the contracting party and 
the enforceability of the contract. NPS considers that the broader 
wording of this section is appropriate. If a proposed acquisition of a 
concession contract is unlawful, this impacts on the qualifications and 
ability of the acquiring party to satisfy the conditions of the 
concession contract within the meaning of Section 408.
    The commenter suggested that the last clause of subsection (c) is 
duplicative. NPS has deleted it.
    The commenter objected to the requirement of subsection (g) to the 
effect that a narrative description of the transaction is required. The 
commenter suggested that the narrative description of the financial 
aspects of the transaction as required by Subsection (c) should suffice 
for NPS purposes. NPS considers that aspects of a transaction beyond 
financial considerations are very relevant under the approval 
conditions of Section 408. This provision has not been changed in the 
final rule.
    The commenter suggested changes and a clarification of subsection 
(h). This section has been clarified accordingly and the requirement 
for review by an independent accounting firm deleted as requested by 
the commenter.
    The commenter objected to the allocations required by subsection 
(i). Subsection (i) has been edited in the final rule to delete a 
specific list of allocations. The general allocation information is 
needed in connection with the NPS responsibility to determine that the 
terms of the transaction will not reduce the concessioner's opportunity 
for a reasonable profit. It is usual practice when examining the 
financial implications of purchases of stock or assets to review the 
allocations of the purchase price among particular asset classes.
    The commenter suggested several changes to the times included in 
subsection (j). NPS has generally made the commenter's requested 
changes in the final rule. The new times established are considered 
appropriate by NPS in the circumstances of NPS concession contracts.
    The commenter requested deletion of subsection (k). It has been 
deleted in the final rule.
    The commenter requested deletion of subsection (l). NPS has not 
deleted it. Given the variety of circumstances that may relate to 
assignment or encumbrance of NPS concession contracts, flexibility in 
requesting information must be retained.
    Another commenter requested that the regulation make clear that the 
information submitted is confidential. NPS has not made a change to 
this section in this connection because the extent to which information 
submitted to NPS by a concessioner is available to the public is 
determined by the requirements of the Freedom of Information Act and 
related laws, including the 1998 Act.

Section 51.101 (Deleted in the final rule) May the Director Waive Any 
of These Documentation Requirements?

    This section has been deleted in the final regulations in light of 
the changes made to Section 51.100.

Section 51.102 (Section 51.92 in the final rule) What Are Standard 
Proformas?

    Several comments suggested that the standard proformas that are 
encouraged but not required to be submitted pursuant to this section do 
not conform to standard business practice because they call for loans 
to be amortized during the remaining term of the concession contract. 
NPS notes, however, that Section 408 of the 1998 Act states that an 
approval of assignments or encumbrances may not be granted if, among 
other matters, the transaction is ``likely to reduce the concessioner's 
opportunity for profit over the remaining term of the contract.''
    NPS, nonetheless, in response to these comments, has made a change 
to this section in the final rule to the effect that a standard pro-
forma, if it does not call for amortization of a loan over the 
remaining term of the contract, must explain why this fact is not 
inconsistent with the considerations stated in Section 51.87(h) of the 
final rule.
    Another commenter suggested that the responsibility of the NPS to 
approve transactions with respect to a concessioner's opportunity for 
profit should be limited to circumstances where NPS determines that a 
negative effect would result from an unprofitable operation. This 
interpretation, however, is in conflict with the plain language of the 
statute.
    NPS has also changed this section in the final regulations by 
deleting subsection (d) in response to comments.

Section 51.103 (Deleted in the final rule) If the Concessioner Submits 
a Non-Standard Proforma, Is the Director More Likely To Disapprove the 
Transaction?

    Because of the changes made to Section 51.92 in the final rule, 
this section has been deleted in the final rule.

Section 51.104 (Section 51.93 in the final rule) If the Transaction 
Includes More Than One Concession Contract, How Must Required 
Information Be Provided?

* * * * *

Section 51.105 (Deleted in the final rule) In What Circumstances Will 
the Director Not Approve an Assignment or Encumbrance?

    Several comments misunderstood subsection (a) to mean that a 
concessioner may not obtain a bank loan without NPS approval of the 
bank as qualified to operate a concession. This is not the case. 
However, in case of foreclosure, a new operator selected by

[[Page 20663]]

the bank would have to be approved by NPS as qualified. The final rule 
makes this clear in Section 51.87(c).
    A comment requested that time limits for approval of a transaction 
be imposed in this section. NPS does not consider this to be practical 
given the scope and variety of transactions that are subject to 
approval under the terms of the 1998 Act.
    Another comment suggested that NPS should rely on banks with 
respect to the reasonable opportunity for a profit aspect of a 
transaction approval. In other words, the comment suggested that if a 
bank will make a loan for a concession transaction, NPS should 
automatically agree that it does not reduce the concessioner's 
opportunity to make a reasonable profit. NPS has not accepted this 
suggestion. In the first instance, adopting such a rule would be an 
abrogation of its responsibilities under the 1998 Act. Moreover, the 
fact that a bank may choose to make a loan relating to a concession 
transaction by no means ensures that the terms of the transaction will 
not reduce a new concessioner's opportunity to earn a reasonable profit 
over the remaining term of the concession contract. The general test 
for a bank loan is whether the lender will receive the principal and 
interest on its loan. In addition, a loan may be secured by unrelated 
assets (personal guarantees, stock pledges, etc.) that make the loan 
secure but do not necessarily indicate that the concessioner has not 
reduced its reasonable opportunity for a profit in committing to the 
transaction. NPS in reviewing transactions will take into account the 
fact that a bank loan is involved.
    NPS has deleted this section in the final rule and moved its 
content to Section 51.87 in the final regulation for the sake of 
clarity.

Section 51.106 (Section 51.94 in the final rule) What Information Will 
the Director Consider When Deciding To Approve a Transaction?

    This section has been modified in the final rule to clarify that 
NPS may consider information other than that submitted by the 
concessioner in determining whether to approve an assignment or 
encumbrance.

Section 51.107 (Section 51.95 in the final rule) Does the Director's 
Approval of an Assignment or Encumbrance Include Any Representations of 
Any Kind?

    A sentence has been added to this section in the final rule to 
clarify that approval of an assignment or encumbrance does not alter 
the terms of the applicable concession contract unless expressly so 
stated by NPS in writing.

Section 51.108 (Section 51.96 in the final rule) May the Director Amend 
or Extend a Concession Contract for the Purpose of Facilitating a 
Transaction?

* * * * *

Section 51.109 (Section 51.97 in the final rule) May the Director Open 
To Renegotiation or Modify the Terms of a Concession Contract as a 
Condition of the Approval of a Transaction?

* * * * *

Section 51.110 (Deleted in the final rule)--May the Director Charge a 
Fee for the Review of a Proposed Transaction?

    NPS has deleted this section in response to comments.
Subpart J--Information and Access to Information (Subpart K in the 
final rule)

Section 51.111 (Section 51.98 in the final rule) What Records Must the 
Concessioner Keep and What Access Does the Director Have To Records?

    Several comments objected to this section with respect to the fact 
that it applies to related records of parent or affiliated entities of 
a concessioner. In response, NPS has deleted the references except in 
circumstances where a concessioner parent or affiliate makes 
representations or commitments to NPS regarding its support or 
responsibilities to a concessioner. Access to records of the parent or 
affiliate in these limited circumstances is necessary in order for NPS 
to be able to reasonably rely on the representations or commitments.

Section 51.112 (Section 51.99 in the final rule) What Access To 
Concessioner Records Will the Comptroller General Have?

    This section has been amended in accordance with the changes to 
Section 51.111.

Section 51.113 (Deleted in the final rule) What Information Will the 
Director Make Publicly Available About the Concessioner and the 
Concession Contract?

    A number of comments raised confidentiality concerns about this 
section, arguing that it is in violation of the Freedom of Information 
Act. NPS has deleted this section in the final rule but moved certain 
of its information requirements to Section 51.5(f) in the final rule. 
The specific information requirements that are retained are those that 
were contained in 36 CFR Part 51 prior to this amendment. Other 
information listed in the proposed regulation has been deleted in the 
final rule in response to comments. Particularly, the reference to the 
existing concessioner's net profit has been deleted.
    However, NPS considers that Section 403(3)(6) of the 1998 Act 
precludes NPS from exercising exemptions to the Freedom of Information 
Act with respect to release of information provided to NPS by a 
concessioner if NPS determines that the release of the information is 
necessary to allow for the submission of competitive proposals. NPS 
considers that the information requirements now contained in Section 
51.5(f) in the final rule are necessary for this purpose. These 
specific information requirements (carried over from the existing 36 
CFR Part 51) represent at least some of the information about the 
general scope of a business that a competitor needs in order to submit 
a competitive proposal.

Section 51.114 (Section 51.100 in the final rule) When Will the 
Director Make Proposals and Evaluation Documents Publicly Available?

    This section has been edited by inserting the introductory phrase 
``in the interests of enhancing competition'' to make clear its 
intentions. The purpose of this section is to avoid actions that may 
have anti-competitive results, e.g., where, in the course of a 
contested selection of the best proposal submitted in response to a 
prospectus, a competitor seeks to obtain a copy of the best proposal 
that it may then utilize to enhance its proposal in the event a 
resolicitation of the contract opportunity is required. This is not 
only unfair to the offeror that submitted the best proposal in the 
first instance, but also inhibits legitimate competition in the award 
of concession contracts, contrary to the purposes of the 1998 Act.
    One commenter, a municipality that holds a concession contract, 
suggested that all concession contract proposals be made public upon 
receipt as it is obliged to make its proposal public because of its 
status as a municipality. NPS has not accepted this suggestion for the 
reasons discussed above regarding the need to maintain the 
confidentiality of proposals.

[[Page 20664]]

Subpart K--The Effect of the 1998 Act's Repeal of the 1965 Act (Subpart 
L in the final rule)

Section 51.115 (Section 51.101 in the final rule) Did the 1998 Act 
Repeal the 1965 Act?

    NPS has changed this section in the final rule to clarify that this 
part as well as the 1998 Act applies to 1965 Act concession contracts 
except to the extent that its provisions are inconsistent with 
particular terms and conditions of a 1965 Act concession contract.

Section 51.116 (Section 51.102 in the final rule) What Is the Effect of 
the 1998 Act's Repeal of the 1965 Act's Renewal Preference?

    This section is discussed in the General Comments section. As 
stated, NPS considers that the 1998 Act's repeal of the 1965 Act, 
including its requirement in Section 5 that NPS give existing 
satisfactory concessioners preference in renewal of their contracts, 
applies to the holders of 1965 Act concession contracts. This section 
of the proposed regulations, however, permits a concessioner to appeal 
this decision to the Director if a 1965 Act concession contract 
expressly references a preference in renewal. In circumstances where a 
1965 Act concession contract does not make express reference to a 
preference in renewal, it is the final administrative decision of NPS, 
based on the considerations discussed in the General Comments section, 
that the repeal of the 1965 Act's preference in renewal by the 1998 Act 
is applicable to holders of 1965 Act concession contracts.
    This section has also been changed in the final rule to track the 
language of Section 415 so as to avoid any concern that NPS 
misinterpreted its meaning with respect to the phrase ``inconsistent 
with the terms and conditions of any such contract or permit.'' 
Finally, in response to a comment discussed under Section 51.49 to the 
effect that a concessioner holding a 1965 Act concession contract not 
only has a continuing right to a right of preference in renewal, but, 
also, has a ``right'' to not submit a responsive proposal in response 
to a prospectus, a sentence has been added to the final rule to clarify 
that if an appeal is successful under this section, or if a court 
determines that a concessioner holding a 1965 Act concession contract 
does have a preference in renewal, that the otherwise applicable terms 
and conditions of this part regarding the exercise of a preference in 
renewal, including, without limit, the obligation to submit a 
responsive proposal, apply to any preference in renewal recognized with 
respect to holders of 1965 Act concession contracts. NPS considers that 
it has authority to adopt these requirements under the 1998 Act and, in 
addition, under 16 USC 1 et seq. (with particular reference to 16 USC 
3).
    By providing this appeal right, NPS does not seek to lead existing 
concessioners to believe that it is likely that they would qualify for 
an appeal under this section. To the best of the knowledge of NPS, no 
1965 Act concession contract or permit with annual gross receipts of 
more than $500,000 references a preference in renewal. However, there 
may be exceptions in which case this section of the final rule will 
apply.
    To avoid requiring concessioners to make administrative appeals 
that are likely to be unsuccessful, NPS has deleted the sentence in 
subsection (b) of this section in the proposed regulations that stated 
that a concessioner must make an appeal under this section in order to 
be considered as having exhausted administrative remedies with respect 
to denial of a renewal preference regarding 1965 Act concession 
contracts. In its place, a sentence has been added to the final rule 
making final the decision of NPS regarding the repeal of the 1965 Act's 
preference in renewal with respect to holders of 1965 Act concession 
contracts.

Section 51.117 (Deleted in the final rule) What Renewal Preference 
Exceptions Are Made for Glacier Bay Cruise Ships?

    A comment asked why this section provides an exemption for Glacier 
Bay cruise ships and requested a similar exemption for other 
concessioners in ``exceptional circumstances.'' The Glacier Bay 
exemption was established by Section 419 of the 1998 Act. NPS has no 
authority to grant similar exemptions from the requirements of the 1998 
Act.
    This section has been deleted in the final rule in light of Section 
419 of the Act.
Subpart L--Information Collection [Subpart M in the final rule]

Section 51.118 (Section 51.104 in the final rule) Have Information 
Collection Procedures Been Followed?

* * * * *

3. Additional Comments and Changes

    In addition to this discussion of changes made to the proposed 
regulations, NPS points out that it has added several clarifying 
sections to the final rule, including new Sections 51.27 and 51.28, to 
set forth definitions of terms used in the final rule. It has also 
added a severability clause in new Section 51.103 of the final rule.
    NPS has also added a new Section 51.81 regarding concessioner rate 
approvals. The new section reiterates most of the rate approval 
requirements of Section 406 of the 1998 Act. Although NPS administers 
concessioner rate approvals under administrative guidelines, it has 
included the text of Section 406 in the final rule so that the final 
rule is self-explanatory with respect to the nature of rate approvals. 
NPS considers that its rate approval process requires significant 
administrative flexibility and therefore is best managed under 
administrative guidelines, not regulations.
    The general concessioner organization suggested that NPS adopt new 
rate approval policies and procedures without waiting for the advice of 
the National Park Concessions Management Advisory Board as is 
contemplated by Section 406(c) of the 1998 Act. NPS has not accepted 
this suggestion. The recommendations of the Advisory Board are critical 
to the development of an effective rate approval program under the 
policies expressed in 1998 Act.
    A commenter requested that NPS consider its views and republish the 
proposed regulations for further public comment. NPS notes that it has 
accommodated many of the concerns of the commenter through incremental 
changes in the final rule. However, NPS has determined not to reissue 
the proposed regulations for further public comment. There is an urgent 
need to recommence concession contracting actions that were necessarily 
halted in November of 1998 in order to promulgate contracting 
regulations under the new law. More than 280 of the 630 NPS concession 
contracts are operating under contract extensions as of January 1999. 
Both the concessioners and NPS are in need for the contracting process 
to resume so that new full term concession contracts may be awarded. 
Concessioners in general dislike operating on extended contracts with 
no certainty as to the future.
    Particularly, concessioners are reluctant to make capital 
investments under extended concession contracts and have difficulty in 
retaining experienced employees in light of the uncertainties created 
by contract extensions. In addition, the public has an obvious need for 
concession operations to be stabilized under new full term concession 
contracts. NPS published the proposed regulations for comment as a 
matter of policy. The regulations are exempt from mandatory publication 
as proposed regulations

[[Page 20665]]

under 5 U.S.C. 553(b)(B) as regulations relating to government agency 
contracts and public property. Even if the regulations were required to 
be republished as proposed, it is considered that this would be 
impractical and contrary to the public interest in light of the backlog 
of contracting actions that face NPS.
    NPS also considers that solicitation of further public comments is 
unnecessary and not in the public interest. NPS has fully considered 
the public comments received and has made incremental modifications to 
the proposed rule that reflect these comments. The final rule, in the 
view of NPS, is a logical outgrowth of the proposed regulations in 
consideration of public comments. Further opportunity for public 
comment would be detrimental to concessioners and visitors to park 
areas, and, would not, in the view of NPS, significantly alter the 
content of the final rule. A delay in the commencement of concession 
contracting under the 1998 Act may make it impossible for NPS to award 
a number of expiring concession contracts this year (in light of the 
length of time required to solicit and award concession contracts), 
thereby requiring further, otherwise unnecessary, contract extensions.
    An environmental consulting firm suggested including in numerous 
places in the proposed regulations specific references to environmental 
protection matters. NPS has not done this as references in the 
regulations to ``protection of resources,'' etc., include by 
implication the commenter's environmental concerns.
    Several comments objected to the fact that the proposed regulations 
do not include provisions regarding the NPS Concessions Management 
Advisory Board established by Section 409 of the 1998 Act. However, 
there is no need for regulations governing this Board. Its activities 
are described by Section 409 and the Board's administrative charter.
    A comment asked why the regulations make no reference to NPS 48, 
the NPS internal guidelines for concessions management. The regulations 
do not mention NPS 48 as there is no need for them to do so. 
Administrative guidelines are necessarily subordinate to the content of 
the regulations.
    Several comments asked NPS to rule in the final regulations on the 
status of particular concessioners or classes of concessioners under 
varying provisions of the regulations. NPS has not done this. The final 
rule establishes the framework for concession contracting decisions. 
Particular decisions must be made as the need arises after finalization 
of the regulations.
    A comment criticized the proposed regulations for not describing 
how NPS intends to carry out Section 410 of the 1998 Act. Section 410 
requires NPS, to the maximum extent possible, to contract with private 
entities to assist NPS in the conduct of elements of the NPS 
concessions management program that are considered to be suitable for 
non-governmental performance. NPS has not made changes to the 
regulations in light of this comment. Decisions as to what elements of 
NPS concessions management should be contracted to third parties are 
administrative in nature.
    Several comments criticized the fact that NPS published for public 
comment its proposed new standard concession contract after publishing 
the proposed regulations for public comment. The comments suggested 
that it is difficult to fully comprehend the proposed regulations in 
the absence of the proposed new standard concession contract. NPS does 
not agree with this view as the standard concession contract is 
subordinate to the terms and conditions of the regulations. NPS also 
notes that it is under no obligation to publish its standard concession 
contract for public comment. It does so as a matter of policy. In any 
event, the proposed new standard concession contract was published for 
public comment almost six weeks in advance of the deadline for 
submitting public comments on the proposed regulations. Commenters had 
ample time to review the documents together.
    The general concessioner organization criticized the preamble to 
the proposed regulations with respect to the fact that it concludes 
that the proposed regulations do not have takings implications within 
the meaning of Executive Order No. 12630. NPS has reviewed the position 
of the general concessioner organization in consultation with the 
Office of the Solicitor. The NPS and the Office of the Solicitor are of 
the view that the final rule does not have any takings implications as 
discussed further below.
    Several comments stated that the question and answer format of the 
regulations is confusing. NPS disagrees. It considers that the question 
and answer format provides an effective means for readers to locate a 
particular section of the regulations and to understand its 
relationship to the other sections.
    In addition to the changes made to the proposed regulations in the 
final rule, NPS has made a number of editorial and conforming changes, 
including, without limit, changing the introductory questions at the 
beginning of each section to reflect changed content of the section.

Drafting Information

    The primary officials that authored this rule are Wendelin M. Mann, 
Concession Program, National Park Service, and Pamela L. Barkin, Office 
of the Solicitor, Department of the Interior.

Compliance With Laws, Executive Orders and Departmental Policy

Regulatory Planning and Review (E.O. 12866)

    This rule is a significant rule under Section 3(f)(4) of Executive 
Order 12866 and accordingly has been reviewed by the Office of 
Management and Budget.

Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule does not have 
an annual effect on the economy of $100 million or more. In fact, NPS 
does not consider that the rule will have any measurable effect on the 
economy. The rule merely establishes the procedures for award of NPS 
concession contracts and the terms and conditions of NPS concession 
contracts. This rule will not result in increased costs or prices for 
consumers, individual industries, Federal, State or local government 
agencies, or geographic regions as the rule does not change the manner 
in which a concessioner's rates and charges to the public are 
established. Further, this rule will not have significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or the ability of U.S.-based enterprises to compete with 
foreign-based enterprises. To the contrary, the rule enhances 
competition in the award of concession contracts. The primary effect of 
the proposed rule is to establish procedures for the solicitation, 
award and administration of National Park Service concession contracts 
required by the 1998 Act.

Regulatory Flexibility Act

    The purpose of this rule is to describe procedures and terms for 
the solicitation, award and administration of NPS concession contracts 
in accordance with the 1998 Act. As such, it is not a rule that is 
required to be published as proposed for public comment by 5 U.S.C. 553 
or other law. 5 U.S.C. 553 exempts from its application regulations 
that involve a ``matter relating to agency management or personnel or 
to public property, loans, grants, benefits and contracts.'' The NPS 
regulations address NPS

[[Page 20666]]

concession contracts and public property (park areas). In addition, 
although Section 417 of the 1998 Act requires NPS to promulgate 
regulations for its implementation, it does not require that this be 
done through a general notice of proposed rulemaking. Accordingly, NPS 
does not consider that this regulation is subject to the Regulatory 
Flexibility Act as that Act, by its terms, only applies to rules and 
regulations that are required by 5 U.S.C. 553 or other laws to be 
promulgated after required publication of a general notice of proposed 
rulemaking.
    On November 22, 1999, however, NPS published in the Federal 
Register a discussion of the proposed regulations that meet the spirit 
of the Regulatory Flexibility Act in the form of an initial regulatory 
flexibility analysis. The notice also asked for public comments on the 
suggestion of NPS that the Regulatory Flexibility Act may not apply to 
these regulations.
    Only two comments were received in response to the notice, both 
from law firms representing incumbent concessioners. Both comments 
summarily concluded that the proposed regulations are subject to the 
Regulatory Flexibility Act. NPS does not agree with this view but 
considers the matter academic as NPS has fully complied with spirit of 
the Regulatory Flexibility Act in promulgating these regulations.
    NPS also points out that the preamble to the proposed regulations 
states that it is likely that the number of NPS concession contracts 
and permits will decrease as a result of the proposed regulations. This 
statement was erroneously included in the preamble after it had been 
determined by NPS to be incorrect. The Federal Register notice 
regarding the initial regulatory flexibility analysis stated that this 
statement should be disregarded.
    Upon consideration of public comments on its initial analysis, NPS 
has concluded that the proposed regulations and final rule, even if 
subject to the Regulatory Flexibility Act, will not have a significant 
impact on a substantial number of small businesses within the meaning 
of the Regulatory Flexibility Act for the reasons discussed in the 
initial notice.
    Nonetheless, NPS sets forth below the required elements of a final 
regulatory flexibility analysis in the spirit of the Regulatory 
Flexibility Act, as follows:
    (1) A succinct statement of the need for, and objectives of the 
rule.
    The final rule is needed to comply with Section 417 of the 1998 Act 
that requires promulgation of appropriate regulations for its 
implementation. The objectives of the rule are to provide appropriate 
procedures, terms and conditions for NPS concession contracting in 
furtherance of the purposes of the 1998 Act.
    (2) A summary of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, a 
summary of the assessment of the agency of such issues, and a statement 
of any changes made in the proposed rule as a result of such comments.
    As stated, only two comments were received in response to the 
initial regulatory flexibility analysis. The NPS response to the issues 
raised by the comments on the initial regulatory flexibility analysis 
(except for restated arguments regarding the preference in renewal 
issue) are as follows:
    a. Comment. The environmental requirements of the proposed rule go 
beyond statutory requirements and impose duties that should be borne by 
the government.
    NPS disagrees with this comment. The environmental requirements of 
the proposed rules, i.e., that concessioners should undertake 
activities in the conduct of their operations that enhance the 
environment (such as recycling and energy conservation) are clearly 
reasonable operating conditions that NPS may place on a concessioner 
under the terms of a concession contract. Further, NPS does not 
understand why the commenter suggests that these type of programs 
should be borne by the government. NPS considers that concessioners 
should be responsible for conserving energy in its operations and 
recycling trash. Finally, the suggestion that a small business (defined 
by SBA as a business grossing less than $5 million dollars) cannot 
afford to undertake progressive environmental management practices such 
as recycling and energy conservation is not supported by practical 
experience. Not only are such practices commonplace in the United 
States, many of them are cost effective. In any event, NPS has modified 
the environmental requirements in the final rule as discussed above.
    b. Comment. The restrictions on assignments and sales take the 
proposed regulations well beyond the statute.
    NPS does not consider that the proposed regulations regarding sales 
and transfers exceeded reasonable implementation of the requirements of 
Section 408 of the 1998 Act. Section 408 did not exempt small 
businesses from its application. The information requirements set forth 
in the proposed regulations are necessary for NPS to carry out its 
responsibilities under Section 408. In any event, in the final rule NPS 
has made the information requirements discretionary in the 
circumstances of particular transactions. The smaller the business, the 
less information NPS will generally need in order to approve a sale or 
transfer. In addition, the final rule has eliminated reference to 
approval of encumbrances of net revenue as mentioned by the commenter 
as particularly burdensome to small businesses.
    c. Comment. The section of the proposed rule that states that a 
purchaser of a concession does not have to buy the related personal 
property of an existing concessioner could cause losses to the small 
business concessioner.
    NPS notes that the 1998 Act makes no mention of a requirement that 
an existing concessioner is entitled to have a new concessioner 
purchase its personal property. It is the position of NPS that 
concession contracts should not require an existing concessioner to 
sell its personal property to a new concessioner or to require a new 
concessioner to purchase the personal property of a previous 
concessioner. Both businesses are treated equally. NPS fails to 
understand why a contract that permits the contractor to sell its 
personal property on the open market upon contract expiration is 
burdensome to the contractor or in any way contrary to usual business 
practices in the United States. In fact, requiring a new concessioner 
to purchase the personal property of a prior concessioner may well be 
considered burdensome to small businesses.
    d. Comment. The requirement in the proposed regulations that the 
purchaser of a concession operation has a year to pay a prior 
concessioner for its leasehold surrender interest is burdensome to 
small businesses.
    NPS has discussed the need for this provision in the section-by-
section analysis. However, NPS also notes that the final rule is 
changed in this connection, requiring the payment of interest and only 
permitting payment after the expiration of a contract in extraordinary 
circumstances beyond the control of NPS. NPS considers that these 
changes address any valid concerns of the commenter.
    e. Comment. One hundred and forty two small businesses constitute a 
significant number of small businesses within the meaning of the 
Regulatory Flexibility Act.
    The commenter made this assertion without explanation. NPS does not 
consider that there is any valid basis upon which to conclude that 142 
businesses out of all the hotel, restaurant, outfitter and guide,

[[Page 20667]]

sightseeing, etc. businesses in the United States are a ``significant'' 
number of small businesses within the meaning of the Regulatory 
Flexibility Act.
    f. Comment. The lottery system and the lack of regulations 
regarding rates to the public unduly affect small businesses.
    Reference to a lottery system has been eliminated in the final 
rule. In addition, a section on rate approvals has been added. In any 
event, NPS rate approvals are accomplished under administrative 
guidelines, not regulations.
    (3) A description of and an estimate of the number of small 
entities to which the rule will apply.
    NPS notes that the vast majority of NPS concessioners 
(approximately 600 out of 630) are ``small businesses'' under 
applicable Small Business Administration guidelines (gross receipts of 
less than $5 million) and has developed the proposed regulations and 
final rule to accommodate to the extent possible the concerns of 
concessioners and prospective concessioners, almost all of which are 
small businesses.
    There are some 630 existing NPS concessioners. Of these, 
approximately 75% will be provided a preference in renewal because of 
the 1998 Act. In addition, there are an unquantifiable number of 
businesses which may in the future seek to obtain a concession contract 
and thereby benefit from the 1998 Act's repeal of the preference in 
renewal as they will have a greater chance of successfully competing 
for a concession contract. The types of businesses that are generally 
NPS concessioners are hotel, restaurant, transportation, marina, 
sightseeing, outfitting, souvenir sales, etc., i.e., businesses that 
provide necessary and appropriate visitor services in areas of the 
national park system.
    (4) A description of the projected reporting, recordkeeping and 
other compliance requirements of the rule, 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.
    All concessioners are subject to these requirements.
    Sections 51.98 and 51.99 describe the records and recordkeeping 
requirements of the final rule. All concessioners are subject to these 
requirements under the 1998 Act and this part. The type of skills 
necessary include business, accounting, and, in limited circumstances, 
legal skills.
    (5) A description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of the 
factual, policy and legal reasons for selecting the alternatives 
adopted in the final rule and why each of the other significant 
alternatives to the rule considered by the agency which affect the 
impact on small entities was rejected.
    The previous discussion under the section-by-section analysis 
provides this information in detail, including a discussion as to why 
suggestions from concessioners were not adopted by NPS in the final 
rule. In general terms, the requirements of the final rule are 
necessary in order for NPS to properly carry out its responsibilities 
under the 1998 Act. However, NPS notes that it has made a number of 
incremental changes in the final rule that ameliorate impacts on 
smaller entities. For example, it has made the environmental management 
program elements of the proposed regulations discretionary with respect 
to businesses grossing less than $100,000 and has provided for lower 
information requirements for smaller concession contract solicitations. 
In addition, a number of changes have been made in the final rule that 
ameliorate impacts on all concessioners, e.g., arbitration of 
construction cost, payment of interest on leasehold surrender interest 
not paid for as of contract expiration, inclusion of additional 
administrative appeal rights, and more limited, non-mandatory 
information requirements for assignments and encumbrances of concession 
contracts.

Unfunded Mandates Reform Act

    The National Park Service has determined (for the reasons discussed 
above) and certifies pursuant to the Unfunded Mandates Reform Act (2 
U.S.C. 1502 et seq.) that this rule will not impose a cost of $100 
million or more in any given year on local, State, tribal governments 
or private entities. A statement containing the information required by 
the Unfunded Mandates Reform Act is not required.

Takings (E.O. 12630)

    In accordance with Executive Order 12360, the rule does not have 
significant takings implications. The rule has no effect on private 
property. Existing concessioners are entitled to payment for any real 
property improvements they may have upon expiration or termination of 
existing concession contracts in accordance with their terms. Other 
persons are not affected by the terms of concession contracts issued 
under the authority of this part unless the person chooses to enter 
into a concession contract.

Federalism

    In accordance with Executive Order 13132, the rule does not have 
sufficient federalism implications to warrant the preparation of a 
federalism assessment. The rule imposes no direct requirements on any 
governmental entity other than the National Park Service.

Civil Justice Reform (E.O. 12988)

    In accordance with Executive Order 12988, the Office of the 
Solicitor has determined that this rule does not unduly burden the 
judicial system and does not meet the requirements of sections 3(a) and 
3(b)(2) of the Order.

Paperwork Reduction Act

    The PRA provides that an agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB Control Number. The 
collections of information contained in this rule have been approved by 
the Office of Management and Budget as required by 44 U.S.C. 3501 et. 
seq. and assigned clearance numbers 1024-0125 (Submission of Offers in 
Response to Concession Prospectuses) and 1024-0126 (Sales of Concession 
Operations). Additional reporting and recordkeeping requirements were 
identified in subpart F regarding appeal of a preferred offeror 
determination, subpart G regarding leasehold surrender interest and in 
subpart K regarding recordkeeping that are not covered under OMB 
approvals. An emergency information collection request to cover these 
requirements has been prepared and submitted to OMB for approval. These 
additional information collection requirements will not be implemented 
until OMB approves the emergency request. NPS will publish a Federal 
Register notice when OMB has approved these requirements.

National Environmental Policy Act

    This rule does not constitute a major federal action significantly 
affecting the quality of the human environment. A detailed statement 
under the National Environmental Policy Act is not required. The rule 
will not increase public use of park areas, introduce noncompatible 
uses into park areas, conflict with adjacent land ownerships or land 
uses, or cause a nuisance to property owners or occupants adjacent to 
park areas. Accordingly, this rule is categorically excluded from the 
procedural requirements of the National Environmental Policy Act by 516 
DM 6, App. 7.4A(10).

[[Page 20668]]

Clarity of This Rule

    Executive Order 12866 requires federal agencies to write 
regulations that are easy to understand. Comment is invited on how to 
make this rule easier to understand, including answers to the following 
questions: (1) Are the requirements in the rule clearly stated? (2) 
Does the rule contain undefined technical language or jargon that 
interferes with its clarity? (3) Does the format of the rule (grouping 
and order of sections, use of headings, paragraphing, etc.) aid in or 
reduce its clarity? (4) Would the rule be easier to understand if it 
were divided into more but shorter sections? (5) Is the description of 
the rule in the Supplementary Information section of the preamble 
helpful in understanding the proposed rule? What else could be done to 
make the rule easier to understand?
    Please send a copy of any comments that concern how this rule could 
be made easier to understand to: Office of Regulatory Affairs, 
Department of the Interior, Room 7229, 1849 C Street NW, Washington, DC 
20240.
    NPS notes that comments stated that the rule contains technical 
language and should be shorter. However, the 1998 Act itself is replete 
with technical language that must be defined in the rule. NPS also 
considers that the requirements of the rule are stated as clearly as 
possible.

List of Subjects in 36 CFR Part 51

    Concessions, Government contracts, National parks, Reporting and 
recordkeeping requirements.


    In consideration of the foregoing, 36 CFR Part 51 is hereby revised 
to read as follows:

PART 51--CONCESSION CONTRACTS

Subpart A--Authority and Purpose
Sec.
51.1   What does this part cover?
51.2   What is the policy underlying concessions contracts?
Subpart B--General Definitions
51.3   How are terms defined in this part?
Subpart C--Solicitation, Selection and Award Procedures
51.4   How will the Director invite the general public to apply for 
the award of a concession contract?
51.5   What information will the prospectus include?
51.6   Will a concession contract be developed for a particular 
potential offeror?
51.7   How will information be provided to a potential offeror after 
the prospectus is issued?
51.8   Where will the Director publish the notice of availability of 
the prospectus?
51.9   How do I get a copy of the prospectus?
51.10   How long will I have to submit my proposal?
51.11   May the Director amend, extend, or cancel a prospectus or 
solicitation?
51.12   Are there any other additional procedures that I must follow 
to apply for a concession contract?
51.13   When will the Director determine if proposals are 
responsive?
51.14   What happens if no responsive proposals are submitted?
51.15   May I clarify, amend or supplement my proposal after it is 
submitted?
51.16   How will the Director evaluate proposals and select the best 
one?
51.17   What are the selection factors?
51.18   When must the Director reject a proposal?
51.19   Must the Director award the concession contract that is set 
forth in the prospectus?
51.20   Does this part limit the authority of the Director?
51.21   When must the selected offeror execute the concession 
contract?
51.22   When may the Director execute the concession contract?
Subpart D--Non-Competitive Award of Concession Contracts
51.23   May the Director extend an existing concession contract 
without a public solicitation?
51.24   May the Director award a temporary concession contract 
without a public solicitation?
51.25   Are there any other circumstances in which the Director may 
award a concession contract without public solicitation?
Subpart E--Right of Preference to a New Concession Contract
51.26   What solicitation, selection and award procedures apply when 
a preferred offeror exists?
51.27   Who is a preferred offeror and what are a preferred 
offeror's rights to the award of a new concession contract?
51.28   When will the Director determine whether a concessioner is a 
preferred offeror?
51.29   How will I know when a preferred offeror exists?
51.30   What must a preferred offeror do before it may exercise a 
right of preference?
51.31   What happens if a preferred offeror does not submit a 
responsive proposal?
51.32   What is the process if the Director determines that the best 
responsive proposal was not submitted by a preferred offeror?
51.33   What if a preferred offeror does not timely amend its 
proposal to meet the terms and conditions of the best proposal?
51.34   What will the Director do if a selected preferred offeror 
does not timely execute the new concession contract?
51.35   What happens to a right of preference if the Director 
receives no responsive proposals?
Subpart F--Determining a Preferred Offeror
51.36   What conditions must be met before the Director determines 
that a concessioner is a preferred offeror?
51.37   How will the Director determine that a new concession 
contract is a qualified concession contract?
51.38   How will the Director determine that a concession contract 
is an outfitter and guide concession contract?
51.39   What are some examples of outfitter and guide concession 
contracts?
51.40   What are some factors to be considered in determining that 
outfitter and guide operations are conducted in the backcountry?
51.41   If the concession contract grants a compensable interest in 
real property improvements, will the Director find that the 
concession contract is an outfitter and guide concession contract?
51.42   Are there exceptions to this compensable interest 
prohibition?
51.43   Who will make the determination that a concession contract 
is an outfitter and guide contract?
51.44   How will the Director determine if a concessioner was 
satisfactory for purposes of a right of preference?
51.45   Will a concessioner that has operated for less than the 
entire term of a concession contract be considered a satisfactory 
operator?
51.46   May the Director determine that a concessioner has not 
operated satisfactorily after a prospectus is issued?
51.47   How does a person appeal a decision of the Director that a 
concessioner is or is not a preferred offeror?
51.48   What happens to a right of preference in the event of 
termination of a concession contract for unsatisfactory performance 
or other breach?
51.49   May the Director grant a right of preference except in 
accordance with this part?
51.50   Does the existence of a preferred offeror limit the 
authority of the Director to establish the terms of a concession 
contract?
Subpart G--Leasehold Surrender Interest
51.51   What special terms must I know to understand leasehold 
surrender interest?
51.52   How do I obtain a leasehold surrender interest?
51.53   When may the Director authorize the construction of a 
capital improvement?
51.54   What must a concessioner do before beginning to construct a 
capital improvement?
51.55   What must a concessioner do after substantial completion of 
the capital improvement?
51.56   How will the construction cost for purposes of leasehold 
surrender interest value be determined?
51.57   How does a concessioner request arbitration of the 
construction cost of a capital improvement?
51.58   What actions may or must the concessioner take with respect 
to a leasehold surrender interest?
51.59   Will leasehold surrender interest be extinguished by 
expiration or termination of a leasehold surrender

[[Page 20669]]

interest concession contract or may it be taken for public use?
51.60   How will a new concession contract awarded to an existing 
concessioner treat a leasehold surrender interest obtained under a 
prior concession contract?
51.61   How is an existing concessioner who is not awarded a new 
concession contract paid for a leasehold surrender interest?
51.62   What is the process to determine a leasehold surrender 
interest value when the concessioner does not seek or is not awarded 
a new concession contract?
51.63   When a new concessioner pays a concessioner for a leasehold 
surrender interest, what is the leasehold surrender interest in the 
related capital improvements for purposes of a new concession 
contract?
51.64   May the concessioner gain additional leasehold surrender 
interest by undertaking a major rehabilitation or adding to a 
structure in which the concessioner has a leasehold surrender 
interest?
51.65   May the concessioner gain additional leasehold surrender 
interest by replacing a fixture in which the concessioner has a 
leasehold surrender interest?
51.66   Under what conditions will a concessioner obtain a leasehold 
surrender interest in existing real property improvements in which 
no leasehold surrender interest exists?
51.67   Will a concessioner obtain leasehold surrender interest as a 
result of repair and maintenance of real property improvements?
Subpart H--Possessory Interest
51.68   If a concessioner under a 1965 Act concession contract is 
not awarded a new concession contract, how will a concessioner that 
has a possessory interest receive compensation for its possessory 
interest?
51.69   What happens if there is a dispute between a new 
concessioner and a prior concessioner as to the value of the prior 
concessioner's possessory interest?
51.70   If a concessioner under a 1965 Act concession contract is 
awarded a new concession contract, what happens to the 
concessioner's possessory interest?
51.71   What is the process to be followed if there is a dispute 
between the prior concessioner and the Director as to the value of 
possessory interest?
51.72   If a new concessioner is awarded the contract, what is the 
relationship between leasehold surrender interest and possessory 
interest?
Subpart I--Concession Contract Provisions
51.73   What is the term of a concession contract?
51.74   When may a concession contract be terminated by the 
Director?
51.75   May the Director segment or split concession contracts?
51.76   May the Director include in a concession contract or 
otherwise grant a concessioner a preferential right to provide new 
or additional visitor services?
51.77   Will a concession contract provide a concessioner an 
exclusive right to provide visitor services?
51.78   Will a concession contract require a franchise fee and will 
the franchise fee be subject to adjustment?
51.79   May the Director waive payment of a franchise fee or other 
payments?
51.80   How will the Director establish franchise fees for multiple 
outfitter and guide concession contracts in the same park area?
51.81   May the Director include ``special account'' provisions in 
concession contracts?
51.82   Are a concessioner's rates required to be reasonable and 
subject to approval by the Director?
51.83   Handicrafts. [Reserved]
Subpart J--Assignment or Encumbrance of Concession Contracts
51.84   What special terms must I know to understand this part?
51.85   What assignments require the approval of the Director?
51.86   What encumbrances require the approval of the Director?
51.87   Does the concessioner have an unconditional right to receive 
the Director's approval of an assignment or encumbrance?
51.88   What happens if an assignment or encumbrance is completed 
without the approval of the Director?
51.89   What happens if there is a default on an encumbrance 
approved by the Director?
51.90   How does the concessioner get the Director's approval before 
making an assignment or encumbrance?
51.91   What information may the Director require in the 
application?
51.92   What are standard proformas?
51.93  If the transaction includes more than one concession 
contract, how must required information be provided?
51.94  What information will the Director consider when deciding to 
approve a transaction?
51.95  Does the Director's approval of an assignment or encumbrance 
include any representations of any nature?
51.96  May the Director amend or extend a concession contract for 
the purpose of facilitating a transaction?
51.97  May the Director open to renegotiation or modify the terms of 
a concession contract as a condition to the approval of a 
transaction?
Subpart K--Information and Access to Information
51.98  What records must the concessioner keep and what access does 
the Director have to records?
51.99  What access to concessioner records will the Comptroller 
General have?
51.100  When will the Director make proposals and evaluation 
documents publicly available?
Subpart L--The Effect of the 1998 Act's Repeal of the 1965 Act
51.101  Did the 1998 Act repeal the 1965 Act?
51.102  What is the effect of the 1998 Act's repeal of the 1965 
Act's preference in renewal?
51.103  Severability.
Subpart M-- Information Collection
51.104  Have information collection procedures been followed?

    Authority: The Act of August 25, 1916, as amended and 
supplemented, 16 U.S.C. 1 et seq., particularly, 16 U.S.C. 3 and 
Title IV of the National Parks Omnibus Management Act of 1998 (Pub. 
L. 105-391).

Subpart A--Authority and Purpose


Sec. 51.1  What does this part cover?

    This part covers the solicitation, award, and administration of 
concession contracts. The Director solicits, awards and administers 
concession contracts on behalf of the Secretary under the authority of 
the Act of August 25, 1916, as amended and supplemented, 16 U.S.C. 1 et 
seq. and Title IV of the National Parks Omnibus Management Act of 1998 
(Public Law 105-391). The purpose of concession contracts is to 
authorize persons (concessioners) to provide visitor services in park 
areas. All concession contracts are to be consistent with the 
requirements of this part. In accordance with section 403 of the 1998 
Act, the Director will utilize concession contracts to authorize the 
provision of visitor services in park areas, except as may otherwise be 
authorized by law. For example, the Director may enter into commercial 
use authorizations under section 418 of the 1998 Act and may enter into 
agreements with non-profit organizations for the sale of interpretive 
materials and conduct of interpretive programs for a fee or charge in 
park areas. In addition, the Director may, as part of an interpretive 
program agreement otherwise authorized by law, authorize a non-profit 
organization to provide incidental visitor services that are necessary 
for the conduct of the interpretive program. Nothing in this part 
amends, supersedes, or otherwise affects any provision of the Alaska 
National Interest Lands Conservation Act (16 U.S.C. 3101 et seq.) 
relating to revenue-producing visitor services.


Sec. 51.2  What is the policy underlying concessions contracts?

    It is the policy of the Congress and the Secretary that visitor 
services in park areas may be provided only under carefully controlled 
safeguards against unregulated and indiscriminate use so that 
visitation will not unduly impair park values and resources. 
Development of visitor services in park areas will be limited to 
locations that are consistent to the highest practicable degree with

[[Page 20670]]

the preservation and conservation of the resources and values of the 
park area. It is also the policy of the Congress and the Secretary of 
the Interior that development of visitor services in park areas must be 
limited to those as are necessary and appropriate for public use and 
enjoyment of the park area in which they are located.

Subpart B--General Definitions


Sec. 51.3  How are terms defined in this part?

    To understand this part, you must refer to these definitions, 
applicable in the singular or the plural, whenever these terms are used 
in this part:
    The 1965 Act means Public Law 89-249, commonly known as the 
National Park Service Concession Policies Act of 1965.
    A 1965 Act concession contract is a concession contract or permit 
entered into under the authority of the 1965 Act.
    The 1998 Act means Title IV of Public Law 105-391.
    The award of a concession contract is the establishment of a 
legally binding concession contract. It occurs only when the Director 
and a selected offeror both fully execute a concession contract.
    A concession contract (or contract) means a binding written 
agreement between the Director and a concessioner entered under the 
authority of this part or the 1965 Act that authorizes the concessioner 
to provide certain visitor services within a park area under specified 
terms and conditions. Concession contracts are not contracts within the 
meaning of 41 U.S.C. 601 et seq. (the Contract Disputes Act) and are 
not service or procurement contracts within the meaning of statutes, 
regulations or policies that apply only to federal service contracts or 
other types of federal procurement actions. Concession contracts will 
contain such terms and conditions as are required by this part or law 
and as are otherwise appropriate in furtherance of the purposes of this 
part and the 1998 Act.
    A concessioner is an individual, corporation, or other legally 
recognized entity that duly holds a concession contract.
    Director means the Director of the National Park Service (acting on 
behalf of the Secretary), or an authorized representative of the 
Director, except where a particular official is specifically identified 
in this part. In circumstances where this part calls for an appeal to 
the Director, the appeal shall be considered by an official of higher 
authority than the official that made the disputed decision.
    A franchise fee is the consideration paid to the Director by a 
concessioner for the privileges granted by a concession contract.
    Offeror means an individual, corporation, or other legally 
recognized entity, including an existing concessioner, that submits a 
proposal for a concession contract. If the entity that is to be the 
concessioner is not formally in existence as of the time of submission 
of a proposal, a proposal must demonstrate that the individuals or 
organizations that intend to establish the entity that will become the 
concessioner have the ability and are legally obliged to cause the 
entity to be a qualified person as defined in this part. In addition, 
if the entity that will be the concessioner is not established at the 
time of submission of a proposal, the proposal must contain assurances 
satisfactory to the Director that the entity that will be the 
concessioner will be a qualified person as of the date of the award of 
the contract and otherwise have the ability to carry out the 
commitments made in the proposal.
    Possessory interest means an interest in real property improvements 
as defined by the 1965 Act obtained by a concessioner under a 
possessory interest concession contract. Possessory interest, for the 
purposes of this part, does not include any interest in property in 
which no possessory interest, as defined by the 1965 Act, exists.
    A possessory interest concession contract means a 1965 Act 
concession contract that provides the concessioner a possessory 
interest.
    A preferred offeror is a concessioner that the Director determines 
is eligible to exercise a right of preference to the award of a 
qualified concession contract in accordance with this part.
    A qualified concession contract is a new concession contract that 
the Director determines to be a qualified concession contract for right 
of preference purposes.
    A qualified person is an individual, corporation or other legally 
recognized entity that the Director determines has the experience and 
financial ability to satisfactorily carry out the terms of a concession 
contract. This experience and financial ability includes, but is not 
limited to, the ability to protect and preserve the resources of the 
park area and the ability to provide satisfactory visitor services at 
reasonable rates to the public.
    A responsive proposal means a timely submitted proposal that is 
determined by the Director as agreeing to all of the minimum 
requirements of the proposed concession contract and prospectus and as 
having provided the information required by the prospectus.
    A right of preference is the preferential right of renewal set 
forth in Section 403(7)(C) of the 1998 Act which requires the Director 
to allow a preferred offeror the opportunity to match the terms and 
conditions of a competing responsive proposal that the Director has 
determined to be the best proposal for a qualified concession contract. 
A right of preference does not provide any rights of any nature to 
establish or negotiate the terms and conditions of a concession 
contract to which a right of preference may apply.
    Visitor services means accommodations, facilities and services 
determined by the Director as necessary and appropriate for public use 
and enjoyment of a park area provided to park area visitors for a fee 
or charge by a person other than the Director. The fee or charge paid 
by the visitor may be direct or indirect as part of the provision of 
comprehensive visitor services (e.g., when a lodging concessioner may 
provide free transportation services to guests). Visitor services may 
include, but are not limited to, lodging, campgrounds, food service, 
merchandising, tours, recreational activities, guiding, transportation, 
and equipment rental. Visitor services also include the sale of 
interpretive materials or the conduct of interpretive programs for a 
fee or charge to visitors.

Subpart C--Solicitation, Selection and Award Procedures


Sec. 51.4  How will the Director invite the general public to apply for 
the award of a concession contract?

    (a) The Director must award all concession contracts, except as 
otherwise expressly provided in this part, through a public 
solicitation process. The public solicitation process begins with the 
issuance of a prospectus. The prospectus will invite the general public 
to submit proposals for the contract. The prospectus will describe the 
terms and conditions of the concession contract to be awarded and the 
procedures to be followed in the selection of the best proposal.
    (b) Except as provided under Sec. 51.47 (which calls for a final 
administrative decision on preferred offeror appeals prior to the 
selection of the best proposal) the terms, conditions and 
determinations of the prospectus and the terms and conditions of the 
proposed concession contract as described in the prospectus, including, 
without limitation, its minimum franchise fee, are not final until the 
concession contract is awarded. The Director will not issue a 
prospectus for a concession contract earlier than

[[Page 20671]]

eighteen months prior to the expiration of a related existing 
concession contract.


Sec. 51.5  What information will the prospectus include?

    The prospectus must include the following information:
    (a) The minimum requirements of the concession contract. The 
minimum requirements of the concession contract, include, but are not 
limited to the following:
    (1) The minimum acceptable franchise fee or other forms of 
consideration to the Government;
    (2) The minimum visitor services that the concessioner is to be 
authorized to provide;
    (3) The minimum capital investment, if any, that the concessioner 
must make;
    (4) The minimum measures that the concessioner must take to ensure 
the protection, conservation, and preservation of the resources of the 
park area; and
    (5) Any other minimum requirements that the new contract may 
specify, including, as appropriate and without limitation, measurable 
performance standards;
    (b) The terms and conditions of a current concession contract, if 
any, relating to the visitor services to be provided, including all 
fees and other forms of compensation provided to the Director under 
such contract;
    (c) A description of facilities and services, if any, that the 
Director may provide to the concessioner under the terms of the 
concession contract, including, but not limited to, public access, 
utilities and buildings;
    (d) An estimate of the amount of any compensation due a current 
concessioner from a new concessioner under the terms of an existing or 
prior concession contract;
    (e) A statement identifying each principal selection factor for 
proposals, including subfactors, if any, and secondary factors, if any, 
and the weight and relative importance of the principal and any 
secondary factors in the selection decision;
    (f) Such other information related to the proposed concession 
contract as is provided to the Director pursuant to a concession 
contract or is otherwise available to the Director, as the Director 
determines is necessary to allow for the submission of competitive 
proposals. Among other such necessary information a prospectus will 
contain (when applicable) are the gross receipts of the current 
concession contract broken out by department for the three most recent 
years; franchise fees charged under the current concession contract for 
the three most recent years; merchandise inventories of the current 
concessioner for the three most recent years; and the depreciable fixed 
assets and net depreciable fixed assets of the current concessioner; 
and
    (g) Identification of a preferred offeror for a qualified 
concession contract, if any, and, if a preferred offeror exists, a 
description of a right of preference to the award of the concession 
contract.


Sec. 51.6  Will a concession contract be developed for a particular 
potential offeror?

    The terms and conditions of a concession contract must represent 
the requirements of the Director in accordance with the purposes of 
this part and must not be developed to accommodate the capabilities or 
limitations of any potential offeror. The Director must not provide a 
current concessioner or other person any information as to the content 
of a proposed or issued prospectus that is not available to the general 
public.


Sec. 51.7  How will information be provided to a potential offeror 
after the prospectus is issued?

    Material information directly related to the prospectus and the 
concession contract (except when otherwise publicly available) that the 
Director provides to any potential offeror prior to the submission of 
proposals must be made available to all persons who have requested a 
copy of the prospectus.


Sec. 51.8  Where will the Director publish the notice of availability 
of the prospectus?

    The Director will publish notice of the availability of the 
prospectus at least once in the Commerce Business Daily or in a similar 
publication if the Commerce Business Daily ceases to be published. The 
Director may also publish notices, if determined appropriate by the 
Director, electronically or in local or national newspapers or trade 
magazines.


Sec. 51.9  How do I get a copy of the prospectus?

    The Director will make the prospectus available upon request to all 
interested persons. The Director may charge a reasonable fee for a 
prospectus, not to exceed printing, binding and mailing costs.


Sec. 51.10  How long will I have to submit my proposal?

    The Director will allow an appropriate period for submission of 
proposals that is not less than 60 days unless the Director determines 
that a shorter time is appropriate in the circumstances of a particular 
solicitation. Proposals that are not timely submitted will not be 
considered by the Director.


Sec. 51.11  May the Director amend, extend, or cancel a prospectus or 
solicitation?

    The Director may amend a prospectus and/or extend the submission 
date prior to the proposal due date. The Director may cancel a 
solicitation at any time prior to award of the concession contract if 
the Director determines in his discretion that this action is 
appropriate in the public interest. No offeror or other person will 
obtain compensable or other legal rights as a result of an amended, 
extended, canceled or resolicited solicitation for a concession 
contract.


Sec. 51.12  Are there any other additional procedures that I must 
follow to apply for a concession contract?

    The Director may specify in a prospectus additional solicitation 
and/or selection procedures consistent with the requirements of this 
part in the interest of enhancing competition. Such additional 
procedures may include, but are not limited to, issuance of a two-
phased prospectus--a qualifications phase and a proposal phase. The 
Director will incorporate simplified administrative requirements and 
procedures in prospectuses for concession contracts that the Director 
considers are likely to be awarded to a sole proprietorship or are 
likely to have annual gross receipts of less than $100,000. Such 
simplified requirements and procedures may include, as appropriate and 
without limitation, a reduced application package, a shorter proposal 
submission period, and a reduction of proposal information 
requirements.


Sec. 51.13  When will the Director determine if proposals are 
responsive?

    The Director will determine if proposals are responsive or non-
responsive prior to or as of the date of selection of the best 
proposal.


Sec. 51.14  What happens if no responsive proposals are submitted?

    If no responsive proposals are submitted, the Director may cancel 
the solicitation, or, after cancellation, establish new contract 
requirements and issue a new prospectus.


Sec. 51.15  May I clarify, amend or supplement my proposal after it is 
submitted?

    (a) The Director may request from any offeror who has submitted a 
timely proposal a written clarification of its proposal. Clarification 
refers to making clear any ambiguities that may have been contained in 
a proposal but does not include amendment or supplementation of a 
proposal. An offeror may not amend or supplement a proposal after the 
submission date

[[Page 20672]]

unless requested by the Director to do so and the Director provides all 
offerors that submitted proposals a similar opportunity to amend or 
supplement their proposals. Permitted amendments must be limited to 
modifying particular aspects of proposals resulting from a general 
failure of offerors to understand particular requirements of a 
prospectus or a general failure of offerors to submit particular 
information required by a prospectus.
    (b) A proposal may suggest changes to the terms and conditions of a 
proposed concession contract and still be considered as responsive so 
long as the suggested changes are not conditions to acceptance of the 
terms and conditions of the proposed concession contract. The fact that 
a proposal may suggest changes to the proposed concession contract does 
not mean that the Director may accept those changes without a 
resolicitation of the concession opportunity.


Sec. 51.16  How will the Director evaluate proposals and select the 
best one?

    (a) The Director will apply the selection factors set forth in 
Sec. 51.17 by assessing each timely proposal under each of the 
selection factors on the basis of a narrative explanation, discussing 
any subfactors when applicable. For each selection factor, the Director 
will assign a score that reflects the determined merits of the proposal 
under the applicable selection factor and in comparison to the other 
proposals received, if any. The first four principal selection factors 
will be scored from zero to five. The fifth selection factor will be 
scored from zero to four (with a score of one for agreeing to the 
minimum franchise fee contained in the prospectus). The secondary 
factor set forth in Sec. 51.17(b)(1) will be scored from zero to three. 
Any additional secondary selection factors set forth in the prospectus 
will be scored as specified in the prospectus provided that the 
aggregate possible point score for all additional secondary selection 
factors may not exceed a total of three.
    (b) The Director will then assign a cumulative point score to each 
proposal based on the assigned score for each selection factor.
    (c) The responsive proposal with the highest cumulative point score 
will be selected by the Director as the best proposal. If two or more 
responsive proposals receive the same highest point score, the Director 
will select as the best proposal (from among the responsive proposals 
with the same highest point score), the responsive proposal that the 
Director determines on the basis of a narrative explanation will, on an 
overall basis, best achieve the purposes of this part. Consideration of 
revenue to the United States in this determination and in scoring 
proposals under principal selection factor five will be subordinate to 
the objectives of protecting, conserving, and preserving the resources 
of the park area and of providing necessary and appropriate visitor 
services to the public at reasonable rates.


Sec. 51.17  What are the selection factors?

    (a) The five principal selection factors are:
    (1) The responsiveness of the proposal to the objectives, as 
described in the prospectus, of protecting, conserving, and preserving 
resources of the park area;
    (2) The responsiveness of the proposal to the objectives, as 
described in the prospectus, of providing necessary and appropriate 
visitor services at reasonable rates;
    (3) The experience and related background of the offeror, including 
the past performance and expertise of the offeror in providing the same 
or similar visitor services as those to be provided under the 
concession contract;
    (4) The financial capability of the offeror to carry out its 
proposal; and
    (5) The amount of the proposed minimum franchise fee, if any, and/
or other forms of financial consideration to the Director. However, 
consideration of revenue to the United States will be subordinate to 
the objectives of protecting, conserving, and preserving resources of 
the park area and of providing necessary and appropriate visitor 
services to the public at reasonable rates.
    (b) The secondary selection factors are:
    (1) The quality of the offeror's proposal to conduct its operations 
in a manner that furthers the protection, conservation and preservation 
of park area and other resources through environmental management 
programs and activities, including, without limitation, energy 
conservation, waste reduction, and recycling. A prospectus may exclude 
this secondary factor if the prospectus solicits proposals for a 
concession contract that is anticipated to have annual gross receipts 
of less than $100,000 and the activities that will be conducted under 
the contract are determined by the Director as likely to have only 
limited impacts on the resources of the park area; and
    (2) Any other selection factors the Director may adopt in 
furtherance of the purposes of this part, including where appropriate 
and otherwise permitted by law, the extent to which a proposal calls 
for the employment of Indians (including Native Alaskans) and/or 
involvement of businesses owned by Indians, Indian tribes, Native 
Alaskans, or minority or women-owned businesses in operations under the 
proposed concession contract.
    (c) A prospectus may include subfactors under each of the principal 
and secondary factors to describe specific elements of the selection 
factor.


Sec. 51.18  When must the Director reject a proposal?

    The Director must reject any proposal received, regardless of the 
franchise fee offered, if the Director makes any of the following 
determinations: the offeror is not a qualified person as defined in 
this part; The offeror is not likely to provide satisfactory service; 
the proposal is not a responsive proposal as defined in this part; or, 
the proposal is not responsive to the objectives of protecting and 
preserving the resources of the park area and of providing necessary 
and appropriate services to the public at reasonable rates.


Sec. 51.19  Must the Director award the concession contract that is set 
forth in the prospectus?

    Except for incorporating into the concession contract appropriate 
elements of the best proposal, the Director must not award a concession 
contract which materially amends or does not incorporate the terms and 
conditions of the concession contract as set forth in the prospectus.


Sec. 51.20  Does this part limit the authority of the Director?

    Nothing in this part may be construed as limiting the authority of 
the Director at any time to determine whether to solicit or award a 
concession contract, to cancel a solicitation, or to terminate a 
concession contract in accordance with its terms.


Sec. 51.21  When must the selected offeror execute the concession 
contract?

    The selected offeror must execute the concession contract promptly 
after selection of the best proposal and within the time established by 
the Director. If the selected offeror fails to execute the concession 
contract in this period, the Director may select another responsive 
proposal or may cancel the selection and resolicit the concession 
contract.


Sec. 51.22  When may the Director award the concession contract?

    Before awarding a concession contract with anticipated annual gross 
receipts in excess of $5,000,000 or of more than 10 years in duration, 
or, pursuant to

[[Page 20673]]

Sec. 51.24(b), the Director must submit the concession contract to the 
Committee on Resources of the House of Representatives and the 
Committee on Energy and Natural Resources of the Senate. The Director 
must not award any such concession contract until 60 days after the 
submission. Award of these contracts may not be made without the 
Director's written approval. The Director may not delegate this 
approval except to a Deputy Director or an Associate Director. The 
Director may award a concession contract that is not subject to these 
or other special award requirements at any time after selection of the 
best proposal and execution of the concession contract by the offeror.

Subpart D--Non-Competitive Award of Concession Contracts


Sec. 51.23  May the Director extend an existing concession contract 
without a public solicitation?

    Notwithstanding the public solicitation requirements of this part, 
the Director may award non-competitively an extension or extensions of 
an existing concession contract to the current concessioner for 
additional terms not to exceed three years in the aggregate, e.g., the 
Director may award one extension with a three year term, two 
consecutive extensions, one with a two year term and one with a one 
year term, or three consecutive extensions with a term of one year 
each. The Director may award such extensions only if the Director 
determines that the extension is necessary to avoid interruption of 
visitor services. Before determining to award such a contract 
extension, the Director must take all reasonable and appropriate steps 
to consider alternatives to avoid an interruption of visitor services. 
Further, the Director must publish notice in the Federal Register of 
the proposed extension at least 30 days in advance of the award of the 
extension (except in emergency situations).


Sec. 51.24  May the Director award a temporary concession contract 
without a public solicitation?

    (a) Notwithstanding the public solicitation requirements of this 
part, the Director may award non-competitively a temporary concession 
contract or contracts for consecutive terms not to exceed three years 
in the aggregate, e.g., the Director may award one temporary contract 
with a three year term, two consecutive temporary contracts, one with a 
two year term and one with a one year term, or three consecutive 
temporary contracts with a term of one year each, to any qualified 
person for the conduct of particular visitor services in a park area if 
the Director determines that the award is necessary to avoid 
interruption of visitor services. Before determining to award a 
temporary concession contract, the Director must take all reasonable 
and appropriate steps to consider alternatives to avoid an interruption 
of visitor services. Further, the Director must publish notice in the 
Federal Register of the proposed temporary concession contract at least 
30 days in advance of its award (except in emergency situations). A 
temporary concession contract may not be extended. A temporary 
concession contract may not be awarded to continue visitor services 
provided under an extended concession contract except as permitted by 
paragraph (b) of this section.
    (b) Notwithstanding the last sentence of paragraph (a) of this 
section, the Director may award a temporary concession contract for 
consecutive terms not to exceed three years in the aggregate to 
authorize the continuing conduct of visitor services that were 
conducted under a concession contract that was in effect as of November 
13, 1998, and that either had been extended as of that date or was due 
to expire by December 31, 1998, and was subsequently extended. The 
Director must personally approve the award of a temporary concession 
contract in these circumstances and may do so only if the Director 
determines that the award is necessary to avoid interruption of visitor 
services and that all reasonable alternatives to the award of the 
temporary concession contract have been considered and found 
infeasible. The Director must publish a notice of his intention to 
award a temporary concession contract to a specified person under this 
paragraph and the reasons for the proposed award in the Federal 
Register at least 60 days before the temporary concession contract is 
awarded. In addition, the Director must notify the Committee on Energy 
and Natural Resources of the Senate and the Committee on Resources of 
the House of Representatives of the proposed award of a temporary 
concession contract under this paragraph at least 60 days before the 
temporary concession contract is awarded. A temporary concession 
contract awarded under the authority of this paragraph will be 
considered as a contract extension for purposes of determining the 
existence of a preferred offeror under Sec. 51.44.
    (c) A concessioner holding a temporary concession contract will not 
be eligible for a right of preference to a qualified concession 
contract which replaces a temporary contract unless the concessioner 
holding the temporary concession contract was determined or was 
eligible to be determined a preferred offeror under the extended 
concession contract that was replaced by the temporary concession 
contract under paragraph (b) of this section.


Sec. 51.25  Are there any other circumstances in which the Director may 
award a concession contract without public solicitation?

    Notwithstanding the public solicitation requirements of this part, 
the Director may award a concession contract non-competitively to any 
qualified person if the Director determines both that such an award is 
otherwise consistent with the requirements of this part and that 
extraordinary circumstances exist under which compelling and equitable 
considerations require the award of the concession contract to a 
particular qualified person in the public interest. Indisputable 
equitable considerations must be the determinant of such circumstances. 
The Director must publish a notice of his intention to award a 
concession contract to a specified person under these circumstances and 
the reasons for the proposed award in the Federal Register at least 60 
days before the concession contract is awarded. In addition, the 
Director also must notify the Committee on Energy and Natural Resources 
of the Senate and the Committee on Resources of the House of 
Representatives at least 60 days before the contract is awarded. The 
Director must personally approve any such award and may only do so with 
the prior written approval of the Secretary.

Subpart E--Right of Preference to a New Concession Contract


Sec. 51.26  What solicitation, selection and award procedures apply 
when a preferred offeror exists?

    The solicitation, selection and award procedures described in this 
part will apply to the solicitation, selection and award of contracts 
for which a preferred offeror exists, except as modified by this 
subpart, subpart F and other sections of this part related to preferred 
offerors and/or a right of preference.


Sec. 51.27  Who is a preferred offeror and what are a preferred 
offeror's rights to the award of a new concession contract?

    (a) A preferred offeror is a concessioner that the Director has 
determined is eligible to exercise a right of preference to the award 
of a qualified new concession contract in accordance with this part.

[[Page 20674]]

    (b) A right of preference is the right of a preferred offeror, if 
it submits a responsive proposal for a qualified concession contract, 
to match in accordance with the requirements of this part the terms and 
conditions of a competing proposal that the Director has determined to 
be the best responsive proposal.


Sec. 51.28  When will the Director determine whether a concessioner is 
a preferred offeror?

    Subject to Secs. 51.46 and 51.47, the Director will determine 
whether a concessioner is a preferred offeror in accordance with this 
part no later than the date of issuance of a prospectus for the 
applicable new concession contract.


Sec. 51.29  How will I know when a preferred offeror exists?

    If the Director has determined that a preferred offeror exists for 
a qualified concession contract under this part, the Director will 
identify the preferred offeror in the applicable prospectus and 
describe the preferred offeror's right of preference.


Sec. 51.30  What must a preferred offeror do before it may exercise a 
right of preference?

    A preferred offeror must submit a responsive proposal pursuant to 
the terms of an applicable prospectus for a qualified concession 
contract if the preferred offeror wishes to exercise a right of 
preference.


Sec. 51.31  What happens if a preferred offeror does not submit a 
responsive proposal?

    If a preferred offeror fails to submit a responsive proposal, the 
offeror may not exercise a right of preference. The concession contract 
will be awarded to the offeror submitting the best responsive proposal.


Sec. 51.32  What is the process if the Director determines that the 
best responsive proposal was not submitted by a preferred offeror?

    If the Director determines that a proposal other than the 
responsive proposal submitted by a preferred offeror is the best 
proposal submitted for a qualified concession contract, then the 
Director must advise the preferred offeror of the better terms and 
conditions of the best proposal and permit the preferred offeror to 
amend its proposal to match them. An amended proposal must match the 
better terms and conditions of the best proposal as determined by the 
Director. If the preferred offeror duly amends its proposal within the 
time period allowed by the Director, and the Director determines that 
the amended proposal matches the better terms and conditions of the 
best proposal, then the Director must select the preferred offeror for 
award of the contract upon the amended terms and conditions, subject to 
other applicable requirements of this part.


Sec. 51.33  What if a preferred offeror does not timely amend its 
proposal to meet the terms and conditions of the best proposal?

    If a preferred offeror does not amend its proposal to meet the 
terms and conditions of the best proposal within the time period 
allowed by the Director, the Director will select for award of the 
contract the offeror that submitted the best responsive proposal.


Sec. 51.34  What will the Director do if a selected preferred offeror 
does not timely execute the new concession contract?

    If a selected preferred offeror fails to execute the concession 
contract in the time period specified by the Director, the Director 
either will select for award of the concession contract the offeror 
that submitted the best responsive proposal, or will cancel the 
solicitation and may resolicit the concession contract but only without 
recognition of a preferred offeror or right of preference.


Sec. 51.35  What happens to a right of preference if the Director 
receives no responsive proposals?

    If the Director receives no responsive proposals, including a 
responsive proposal from a preferred offeror, in response to a 
prospectus for a qualified concession contract for which a preferred 
offeror exists, the Director must cancel the solicitation and may 
resolicit the concession contract or take other appropriate action in 
accordance with this part. No right of preference will apply to a 
concession contract resolicited under this section unless the contract 
is resolicited upon terms and conditions materially more favorable to 
offerors than those contained in the original contract.

Subpart F--Determining a Preferred Offeror


Sec. 51.36  What conditions must be met before the Director determines 
that a concessioner is a preferred offeror?

    A concessioner is a preferred offeror if the Director determines 
that the following conditions are met:
    (a) The concessioner was a satisfactory concessioner during the 
term of its concession contract as determined under this part;
    (b) The applicable new contract is a qualified concession contract 
as determined under this part; and
    (c) If applicable, the concessioner's previous concession contract 
was an outfitter and guide concession contract as determined under this 
part.


Sec. 51.37  How will the Director determine that a new concession 
contract is a qualified concession contract?

    A new concession contract is a qualified concession contract if the 
Director determines that:
    (a) The new concession contract provides for the continuation of 
the visitor services authorized under a previous concession contract. 
The visitor services to be continued under the new contract may be 
expanded or diminished in scope but, for purposes of a qualified 
concession contract, may not materially differ in nature and type from 
those authorized under the previous concession contract; and either
    (b) The new concession contract that is to replace the previous 
concession contract is estimated to result in, as determined by the 
Director, annual gross receipts of less than $500,000 in the first 12 
months of its term; or
    (c) The new concession contract is an outfitter and guide 
concession contract as described in this part.


Sec. 51.38  How will the Director determine that a concession contract 
is an outfitter and guide concession contract?

    The Director will determine that a concession contract is an 
outfitter and guide concession contract if the Director determines 
that:
    (a) The concession contract solely authorizes or requires (except 
for park area access purposes) the conduct of specialized outdoor 
recreation guide services in the backcountry of a park area; and
    (b) The conduct of operations under the concession contract 
requires employment of specially trained and experienced guides to 
accompany park visitors who otherwise may not have the skills and 
equipment to engage in the activity and to provide a safe and enjoyable 
experience for these visitors.


Sec. 51.39  What are some examples of outfitter and guide concession 
contracts?

    Outfitter and guide concession contracts may include, but are not 
limited to, concession contracts which solely authorize or require the 
guided conduct of river running, hunting (where otherwise lawful in a 
park area), fishing, horseback, camping, and mountaineering activities 
in the backcountry of a park area.


Sec. 51.40  What are some factors to be considered in determining that 
outfitter and guide operations are conducted in the backcountry?

    Determinations as to whether outfitter and guide operations are 
conducted in the backcountry of a park area will be made on a park-by-
park basis, taking into account the park area's particular

[[Page 20675]]

geographic circumstances. Factors that generally may indicate that 
outfitter and guide operations are conducted in the backcountry of a 
park area include, without limitation, the fact that:
    (a) The operations occur in areas remote from roads and developed 
areas;
    (b) The operations are conducted within a designated natural area 
of a park area;
    (c) The operations occur in areas that are inaccessible by 
motorized vehicle;
    (d) The operations occur in areas where search and rescue support 
is not readily available; and
    (e) All or a substantial portion of the operations occur in 
designated or proposed wilderness areas.


Sec. 51.41  If the concession contract grants a compensable interest in 
real property improvements, will the Director find that the concession 
contract is an outfitter and guide concession contract?

    The Director will find that a concession contract is not an 
outfitter and guide contract if the contract grants any compensable 
interest in real property improvements on lands owned by the United 
States within a park area.


Sec. 51.42  Are there exceptions to this compensable interest 
prohibition?

    Two exceptions to this compensable interest prohibition exist:
    (a) The prohibition will not apply to real property improvements 
lawfully constructed by a concessioner with the written approval of the 
Director in accordance with the express terms of a 1965 Act concession 
contract; and
    (b) The prohibition will not apply to real property improvements 
constructed and owned in fee simple by a concessioner or owned in fee 
simple by a concessioner's predecessor before the land on which they 
were constructed was included within the boundaries of the applicable 
park area.


Sec. 51.43  Who will make the determination that a concession contract 
is an outfitter and guide contract?

    Only a Deputy Director or an Associate Director will make the 
determination that a concession contract is or is not an outfitter and 
guide contract.


Sec. 51.44  How will the Director determine if a concessioner was 
satisfactory for purposes of a right of preference?

    To be a satisfactory concessioner for the purposes of a right of 
preference, the Director must determine that the concessioner operated 
satisfactorily on an overall basis during the term of its applicable 
concession contract, including extensions of the contract. The Director 
will base this determination in consideration of annual evaluations 
made by the Director of the concessioner's performance under the terms 
of the applicable concession contract and other relevant facts and 
circumstances. The Director must determine that a concessioner did not 
operate satisfactorily on an overall basis during the term of a 
concession contract if the annual evaluations of the concessioner made 
subsequent to May 17, 2000 are less than satisfactory for any two or 
more years of operation under the concession contract.


Sec. 51.45  Will a concessioner that has operated for less than the 
entire term of a concession contract be considered a satisfactory 
operator?

    The Director will determine that a concessioner has operated 
satisfactorily on an overall basis during the term of a concession 
contract only if the concessioner (including a new concessioner 
resulting from an assignment as described in this part, including, 
without limit, an assignment of a controlling interest in a 
concessioner as defined in this part) has or will have operated for 
more than two years under a concession contract with a term of more 
than five years or for one year under a concession contract with a term 
of five years or less. For purposes of this section, a new 
concessioner's first day of operation under an assigned concession 
contract (or as a new concessioner after approval of an assignment of a 
controlling interest in a concessioner) will be the day the Director 
approves the assignment pursuant to this part. If the Director 
determines that an assignment was compelled by circumstances beyond the 
control of the assigning concessioner, the Director may make an 
exception to the requirements of this section.


Sec. 51.46  May the Director determine that a concessioner has not 
operated satisfactorily after a prospectus is issued?

    The Director may determine that a concessioner has not operated 
satisfactorily on an overall basis during the term of a current 
concession contract, and therefore is not a preferred offeror, after a 
prospectus for a new contract has been issued and prior to the 
selection of the best proposal submitted in response to a prospectus. 
In circumstances where the usual time of an annual evaluation of a 
concessioner's performance may not occur until after the selection of 
the best proposal submitted in response to a prospectus, the Director 
will make an annual performance evaluation based on a shortened 
operations period prior to the selection of the best proposal. Such 
shorter operations period, however, must encompass at least 6 months of 
operations from the previous annual performance evaluation. In the 
event the concessioner receives a second less than satisfactory annual 
evaluation (including, without limitation, one based on a shortened 
operations period) May 17, 2000, the prospectus must be amended to 
delete a right of preference or canceled and reissued without 
recognition of a right of preference to the new concession contract.


Sec. 51.47  How does a person appeal a decision of the Director that a 
concessioner is or is not a preferred offeror?

    (a) Except as stated in paragraph (b) of this section, any person 
may appeal to the Director a determination that a concessioner is or is 
not a preferred offeror for the purposes of a right of preference in 
renewal, including, without limitation, whether the applicable new 
concession contract is or is not a qualified concession contract as 
described in this part. This appeal must specify the grounds for the 
appeal and be received by the Director in writing no later than 30 days 
after the date of the determination. If applicable, the Director may 
extend the submission date for an appeal under this section upon 
request by the concessioner if the Director determines that good cause 
for an extension exists.
    (b) The appeal provided by this section will not apply to 
determinations that a concessioner is not a preferred offeror as a 
consequence of two or more less than satisfactory annual evaluations as 
described in this part as the concessioner is given an opportunity to 
appeal those evaluations after they are made in accordance with 
applicable administrative guidelines.
    (c) The Director must consider an appeal under this section 
personally or must authorize a Deputy Director or Associate Director to 
consider the appeal. The deciding official must prepare a written 
decision on the appeal, taking into account the content of the appeal, 
other written information available, and the requirements of this part. 
The written decision on the appeal must be issued by the date of 
selection of the best proposal submitted in response to a prospectus. 
If the appeal results in a concessioner being determined a preferred 
offeror, then the concessioner will have a right of preference to the 
qualified concession contract as described in and subject to the 
conditions of this part, including, but not limited to, the obligation 
to submit a responsive proposal pursuant to the terms of the related 
prospectus. If the appeal results in a determination

[[Page 20676]]

that a concessioner is not a preferred offeror, no right of preference 
will apply to the award of the related concession contract and the 
award will be made in accordance with the requirements of this part.
    (d) No person will be considered as having exhausted administrative 
remedies with respect to a determination by the Director that a 
concessioner is or is not a preferred offeror until the Director issues 
a written decision in response to an appeal submitted pursuant to this 
section, or, where applicable, pursuant to an appeal provided by the 
administrative guidelines described in paragraph (b) of this section. 
The decision of the Director is final agency action.


Sec. 51.48  What happens to a right of preference in the event of 
termination of a concession contract for unsatisfactory performance or 
other breach?

    Nothing in this part will limit the right of the Director to 
terminate a concession contract pursuant to its terms at any time for 
less than satisfactory performance or otherwise. If a concession 
contract is terminated for less than satisfactory performance or other 
breach, the terminated concessioner, even if otherwise qualified, will 
not be eligible to be a preferred offeror. The fact that the Director 
may not have terminated a concession contract for less than 
satisfactory performance or other breach will not limit the authority 
of the Director to determine that a concessioner did not operate 
satisfactorily on an overall basis during the term of a concession 
contract.


Sec. 51.49  May the Director grant a right of preference except in 
accordance with this part?

    The Director may not grant a concessioner or any other person a 
right of preference or any other form of entitlement of any nature to a 
new concession contract, except in accordance with this part or in 
accordance with 36 CFR part 13.


Sec. 51.50  Does the existence of a preferred offeror limit the 
authority of the Director to establish the terms of a concession 
contract?

    The existence of a preferred offeror does not limit the authority 
of the Director to establish, in accordance with this part, the terms 
and conditions of a new concession contract, including, but not limited 
to, terms and conditions that modify the terms and conditions of a 
prior concession contract.

Subpart G--Leasehold Surrender Interest


Sec. 51.51  What special terms must I know to understand leasehold 
surrender interest?

    To understand leasehold surrender interest, you must refer to these 
definitions, applicable in the singular or the plural, whenever these 
terms are used in this part:
    Arbitration means binding arbitration conducted by an arbitration 
panel. All arbitration proceedings conducted under the authority of 
this subpart or subpart H of this part will utilize the following 
procedures unless otherwise agreed by the concessioner and the 
Director. One member of the arbitration panel will be selected by the 
concessioner, one member will be selected by the Director, and the 
third (neutral) member will be selected by the two party-appointed 
members. The neutral arbiter must be a licensed real estate appraiser. 
The expenses of the neutral arbiter and other associated common costs 
of the arbitration will be borne equally by the concessioner and the 
Director. The arbitration panel will adopt procedures that treat each 
party equally, give each party the opportunity to be heard, and give 
each party a fair opportunity to present its case. Adjudicative 
procedures are not encouraged but may be adopted by the panel if 
determined necessary in the circumstances of the dispute. 
Determinations must be made by a majority of the members of the panel 
and will be binding on the concessioner and the Director.
    A capital improvement is a structure, fixture, or non-removable 
equipment provided by a concessioner pursuant to the terms of a 
concession contract and located on lands of the United States within a 
park area. A capital improvement does not include any interest in land. 
Additionally, a capital improvement does not include any interest in 
personal property of any kind including, but not limited to, vehicles, 
boats, barges, trailers, or other objects, regardless of size, unless 
an item of personal property becomes a fixture as defined in this part. 
Concession contracts may further describe, consistent with the 
limitations of this part and the 1998 Act, the nature and type of 
specific capital improvements in which a concessioner may obtain a 
leasehold surrender interest.
    Construction cost of a capital improvement means the total of the 
incurred eligible direct and indirect costs necessary for constructing 
or installing the capital improvement that are capitalized by the 
concessioner in accordance with Generally Accepted Accounting 
Principals (GAAP). The term ``construct'' or ``construction'' as used 
in this part also means ``install'' or ``installation'' of fixtures 
where applicable.
    Consumer Price Index means the national ``Consumer Price Index--All 
Urban Consumers'' published by the Department of Labor. If this index 
ceases to be published, the Director will designate another regularly 
published cost-of-living index approximating the national Consumer 
Price Index.
    Depreciation means the loss of value in a capital improvement as 
evidenced by the condition and prospective serviceability of the 
capital improvement in comparison with a new unit of like kind.
    Eligible direct costs means the sum of all incurred capitalized 
costs (in amounts no higher than those prevailing in the locality of 
the project), that are necessary both for the construction of a capital 
improvement and are typically elements of a construction contract. 
Eligible direct costs may include, without limitation, the costs of (if 
capitalized in accordance with GAAP and in amounts no higher than those 
prevailing in the locality of the project): building permits; 
materials, products and equipment used in construction; labor used in 
construction; security during construction; contractor's shack and 
temporary fencing; material storage facilities; power line installation 
and utility costs during construction; performance bonds; and 
contractor's (and subcontractor's) profit and overhead (including job 
supervision, worker's compensation insurance and fire, liability, and 
unemployment insurance).
    Eligible indirect costs means, except as provided in the last 
sentence of this definition, the sum of all other incurred capitalized 
costs (in amounts no higher than those prevailing in the locality of 
the project) necessary for the construction of a capital improvement. 
Eligible indirect costs may include, without limitation, the costs of 
(if capitalized in accordance with GAAP and in amounts no higher than 
those prevailing in the locality of the project): architectural and 
engineering fees for plans, plan checks; surveys to establish building 
lines and grades; environmental studies; if the project is financed, 
the points, fees or service charges and interest on construction loans; 
all risk insurance expenses and ad valorem taxes during construction. 
The actual capitalized administrative expenses (in amounts no higher 
than those prevailing in the locality of the project) of the 
concessioner for direct, on-site construction inspection are

[[Page 20677]]

eligible indirect costs. Other administrative expenses of the 
concessioner are not eligible indirect costs.
    Fixtures and non-removable equipment are manufactured items of 
personal property of independent form and utility necessary for the 
basic functioning of a structure that are affixed to and considered to 
be part of the structure such that title is with the Director as real 
property once installed. Fixtures and non-removable equipment do not 
include building materials (e.g., wallboard, flooring, concrete, cinder 
blocks, steel beams, studs, window frames, windows, rafters, roofing, 
framing, siding, lumber, insulation, wallpaper, paint, etc.). Because 
of their special circumstances, floating docks (but not other types of 
floating property) constructed by a concessioner pursuant to the terms 
of a leasehold surrender interest concession contract are considered to 
be non-removable equipment for leasehold surrender interest purposes 
only. Except as otherwise indicated in this part, the term ``fixture'' 
as used in this part includes the term ``non-removable equipment.''
    Leasehold surrender interest solely means a right to payment in 
accordance with this part for related capital improvements that a 
concessioner makes or provides within a park area on lands owned by the 
United States pursuant to this part and under the terms and conditions 
of an applicable concession contract. The existence of a leasehold 
surrender interest does not give the concessioner, or any other person, 
any right to conduct business in a park area, to utilize the related 
capital improvements, or to prevent the Director or another person from 
utilizing the related capital improvements. The existence of a 
leasehold surrender interest does not include any interest in the land 
on which the related capital improvements are located.
    Leasehold surrender interest concession contract means a concession 
contract that provides for leasehold surrender interest in capital 
improvements.
    Leasehold surrender interest value means the amount of compensation 
a concessioner is entitled to be paid for a leasehold surrender 
interest in capital improvements in accordance with this part. Unless 
otherwise provided by the terms of a leasehold surrender interest 
concession contract under the authority of section 405(a)(4) of the 
1998 Act, leasehold surrender interest value in existing capital 
improvements is an amount equal to:
    (1) The initial construction cost of the related capital 
improvement;
    (2) Adjusted by (increased or decreased) the same percentage 
increase or decrease as the percentage increase or decrease in the 
Consumer Price Index from the date the Director approves the 
substantial completion of the construction of the related capital 
improvement to the date of payment of the leasehold surrender interest 
value;
    (3) Less depreciation of the related capital improvement on the 
basis of its condition as of the date of termination or expiration of 
the applicable leasehold surrender interest concession contract, or, if 
applicable, the date on which a concessioner ceases to utilize a 
related capital improvement (e.g., where the related capital 
improvement is taken out of service by the Director pursuant to the 
terms of a concession contract).
    Major rehabilitation means a planned, comprehensive rehabilitation 
of an existing structure that:
    (1) The Director approves in advance and determines is completed 
within 18 months from start of the rehabilitation work (unless a longer 
period of time is approved by the Director in special circumstances); 
and
    (2) The construction cost of which exceeds fifty percent of the 
pre-rehabilitation value of the structure.
    Pre-rehabilitation value of an existing structure means the 
replacement cost of the structure less depreciation.
    Real property improvements means real property other than land, 
including, but not limited to, capital improvements.
    Related capital improvement or related fixture means a capital 
improvement in which a concessioner has a leasehold surrender interest.
    Replacement cost means the estimated cost to reconstruct, at 
current prices, an existing structure with utility equivalent to the 
existing structure, using modern materials and current standards, 
design and layout.
    Structure means a building, dock, or similar edifice affixed to the 
land so as to be part of the real estate. A structure may include both 
constructed infrastructure (e.g., water, power and sewer lines) and 
constructed site improvements (e.g., paved roads, retaining walls, 
sidewalks, paved driveways, paved parking areas) that are permanently 
affixed to the land so as to be part of the real estate and that are in 
direct support of the use of a building, dock, or similar edifice. 
Landscaping that is integral to the construction of a structure is 
considered as part of a structure. Interior furnishings that are not 
fixtures are not part of a structure.
    Substantial completion of a capital improvement means the condition 
of a capital improvement construction project when the project is 
substantially complete and ready for use and/or occupancy.


Sec. 51.52  How do I obtain a leasehold surrender interest?

    Leasehold surrender interest concession contracts will contain 
appropriate leasehold surrender interest terms and conditions 
consistent with this part. A concessioner will obtain leasehold 
surrender interest in capital improvements constructed in accordance 
with this part and the leasehold surrender interest terms and 
conditions of an applicable leasehold surrender interest concession 
contract.


Sec. 51.53  When may the Director authorize the construction of a 
capital improvement?

    The Director may only authorize or require a concessioner to 
construct capital improvements on park lands in accordance with this 
part and under the terms and conditions of a leasehold surrender 
interest concession contract for the conduct by the concessioner of 
visitor services, including, without limitation, the construction of 
capital improvements necessary for the conduct of visitor services.


Sec. 51.54  What must a concessioner do before beginning to construct a 
capital improvement?

    Before beginning to construct any capital improvement, the 
concessioner must obtain written approval from the Director in 
accordance with the terms of its leasehold surrender interest 
concession contract. The request for approval must include appropriate 
plans and specifications for the capital improvement and any other 
information that the Director may specify. The request must also 
include an estimate of the total construction cost of the capital 
improvement. The estimate of the total construction cost must specify 
all elements of the cost in such detail as is necessary to permit the 
Director to determine that they are elements of construction cost as 
defined in this part. (The approval requirements of this and other 
sections of this part also apply to any change orders to a capital 
improvement project and to any additions to a structure or replacement 
of fixtures as described in this part.)


Sec. 51.55  What must a concessioner do after substantial completion of 
the capital improvement?

    Upon substantial completion of the construction of a capital 
improvement in which the concessioner is to obtain a leasehold 
surrender interest, the

[[Page 20678]]

concessioner must provide the Director a detailed construction report. 
The construction report must be supported by actual invoices of the 
capital improvement's construction cost together with, if requested by 
the Director, a written certification from a certified public 
accountant. The construction report must document, and any requested 
certification by the certified public accountant must certify, that all 
components of the construction cost were incurred and capitalized by 
the concessioner in accordance with GAAP, and that all components are 
eligible direct or indirect construction costs as defined in this part. 
Invoices for additional construction costs of elements of the project 
that were not completed as of the date of substantial completion may 
subsequently be submitted to the Director for inclusion in the 
project's construction cost.


Sec. 51.56  How will the construction cost for purposes of leasehold 
surrender interest value be determined?

    After receiving the detailed construction report (and 
certification, if requested), from the concessioner, the Director will 
review the report, certification and other information as appropriate 
to determine that the reported construction cost is consistent with the 
construction cost approved by the Director in advance of the 
construction and that all costs included in the construction cost are 
eligible direct or indirect costs as defined in this part. The 
construction cost determined by the Director will be the construction 
cost for purposes of the leasehold surrender interest value in the 
related capital improvement unless the Concessioner requests 
arbitration of the construction cost under Sec. 51.57. The Director may 
at any time amend a construction cost determination (subject to 
arbitration under Sec. 51.57) if the Director determines that it was 
based on false, misleading or incomplete information.


Sec. 51.57  How does a concessioner request arbitration of the 
construction cost of a capital improvement?

    If a concessioner requests arbitration of the construction cost of 
a capital improvement determined by the Director, the request must be 
made in writing to the Director within 3 months of the date of the 
Director's determination of construction cost under Sec. 51.56. If a 
timely request is not made, the Director's determination of 
construction cost under Sec. 51.56 shall be the final determination of 
the construction cost. The arbitration procedures are described in 
Sec. 51.51. The decision of the arbitration panel as to the 
construction cost of the capital improvement will be binding on the 
concessioner and the Director.


Sec. 51.58  What actions may or must the concessioner take with respect 
to a leasehold surrender interest?

    The concessioner:
    (a) May encumber a leasehold surrender interest in accordance with 
this part, but only for the purposes specified in this part;
    (b) Where applicable, must transfer in accordance with this part 
its leasehold surrender interest in connection with any assignment, 
termination or expiration of the concession contract; and
    (c) May relinquish or waive a leasehold surrender interest.


Sec. 51.59  Will a leasehold surrender interest be extinguished by 
expiration or termination of a leasehold surrender interest concession 
contract or may it be taken for public use?

    A leasehold surrender interest may not be extinguished by the 
expiration or termination of a concession contract and a leasehold 
surrender interest may not be taken for public use except on payment of 
just compensation. Payment of leasehold surrender interest value 
pursuant to this part will constitute the payment of just compensation 
for leasehold surrender interest within the meaning of this part and 
for all other purposes.


Sec. 51.60  How will a new concession contract awarded to an existing 
concessioner treat a leasehold surrender interest obtained under a 
prior concession contract?

    When a concessioner under a leasehold surrender interest concession 
contract is awarded a new concession contract by the Director, and the 
new concession contract continues a leasehold surrender interest in 
related capital improvements, then the concessioner's leasehold 
surrender interest value (established as of the date of expiration or 
termination of its prior concession contract) in the related capital 
improvements will be continued as the initial value (instead of initial 
construction cost) of the concessioner's leasehold surrender interest 
under the terms of the new concession contract. No compensation will be 
due the concessioner for its leasehold surrender interest or otherwise 
in these circumstances except as provided by this part.


Sec. 51.61  How is an existing concessioner who is not awarded a new 
concession contract paid for a leasehold surrender interest?

    (a) When a concessioner is not awarded a new concession contract 
after expiration or termination of a leasehold surrender interest 
concession contract, or, the concessioner, prior to such termination or 
expiration, ceases to utilize under the terms of a concession contract 
capital improvements in which the concessioner has a leasehold 
surrender interest, the concessioner will be entitled to be paid its 
leasehold surrender interest value in the related capital improvements. 
The leasehold surrender interest will not be transferred until payment 
of the leasehold surrender interest value. The date for payment of the 
leasehold surrender interest value, except in special circumstances 
beyond the Director's control, will be the date of expiration or 
termination of the leasehold surrender interest contract, or the date 
the concessioner ceases to utilize related capital improvements under 
the terms of a concession contract. Depreciation of the related capital 
improvements will be established as of the date of expiration or 
termination of the concession contract, or, if applicable, the date the 
concessioner ceases to utilize the capital improvements under the terms 
of a concession contract.
    (b) In the event that extraordinary circumstances beyond the 
control of the Director prevent the Director from making the leasehold 
surrender interest value payment as of the date of expiration or 
termination of the leasehold surrender interest concession contract, 
or, as of the date a concessioner ceases to utilize related capital 
improvements under the terms of a concession contract, the payment when 
made will include interest on the amount that was due on the date of 
expiration or termination of the concession contract or cessation of 
use for the period after the payment was due until payment is made (in 
addition to the inclusion of a continuing Consumer Price Index 
adjustment until the date payment is made). The rate of interest will 
be the applicable rate of interest established by law for overdue 
obligations of the United States. The payment for a leasehold surrender 
interest value will be made within one year after the expiration or 
termination of the concession contract or the cessation of use of 
related capital improvements under the terms of a concession contract.

[[Page 20679]]

Sec. 51.62  What is the process to determine the leasehold surrender 
interest value when the concessioner does not seek or is not awarded a 
new concession contract?

    Leasehold surrender interest concession contracts must contain 
provisions under which the Director and the concessioner will seek to 
agree in advance of the expiration or other termination of the 
concession contract as to what the concessioner's leasehold surrender 
interest value will be on a unit-by-unit basis as of the date of 
expiration or termination of the concession contract. In the event that 
agreement cannot be reached, the provisions of the leasehold surrender 
interest concession contract must provide for arbitration as to the 
leasehold surrender interest values upon request of the Director or the 
concessioner. The arbitration procedures are described in Section 
51.51. A prior decision as to the construction cost of capital 
improvements made by the Director or by an arbitration panel in 
accordance with this part are final and not subject to further 
arbitration.


Sec. 51.63  When a new concessioner pays a prior concessioner for a 
leasehold surrender interest, what is the leasehold surrender interest 
in the related capital improvements for purposes of a new concession 
contract?

    A new leasehold surrender interest concession contract awarded to a 
new concessioner will require the new concessioner to pay the prior 
concessioner its leasehold surrender interest value in existing capital 
improvements as determined under Sec. 51.62. The new concessioner upon 
payment will have a leasehold surrender interest in the related capital 
improvements on a unit-by-unit basis under the terms of the new 
leasehold surrender interest contract. Instead of initial construction 
cost, the initial value of such leasehold surrender interest will be 
the leasehold surrender interest value that the new concessioner was 
required to pay the prior concessioner.


Sec. 51.64  May the concessioner gain additional leasehold surrender 
interest by undertaking a major rehabilitation or adding to a structure 
in which the concessioner has a leasehold surrender interest?

    A concessioner that, with the written approval of the Director, 
undertakes a major rehabilitation or adds a new structure (e.g., a new 
wing to an existing building or an extension of an existing sidewalk) 
to an existing structure in which the concessioner has a leasehold 
surrender interest, will increase its leasehold surrender interest in 
the related structure, effective as of the date of substantial 
completion of the major rehabilitation or new structure, by the 
construction cost of the major rehabilitation or new structure. The 
Consumer Price Index adjustment for leasehold surrender interest value 
purposes will apply to the construction cost as of the date of 
substantial completion of the major rehabilitation or new structure. 
Approvals for major rehabilitations and additions to structures are 
subject to the same requirements and conditions applicable to new 
construction as described in this part.


Sec. 51.65  May the concessioner gain additional leasehold surrender 
interest by replacing a fixture in which the concessioner has a 
leasehold surrender interest?

    A concessioner that replaces an existing fixture in which the 
concessioner has a leasehold surrender interest with a new fixture will 
increase its leasehold surrender interest by the amount of the 
construction cost of the replacement fixture less the construction cost 
of the replaced fixture.


Sec. 51.66  Under what conditions will a concessioner obtain a 
leasehold surrender interest in existing real property improvements in 
which no leasehold surrender interest exists?

    (a) A concession contract may require the concessioner to replace 
fixtures in real property improvements in which there is no leasehold 
surrender interest (e.g., fixtures attached to an existing government 
facility assigned by the Director to the concessioner). A leasehold 
surrender interest will be obtained by the concessioner in such 
fixtures subject to the approval and determination of construction cost 
and other conditions contained in this part.
    (b) A concession contract may require the concessioner to undertake 
a major rehabilitation of a structure in which there is no leasehold 
surrender interest (e.g., a government-constructed facility assigned to 
the concessioner). Upon substantial completion of the major 
rehabilitation, the concessioner will obtain a leasehold surrender 
interest in the structure. The initial construction cost of this 
leasehold surrender interest will be the construction cost of the major 
rehabilitation. Depreciation for purposes of leasehold surrender 
interest value will apply only to the rehabilitated components of the 
related structure.


Sec. 51.67  Will a concessioner obtain leasehold surrender interest as 
a result of repair and maintenance of real property improvements?

    A concessioner will not obtain initial or increased leasehold 
surrender interest as a result of repair and maintenance of real 
property improvements unless a repair and maintenance project is a 
major rehabilitation.

Subpart H--Possessory Interest


Sec. 51.68  If a concessioner under a 1965 Act concession contract is 
not awarded a new concession contract, how will a concessioner that has 
a possessory interest receive compensation for its possessory interest?

    A concessioner that has possessory interest in real property 
improvements pursuant to the terms of a 1965 Act concession contract, 
will, if the prior concessioner does not seek or is not awarded a new 
concession contract upon expiration or other termination of its 1965 
Act concession contract, be entitled to receive compensation for its 
possessory interest in the amount and manner described by the 
possessory interest concession contract. The concessioner shall also be 
entitled to receive all other compensation, including any compensation 
for property in which there is no possessory interest, to the extent 
and in the manner that the possessory interest contract may provide.


Sec. 51.69  What happens if there is a dispute between the new 
concessioner and a prior concessioner as to the value of the prior 
concessioner's possessory interest?

    In case of a dispute between a new concessioner and a prior 
concessioner as to the value of the prior concessioner's possessory 
interest, the dispute will be resolved under the procedures contained 
in the possessory interest concession contract. A new concessioner will 
not agree on the value of a prior concessioner's possessory interest 
without the prior written approval of the Director unless the value is 
determined through the binding determination process required by the 
possessory interest concession contract. The Director's written 
approval is to ensure that the value is consistent with the terms and 
conditions of the possessory interest concession contract. If a new 
concessioner and a prior concessioner engage in a binding process to 
resolve a dispute as to the value of the prior concessioner's 
possessory interest, the new concessioner must allow the Director to 
assist the new concessioner in the dispute process to the extent 
requested

[[Page 20680]]

by the Director. Nothing in this section may be construed as limiting 
the rights of the prior concessioner to be paid for its possessory 
interest or other property by a new concessioner in accordance with the 
terms of its concession contract.


Sec. 51.70  If a concessioner under a 1965 Act concession contract is 
awarded a new concession contract, what happens to the concessioner's 
possessory interest?

    In the event a concessioner under a 1965 Act concession contract is 
awarded a new concession contract replacing a possessory interest 
concession contract, the concessioner will obtain a leasehold surrender 
interest in its existing possessory interest real property improvements 
under the terms of the new concession contract. The concessioner will 
carry over as the initial value of such leasehold surrender interest 
(instead of initial construction cost) an amount equal to the value of 
its possessory interest in real property improvements as of the 
expiration or other termination of its possessory interest contract. 
This leasehold surrender interest will apply to the concessioner's 
possessory interest in real property improvements even if the real 
property improvements are not capital improvements as defined in this 
part. In the event that the concessioner had a possessory interest in 
only a portion of a structure, depreciation for purposes of leasehold 
surrender interest value under the new concession contract will apply 
only to the portion of the structure to which the possessory interest 
applied. The concessioner and the Director will seek to agree on an 
allocation of the leasehold surrender interest value on a unit by unit 
basis.


Sec. 51.71  What is the process to be followed if there is a dispute 
between the prior concessioner and the Director as to the value of 
possessory interest?

    Unless other procedures are agreed to by the concessioner and the 
Director, in the event that a concessioner under a possessory interest 
concession contract is awarded a new concession contract and there is a 
dispute between the concessioner and the Director as to the value of 
such possessory interest, or, a dispute as to the allocation of an 
established overall possessory interest value on a unit by unit basis, 
the value and/or allocation will be established by arbitration in 
accordance with the terms and conditions of this part. The arbitration 
procedures are described in Sec. 51.51.


Sec. 51.72  If a new concessioner is awarded the contract, what is the 
relationship between leasehold surrender interest and possessory 
interest?

    If a new concessioner is awarded a leasehold surrender interest 
concession contract and is required to pay a prior concessioner for 
possessory interest in real property improvements, the new concessioner 
will have a leasehold surrender interest in the real property 
improvements under the terms of its new concession contract. The 
initial value of the leasehold surrender interest (instead of initial 
construction cost) will be the value of the possessory interest as of 
the expiration or other termination of the 1965 Act possessory interest 
concession contract. This leasehold surrender interest will apply even 
if the related possessory interest real property improvements are not 
capital improvements as defined in this part. In the event a new 
concessioner obtains a leasehold surrender interest in only a portion 
of a structure as a result of the acquisition of a possessory interest 
from a prior concessioner, depreciation for purposes of leasehold 
surrender interest value will apply only to the portion of the 
structure to which the possessory interest applied.

Subpart I--Concession Contract Provisions


Sec. 51.73  What is the term of a concession contract?

    A concession contract will generally be awarded for a term of 10 
years or less unless the Director determines that the contract terms 
and conditions, including the required construction of capital 
improvements, warrant a longer term. It is the policy of the Director 
under these requirements that the term of concession contracts should 
be as short as is prudent, taking into account the financial 
requirements of the concession contract, resource protection and 
visitor needs, and other factors the Director may deem appropriate. In 
no event will a concession contract have a term of more than 20 years 
(unless extended in accordance with this part).


Sec. 51.74  When may a concession contract be terminated by the 
Director?

    Concession contracts will contain appropriate provisions for 
suspension of operations under a concession contract and for 
termination of a concession contract by the Director for default, 
including, without limitation, unsatisfactory performance, or 
termination when necessary to achieve the purposes of the 1998 Act. The 
purposes of the 1998 Act include, but are not limited to, protecting, 
conserving, and preserving park area resources and providing necessary 
and appropriate visitor services in park areas.


Sec. 51.75  May the Director segment or split concession contracts?

    The Director may not segment or otherwise split visitor services 
authorized or required under a single concession contract into separate 
concession contracts if the purpose of such action is to establish a 
concession contract with anticipated annual gross receipts of less than 
$500,000.


Sec. 51.76  May the Director include in a concession contract or 
otherwise grant a concessioner a preferential right to provide new or 
additional visitor services?

    The Director may not include a provision in a concession contract 
or otherwise grant a concessioner a preferential right to provide new 
or additional visitor services under the terms of a concession contract 
or otherwise. For the purpose of this section, a ``preferential right 
to new or additional services'' means a right of a concessioner to a 
preference (in the nature of a right of first refusal or otherwise) to 
provide new or additional visitor services in a park area beyond those 
already provided by the concessioner under the terms of a concession 
contract. A concession contract may be amended to authorize the 
concessioner to provide minor additional visitor services that are a 
reasonable extension of the existing services. A concessioner that is 
allocated park area entrance, user days or similar resource use 
allocations for the purposes of a concession contract will not obtain 
any contractual or other rights to continuation of a particular 
allocation level pursuant to the terms of a concession contract or 
otherwise. Such allocations will be made, withdrawn and/or adjusted by 
the Director from time to time in furtherance of the purposes of this 
part.


Sec. 51.77  Will a concession contract provide a concessioner an 
exclusive right to provide visitor services?

    Concession contracts will not provide in any manner an exclusive 
right to provide all or certain types of visitor services in a park 
area. The Director may limit the number of concession contracts to be 
awarded for the conduct of visitor services in a particular park area 
in furtherance of the purposes described in this part.


Sec. 51.78  Will a concession contract require a franchise fee and will 
the franchise fee be subject to adjustment?

    (a) Concession contracts will provide for payment to the government 
of a

[[Page 20681]]

franchise fee or other monetary consideration as determined by the 
Director upon consideration of the probable value to the concessioner 
of the privileges granted by the contract involved. This probable value 
will be based upon a reasonable opportunity for net profit in relation 
to capital invested and the obligations of the contract. Consideration 
of revenue to the United States shall be subordinate to the objectives 
of protecting and preserving park areas and of providing necessary and 
appropriate visitor services at reasonable rates.
    (b) The franchise fee contained in a concession contract with a 
term of 5 years or less may not be adjusted during the term of the 
contract. Concession contracts with a term of more than 5 years will 
contain a provision that provides for adjustment of the contract's 
established franchise fee at the request of the concessioner or the 
Director. An adjustment will occur if the concessioner and the Director 
mutually determine that extraordinary, unanticipated changes occurred 
after the effective date of the contract that have affected or will 
significantly affect the probable value of the privileges granted by 
the contract. The concession contract will provide for arbitration if 
the Director and a concessioner cannot agree upon an appropriate 
adjustment to the franchise fee that reflects the extraordinary, 
unanticipated changes determined by the concessioner and the Director.


Sec. 51.79  May the Director waive payment of a franchise fee or other 
payments?

    The Director may not waive the concessioner's payment of a 
franchise fee or other payments or consideration required by a 
concession contract, except that a franchise fee may be waived in part 
by the Director pursuant to administrative guidelines that may allow 
for a partial franchise fee waiver in recognition of exceptional 
performance by a concessioner under the terms of a concession contract. 
A concessioner will have no right to require the partial waiver of a 
franchise fee under this authority or under any related administrative 
guidelines.


Sec. 51.80  How will the Director establish franchise fees for multiple 
outfitter and guide concession contracts in the same park area?

    If the Director awards more than one outfitter and guide concession 
contract that authorizes or requires the concessioners to provide the 
same or similar visitor services at the same approximate location or 
utilizing the same resource within a single park area, the Director 
will establish franchise fees for those concession contracts that are 
comparable. In establishing these comparable franchise fees, the 
Director will take into account, as appropriate, variations in the 
nature and type of visitor services authorized by particular concession 
contracts, including, but not limited to, length of the visitor 
experience, type of equipment utilized, relative expense levels, and 
other relevant factors. The terms and conditions of an existing 
concession contract will not be subject to modification or open to 
renegotiation by the Director because of the award of a new concession 
contract at the same approximate location or utilizing the same 
resource.


Sec. 51.81  May the Director include ``special account'' provisions in 
concession contracts?

    (a) The Director may not include in concession contracts ``special 
account'' provisions, that is, contract provisions which require or 
authorize a concessioner to undertake with a specified percentage of 
the concessioner's gross receipts the construction of real property 
improvements, including, without limitation, capital improvements on 
park lands. The construction of capital improvements will be undertaken 
only pursuant to the leasehold surrender interest provisions of this 
part and the applicable concession contract.
    (b) Concession contracts may contain provisions that require the 
concessioner to set aside a percentage of its gross receipts or other 
funds in a repair and maintenance reserve to be used at the direction 
of the Director solely for maintenance and repair of real property 
improvements located in park areas and utilized by the concessioner in 
its operations. Repair and maintenance reserve funds may not be 
expended to construct real property improvements, including, without 
limitation, capital improvements. Repair and maintenance reserve 
provisions may not be included in concession contracts in lieu of a 
franchise fee, and funds from the reserves will be expended only for 
the repair and maintenance of real property improvements assigned to 
the concessioner by the Director for use in its operations.
    (c) A concession contract must require the concessioner to maintain 
in good condition through a comprehensive repair and maintenance 
program all of the concessioner's personal property used in the 
performance of the concession contract and all real property 
improvements, including, without limitation, capital improvements, and, 
government personal property, assigned to the concessioner by a 
concession contract.


Sec. 51.82  Are a concessioner's rates required to be reasonable and 
subject to approval by the Director?

    (a) Concession contracts will permit the concessioner to set 
reasonable and appropriate rates and charges for visitor services 
provided to the public, subject to approval by the Director.
    (b) Unless otherwise provided in a concession contract, the 
reasonableness of a concessioner's rates and charges to the public will 
be determined primarily by comparison with those rates and charges for 
facilities and services of comparable character under similar 
conditions, with due consideration of the following factors and other 
factors deemed relevant by the Director: Length of season; peakloads; 
average percentage of occupancy; accessibility; availability and costs 
of labor and materials; and types of patronage. Such rates and charges 
may not exceed the market rates and charges for comparable facilities, 
goods, and services, after taking these factors into consideration.


Sec. 51.83   Handicrafts. [Reserved]

Subpart J--Assignment or Encumbrance of Concession Contracts


Sec. 51.84  What special terms must I know to understand this part?

    To understand this subpart specifically and this part in general 
you must refer to these definitions, applicable in the singular or 
plural, whenever the terms are used in this part.
    A controlling interest in a concession contract means an interest, 
beneficial or otherwise, that permits the exercise of managerial 
authority over a concessioner's performance under the terms of the 
concession contract and/or decisions regarding the rights and 
liabilities of the concessioner.
    A controlling interest in a concessioner means, in the case of 
corporate concessioners, an interest, beneficial or otherwise, of 
sufficient outstanding voting securities or capital of the concessioner 
or related entities that permits the exercise of managerial authority 
over the actions and operations of the concessioner. A ``controlling 
interest'' in a concessioner also means, in the case of corporate 
concessioners, an interest, beneficial or otherwise, of sufficient 
outstanding voting securities or capital of the concessioner or related 
entities to permit the election of a majority of the Board of Directors 
of the concessioner.

[[Page 20682]]

The term ``controlling interest'' in a concessioner, in the instance of 
a partnership, limited partnership, joint venture, other business 
organization or individual entrepreneurship, means ownership or 
beneficial ownership of the assets of the concessioner that permits the 
exercise of managerial authority over the actions and operations of the 
concessioner.
    Rights to operate and/or manage under a concession contract means 
any arrangement where the concessioner employs or contracts with a 
third party to operate and/or manage the performance of a concession 
contract (or any portion thereof). This does not apply to arrangements 
with an individual employee.
    Subconcessioner means a third party that, with the approval of the 
Director, has been granted by a concessioner rights to operate under a 
concession contract (or any portion thereof), whether in consideration 
of a percentage of revenues or otherwise.


Sec. 51.85  What assignments require the approval of the Director?

    The concessioner may not assign, sell, convey, grant, contract for, 
or otherwise transfer (such transactions collectively referred to as 
``assignments'' for purposes of this part), without the prior written 
approval of the Director, any of the following:
    (a) Any concession contract;
    (b) Any rights to operate under or manage the performance of a 
concession contract as a subconcessioner or otherwise;
    (c) Any controlling interest in a concessioner or concession 
contract; or
    (d) Any leasehold surrender interest or possessory interest 
obtained under a concession contract.


Sec. 51.86  What encumbrances require the approval of the Director?

    The concessioner may not encumber, pledge, mortgage or otherwise 
provide as a security interest for any purpose (such transactions 
collectively referred to as ``encumbrances'' for purposes of this 
part), without the prior written approval of the Director, any of the 
following:
    (a) Any concession contract;
    (b) Any rights to operate under or manage performance under a 
concession contract as a subconcessioner or otherwise;
    (c) Any controlling interest in a concessioner or concession 
contract; or
    (d) Any leasehold surrender interest or possessory interest 
obtained under a concession contract.


Sec. 51.87  Does the concessioner have an unconditional right to 
receive the Director's approval of an assignment or encumbrance?

    No, approvals of assignments or encumbrances are subject to the 
following determinations by the Director:
    (a) That the purpose of a leasehold surrender interest or 
possessory interest encumbrance is either to finance the construction 
of capital improvements under the applicable concession contract in the 
applicable park area or to finance the purchase of the applicable 
concession contract. An encumbrance of a leasehold surrender interest 
or possessory interest may not be made for any other purpose, 
including, but not limited to, providing collateral for other debt of a 
concessioner, the parent of a concessioner, or an entity related to a 
concessioner;
    (b) That the encumbrance does not purport to provide the creditor 
or assignee any rights beyond those provided by the applicable 
concession contract, including, but not limited to, any rights to 
conduct business in a park area except in strict accordance with the 
terms and conditions of the applicable concession contract;
    (c) That the encumbrance does not purport to permit a creditor or 
assignee of a creditor, in the event of default or otherwise, to begin 
operations under the applicable concession contract or through a 
designated operator unless and until the Director determines that the 
proposed operator is a qualified person as defined in this part;
    (d) That an assignment or encumbrance does not purport to assign or 
encumber assets that are not owned by the concessioner, including, 
without limitation, park area entrance, user day, or similar use 
allocations made by the Director;
    (e) That the assignment is to a qualified person as defined in this 
part;
    (f) That the assignment or encumbrance would not have an adverse 
impact on the protection, conservation or preservation of park 
resources;
    (g) That the assignment or encumbrance would not have an adverse 
impact on the provision of necessary and appropriate facilities and 
services to visitors at reasonable rates and charges; and
    (h) That the terms of the assignment or encumbrance are not likely, 
directly or indirectly, to reduce an existing or new concessioner's 
opportunity to earn a reasonable profit over the remaining term of the 
applicable concession contract, to affect adversely the quality of 
facilities and services provided by the concessioner, or result in a 
need for increased rates and charges to the public to maintain the 
quality of concession facilities and services.


Sec. 51.88  What happens if an assignment or encumbrance is completed 
without the approval of the Director?

    Assignments or encumbrances completed without the prior written 
approval of the Director will be considered as null and void and a 
material breach of the applicable concession contract which may result 
in termination of the contract for cause. No person will obtain any 
valid or enforceable rights in a concessioner, in a concession 
contract, or to operate or manage under a concession contract as a 
subconcessioner or otherwise, or to leasehold surrender interest or 
possessory interest, if acquired in violation of the requirements in 
this subpart.


Sec. 51.89  What happens if there is a default on an encumbrance 
approved by the Director?

    In the event of default on an encumbrance approved by the Director 
in accordance with this part, the creditor, or an assignee of the 
creditor, may succeed to the interests of the concessioner only to the 
extent provided by the approved encumbrance, this part and the terms 
and conditions of the applicable concession contract.


Sec. 51.90  How does the concessioner get the Director's approval 
before making an assignment or encumbrance?

    Before completing any assignment or encumbrance which may be 
considered to be the type of transaction described in this part, 
including, but not limited to, the assignment or encumbrance of what 
may be a controlling interest in a concessioner or a concession 
contract, the concessioner must apply in writing for approval of the 
transaction by the Director.


Sec. 51.91  What information may the Director require in the 
application?

    An application for the Director's approval of an assignment or 
encumbrance will include, to the extent required by the Director in the 
circumstances of the transaction, the following information in such 
detail as the Director may specify in order to make the determinations 
required by this subpart:
    (a) All instruments proposed to implement the transaction;
    (b) An opinion of counsel to the effect that the proposed 
transaction is lawful under all applicable federal and state laws;

[[Page 20683]]

    (c) A narrative description of the proposed transaction;
    (d) A statement as to the existence and nature of any litigation 
relating to the proposed transaction;
    (e) A description of the management qualifications, financial 
background, and financing and operational plans of any proposed 
transferee;
    (f) A detailed description of all financial aspects of the proposed 
transaction;
    (g) Prospective financial statements (proformas);
    (h) A schedule that allocates in detail the purchase price (or, in 
the case of a transaction other than an asset purchase, the valuation) 
of all assets assigned or encumbered. In addition, the applicant must 
provide a description of the basis for all allocations and ownership of 
all assets; and
    (i) Such other information as the Director may require to make the 
determinations required by this subpart.


Sec. 51.92  What are standard proformas?

    Concessioners are encouraged to submit standard prospective 
financial statements (proformas) pursuant to this part. A ``standard 
proforma'' is one that:
    (a) Provides projections, including revenues and expenses that are 
consistent with the concessioner's past operating history unless the 
proforma is accompanied by a narrative that describes why differing 
expectations are achievable and realistic;
    (b) Assumes that any loan related to an assignment or encumbrance 
will be paid in full by the expiration of the concession contract 
unless the proforma contains a narrative description as to why an 
extended loan period is consistent with an opportunity for reasonable 
profit over the remaining term of the concession contract. The 
narrative description must include, but is not limited to, 
identification of the loan's collateral after expiration of the 
concession contract; and
    (c) Assumes amortization of any intangible assets assigned or 
encumbered as a result of the transaction over the remaining term of 
the concession contract unless the proforma contains a narrative 
description as to why such extended amortization period is consistent 
with an opportunity for reasonable profit over the remaining term of 
the concession contract.


Sec. 51.93  If the transaction includes more that one concession 
contract, how must required information be provided?

    In circumstances of an assignment or encumbrance that includes more 
than one concession contract, the concessioner must provide the 
information described in this subpart on a contract by contract basis.


Sec. 51.94  What information will the Director consider when deciding 
to approve a transaction?

    In deciding whether to approve an assignment or encumbrance, the 
Director will consider the proformas, all other information submitted 
by the concessioner, and other information available to the Director.


Sec. 51.95  Does the Director's approval of an assignment or 
encumbrance include any representations of any nature?

    In approving an assignment or encumbrance, the Director has no duty 
to inform any person of any information the Director may have relating 
to the concession contract, the park area, or other matters relevant to 
the concession contract or the assignment or encumbrance. In addition, 
in approving an assignment or encumbrance, the Director makes no 
representations of any nature to any person about any matter, 
including, but not limited to, the value, allocation, or potential 
profitability of any concession contract or assets of a concessioner. 
No approval of an assignment or encumbrance may be construed as 
altering the terms and conditions of the applicable concession contract 
unless expressly so stated by the Director in writing.


Sec. 51.96  May the Director amend or extend a concession contract for 
the purpose of facilitating a transaction?

    The Director may not amend or extend a concession contract for the 
purpose of facilitating an assignment or encumbrance. The Director may 
not make commitments regarding rates to the public, contract 
extensions, concession contract terms and conditions, or any other 
matter, for the purpose of facilitating an assignment or encumbrance.


Sec. 51.97  May the Director open to renegotiation or modify the terms 
of a concession contract as a condition to the approval of a 
transaction?

    The Director may not open to renegotiation or modify the terms and 
conditions of a concession contract as a condition to the approval of 
an assignment or encumbrance. The exception is if the Director 
determines that renegotiation or modification is required to avoid an 
adverse impact on the protection, conservation or preservation of the 
resources of a park area or an adverse impact on the provision of 
necessary and appropriate visitor services at reasonable rates and 
charges.

Subpart K--Information and Access to Information


Sec. 51.98  What records must the concessioner keep and what access 
does the Director have to records?

    A concessioner (and any subconcessioner) must keep any records that 
the Director may require for the term of the concession contract and 
for five calendar years after the termination or expiration of the 
concession contract to enable the Director to determine that all terms 
of the concession contract are or were faithfully performed. The 
Director and any duly authorized representative of the Director must, 
for the purpose of audit and examination, have access to all pertinent 
records, books, documents, and papers of the concessioner, 
subconcessioner and any parent or affiliate of the concessioner (but 
with respect to parents and affiliates, only to the extent necessary to 
confirm the validity and performance of any representations or 
commitments made to the Director by a parent or affiliate of the 
concessioner).


Sec. 51.99  What access to concessioner records will the Comptroller 
General have?

    The Comptroller General or any duly authorized representative of 
the Comptroller General must, until the expiration of five calendar 
years after the close of the business year of each concessioner (or 
subconcessioner), have access to and the right to examine all pertinent 
books, papers, documents and records of the concessioner, 
subconcessioner and any parent or affiliate of the concessioner (but 
with respect to parents and affiliates only to the extent necessary to 
confirm the validity and performance of any representations or 
commitments made to the Director by the parent or affiliate of the 
concessioner).


Sec. 51.100  When will the Director make proposals and evaluation 
documents publicly available?

    In the interest of enhancing competition for concession contracts, 
the Director will not make publicly available proposals submitted in 
response to a prospectus or documents generated by the Director in 
evaluating such proposals, until the date that the new concession 
contract solicited by the prospectus is awarded. At that time, the 
Director may or will make the proposals and documents publicly 
available in accordance with applicable law.

[[Page 20684]]

Subpart L--The Effect of the 1998 Act's Repeal of the 1965 Act


Sec. 51.101  Did the 1998 Act repeal the 1965 Act?

    Section 415 of the 1998 Act repealed the 1965 Act and related laws 
as of November 13, 1998. This repeal did not affect the validity of any 
1965 Act concession contract. The provisions of this part apply to all 
1965 Act concession contracts except to the extent that such provisions 
are inconsistent with terms and conditions of a 1965 Act concession 
contract.


Sec. 51.102  What is the effect of the 1998 Act's repeal of the 1965 
Act's preference in renewal?

    (a) Section 5 of the 1965 Act required the Secretary to give 
existing satisfactory concessioners a preference in the renewal (termed 
a ``renewal preference'' in the rest of this section) of its concession 
contract or permit. Section 415 of the 1998 Act repealed this statutory 
renewal preference as of November 13, 1998. It is the final decision of 
the Director, subject to the right of appeal set forth in paragraph (b) 
of this section, that holders of 1965 Act concession contracts are not 
entitled to be given a renewal preference with respect to such 
contracts (although they may otherwise qualify for a right of 
preference regarding such contracts under Sections 403(7) and (8) of 
the 1998 Act as implemented in this part). However, if a concessioner 
holds an existing 1965 Act concession contract and the contract makes 
express reference to a renewal preference, the concessioner may appeal 
to the Director for recognition of a renewal preference.
    (b) Such appeal must be in writing and be received by the Director 
no later than thirty days after the issuance of a prospectus for a 
concession contract under this part for which the concessioner asserts 
a renewal preference. The Director must make a decision on the appeal 
prior to the proposal submission date specified in the prospectus. 
Where applicable, the Director will give notice of this appeal to all 
potential offerors that requested a prospectus. The Director may 
delegate consideration of such appeals only to a Deputy or Associate 
Director. The deciding official must prepare a written decision on the 
appeal, taking into account the content of the appeal and other 
available information.
    (c) If the appeal results in a determination by the Director that 
the 1965 Act concession contract in question makes express reference to 
a renewal preference under section 5 of the 1965 Act, the 1998 Act's 
repeal of section 5 of the 1965 Act was inconsistent with the terms and 
conditions of the concession contract, and that the holder of the 
concession contract in these circumstances is entitled to a renewal 
preference by operation of law, the Director will permit the 
concessioner to exercise a renewal preference for the contract subject 
to and in accordance with the otherwise applicable right of preference 
terms and conditions of this part, including, without limitation, the 
requirement for submission of a responsive proposal pursuant to the 
terms of an applicable prospectus. The Director, similarly, will permit 
any holder of a 1965 Act concession contract that a court of competent 
jurisdiction determines in a final order is entitled to a renewal 
preference, for any reason, to exercise a right of preference in 
accordance with the otherwise applicable requirements of this part, 
including, without limitation, the requirement for submission of a 
responsive proposal pursuant to the terms of an applicable prospectus.


Sec. 51.103  Severability.

    A determination that any provision of this part is unlawful will 
not affect the validity of the remaining provisions.

Subpart M--Information Collection


Sec. 51.104  Have information collection procedures been followed?

    (a) The Paperwork Reduction Act provides that an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
Control Number. The information collection for submission of proposals 
in response to concession prospectuses contained in this part have been 
approved by the Office of Management and Budget as required by 44 
U.S.C. 3501 et seq. and assigned clearance number 1024-0125, extended 
through May 30, 2000. An information collection for proposed transfers 
of concession operations is covered by OMB Approval No. 1024-0126 
effective through August 31, 2002.
    (b) The public reporting burden for the collection of information 
for the purpose of preparing a proposal in response to a contract 
solicitation is estimated to average 480 hours per proposal for large 
authorizations and 240 hours per proposal for small authorizations. The 
public reporting burden for the collection of information for the 
purpose of requesting approval of a sale or transfer of a concession 
operation is estimated to be 80 hours. Please send comments regarding 
this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing the burden, to the 
Information Collection Officer, National Park Service, 1849 C Street, 
Washington, DC 20240; and to the Attention: Desk Officer for the 
Interior Department, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Washington, DC 20503.
    (c) Additional reporting and recordkeeping requirements were 
identified in subpart F regarding appeal of a preferred offeror 
determination, subpart G regarding leasehold surrender interest and in 
subpart K regarding recordkeeping that are not covered under OMB 
approval. An emergency information collection request to cover these 
requirements has been prepared and submitted to OMB for approvals. 
These additional information collection requirements will not be 
implemented until OMB approves the emergency request. The Director will 
publish a Federal Register notice when OMB has approved these 
requirements.

    Dated: April 10, 2000.
Stephen C. Saunders,
Acting Assistant Secretary for Fish and Wildlife and Parks.
[FR Doc. 00-9289 Filed 4-14-00; 8:45 am]
BILLING CODE 4310-70-P