TITLE: B-308968, No-Cost Contracts for Event Planning Services, November 27, 2007
BNUMBER: B-308968
DATE: November 27, 2007
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B-308968, No-Cost Contracts for Event Planning Services, November 27, 2007
B-308968
November 27, 2007
The Honorable Barbara A. Mikulski
United States Senate
Subject:No-Cost Contracts for Event Planning Services
Dear Senator Mikulski:
This opinion responds to your letter of January 26, 2007, requesting that
we "clarify the suitability of using no-cost contracts to obtain
conference, event and trade show planning services." Specifically, you
asked us to review a model contract supplied to us by National Conference
Services, Inc.'s (NCSI) counsel.[1] Letter from Antonio R. Franco and
Jonathan T. Williams, Piliero Mazza, to Thomas H. Armstrong, Assistant
General Counsel, GAO, Re: No Cost Contract for Conference Services, Jan.
23, 2007 (NCSI Letter). In its model contract, NCSI offers to provide
conference planning services with no financial obligation to the
government; NCSI would recoup its costs by charging exhibitors, sponsors,
and attendees of the conference. Id.
We conclude that the NCSI contract is a valid, binding no-cost contract
that agencies may utilize to obtain conference planning services without
violating the voluntary services prohibition of the Antideficiency Act,
31 U.S.C. sect. 1342. Because of the terms and conditions of the NCSI
contract, an agency would incur no financial liability and NCSI would have
no expectation of payment from the government. Before engaging in no-cost
contracts, however, agencies should address several considerations to
balance the financial flexibility of no-cost contracts with achievement of
agency objectives in hosting a conference.
BACKGROUND
NCSI provides "event planning, production and support services." NCSI,
About NCSI--Who We Are, available at
www.ncsievents.com/aboutncsi/who_we_are.aspx (last visited Oct. 16, 2007).
NCSI reports that it has conducted business with various government
agencies, including those within the intelligence community and the
Department of Defense, by facilitating "information technology
conferences, industry days, [and] meetings and technology expositions . .
. ." Id.
NCSI's services include: "Planning; Selecting venues; Negotiating
contracts; Marketing; Coordinating logistics; Taking registrations;
Processing payments; [and] Post-event reporting." NCSI, Federal,
Intelligence Community and Department of Defense Services--Conferences,
available at www.ncsievents.com/federal/federal_conferences.aspx (last
visited Oct. 16, 2007 ) (NCSI Conferences). NCSI offers to plan "Sponsored
receptions;" "Break-out meetings; Seminars; Working luncheons;" and
"Workshops." NCSI, Events--Conferences, available
at www.ncsievents.com/event/conferences.aspx (last visited Oct. 16, 2007).
In contracting with its clients, "NCSI is able to . . . offer its event
planning services to government hosts at zero cost . . . ." NCSI
Conferences.
The proposed NCSI contract provides:
"The Contractor may choose to provide for all services as required by
the task order at no cost to the Government. The Contractor is entitled
to all of the registration, exhibition, sponsorship and/or other fees
collected as payment for performance under the task order if there is no
cost to the Government. In this case, the Contractor is liable for all
costs related to the performance of the task order as defined in the
task order and the government's liability for payment of services under
this task order is `zero.'"
NCSI Letter, Exhibit E. NCSI explained that it recoups its costs by
"charging the attendee and exhibitor participants of the event." NCSI
Letter.
DISCUSSION
Generally, a no-cost contract is a formal arrangement between a government
entity and a vendor under which the government makes no monetary payment
for the vendor's performance. B-302811, July 12, 2004. "Under a typical
no-cost contract, a vendor provides a service that [an] agency would
otherwise perform, but instead of receiving compensation from the agency,
the vendor charges and retains fees [assessed against third parties] for
its services." B-300248, Jan. 15, 2004. See also Ober United Travel
Agency, Inc. v. United States Department of Labor, 135 F.3d 822, 823 (D.C.
Cir. 1998). In the instant case, NCSI intends to recoup its costs, and
presumably earn a profit, by charging conference attendees and other
participants.[2] At issue when a federal agency agrees to a no-cost
contract and receives services without having to pay is whether the agency
has violated the Antideficiency Act's voluntary services prohibition, 31
U.S.C. sect. 1342.
The Antideficiency Act prohibits federal agencies from accepting voluntary
services without specific statutory authority.[3] 31 U.S.C. sect. 1342.
The purpose of the prohibition is to preclude situations that might
generate claims for compensation that might exceed an agency's available
funds. See, e.g., B-211079.2, Jan. 2, 1987.
We have previously examined no-cost contracts in the context of the
voluntary services prohibition.[4] In 1928, we concluded that the Federal
Trade Commission (FTC) was not prohibited from entering into a no-cost
contract for stenographic services. 7 Comp. Gen. 810 (1928). There, FTC
gave the contractor the exclusive right to report FTC proceedings and to
sell copies of transcripts to the public at rates specified in the
contract; in return, the contractor would furnish copies to FTC without
cost. Id. We determined that FTC did not violate the prohibition because
"services furnished pursuant to a formal contract are not voluntary within
the meaning" of the statute. Id. at 811.
More recently, we found no violation when the General Services
Administration (GSA) proposed a no-cost contract with real estate brokers.
B-302811, July 12, 2004; B-291947, Aug. 15, 2003. The contract awarded
four real estate brokers "exclusive rights to represent the United States
with respect to all GSA real property leases" in exchange for the brokers'
lease acquisition services. B-302811, July 12, 2004. Reflecting industry
practice, the real estate brokers would stipulate in the contract that
they had no expectation of payment from the government and GSA had no
financial liability to the brokers. B-302811, July 12, 2004; B-291947,
Aug. 15, 2003. Nor would any other party pay the brokers on the
government's behalf. Instead, consistent with industry norms, the brokers
would receive commissions from landlords with whom they did business.
B-302811, July 12, 2004; B-291947, Aug.15, 2003. We reiterated our
long-standing rule that "services received . . . free of cost pursuant to
a formal contract or agreement do not constitute `voluntary services'"
within the meaning of the Antideficiency Act, and determined that GSA did
not violate the voluntary services prohibition.[5] B-291947, Aug. 15,
2003.
Critical in the GSA case were the terms and conditions of the contract and
the attendant expectations of each party regarding payment. We emphasized,
"Because the contract was constructed as a no cost contract, GSA will have
no financial liability to [the] brokers, and [the] brokers will have no
expectation of a payment from GSA." B-302811, July 12, 2004. As a
consequence, even if the third parties making remuneration to the real
estate brokers failed to pay, "the broker would have no claim against
GSA." Id. Cf. B-300248, Jan. 15, 2004. We concluded that "accept[ing]
services without payment pursuant to a valid, binding no-cost contract
does not augment an agency's appropriation nor does it violate the
voluntary services prohibition." B-302811, July 12, 2004.
In its contract, NCSI would stipulate that it will provide its services
"at no cost to the Government," specifying that "the government's
liability for payment of services under this task order is `zero.'" NCSI
Letter, Exhibit E. NCSI expects to retain "all of the registration,
exhibition, sponsorship and/or other fees collected as payment for
performance." Id. As with the FTC and GSA contracts, an agency agreeing to
the NCSI contract would have no financial liability to NCSI, nor would
NCSI have any expectation of payment from the government. Consequently, an
agency entering into the NCSI contract would neither augment its
appropriation nor run afoul of the voluntary services prohibition.
In 2006, the Department of Justice's Office of Legal Counsel (OLC)
addressed a Department of Commerce proposal asking whether an agency, when
hosting a conference, may permit its contractor "(1) to provide meals,
lodging, refreshments, and other goods and services to conference
attendees and (2) to charge the attendees a `personal convenience' fee to
cover the costs of these items." Memorandum Opinion for the General
Counsel, Department of Commerce, Applicability of the Miscellaneous
Receipts Act to Contractors Receiving Personal Convenience Fees from
Attendees at an Agency-Sponsored Conference, OLC Opinion, Nov. 22, 2006.
OLC did not object to the proposal because the personal convenience fees
"are not used, and are not intended to be used, by or for the benefit of
the host agency that hires the event planner." Id. OLC noted that
collected amounts do not "compensate the event planner for any contractual
obligation that the host agency owes to it, or enable the agency to avoid
expending appropriations . . . ." Id. We agree with OLC's distinction and
the rationale OLC applied to the issue before it.
Notably, the scenario presented by the Department of Commerce to OLC
differs from scenarios that we have considered previously regarding agency
attempts to collect fees from conference participants. In 2005, we advised
the National Institutes of Health (NIH) that absent statutory authority to
charge a fee and retain the proceeds, neither NIH, nor a contractor on its
behalf, may charge a registration or other fee to defray the costs of
providing meals or light refreshments integral to a conference. B-300826,
Mar. 3, 2005. Doing so would impermissibly augment NIH's appropriation.
Id. In January 2006, we reiterated the holding in B-300826 -- an agency
may no more engage a contractor to charge and retain a fee than the agency
itself may charge and retain fees for its own benefit without specific
statutory authority. B-306663, Jan. 4, 2006. In its request to OLC, the
Department of Commerce represented that the department did not intend to
provide meals, refreshments, and lodging to conference participants. Nov.
22, 2006, OLC Opinion. In both B-300826 and B-306663, however, we
addressed a scenario where the host agency provided food as part of the
conference with the purpose of ensuring full participation in the
conference. In that situation, an agency may not charge participants to
offset the agency's costs without statutory authority.
As with the no-cost contract GSA employed with real estate brokers, we do
not opine on the wisdom of such arrangements for conference planning
services.[6] Although a no-cost contract such as that offered by NCSI does
not violate the Antideficiency Act, there are other considerations beyond
compliance with fiscal laws that an agency should take into account before
agreeing to a no-cost contract. An agency contemplating use of a no-cost
contract for conference planning services should weigh the value of the
services received from the contractor with that of the concession offered
by the contractor. Important considerations include, for example, who may
approve and sign such contracts, registration procedures and collection of
fees, and, particularly where many, if not most, attendees are expected to
be government employees, the ultimate cost to the government as a whole.
Agency officials also should consider possible conflicts of interest
before signing a no-cost contract, keeping in mind that control of the
agenda, selection of speakers, and other matters concerning content should
serve the government's, not the contractor's, purpose. In addition,
agencies should ensure an open, transparent selection process before
entering into no-cost contracts. Ultimately, an agency must not lose sight
of its objectives for a particular event and should ensure that in
avoiding costs to the agency, it does not take actions that compromise the
effectiveness of its conference, undermine the achievement of agency
goals, or violate ethics rules.
CONCLUSION
The NCSI contract is a valid, binding no-cost contract. An agency may
enter into such a contract without violating the Antideficiency Act's
voluntary services prohibition, 31 U.S.C. sect. 1342. Services performed
pursuant to a formal contract, in which the agency has no financial
obligation and the contractor has no expectation of payment from the
government, are not "voluntary" within the meaning of the prohibition. Id.
Sincerely yours,
Gary L. Kepplinger
General Counsel
------------------------
[1] Our practice when rendering legal opinions is to obtain the views of
the relevant agency to establish a factual record and to elicit the
agency's legal position on the subject matter of the request. GAO,
Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP
(Washington, D.C.: Sept. 2006) available at www.gao.gov/congress.html
(last visited Oct. 16, 2007). In this instance, your letter did not
identify an agency that had contracted with NCSI. At your request, NCSI
provided us with a copy of its model contract and its explanation of the
contract.
[2] To be enforceable, a contract with the United States government
requires an offer, acceptance of the offer, and consideration. Rick's
Mushroom Service, Inc. v. United States, 76 Fed. Cl. 250, 259 (2007),
citing Total Medical Management, Inc. v. United States, 104 F.3d 1314,
1319 (Fed. Cir. 1997). A no-cost contract "raises the question . . .
whether it is void for lack of consideration." 7 Comp. Gen. 810, 811
(1928). A federal agency accepting the NCSI-proposed contract would
provide as consideration exclusive access to a group from which the
contractor may earn income. Concurrently, the federal agency would receive
NCSI's services in planning a conference.
[3] The Act makes an exception "for emergencies involving the safety of
human life or the protection of property." 31 U.S.C. sect. 1342.
[4] GAO has also considered award of various no-cost contracts in the
context of bid protests. See, e.g., B-283731.2, Dec. 21, 1999.
[5] In our decision, we did not evaluate "the soundness of the terms of
the contract or advisability of entering into" no-cost contracts.
B-291947, Aug. 15, 2003. In January 2007, GAO reported on the first
contract year of GSA's no-cost leasing contracts with the brokers. GAO,
GSA Leasing: Initial Implementation of the National Broker Services
Contracts Demonstrates Need for Improvements, GAO-07-17 (Washington, D.C.:
Jan. 31, 2007).
[6] An agency, of course, may request legislation authorizing the agency
to charge an attendance fee at conferences and use the fees to offset
conference costs. B-306663, Jan. 4, 2006. Last year, Congress enacted
authority for the Department of Defense to collect and retain conference
fees for the purpose of crediting the appropriation charged to pay
conference costs. National Defense Authorization Act for Fiscal Year 2007,
Pub. L. No. 109-364, div. A, title X, subtitle F, sect. 1051, 120 Stat.
2083, 2395-96 (Oct. 17, 2006), codified at 10 U.S.C. sect. 2262. See S.
Rep. No. 109-254, at 385-86 (2006). The same provision also allows the
department to permit a contractor to collect fees on the department's
behalf. Id.