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.