Concessions Contracting: Governmentwide Rates of Return (Letter Report,
04/29/96, GAO/GGD-96-86).

Pursuant to a congressional request, GAO provided information on
government concession contracting in 1994, focusing on: (1) the extent
of government concession operations; (2) the amount of and factors that
affect federal concession returns; (3) how federal concession return
rates compare with other governments' return rates; and (4) whether
agencies' non-commission income gathering operations could be converted
into concessions.

GAO noted that: (1) 27 of the 75 federal departments and agencies
surveyed had entered into concessioning agreements; (2) 42 of these
agencies and agency components managed a total of 11,263 concessions
programs; (3) 92 percent of these concession agreements were held by 6
land management agencies; (4) gross revenue from the concessions
totalled $2.2 billion, but agencies lacked sufficient data to determine
the gross revenues of all concession operations; (5) concessioners paid
the government $82.5 million, including $64.6 million in concession fees
and $17.9 million for facility repair and improvement; (6) concessioners
provided the government with an additional $4.7 million in non-fee
compensation by maintaining government property; (7) the government's
return rate on concessioners' gross revenues was 3.6 percent; (8) other
governments surveyed had average concession return rates of 12.7
percent; (9) competitively awarded concession agreements where fees were
considered in the competition had higher return rates than those that
were not competed; (10) although 96 percent of
non-land-management-agency concessions were awarded competitively, only
8.6 percent of land management agencies concessions were awarded
competitively; (11) the agencies able to retain more than 50 percent of
their concessions fees had higher return rates than those agencies
required to deposit their returns into treasury funds; and (12) 29 of
the 75 agencies had income generating-operations other than concessions,
but many of these activities could not be concession contracted because
of security and privacy concerns.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-96-86
     TITLE:  Concessions Contracting: Governmentwide Rates of Return
      DATE:  04/29/96
   SUBJECT:  Retail facilities
             Surveys
             Budget receipts
             Data collection operations
             Concessions contracts
             Profits
             Government collections
             Federal property management
             User fees
             Public lands
IDENTIFIER:  Canada
             California
             Maryland
             Michigan
             Missouri
             Tennessee
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight of Government
Management and the District of Columbia, Committee on Governmental
Affairs, U.S.  Senate

April 1996

CONCESSIONS CONTRACTING -
GOVERNMENTWIDE RATES OF RETURN

GAO/GGD-96-86

Concessions Contracting

(240170)


Abbreviations
=============================================================== ABBREV

  ATF - Bureau of Alcohol, Tobacco and firearms
  CAFE - Corporate Average Fuel Economy
  COBRA - Consolidated Omnibus Budget and Reconciliation Act
  FOIA - Freedom of Information Act
  GSA - General Services Administration
  RHCDS - Rural Housing and Community Development Service
  UBPR - Uniformed Bank Performance Report
  VCS - Veterans Canteens Service

Letter
=============================================================== LETTER


B-260029

April 29, 1996

The Honorable William S.  Cohen
Chairman, Subcommittee on Oversight
 of Government Management and the
 District of Columbia
Committee on Governmental Affairs
United States Senate

Dear Mr.  Chairman: 

This report responds to your request that we determine (1) the extent
of concessions operations in the federal government;\1 (2) the rate
of return to the federal government from concessions operations and
factors that affected the rate of return; (3) how the federal rate of
return from concessions compared to rates earned by other
governments; and (4) the extent of agencies' income-generating
operations that were not concessions and whether they offered
opportunities for the agencies to handle them as concessions. 

This report provides the detailed information on data collected from
75 federal executive departments and agencies, including 1 Department
of Defense component--the Department of the Army Corps of Engineers. 
We used three questionnaires to collect both general data on
agencies' total concessions and detailed information on each of the
concessions agreements that agencies either made or extended during
fiscal year 1994. 


--------------------
\1 Concessions are generally businesses that use a government's
property to provide services to the general public or specific
individuals and share the profits with the government. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Twenty-seven of the 75 federal departments and agencies surveyed
reported that they had concessions agreements during fiscal year
1994.  Forty-two respondents (agencies or agency components) reported
that they managed concessions programs.  They reported that they had
11,263 concessions agreements in fiscal year 1994.  The 6 land
management agencies reported that they had 10,427 (over 92 percent)
of these agreements.\2

The reported gross revenues from concessions were $2.2 billion in
fiscal year 1994.  However, because agencies did not collect gross
revenue data on all concessions, particularly those concessions where
the concessioners paid a flat fee to the government, agencies did not
know the gross revenues of all concessioners operating on federal
property. 

Agencies reported that concessioners paid the government $82.5
million from their concessions revenues in fiscal year 1994,
including $64.6 million paid to the government as concessions fees
and $17.9 million that concessioners deposited into special accounts
for repairs and improvements to facilities on government property. 
Agencies also estimated that concessioners provided an additional
$4.7 million in nonfee compensation by maintaining government
property in lieu of, or along with, making payments to the federal
government on concessions. 

From financial information reported in our questionnaire, we computed
that the government earned a 3.6 percent rate of return on
concessioners' gross revenues from agreements either initiated or
extended in fiscal year 1994.\3 The rate represents the percentage of
reported concessioners' gross revenues received by the federal
government.  Analysis of the reported information also showed a rate
of return of 2.8 percent for the six land management agencies'
concessions and 9.2 percent for nonland management agencies'
concessions. 

Other governments we surveyed, including those of Canada, California,
Maryland, Michigan, and Missouri, reported receiving on average a
12.7 percent rate of return on a range of concessions that were
similar to those reported by the federal agencies.  The four states
reported receiving between 11 and 17 percent rates of return from
their concessions, while Canada's reported overall rate was 9.8
percent. 

Questionnaire data showed that competitively awarded agreements for
which fees were considered in the competition had higher rates of
return than those that were not competed.  When the federal agencies
reported that they competed fees for concessions agreements, the rate
of return was 5.1 percent, compared to a 2.0-percent rate when
agencies reported that they did not use competition.  All four states
and Canada said they generally competed their concessions agreements. 

Nonland management agencies reported both revenue and fee data for
101 agreements initiated in fiscal year 1994 and reported that they
competed 96 percent of them.  For the same period, the land
management agencies reported both revenue and fee data for 2,133 new
agreements and reported that they competed 8.6 percent of them.  Most
land management agencies generally have discretion whether to compete
concessions agreements.  While legislation governing National Park
Service concessions requires competition, it also limits such
competition by giving existing concessioners preferential right of
contract renewal.  Also, according to agency officials, some
concessions are just not conducive to competition, such as certain
ski areas where major portions of the operations are located on
private land.  In these situations, the federal government's land is
usually needed to complete a service, such as adding a ski lift or
extending a ski lift to the top of a mountain. 

Analysis of financial data reported in our questionnaire showed that
agencies' authority to retain and use concessions fees also
contributed to the government's rate of return.  The rate of return
on agreements where agencies reported that they were allowed to
retain over 50 percent of the fees was 3.3 times the rate on
agreements where agencies reported that over 50 percent of the
concessions fees was to be deposited into the Department of the
Treasury as general miscellaneous receipts. 

Twenty-nine of the 75 agencies said they received $20.5 billion from
other income-generating activities that were not concessions in
fiscal year 1994.  The reported activities ranged from the sale of
hydroelectric power and patent information to the collection of user
and entrance fees.  Eight of the agency components said that
activities with revenues of about $175 million could be handled like
concessions.  However, agency officials said because of security and
privacy concerns, most of the activities were not conducive to
concessions operations. 


--------------------
\2 The six land management agencies are the Department of the Army
Corps of Engineers; the Department of the Interior's National Park
Service, Bureaus of Reclamation and Land Management, and the Fish and
Wildlife Service; and the Department of Agriculture's Forest Service. 

\3 Because agencies did not collect revenue data on all concessions,
we calculated the rate of return for only those agreements for which
both revenues and fees were reported.  We used the detailed
information agencies provided on agreements that were either made or
extended in fiscal year 1994.  From this reported information, we
calculated the rate of return by dividing gross revenues into the sum
of (1) the fees and (2) amounts deposited into concessioners' special
accounts. 


   BACKGROUND
------------------------------------------------------------ Letter :2

For the purpose of this assignment, we defined "concessions" as
private or public entities using federally owned/leased property
under a government contract, permit, license, or other similar
agreements to provide recreation, food, or other services to either
the general public or specific individuals.  Concessions services
included, but were not limited to, food operations, vending machines,
retail shops, public pay telephones, barber/beauty shops,
transportation, lodging, marinas, and campgrounds.  We excluded day
care centers, employee association stores, and services provided by
visually impaired persons under the Randolph-Sheppard Act.\4

Under concessions agreements with federal agencies, private parties
and nonfederal public entities, such as local governments, supply
many of the services and accommodations provided on federal property
to the public.  Each year, millions of people use the services made
possible through these agreements.  Some agreements are long-term and
some are short-term.  A long-term agreement, which generally involves
a large financial investment by the concessioner for construction or
capital improvements, may last up to 50 years.  A short-term permit
or license, which generally requires little or no financial
investment in facilities by the concessioner, may last up to 5 years. 

Each agency is responsible for developing, implementing, and
monitoring its concessions program to ensure that the federal
government receives a fair return from the partnership.  No overall
federal concessions policy exists.  In exchange for use of federal
property, concessioners pay the government a concessions, franchise,
permit, or license fee.  Most agreements provide that the
concessioner will pay the government either a flat fee or a
percentage of gross revenues. 

The primary purpose of the six land management agencies' concessions
programs is to encourage operation of a public-private partnership to
provide recreation for visitors to national parks, forests, and other
public lands and waters.  Concessions services include food service,
retail sales, ski resorts, lodging, and marinas. 

Nonland management agencies such as the General Services
Administration and U.S.  Postal Service provide concessions services
either for all federal employees or their individual employees and
users of their services.  The primary purpose of their concessions
programs is to provide high-quality merchandise and convenient
services at reasonable prices.  Their concessions services include
food service, retail sales such as gift shops, vending machines, and
coin-operated photocopiers. 

Since the mid 1970s, we have conducted several reviews of the
concessions programs in the land management agencies.  (See the list
of Related GAO Products on pp.  43 and 44.)


--------------------
\4 20 U.S.C.  107-107f.  The Randolph-Sheppard Act provides a
preference for visually impaired persons to operate vending
facilities on federal property to encourage their self-support. 
State governments manage Randolph-Sheppard concessions that are on
federal property. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

The objectives of our review were to determine (1) the extent of
concessions operations in the federal government, (2) the rate of
return received by the federal government from concessions and the
factors affecting the rate of return, (3) how the federal
government's rate of return compared to other governments' rates of
return, and (4) the extent of agencies' nonconcessions activities
that generated income in fiscal year 1994 and whether they offered
opportunities for the agencies to handle them like concessions. 

To accomplish objectives one, two, and four, we (1) sent 3
questionnaires to the 75 federal government entities listed in
appendix I, requesting general information on all concessions
operations and detailed agreement-specific information (including
copies of the concessions agreements) on each agreement that was
either initiated or extended during fiscal year 1994;\5 (2)
interviewed federal concessions management staff at both headquarters
and field levels and nonprofit organizations interested in
concessions issues; and (3) obtained and reviewed the laws,
regulations, and policies for each federal entity's concessions
operations.  Further, if concessions services in agencies were
provided under agreements with GSA, we requested agencies not to
include these operations in their responses.  GSA agreed to include
these concessions in its response. 

Our information on the concessions agreements comes from only the
agency's questionnaire responses for the agreements.  However, we
checked selected responses against copies of the concessions
agreements sent to us, checked agency totals for concessions revenues
and fees against our prior reports, and followed up with agency staff
in selected cases to clarify their responses. 

Because agencies did not collect revenue data on all concessions, we
could calculate the rate of return only for those agreements where
agencies reported both the revenues and fees.  As shown in appendix
III, we used the detailed information they provided on agreements
containing both revenue and fee data that were either initiated or
extended in fiscal year 1994.  From this reported information, we
calculated the rate of return by dividing gross revenues into the sum
of concessions fees and special accounts. 

To determine how the federal government's rate of return compared
with that of other governments, we also sent a questionnaire to five
state governments and Canada.  We selected the five
states--California, Maryland, Michigan, Missouri, and Tennessee--on
the basis of each government's rate of return that was collected by
the National Parks and Conservation Association.  This Association is
a private, nonprofit citizens organization organized to protect,
preserve, and enhance the U.S.  National Park System.  We also
visited two of the states--Maryland and Tennessee--and met with their
key concessions managers.  We selected Canada to obtain information
on another country's experience. 

We did our review from January 1995 to November 1995, in accordance
with generally accepted government auditing standards.  We did our
work in Washington, D.C.; Nashville, Tennessee; and Annapolis,
Maryland.  Because it was impractical for us to obtain comments from
all 75 agencies, we provided copies of a draft of this report to the
heads of the departments of the 6 land management agencies for
comment.  The six agencies accounted for over 92 percent of the
concessions.  On March 25, 1996, we discussed the draft report with
officials designated by the departments.  Their comments are
discussed on pages 16 and 17. 

Appendix VIII contains a more detailed description of our objectives,
scope, and methodology. 


--------------------
\5 All 75 agencies responded to our questionnaires. 


   EXTENT OF CONCESSIONS
   OPERATIONS IN THE FEDERAL
   GOVERNMENT
------------------------------------------------------------ Letter :4

As shown in appendix I, 27 of the 75 federal departments and agencies
surveyed reported having concessions agreements in effect during
fiscal year 1994.  Forty-two respondents (agencies or agency
components) provided concessions data because, as shown in appendix
II, some agencies, such as the Department of the Interior, had more
than 1 component managing concessions agreements.  The 42 agencies or
agency components reported that they had 11,263 concessions
agreements in effect during fiscal year 1994.  Reported data showed
that concessions operations ranged from small fishing guide services
generating annual revenues of less than $1,000 to multimillion-dollar
recreation corporations. 

As shown in table 1, 10,427 (over 92 percent) of the total 11,263
reported concessions agreements were with the 6 land management
agencies.  The National Park Service and the Forest Service
concessions operations accounted for about 90 percent of the six land
management agencies' reported concessioners' gross revenues and fees
paid to the government. 



                                Table 1
                
                     Reported Number of Concessions
                Agreements With Federal Agencies During
                            Fiscal Year 1994

                              Reported                Reported
                             number of  Percen       amount of  Percen
                            concession    t of  concessioners'    t of
Agency category                      s   total        revenues   total
--------------------------  ----------  ------  --------------  ------
Land management agencies        10,427    92.6  $2,064,880,989   92.7%
Nonland management                 836     7.4     163,162,541     7.3
 agencies
======================================================================
Total                           11,263   100.0  $2,228,043,530   100.0
----------------------------------------------------------------------
Source:  GAO questionnaire data. 

The agencies reported concessioners' gross revenues of $2.2 billion
in fiscal year 1994.  However, the actual amount of gross revenues
was greater because some agencies did not collect gross revenue data
from all concessioners.\6 Eight of the 42 agencies or agency
components with concessions reported that some concessioners were not
required to report revenues, particularly those paying a flat
concessions fee.  Some agency officials said they had no requirement
to track concessioners' revenues when concessioners paid a flat
concessions fee.  However, the National Park Service said it plans to
change this practice in the future, because some of these agreements
may be conducive to competitive agreements. 

As shown in table 2, agencies reported that the government received
over $82 million from concessions operations during fiscal year 1994. 



                                Table 2
                
                     Reported Return on Concessions
                   Agreements During Fiscal Year 1994

                                          Reported
                            Reported         funds
                         concessions     deposited
                        fees paid to          into
                                 the  concessioner
                          government    s' special       Total  Percen
                                 (in  accounts (in         (in    t of
Agency category            millions)     millions)   millions)   total
----------------------  ------------  ------------  ----------  ------
Land management                $47.1         $12.2       $59.3   71.9%
 agencies
Nonland                         17.5           5.7        23.2    28.1
 management
 agencies
Total                          $64.6         $17.9       $82.5   100.0
----------------------------------------------------------------------
Source:  GAO questionnaire data. 

The reported $82.5 million of government receipts includes funds that
concessioners deposited into special accounts that officials said are
primarily used for repairs and improvements to facilities on
government property. 

Nine of the 42 agencies or agency components also estimated that
concessioners provided an additional $4.7 million in nonfee
compensation by maintaining government property.  This amount is not
included in table 2.  Some agency officials said they estimated
nonfee compensation value by considering what the cost would have
been for the agency to perform the work, obtaining quoted prices from
vendors, using receipts maintained by the concessioners, and
reviewing concessioners' annual financial reports.  This estimated
value likely did not include the total nonfee value; some agencies
said they did not monitor the value of concessioners' maintenance of
government property for various reasons, including the difficulty of
distinguishing between maintenance costs for federal property and
concessioners' property. 


--------------------
\6 Because agencies did not collect revenue data on all concessions,
we calculated the rate of return for only those agreements for which
both revenue and fees were reported.  We used the detailed
information agencies provided on agreements that were either made or
extended in fiscal year 1994.  From this reported information, we
calculated the rate of return by dividing gross revenues into the sum
of (1) concessions fees and (2) special accounts. 


   THE RATE OF RETURN ON
   CONCESSIONS AGREEMENTS EITHER
   INITIATED OR EXTENDED DURING
   FISCAL YEAR 1994
------------------------------------------------------------ Letter :5

As shown in appendix III, our analysis of financial data from the
questionnaire showed a 3.6 percent rate of return to the government
on reported concessioners' revenues from concessions agreements
either initiated or extended in fiscal year 1994.  From reported
information on the agreements with both revenue and fee data, we
calculated the rate of return by dividing gross revenues into the sum
of (1) concessions fees and (2) the amount concessioners deposited
into special accounts for improvements.  The rate represents the
percentage of reported concessioners' gross revenues that the federal
government is to receive. 

Our analysis of the reported data showed a rate of return of 2.8
percent for the 6 land management agencies' concessions, 9.2 percent
for the nonland management agencies' concessions, and 3.1 percent for
the 50 concessions with the largest reported amount of gross revenues
in our survey.\7

As shown in appendix IV, the reported data showed that the rates of
return ranged from a low rate of 2 percent to a high rate of 47
percent for the 15 service categories.  Food service operations
averaged the lowest rate of return (2 percent), and coin-operated
copiers in U.S.  Postal Service facilities averaged the highest rate
of return (47 percent). 


--------------------
\7 The 50 concessions with the largest revenues each generated
reported gross revenues that ranged from $1.4 million to $82 million
during fiscal year 1994.  Most of these concessions were managed by
the Forest Service and the National Park Service. 


   HOW THE FEDERAL RATE OF RETURN
   COMPARED TO OTHER GOVERNMENTS'
   RATES
------------------------------------------------------------ Letter :6

Other governments reported receiving higher rates of return from
concessions operations than the overall federal rate.  Four states
and Canada reported on average a 12.7 percent rate of return.  The
states were California, Maryland, Michigan, and Missouri.\8 The
states noted by the National Parks and Conservation Association as
having high rates of return from concessions reported obtaining rates
of return ranging from 11 to 17 percent.\9 In addition, Canada
reported receiving a 9.8 percent rate of return on its concessions
operations.  As shown in appendix V, Canada and the four states
reported that their concessions services included marinas, food
service operations, campgrounds, and retail sales--some of the same
types of services reported by the agencies we surveyed. 

All four states and Canada said they generally compete concessions
agreements.  They said that key factors for selecting concessioners
were the amount of fees generated for the government and bidders'
experience and financial status.  According to state officials,
agreements exempted from competition included short-term permits
expecting to gross a low level of revenue, generally $5,000 or less. 
Officials for one state also said the state would enter into a
noncompetitive agreement with a business that initiated a proposal
for a concession, but if the operation proved lucrative after 1 year,
the state would renegotiate the concessions agreement through a
competitive process. 


--------------------
\8 Tennessee was the fifth state we selected for our review. 
However, since Tennessee charged a flat fee for most of its
concessions and did not track concessioners' revenues, rate of return
information was not obtainable. 

\9 The National Parks and Conservation Association is a nonprofit
organization organized to preserve the U.S.  National Park System. 


   FACTORS AFFECTING THE RATE OF
   RETURN FROM CONCESSIONS
------------------------------------------------------------ Letter :7

We analyzed numerous factors to determine their impact on the rate of
return, including competition, background of concession staff, type
of service, agencies' retention of concessions fees, and the methods
used to determine concessions fees.  Questionnaire data showed that
although some of these factors affected the rate of return to the
government, others did not.  For example, our analysis of the
reported data showed that the lack of a procurement background for
concessions staff did not have an impact on the rate of return.  In
addition, officials from the five states said none of their
concessions staff had procurement backgrounds.  They reported that
they had contracting officers to set policies but delegated
concessions management to park managers. 


      COMPETITION RESULTED IN A
      HIGHER RATE OF RETURN FROM
      CONCESSIONS OPERATIONS
---------------------------------------------------------- Letter :7.1

As shown in appendix VI, concessions agreements entered into on a
competitive basis had higher rates of return than those that were not
competed.  Our calculated rate of return for agreements where
agencies reported that they competed concessions fees was 5.1
percent, compared to a 2.0-percent rate when agencies reported that
they did not use competition.  The impact of competition on the rate
of return remained when the differences among services were
considered. 

Detailed analysis of reported information on the recreation service
providing the highest rate of return in the land management
agencies--campground--showed that competition was a factor.  For
campground permits where agencies reported both revenue and fee data,
agencies reported that they competed 82 percent of the permits issued
in fiscal year 1994.  Campground permits that agencies reported
competing averaged a 7.1 percent rate of return compared to a
4.1-percent rate of return for campground permits agencies said they
issued noncompetitively. 

Questionnaire information showed that nonland management agencies
competed more of their concessions than the land management agencies. 
Information on 2,234 concessions agreements reporting both revenue
and fee data detailed how they were entered into during fiscal year
1994.  The information showed that nonland management agencies
entered into 101 of the agreements and competed 96 percent of them,
and the land management agencies initiated 2,133 of these concessions
agreements and competed 8.6 percent of them.  Nonland management
agencies reported that they either entered into concessions
agreements using the Federal Acquisition Regulation or other policies
that under most circumstances provide for competition.\10

Most land management agencies generally have discretion whether to
compete concessions agreements.  The Concessions Policy Act of 1965,
governing National Park Service concessions, is the only law covering
concessions in land management agencies that specifically requires
competition.\11 The act requires the National Park Service to give
the public the right to compete for concessions contracts.  However,
competition is limited by the requirement that existing concessioners
who perform satisfactorily be given a preferential right of contract
renewal when the agreement expires. 

Officials in the land management agencies said that more competition
is needed, but they also said it can not always be used.  They said
some operations could not be competed, such as ski areas where major
portions of the operations are located on private land and the
concessioners have a substantial financial investment in the
activities.  In such situations, the federal government's land is
usually needed to complete a service, such as adding a ski lift or
extending a ski lift to the top of a mountain. 

However, they noted that other activities, such as river running,
jeep tours through scenic areas, and hunting trips, were very
profitable to concessioners and conducive to competition.  On the
basis of questionnaire data, we determined that 6 of these types of
concessions were among the 50 concessions with the highest reported
gross revenues to the concessioners in our survey and were initiated
in fiscal year 1994.  The reported information showed that the
agreements were initiated on a noncompetitive basis. 


--------------------
\10 The Federal Acquisition Regulation contains the uniform
regulations pertaining to federal agencies' procurement of services
and supplies. 

\11 The Concessions Policy Act of 1965 is codified at 16 U.S.C. 
20-20g. 


      AGENCIES' AUTHORITY TO
      RETAIN FEES
---------------------------------------------------------- Letter :7.2

Our analysis of questionnaire data showed that another factor
increasing the rate of return was the agencies' authority to retain
concessions fees and use them in their operations.  The rate of
return on agreements where agencies reported that they were
authorized to retain over 50 percent of the fees was 3.3 times the
rate on agreements where agencies reported that over 50 percent of
the fees were to be deposited into the Department of the Treasury as
miscellaneous receipts.  Further questionnaire data analysis showed
that concessions with the highest gross revenues in our survey
managed by agencies retaining fees averaged an 11.1 percent rate of
return to the government.  In contrast, the reported data showed that
this category of concessions managed by agencies that did not retain
fees averaged a 2.6 percent rate of return. 

Additionally, five nonland management agencies (with authority to
retain fees) reported 5 percent of the total agreements and 3 percent
of concessioners' gross revenues but reported 18 percent of
concessions fees.  In contrast, the six land management agencies
(without authority to retain their fees) reported 93 percent of the
total agreements and 93 percent of concessioners' gross revenues but
reported 73 percent of concessions fees, as shown in table 3. 
Therefore, agencies authorized to retain fees reported obtaining more
fees in proportion to their concessioners' gross revenues than
agencies that were not authorized to retain fees. 



                                Table 3
                
                Proportion of Concessions Fees Earned by
                Agencies That Reported That They Did or
                    Did Not Retain Concessions Fees

                                              Six land    Five nonland
                                            management      management
                                         agencies (did        entities
                                            not retain     (did retain
                                                 fees)         fees)\a
--------------------------------------  --------------  --------------
Percent of concessions agreements                 92.6            5.0%
Percent of concessioners' gross                   92.7             3.2
 revenue
Percent of concessions fees                       73.0            18.3
----------------------------------------------------------------------
\a The five agencies are the Smithsonian Institution, the John F. 
Kennedy Center for the Performing Arts, the U.S.  Postal Service, the
Department of Veterans Affairs' Veterans Canteen Service, and the
Department of Transportation's U.S.  Coast Guard. 

Source:  GAO questionnaire data. 

Generally, agencies are not authorized to retain and use money they
receive from outside sources in the absence of express statutory
authority to do so.  As shown in figure 1, most concessions fees are
to be deposited into the Department of the Treasury as general
miscellaneous receipts. 

   Figure 1:  Where Reported
   Concessions Fees Are to Be
   Deposited (Percent of Reported
   Fiscal Year 1994 Concessions
   Fees)

   (See figure in printed
   edition.)

\a Treasury's special fund accounts are accounts that are earmarked
by law for a specific purpose.  Receipts into special fund accounts
are either available immediately or unavailable for expenditure
depending upon statutory requirements. 

\b Agencies' concessions fees to be deposited into Treasury's account
for state/local governments are collected receipts the agencies are
to make available to build and maintain roads and trails on federal
lands within the state where the receipts were collected. 

Source:  GAO questionnaire data. 

Since agencies that collect concessions fees generally are not able
to use them, they have less incentive to maximize fees.  An official
from one of the agencies that retained fees said that since the fees
support agency operations, staff put forth extra effort to obtain a
high rate of return on concessions.  About 70 percent of the 42
agencies or agency components responding to our survey said retaining
fees is or would be beneficial to them. 


      PREFERENTIAL RIGHT OF
      CONTRACT RENEWAL REDUCES
      COMPETITION
---------------------------------------------------------- Letter :7.3

The Concessions Policy Act of 1965 grants existing National Park
Service concessioners a preferential right of contract renewal when
their agreements expire.  Under the legislation, the Secretary of the
Interior is to give preference to the renewal of a concessions
contract to existing concessioners who have satisfactorily performed
their obligations.  Under the Department of the Interior's
regulations, the preferential right for contract renewal is the right
of incumbent concessioners to match or better the best offer received
from firms competing for the concessions contract.  The existing
concessioner must have performed satisfactorily and must have been
under the existing contract for 2 years. 

This preference reduces competition because it may limit the number
of prospective concessioners.  Businesses are reluctant to expend
time and money preparing bids in a process where the award is most
likely going to the incumbent contractor.  The National Park Service
said that between 1985 and 1989, 28 of 29 contracts up for renewal
were awarded to the incumbent concessioner. 

The National Park Service reported 23 of the 50 concessions
agreements with the highest revenues reported in our survey.  On the
basis of the reported data, when 17 of the contracts were last
awarded, the incumbent concessioners received preferential right of
contract renewal and received 16 of the contracts, with 1 contract
awarded to a new concessioner.  The National Park Service reported
that the existing concessioners sold three of the remaining six
concessions to other concessioners before the contracts expired, two
concessioners operated under noncompetitive commercial use licenses,
and the National Park Service converted another commercial use
license to a sole-source contract. 


      POSSESSORY INTEREST
---------------------------------------------------------- Letter :7.4

Another statutory requirement for the National Park Service that
influences the number of bidders is possessory interest.  The
Concessions Policy Act of 1965 gives National Park Service
concessioners the right to be compensated for improvements they
construct on federal lands, which is called possessory interest.\12
The legislation specifies that unless otherwise provided by
agreement, the compensation must be based on "sound value," which is
generally defined as reconstruction cost less depreciation, not to
exceed fair market value.  Either the National Park Service or a
successor concessioner has the liability to pay the concessioner
sound value compensation.  According to National Park Service
officials, this valuation limits the number of businesses submitting
offers for concessions. 

In 1993, the National Park Service issued a new policy covering
standard concessions contract language, which included a provision to
reduce possessory interest for contracts awarded after January 7,
1993.  The policy revises the calculation of possessory interest to
"fair value," which is defined as the original cost of improvements
less straight-line depreciation.  This change is being challenged by
the National Park Hospitality Association in the courts on the basis
that the new policy is not in accordance with the Concessions Policy
Act of 1965. 

Officials from the four states and Canada said their regulations do
not allow concessioners to acquire possessory interests.  However,
they said they consider the amount of a concessioner's investment
when deciding the length of the contract.  According to the
officials, concessioners are given enough time to make a profit and
amortize their investments, but the maximum term of contracts is 20
years. 

Calculation of questionnaire data on the National Park Service
concessions that reported both revenue and fee data for contracts
either awarded or extended during fiscal year 1994 showed that: 

  -- New and extended agreements granting possessory interest
     resulted in a rate of return of 3.8 percent, and those without
     possessory interest resulted in a rate of return of 4.5 percent. 

  -- New agreements with preferential right of contract renewal
     resulted in a 3.8 percent rate of return, and those without the
     preference resulted in a rate of return of 6.4 percent.\13


--------------------
\12 Section 5(b) of P.L.  96-375 also authorizes the Department of
the Interior to grant possessory interest at fair value to Bureau of
Reclamation concessioners at Lake Berryessa, CA. 

\13 The National Park Service reported that preferential contract
renewal data for contracts extended in fiscal year 1994 were not
readily available. 


   REPORTED NONCONCESSIONS
   ACTIVITIES GENERATING INCOME
------------------------------------------------------------ Letter :8

Fifty components from 29 of the 75 federal agencies we surveyed said
they received income of $20.5 billion in 1994 from activities that
were not concessions.  As shown in appendix VII, the activities
varied and included the sale of hydroelectric power, audiovisual
products, coins, medals, and commemorative items; tours of the Hoover
Dam; operation of gift shops and reproduction services; and admission
to presidential libraries.  Agencies reported that most of the $20.5
billion was to be either deposited in Treasury's special account for
the agency's use or retained by the agency for its use. 

According to agency officials, because of such issues as security and
privacy concerns, most of the activities were not conducive to
concessions operations.  They estimated that activities generating
$175 million, or about 1 percent of the $20.5 billion in income,
could be converted into concessions operations.  These activities
included

  -- the sale of hydroelectric power,

  -- tours of Hoover Dam,

  -- retail sales,

  -- the sale of commemorative items and coins, and

  -- collection of user or entrance fees. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

On March 21, 1996, we provided copies of a draft of this report to
the heads of the departments of the six land management agencies for
comment.  We did not ask for comments from all 75 agencies in our
survey because to do so would have been impractical.  The six
agencies accounted for over 92 percent of total concessions.  On
March 25, 1996, we discussed the draft report with officials
designated by the departments, including the Forest Service's
Director of Recreation, Heritage, and Wilderness Resources; the
National Park Service's Acting Chief of the Concessions Program
Division; the Bureau of Land Management's Special Assistant to the
Assistant Director for Resource Use and Protection; the Fish and
Wildlife Service's Branch Chief for Visitor Services and Information
Management; and the Bureau of Reclamation's Natural Resources
Specialist. 

The officials said they generally agreed with the facts as presented
in the draft report.  Officials from four of the agencies--National
Park Service, Fish and Wildlife Service, and the Bureaus of Land
Management and Reclamation--reiterated the statement in our report
that the primary purpose of the land management agencies' concessions
programs is to provide a service to the public, not to maximize the
rate of return.  Officials from the Forest Service and the Bureau of
Reclamation noted that high investments made by some concessioners
also affect the rate of return that the government receives, which
our report recognizes. 

The National Park Service official said the report highlighted two
factors required by legislation--preferential right of contract
renewal to the existing contractor and granting possessory interest
to concessioners--that affect the agency's rate of return.  He added
that three other factors also affect the rate of return:  (1) the
National Park Service's periodic operational reviews of
concessioners, which may increase maintenance costs of concessioners;
(2) the legislatively required rate control of concessioners' prices
for goods and services; and (3) the expense for financial audits to
concessioners grossing over 1 million dollars annually that the
National Park Service requires.  Our review was not designed to
measure what impact, if any, that operational reviews or rate
controls have on a concessioner's profitability or whether all
concessioners had financial audits.  We would expect, however, that
economic market forces for large dollar value concessions would be
similar for the National Park Service and other agencies'
concessions.  It is likely that all larger concessioners would incur
the costs of financial and routine maintenance audits, regardless of
the agencies' requirements.  Also with respect to prices, the
legislative requirement calls for National Park Service
concessioners' prices to be comparable to those of similar services
and facilities under similar circumstances.  Therefore, nothing seems
to suggest that National Park Service concessioners have been
directed to set prices at rates below those that one would normally
expect to find in the surrounding localities. 

The Department of the Army Corps of Engineers said they had no
comments on the draft report. 


---------------------------------------------------------- Letter :9.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter.  At that time, we will send copies of
this report to interested congressional committees, the agencies
included in our review, the Director of the Office of Management and
Budget, and other interested parties.  We will also make copies
available to others upon request. 

The major contributors to this report are listed in appendix IX. 
Please contact me on (202) 512-8387 if you have any questions
concerning this report. 

Sincerely yours,

J.  William Gadsby
Director, Government Business
 Operations Issues


LIST OF AGENCIES SURVEYED
=========================================================== Appendix I


Agency                                                  Yes     No
------------------------------------------------------  ------  ------
Department of Agriculture                               X

Central Intelligence Agency                             X

Department of Commerce                                  X

Commission on Civil Rights                                      X

Commodity Futures Trading Commission                            X

Consumer Product Safety Commission                              X

Corporation for National Service                                X

Department of the Army Corps of Engineers               X

Department of Education                                         X

Department of Energy                                    X

Environmental Protection Agency                                 X

Equal Employment Opportunity Commission                         X

Export-Import Bank                                              X

Farm Credit Administration                                      X

Federal Communications Commission                               X

Federal Deposit Insurance Corporation                   X

Federal Election Commission                                     X

Federal Emergency Management Agency                     X

Federal Energy Regulatory Commission                    X

Federal Housing Finance Board                                   X

Federal Labor Relations Authority                               X

Federal Maritime Commission                                     X

Federal Mediation and Conciliation Service                      X

Federal Mine Safety and Health Review Commission                X

Federal Reserve Board                                   X

Federal Retirement Thrift Investment Board                      X

Federal Trade Commission                                        X

General Services Administration                         X

Department of Health and Human Services                 X

Department of Housing and Urban Development                     X

Inter-American Foundation                                       X

Department of the Interior                              X

Interstate Commerce Commission                                  X

Department of Justice                                   X

The John F. Kennedy Center for the Performing Arts      X

Department of Labor                                             X

Merit Systems Protection Board                                  X

National Aeronautics and Space Administration           X

National Archives and Records Administration            X

National Capital Planning Commission                            X

National Credit Union Administration                    X

National Endowment for the Arts                                 X

National Endowment for the Humanities                           X

National Gallery of Art                                 X

National Labor Relations Board                                  X

National Mediation Board                                        X

National Railroad Passenger Corporation                         X

National Science Foundation                                     X

National Transportation Safety Board                            X

Nuclear Regulatory Commission                                   X

Occupational Safety and Health Review Commission                X

Office of Government Ethics                                     X

Office of Personnel Management                                  X

Office of Special Counsel                                       X

Panama Canal Commission                                 X

Pennsylvania Avenue Development Corporation                     X

Pension Benefit Guaranty Corporation                            X

Resolution Trust Corporation                            X

Securities and Exchange Commission                              X

Small Business Administration                                   X

Smithsonian Institution                                 X

Tennessee Valley Authority                              X

Thrift Deposit Protection Oversight Board                       X

Department of Transportation                            X

Department of the Treasury                              X

U.S. International Trade Commission                             X

U.S. Postal Service                                     X

U.S. Railroad Retirement Board                                  X

U.S. Trade and Development Agency                               X

Department of Veterans Affairs                          X

Department of State                                             X

U.S. Agency for International Development               X

U.S. Peace Corps                                                X

U.S. Arms Control and Disarmament Agency                        X

U.S. Information Agency                                         X

======================================================================
Total                                                   27      48
----------------------------------------------------------------------
Source:  GAO questionnaire data. 


EXTENT OF CONCESSIONS IN THE
FEDERAL GOVERNMENT
========================================================== Appendix II

Twenty-seven of the 75 departments and agencies we surveyed reported
that they had concessions operations during fiscal year 1994.  Table
II.1 contains overall information reported by the 27 departments and
agencies.  Forty-two departments and agencies responded because some
had more than one component managing concessions. 

As indicated in the table, data on all concessioners' revenues were
not available.  Some agencies reported that gross revenue data were
not available because concessioners paid a flat concessions fee and
the agency had no requirement to track gross revenues.  As a
consequence, total concessions revenues and fees in this table can
not be compared to determine the rate of return the government
received from concessioners' revenues. 



                                    Table II.1
                     
                     Extent of Concessions Operations in the
                      Federal Government in Fiscal Year 1994


                                                            Amount
                                                         deposited
                                                              into
                                                      concessioner
                                                       s' accounts
                                         Concessions           for      Value of
               Number of                 fees earned   maintenance  concessioner
              contracts,                      by the           and     s' nonfee
Agency/      permits, or  Concessioner       federal  improvements  compensation
component     agreements   s' revenues    government            \a            \b
----------  ------------  ------------  ------------  ------------  ------------
Department         5,322  $1,204,977,0   $26,014,205      $735,326    $2,375,664
 of                                 06
 Agricultu
 re/
 Forest
 Service
Department             2     3,407,313        44,110             0             0
 of
 Agricultu
 re/other
 component
 s
Central                0             0             0             0             0
 Intellige
 nce
 Agency\c
Department             1       228,787             0             0         9,600
 of
 Commerce/
 Bureau of
 the
 Census\d
Department             3     1,136,784        23,867        15,562        15,593
 of
 Commerce/
 National
 Institute
 of
 Standards
 &
 Technolog
 y\e
Department             2       242,082         2,790             0             0
 of
 Commerce/
 National
 Oceanic
 and
 Atmospher
 ic
 Administr
 ation\d
Department         1,388   168,594,170     3,409,084             0             0
 of Army
 Corps of
 Engineers
 \e
Department             2     1,021,784        38,598             0             0
 of
 Energy/
 Bonnevill
 e Power
 Administr
 ation
Federal                3       217,074        39,557             0             0
 Deposit
 Insurance
 Corporati
 on
Federal                1    $1,000,000            $0            $0            $0
 Emergency
 Managemen
 t
 Agency\d
Federal                1             0       201,010             0             0
 Energy
 Regulator
 y
 Commissio
 n\e
Federal                4       128,196        22,111             0             0
 Reserve
 Board
General               75    50,400,577     2,420,158       129,605       363,579
 Services
 Administr
 ation
Department             2     2,897,000         7,787             0             0
 of Health
 and Human
 Services/
 National
 Institute
 s of
 Health
Department         1,933   668,000,000   14,807,813\    11,442,565             0
 of the
 Interior/
 National
 Park
 Service\e
Department         1,508    11,378,474     2,193,471             0       977,000
 of the
 Interior/
 Bureau of
 Land
 Managemen
 t\e
Department           239     3,924,736       295,073             0             0
 of the
 Interior/
 Fish and
 Wildlife
 Service\e
Department            37     8,006,603       335,979             0        41,002
 of the
 Interior/
 Bureau of
 Reclamati
 on\f
Department            12             0        41,655           300             0
 of the
 Interior/
 Bureau of
 Indian
 Affairs\e
Department             3       115,464             0             0             0
 of the
 Interior/
 Board of
 Indian
 Arts and
 Crafts\d
Department             2     2,645,383             0        31,728             0
 of
 Justice/
 Federal
 Bureau of
 Investiga
 tion\d
Department            67     5,411,742       847,066             0             0
 of
 Justice/
 Bureau of
 Prisons
The John               4     9,564,502     1,853,828             0             0
 F.
 Kennedy
 Center
 for the
 Performin
 g Arts
National              27     9,111,244       779,408     5,428,878             0
 Aeronauti
 cs and
 Space
 Administr
 ation\e
National               1       235,000         3,300             0             0
 Archives
 and
 Records
 Administr
 ation
National               1        19,118             0             0             0
 Credit
 Union
 Administr
 ation\d
National               2     4,500,000        24,199        81,706             0
 Gallery
 of Art
Panama                25             0       107,000             0             0
 Canal
 Commissio
 n\d,e
Resolution             2             0             0             0             0
 Trust
 Corporati
 on\d,e
Smithsonia             6   $18,000,000    $3,300,000            $0            $0
 n
 Instituti
 on
Tennessee              5     4,230,000        63,200             0       500,000
 Valley
 Authority
Department           279             0     1,246,703             0        13,200
 of
 Transport
 ation/
 U.S.
 Coast
 Guard\e
Department             1     1,050,035       317,561             0       400,000
 of
 Transport
 ation/
 St.
 Lawrence
 Seaway
 Developme
 nt
 Corporati
 on
Department            17     1,039,700         9,313             0             0
 of
 Transport
 ation/
 Federal
 Aviation
 Administr
 ation\e
Department             2       442,899         6,643             0             0
 of
 Transport
 ation/
 Volpe
 National
 Transport
 ation
 Systems
 Center
Department             8             0       452,780             0             0
 of the
 Treasury/
 Office of
 Thrift
 Supervisi
 on\e
Department             1     3,494,293       173,140             0             0
 of the
 Treasury/
 U.S. Mint
Department             1             0         2,920             0             0
 of the
 Treasury/
 Federal
 Law
 Enforceme
 nt
 Training
 Center\e
U.S.                 237    28,108,564     2,320,068             0             0
 Postal
 Service
Department            28    14,490,000     3,101,165             0             0
 of
 Veterans
 Affairs/
 Veterans
 Canteen
 Service
U.S.                   9        25,000         2,400             0             0
 Agency
 for
 Internati
 onal
 Developme
 nt\d
================================================================================
Totals            11,263  $2,228,043,5   $64,507,962   $17,865,670    $4,695,638
 27                                 30
 agencies
 42 agency
 component
 s
--------------------------------------------------------------------------------
\a Concessioners are allowed to deposit funds into concessioners'
accounts (in lieu of or along with payment of concessions fees) for
maintenance and repairs. 

\b The value of nonfee compensation represents concessioners' general
maintenance and improvements made to government property.  Agencies
based the value on estimates, receipts, and quoted vendors' prices. 
Some agencies said they could not estimate the nonfee value because,
in some cases, of the difficulty in distinguishing between federal
and concessioner's property. 

\c The Central Intelligence Agency did not provide details on its
concessions agreements. 

\d Agency responded that concessions fees were sometimes waived
because of the following reasons:  (1) reduced prices on vended
items, (2) difficulty in obtaining contractors--the building is
surrounded by many food establishments, (3) a more attractive
procurement was needed because of a lack of offerors, (4) a limited
profit rate for concessioners--with overage to be either returned to
the government or put back into the food service operation, (5)
concessioners make it possible to market Native Americans arts and
crafts--an activity the agency could not do. 

\e Agency responded that some revenue data were not available mainly
because concessioners were not required to report revenues for
certain concessions where they generally paid a flat concessions fee. 

\f According to the Bureau of Reclamation, the 37 concessioners
represent only a portion of the agency's concessioners.  Survey
information was not available for the 225 concessions agreements that
are managed by state agencies. 

Source:  GAO questionnaire data. 


RATE OF RETURN ON CONCESSIONS
AGREEMENTS EITHER INITIATED OR
EXTENDED DURING FISCAL YEAR 1994
========================================================= Appendix III

                                             Amount
                                          deposited
                                               into      Total
              Concessioner            concessioners      (fees              Rate
                        s'                        '          +  Number of     of
                     gross                  special    special  concessio  retur
Agency             revenue      Fees     accounts\a  accounts)         ns      n
------------  ------------  --------  -------------  ---------  ---------  -----
Forest        $306,473,830  $7,765,7        $66,339  $7,832,09      2,361  2.56%
 Service                          58                         7
National       135,626,774  3,624,39      1,116,671  4,741,069        555   3.50
 Park                              8
 Service
Army Corps       9,473,016   214,446         34,531    248,977         27   2.63
 of
 Engineers
Bureau of        2,376,622    71,243              0     71,243         15   3.00
 Land
 Management
Fish and           807,713    39,551              0     39,551          6   4.90
 Wildlife
 Service
Bureau of           16,000       600              0        600          1   3.75
 Reclamation
Subtotal,      454,773,955  11,715,9      1,217,541  12,933,53      2,965   2.84
 land                             96                         7
 management
 agencies
U.S. Postal     27,349,976  1,950,66              0  1,950,669        183   7.13
 Service                           9
General         17,671,583   143,054        129,605    272,659         17   1.54
 Services
 Administrat
 ion
Department       6,679,611  1,838,57              0  1,838,571          5  27.53
 of Veterans                       1
 Affairs
Department       5,804,100   810,980         33,003    843,983         54  14.54
 of Justice
National         3,845,102   608,181              0    608,181         16  15.82
 Aeronautics
 and Space
 Administrat
 ion
Department       1,206,526    14,057         15,562     29,619          3   2.45
 of Commerce
Department       1,441,766   323,925              0    323,925          6  22.47
 of
 Transportat
 ion
National           235,000     3,300              0      3,300          1   1.40
 Archives
 and Records
 Administrat
 ion
Federal            178,803    39,557              0     39,557          1  22.12
 Deposit
 Insurance
 Corporation
Other                7,424         0          3,712      3,712          1  50.00
 Interior
 agencies
Subtotal        64,419,891  5,732,29        181,882  5,914,176        287   9.18
 nonland                           4
 management
 agencies
All agencies  $519,193,846  $17,448,     $1,399,423  $18,847,7      3,252  3.63%
                                 290                        13
--------------------------------------------------------------------------------
\a Concessioners are allowed to deposit funds into concessioners'
special accounts (in lieu of or along with payment of concessions
fees) for improvements and maintenance of facilities on federal
property. 

Note:  From questionnaire financial data, we calculated the rate of
return by dividing gross revenues into the sum of reported (1)
concessions fees and (2) amounts deposited into concessioners'
special accounts.  Questionnaire responses that did not contain both
revenue and concessions fee data were excluded from this analysis. 

Source:  GAO questionnaire data. 


RATE OF RETURN BY PRIMARY
CONCESSIONS SERVICES ON
CONCESSIONS AGREEMENTS EITHER
INITIATED OR EXTENDED DURING
FISCAL YEAR 1994
========================================================== Appendix IV

                                                               Rate of
                                                                return
Concessions services                                         (percent)
------------------------------------------------------  --------------
Coin-operated copiers                                             47.0
Vending machines                                                  13.1
Campgrounds                                                        5.5
Education/instruction                                              5.5
Retail sales                                                       5.3
Lodging                                                            4.2
River running                                                      3.5
Big game hunting                                                   3.2
Marinas                                                            3.0
Food operations and vending                                        2.8
Ski areas                                                          2.5
Outfitting-guiding                                                 2.2
Transportation (including ferry, cruise, tourmobile)               2.2
Food operations                                                    2.1
----------------------------------------------------------------------
Note:  From questionnaire financial data, we calculated the rate of
return by dividing gross revenues into the sum of reported (1)
concessions fees and (2) amounts concessioners deposited into
concessioners' accounts for improvements and maintenance of
facilities on federal property.  Questionnaire responses that did not
contain both revenue and concessions fee data were excluded from this
analysis. 

Source:  GAO questionnaire data. 


COMPARISON OF THE FEDERAL RATE OF
RETURN WITH OTHER GOVERNMENTS'
RATES--FISCAL YEAR 1994
=========================================================== Appendix V

                                                            Rate
                                                              of
Government        Concessions services                    return
----------------  --------------------------------------  ------
Federal           Food service operations, lodging,       3.6%\a
 government        campgrounds, vending machines, retail
                   sales, river running, big game
                   hunting, marinas, ski resorts,
                   transportation, cruise boats, boat
                   docks, coin-operated copiers, and
                   others.
California        Retail sales, marinas, beaches, golf      11.0
                   courses
Maryland          Food service operations, vending          13.0
                   machines, optical viewing machines,
                   water sports equipment, campgrounds,
                   and cruise boats
Michigan          Food service operations, retail sales,    13.0
                   campgrounds, stables, bicycle and
                   boat rentals, rifle ranges, and
                   vending machines
Missouri          Lodging, food service operations,         16.6
                   marinas, retail sales, pools,
                   horseback riding, and firewood sales
Tennessee         Lodging, food service operations,           \b
                   swimming pools, snack bars, marinas,
                   boat docks, horseback riding, and
                   golf courses
Canada            Retail sales, recreation equipment         9.8
                   rentals, food service operations,
                   marinas, golf courses, tennis courts,
                   theaters, and office and special
                   purpose space
----------------------------------------------------------------
\a From questionnaire financial data, we calculated the rate of
return by dividing gross revenues into the sum of reported (1)
concessions fees and (2) amounts concessioners deposited into
concessioners' accounts for improvements and maintenance of
facilities on federal property.  Questionnaire responses that did not
contain both revenue and concessions fee data were excluded from this
analysis. 

\b Tennessee did not track concessioners' revenues.  It charged a
flat concessions fee. 

Source:  GAO questionnaire data. 


RATE OF RETURN ON CONCESSIONS
AGREEMENTS INITIATED DURING FISCAL
YEAR 1994 WITH OR WITHOUT
COMPETITION
========================================================== Appendix VI

                                            Agreements      Agreements
                                          initiated by       initiated
                                                 using   without using
                                           competition     competition
----------------------------------------  ------------  --------------
Number of concessions agreements                   280           1,954
Concessioners' gross revenues              $44,237,225    $117,648,966
Concessions fees + funds concessioners      $2,259,108      $2,381,230
 deposited into special accounts
Rate of return                                    5.1%            2.0%
----------------------------------------------------------------------
Note:  From questionnaire financial data, we calculated the rate of
return by dividing gross revenues into the sum of reported (1)
concessions fees and (2) amounts concessioners deposited into
concessioners' accounts for improvements and maintenance of
facilities on federal property.  Questionnaire responses that did not
contain both revenue and concessions fee data were excluded from this
analysis

Source:  GAO questionnaire data. 


AGENCIES' NONCONCESSION
INCOME-GENERATING ACTIVITIES IN
FISCAL YEAR 1994
========================================================= Appendix VII

Agency/component           Nonconcession, income-generating activities
-------------------------  -----------------------------------------------------
Department of              Timber sales, grazing, land uses, power, and mineral
Agriculture/               sales
Forest Service

Department of              Funds from state and local governments for animal
Agriculture/               damage control activities, such as food & agriculture
Animal and Plant Health    inspection services, illegally imported birds,
Inspection Service         import-export user fees, phytosanitary certificate
                           user fees, agriculture quarantine and inspection user
                           fees, Truman Animal Import Center, and veterinary
                           diagnostics user fees

Department of              User fees for publications
Agriculture/
Economic Research Service

Department of              User fees for grading services (cotton, tobacco,
Agriculture/Agricultural   dairy products), license fees for traders of
Marketing Service          perishable agricultural commodities (fresh and frozen
                           fruits and vegetables), subscription fees for printed
                           market reports, user fees for development and
                           maintenance of quality standards used in grading

Department of              Participation fees for participation in international
Agriculture/Foreign        food trade shows and dairy import license fees
Agricultural Service       charged to recover the government's costs of issuing
                           licenses permitting the importation of foreign cheese

Department of              Revenues from land use fees and money for the repair
Agriculture/               of government property
Research, Education and
Economics

Department of              Loan guarantee fees collected from lenders for loan
Agriculture/Rural Housing  guarantees for single-family housing and community
and Community Development  facility loans, conditional commitment fees from
Service (RHCDS)            developers who request commitments from RHCDS for
                           single-family housing loans for the purchase of new
                           construction, appraisal fees from single-family
                           housing loan applicants to offset the cost to obtain
                           an appraisal, loan origination fees collected from
                           borrowers in certain loan programs, credit report
                           fees collected from loan applicants, late fees
                           charged to borrowers who are late on multifamily
                           housing loan payments, loan application/transfer fees
                           charged to nonprogram eligible purchasers for
                           properties financed by RHCDS

Department of Commerce/    Moorage fees and payments for leased space
National Oceanic and
Atmospheric
Administration

Department of Commerce/    Application fees and the sale of patent information
U.S. Patent and Trademark
Office

Commodity Futures Trading  Fees for rule reviews, designations, Freedom of
Commission                 Information Act (FOIA), leverage audits,
                           registration, reparations, photocopying, and
                           publications

Department of Energy       User fees for the disposal of high-level radioactive
                           waste; timber sales; public hunting; recycling;
                           procurement seminars and procurement solicitation
                           fees; occasional rights-of-way and easement and
                           grazing fees; and sale of crude oil and natural gas

Department of Energy/      Sale of wholesale power to customers who redistribute
Alaska Power               to retail customers
Administration

Department of Energy/      Sale of hydroelectric power from 21 multipurpose
Bonneville Power           water resource projects of the Army Corps of
Administration             Engineers and 9 of the Bureau of Reclamation, plus
                           power from nonfederal generating plants

Department of Energy/      Sale of more than 10,000 megawatts of power
Western Area Power         (electricity) from 54 hydro power plants
Administration

Department of Energy/      Sale of power and energy from 24 hydroelectric power
Southwest Power            plants operated by the Army Corps of Engineers
Administration

Department of Energy/      Sale of power generated at 22 U.S. Army Corps of
Southeast Power            Engineers projects located in a 10-state southeastern
Administration             region

Federal Deposit Insurance  Revenue and fees obtained from contractor parking,
Corporation                fitness dues, interest earned on investments,
                           telecommunications income from billings, earned
                           assessments, provision for assessment credit, exit/
                           entrance fees, recoverable expenses from the
                           Uniformed Bank Performance Report (UBPR) collections,
                           miscellaneous income from seminars, rents, and others

Federal Election           Collection of civil penalties, the sale of federal
Commission                 campaign disclosure reports and records, and revenues
                           from FOIA

Federal Maritime           User fee collections, fines and penalty payments, and
Commission                 Davis Law receipts

Federal Trade Commission   Filing fee from persons acquiring voting securities
                           or assets who are required to file pre-merger
                           notifications (15 U.S.C. 18a)

Department of the          Entrance fees, commodity revenues from grazing, oil
Interior/Fish and          and gas, sand and gravel, and other special use fees
Wildlife Service

Department of the          Tours of Hoover Dam, site rentals of cabins,
Interior/Bureau of         trailers, and camping and group-use sites, and land-
Reclamation                use fees

Department of the          Public Information products, the review and approval
Interior/Minerals          of pipeline rights-of-way, Cenozoic Publication,
Management Service         transfer of rights-of-way titles, assignment and
                           lease transactions


Interstate Commerce        User fees from applicants for licenses to engage in
Commission                 interstate commerce, parties in rail authority
                           proceedings and compliant and compliant-type
                           declaratory order proceedings (49 C.F.R. 1002.3)

Department of Justice/     Registration fees from handlers of authorized drugs
Drug Enforcement           (doctors, pharmacies, and others)
Administration

Department of Justice/     Collection of initial and supplemental registrations
Criminal Division          for foreign principals; generation of copies of
                           registration statements, supplements, amendments,
                           exhibits, dissemination reports, political
                           propaganda, and other materials contained in public
                           files; execution of information searches; preparation
                           and execution of written advisory opinions

Department of Justice/     Sale of utilities (electricity, steam, water, and
Bureau of Prisons          sewage treatment) to Federal Prison Industries, Inc.
                           (Trade name-UNICOR); sale of meal tickets; rental
                           income from staff housing located at various federal
                           prisons; sale of farm by-products; fees from the care
                           and custody of state prisoners from various states

National Aeronautics and   Gift shop sales, tickets, and tours
Space Administration/
Ames Research Center

National Archives and      Reproduction services, the sale of reference
Records Management         material, over-the-counter sales (museum and
                           presidential library shops), publication sales,
                           audiovisual sales and rentals, and Presidential
                           library admissions

National Endowment for     File search and copying services in association with
the Arts                   FOIA and requests made to the Research Division

National Mediation Board   Duplicating costs under FOIA and the sale of Board
                           publications reports

Nuclear Regulatory         License and inspection fees, annual fees, and other
Commission                 regulatory costs

Office of Personnel        Rebates for volume discounts on governmentwide total
Management                 quality training costs

Securities and Exchange    Fees for over 80 types of applications, statements,
Commission                 and reports filed pursuant to each of the statutes
                           the Commission administers

Small Business             User fees charged to cover the costs of materials,
Administration             brochures, and space rental for seminars, workshops,
                           business award events, and others

Smithsonian Institution    Sales and membership fees

Tennessee Valley           Sale of electric energy and rent from electric
Authority                  property such as substations and transmission lines;
                           interest income from customer loans; royalties from
                           leased coal property; various cost-recovery fees,
                           such as campground, entrance, and user fees

Department of              Ad valorem fees for cargo on vessels going into U.S.
Transportation/St.         ports; interest on Minority Bank investments; fees
Lawrence Seaway            for observation decks and viewing machines at
Development Corporation    Eisenhower Lock; fees for vessel service, damage
                           repairs, and violations; rental of office space;
                           pleasure craft and noncommercial tolls for use of the
                           seaway

Department of              Civil penalties, sale of test tires and vehicles,
Transportation/National    royalties, FOIA requests, Corporate Average Fuel
Highway, Transportation,   Economy fine (CAFE) penalties, and user fees
and Safety Administration

Department of              User fees for processing applications to sell ships;
Transportation/            operating the computer-aided Operations Research
Maritime Administration    Facility at the U.S. Merchant Marine Academy; making
                           copies of agency rulings, orders, and economic data;
                           filing and investigation fees

Department of the          Assessment of all federally chartered national banks,
Treasury/Office of the     corporate applications, examinations, and security
Comptroller of the         filings; sale of publications; investment income
Currency                   (interest earned from the investment of operating
                           funds in U.S. Treasury securities)

Department of the          Sales at the Denver Mint and Union Station in
Treasury/U.S. Mint         Washington, DC, of numismatic items: coins, medals,
                           and commemorative items

Department of the          Harbor maintenance fees; commissions on pay telephone
Treasury/U.S. Customs      stations; charges for testing, inspecting and grading
Service                    services; fees and other charges for miscellaneous
                           services and Consolidated Omnibus Budget and
                           Reconciliation Act (COBRA).

Department of the          Fees for firearm and explosives licenses and permits
Treasury/Bureau of         for ATF issues and registration fees to import U.S.
Alcohol, Tobacco and       munitions
Firearms (ATF)

U.S. Postal Service        Coin-operated photocopy machines at Post Office
                           facilities

Department of Veterans     Profits received from Veterans Canteens Service (VCS)
Affairs                    operated by VCS employees

Department of State        Fees for authentication services

Panama Canal Commission    Tolls; navigation, logistical, fire protection, and
                           communication services; sanitation and grounds;
                           power; water systems, housing, and others

The Kennedy Center         Box office receipts from the Kennedy Center and the
                           National Symphony Orchestra, theater license fees,
                           gift shops sales, and investment income

Federal Energy Regulatory  Limited filing fees collected from regulated oil,
Commission                 gas, and electric companies and an assessed charge to
                           major oil, gas, and electric customers based upon
                           their respective portions of program costs
--------------------------------------------------------------------------------
Source:  GAO questionnaire data. 


OBJECTIVES, SCOPE, AND METHODOLOGY
======================================================== Appendix VIII

The objectives of our review were to determine (1) the extent of
concessions operations in the federal government, (2) the rate of
return the federal government received from concessions and factors
that affected the rate of return, (3) how the federal government's
rate of return compared to other governments' rates of return, and
(4) the extent of agencies' nonconcessions activities that generated
income in fiscal year 1994 and whether they offered opportunities to
be handled as concessions. 

To accomplish objectives one, two, and four, we used three
questionnaires to request data from 75 federal executive departments
and agencies listed in the 1993/94 U.S.  Government Manual.  The
first questionnaire requested summary information on all concessions
agreements in effect during fiscal year 1994, such as the total
number of agreements, concessioners' revenues, and concessions fees. 
The second questionnaire asked for detailed agreement-specific
information on each concessions agreements either initiated or
extended during fiscal year 1994.  Details included the amount of
revenues and fees, information on whether competition was used to
select the concessioner, whether fees was one of the factors
considered during competition, how competed agreements were
advertised, and terms of agreements.  We also requested copies of
pertinent agency policies and each agreement that was either issued
or extended in fiscal year 1994.  The third questionnaire asked for
information on agencies' income-generating activities that were not
concessions. 

We pretested the questionnaires at six federal agencies or agency
components:  the Department of Agriculture's Forest Service, the
Department of the Army Corps of Engineers, the General Services
Administration, the Smithsonian, and the Department of the Interior's
National Park Service and Fish and Wildlife Service.  These
agencies--the land management agencies in particular--are responsible
for most federal concessions.\1 We revised the questionnaires on the
basis of their detailed feedback. 

For the purpose of this assignment, we defined "concessions" as
private or public entities using federally owned/leased property
under a government permit, contract, or other similar agreement to
provide recreation, food, or other services to either the general
public or specific individuals.  Concession services included, but
were not limited to, food operations, vending machines, retail shops,
public pay telephones, barber/beauty shops, transportation, lodging,
marinas, and campgrounds.  We excluded day care centers, employee
association stores, and services provided by the visually impaired
under the Randolph-Sheppard Act.  State governments manage
Randolph-Sheppard concessions that are on federal property.  Further,
if concessions services in an agency were provided under an agreement
with GSA, we requested agencies not to include these operations in
their response.  GSA agreed to include these concessions in its
response. 

All 75 agencies responded to our request.  Twenty-seven of the
agencies said they had at least one concessions agreement.  Forty-two
respondents provided concessions information, because some agencies,
such as the Department of the Interior, had more than one component
managing concessions (see app.  II).  Fifteen of the 27 agencies
either initiated or extended at least 1 concession agreement during
fiscal year 1994.  The Central Intelligence Agency provided an oral
briefing on its concessions program and did not provide any details
on its concessions agreements. 

In response to our questionnaires, we received information on 5,000
concessions agreements.  Our information about the agreements comes
from only the agencies' questionnaire responses for the agreements. 
However, to check whether the questionnaires were filled out
completely and accurately, we (1) checked selected responses against
copies of the concessions agreements that agencies sent to us; (2)
checked agency totals for concessions revenues and fees against prior
GAO reports; (3) followed up with agency staff in selected cases to
clarify their responses; (4) manually reviewed all pages of each
form; (5) had specially trained staff convert the data to
computer-readable format and verify their entries; (6) manually
checked computerized data against the original forms, including all
data on concessions revenues and fees; and (7) conducted computerized
checks for data consistency.  We analyzed the information using
standard software for tabulating and analyzing data. 

To calculate the rate of return from concessions, we used
questionnaire financial data for concessions agreements either
initiated or extended during fiscal year 1994.  From this reported
information, we calculated the rate of return by dividing gross
revenues into the sum of concessions fees and the amount in special
accounts.  For rate of return analyses, we excluded questionnaires
that did not contain both gross revenue and concessions fee data. 

In addition to the questionnaire data, we also (1) interviewed
federal concessions management staff at both headquarters and field
levels and officials of the National Parks and Conservation
Association and the National Park Hospitality Association; and (2)
reviewed our previous work in this area; Inspector General reports;
and laws, regulations, and policies for each federal entity's
concessions operations. 

To determine how the federal government's rate of return compared
with that of other governments, we used the data we obtained from
objectives one, two, and four and sent a questionnaire to five state
governments and Canada.  We selected the five states--California,
Maryland, Michigan, Missouri, and Tennessee--on the basis of
information we received from the National Parks and Conservation
Association.  The information showed that these five states had
relatively high rates of return.  We visited two of the
states--Maryland and Tennessee--and met with their key concessions
managers.  We selected Canada to obtain information on another
country's experience. 

We did our review from January 1995 to November 1995, in accordance
with generally accepted government auditing standards.  Because it
was impractical for us to obtain comments from all 75 agencies, we
provided copies of a draft of this report to the heads of the
departments of the six land management agencies for comment.  The six
agencies accounted for over 92 percent of the concessions.  On March
25, 1996, we discussed the draft report with officials designated by
the departments.  Their comments are discussed on pages 16 and 17. 


--------------------
\1 The six land management agencies are the Department of the Army
Corps of Engineers; the Department of the Interior's National Park
Service, Bureaus of Reclamation and Land Management, and the Fish and
Wildlife Service; and the Department of Agriculture's Forest Service. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IX

GENERAL GOVERNMENT DIVISION,
WASHINGTON, D.C. 

John S.  Baldwin, Sr., Assistant Director
Lucy M.  Hall, Evaluator-in-Charge
Shirley C.  Bates, Staff Evaluator
Abraham L.  Logan, Staff Evaluator
Kenneth E.  John, Senior Social Science Analyst
Catherine M.  Hurley, Computer Programmer Analyst
James M.  Fields, Senior Social Science Analyst
George H.  Quinn, Jr., Computer Programmer Analyst
Donna M.  Leiss, Communications Analyst

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

Jill P.  Sayre, Senior Attorney





RELATED GAO PRODUCTS
============================================================ Chapter 0

Federal Lands:  Views on Reform of Recreation Concessioners
(GAO-T/RCED-95-250, July 25, 1995). 

Federal Lands:  Improvements Needed in Managing Short-Term
Concessioners (GAO/RCED-93-177, Sep.  14, 1993). 

Federal Land:  Little Progress Made in Improving Oversight of
Concessioners (GAO/T-RCED-93-42, May 27, 1993). 

Forest Service:  Little Assurance That Fair Market Value Fees Are
Collected From Ski Areas (GAO/RCED-93-107, Apr.  16, 1993). 

National Park Service:  Policies and Practices for Determining
Concessioners' Building Use Fees (GAO-T-RCED-92-66, May 21, 1992). 

Federal Lands:  Oversight of Long-Term Concessioners
(GAO/RCED-92-128BR, Mar.  20, 1992). 

Federal Lands:  Improvements Needed in Managing Concessioners
(GAO/RCED-91-163, June 11, 1991). 

Forest Service:  Difficult Choices Face the Future of the Recreation
Program (GAO/RCED-91-115, Apr.  15, 1991). 

Recreation Concessioners Operating on Federal Lands
(GAO/T-RCED-91-16, Mar.  21, 1991). 

Changes Needed in the Forest Service's Recreation Program
(GAO/T-RCED-91-10, Fed.  27, 1991). 

Parks and Recreation:  Maintenance and Reconstruction Backlog on
National Forest Trails (GAO/RCED-89-182, Sep.  22, 1989). 

Parks and Recreation:  Problems with Fee System for Resorts Operating
on Forest Service Lands (GAO/RCED-88-94, May 16, 1988). 

Parks and Recreation:  Interior Did Not Comply With Legal
Requirements for the Outdoors Commission (GAO/RCED-88-65, Mar.  25,
1988). 

Parks and Recreation:  Park Service Managers Report Shortfalls in
Maintenance Funding (GAO/RCED-88-91BR, Mar.  21,1988). 

Maintenance Needs of the National Park Service (GAO/T-RCED-88-27,
Mar.  23, 1988). 

Parks and Recreation:  Limited Progress Made in Documenting and
Mitigating Threats to the Parks (GAO/RCED-87-36, Feb.  9, 1987). 

Parks and Recreation:  Recreational Fee Authorizations, Prohibitions,
and Limitations (GAO/RCED-86-149, May 8, 1986). 

Corps of Engineers and Bureau of Reclamation's Recreation and
Construction Backlogs (GAO/RCED-84-54, Nov.  25, 1984). 

The National Park Service Has Improved Facilities at 12 Park Service
Areas (GAO/RCED-83-65, Dec.  17, 1983). 

Information Regarding U.S.  Army Corps of Engineers Management of
Recreation Areas (GAO/RCED-83-65, Dec.  17, 1983). 

National Parks' Health and Safety Problems Given Priority:  Cost
Estimates and Safety Management Could Be Improved (GAO/RCED-83-59,
Apr.  25, 1983). 

Increasing Entrance Fees:  National Park Service (GAO/RCED-82-84,
Aug.  4, 1982). 

Facilities in Many National Parks and Forests Do Not Meet Health and
Safety Standards (GAO/CED-80-115, Oct.  10, 1980). 

Better Management of National Park Concessions Can Improve Services
Provided to the Public (GAO/CED-80-102, July 31, 1980). 

Concession Operations in the National Parks--Improvements Needed in
Administration (GAO/RED-76-1, July 21, 1975). 


*** End of document. ***