99-30292. Economic Analysis of Proposed Concession Contracting Regulations  

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

Document Information

Published:
11/22/1999
Department:
National Park Service
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
99-30292
Dates:
NPS will accept written comments, suggestions or objections until December 22, 1999.
Pages:
63775-63778 (4 pages)
RINs:
1024-AC72: Concession Contracts
RIN Links:
https://www.federalregister.gov/regulations/1024-AC72/concession-contracts
PDF File:
99-30292.pdf
CFR: (2)
36 CFR 51.100
36 CFR 51.111