B-166725, AUGUST 11, 1969, 49 COMP. GEN. 88

B-166725, AUGUST 11, 1969, 49 COMP. GEN. 88

CONCESSIONS -- CONTRACTS -- PREFERENCE TO INCUMBENT CONCESSIONERS THE AWARD OF A NEW LONG TERM CONCESSION CONTRACT TO SUPERSEDE AN EXISTING ONE TO THE CONTRACTOR WHO HAD SATISFACTORILY PERFORMED UNDER SUCCESSIVE CONTRACTS AND WHO HAD BEEN PERMITTED TO MODIFY HIS INITIAL PROPOSAL FOR THE IMPROVEMENT OF CONCESSION FACILITIES AT SUBSTANTIAL INVESTMENTS IN ORDER TO MATCH THE INVESTMENT PROPOSAL OF ANOTHER BIDDER WILL NOT BE DISTURBED, EVEN THOUGH ORDINARILY THE MODIFICATION OF AN INITIAL PROPOSAL REQUIRES THE SOLICITATION OF NEW PROPOSALS, AS 16 U.S.C. 20D IN AUTHORIZING PREFERENCE TO AN INCUMBENT CONCESSIONER IN THE RENEWAL OF A CONTRACT OR IN THE NEGOTIATION OF A NEW CONTRACT FOR THE PURPOSE OF MAINTAINING THE CONTINUITY OF OPERATIONS AND OPERATORS, AND IN NOT PROVIDING BIDDING PROCEDURES, REMOVES CONCESSION CONTRACTS FROM NORMAL RULES. CONCESSIONS -- CONTRACTS -- MODIFICATION -- REPORTING TO CONGRESS WHERE THE PROPOSED CONCESSION CONTRACT REPORTED TO THE CONGRESS 60 DAYS BEFORE AWARD PURSUANT TO 16 U.S.C. 17B-1 IS MODIFIED, THE CONTRACT AS EXECUTED BY THE NATIONAL PARK SERVICE, DEPARTMENT OF THE INTERIOR, IS NOT THE ONE REPORTED TO THE CONGRESS AND, THEREFORE, THE REQUIREMENT FOR REPORTING A PROPOSED CONCESSION CONTRACT "IN DETAIL" 60 DAYS BEFORE THE CONTRACT IS AWARDED WAS NOT MET. HOWEVER, THE STATUTE OMITTING TO SET FORTH THE CONSEQUENCES RESULTING FROM FAILURE TO COMPLY WITH THE REQUIREMENT, THE CONTRACT AWARDED IS VOIDABLE AT THE OPTION OF THE GOVERNMENT, AN OPTION THAT IS WITHIN THE DISCRETION OF THE SECRETARY OF THE INTERIOR TO EXERCISE, THE UNITED STATES GENERAL ACCOUNTING OFFICE TAKING ACTION ONLY WHEN A CONTRACT IS CONSIDERED VOID, NOT VOIDABLE.

TO IRELAND, STAPLETON, PRYOR & HOLMES, AUGUST 11, 1969:

WE REFER TO YOUR LETTER OF APRIL 18, 1969, AND SUBSEQUENT CORRESPONDENCE PROTESTING ON BEHALF OF YOUR CLIENT, HOST INTERNATIONAL INCORPORATED (HOST), AGAINST THE AWARD OF A CONTRACT BY THE NATIONAL PARK SERVICE TO FRED HARVEY, INCORPORATED, FOR DEVELOPING AND OPERATING THE PRIMARY CONCESSION FACILITIES IN THE GRAND CANYON NATIONAL PARK, SOUTH RIM.

IN CONJUNCTION WITH THE CONSIDERATION OF YOUR PROTEST AND PURSUANT TO A REQUEST BY THE CHAIRMAN, GOVERNMENT ACTIVITIES SUBCOMMITTEE OF THE HOUSE COMMITTEE ON GOVERNMENT OPERATIONS, WE CONDUCTED AN INDEPENDENT AND COMPREHENSIVE REVIEW, INCLUDING FIELD INVESTIGATIONS, OF ALL FACTORS RELATING TO THE AWARD OF THE CONTRACT TO FRED HARVEY. OUR REVIEW DISCLOSED THE FOLLOWING FACTS AND CIRCUMSTANCES SURROUNDING THE AWARD OF THE CONTRACT.

FRED HARVEY HAS OPERATED VARIOUS CONCESSIONS AT THE SOUTH RIM OF THE GRAND CANYON NATIONAL PARK UNDER SUCCESSIVE CONTRACTS EVER SINCE THE PARK WAS ESTABLISHED. IMMEDIATELY PRIOR TO EXECUTION OF THE PRESENT CONTRACT HARVEY HAD OPERATED CONCESSIONS AT GRAND CANYON NATIONAL PARK UNDER CONTRACT NO. 14-10-0100-346 WHICH COVERED THE PERIOD FROM AUGUST 1, 1954, THROUGH JULY 31, 1974.

DURING THE PERIOD OF THE EARLIER CONTRACT, DISCUSSIONS TOOK PLACE BETWEEN HARVEY AND THE NATIONAL PARK SERVICE (NPS) CONCERNING THE NEED FOR SUBSTANTIAL IMPROVEMENTS IN CONCESSION FACILITIES AT THE SOUTH RIM. IN AN AUGUST 1967 LETTER TO THE SUPERINTENDENT, GRAND CANYON NATIONAL PARK, HARVEY SUGGESTED THAT A NEW CONTRACT BE NEGOTIATED BECAUSE THE PROPOSED IMPROVEMENTS WOULD REQUIRE SUBSTANTIAL INVESTMENTS, THEN ESTIMATED TO COST ABOUT $1.6 MILLION. AFTER REVIEW BY NPS STAFF AND MEETINGS WITH REPRESENTATIVES OF THE CONCESSIONER, NPS DETERMINED THAT IMPROVEMENTS AGGREGATING APPROXIMATELY $5 MILLION WERE NEEDED AND THAT A 30-YEAR CONTRACT WOULD BE APPROPRIATE FOR SUCH AN INVESTMENT. ACCORDINGLY, NPS PREPARED A "FACT SHEET" UNDER WHICH A 30 YEAR CONCESSION CONTRACT WAS TO BE NEGOTIATED FOR THE OPERATION OF CONCESSIONS AT THE PARK.

THE FACT SHEET NOTED THAT HARVEY HAD BEEN CONDUCTING CONCESSION OPERATIONS AT THE SOUTH RIM IN A MANNER SATISFACTORY TO THE SECRETARY OF THE INTERIOR AND THAT HARVEY HAD APPLIED FOR A NEW LONG-TERM CONTRACT TO SUPERSEDE AND CANCEL THE EXISTING CONTRACT AS SECURITY FOR A SUBSTANTIAL CONSTRUCTION AND IMPROVEMENT PROGRAM. THE IMPROVEMENT DESIRED BY NPS WAS ESTIMATED TO COST $5 MILLION. THE FACT SHEET SPECIFIED THE IMPROVEMENTS TO BE CONSTRUCTED DURING THE FIRST 5 YEARS OF THE CONTRACT PERIOD AT AN ESTIMATED COST OF $3 MILLION AND STATED THAT THE CONCESSIONER WOULD INVEST AN ADDITIONAL $2 MILLION DURING THE NEXT 5 YEARS OF THE CONTRACT PERIOD IN CONSTRUCTION OF SUCH ADDITIONAL FACILITIES AS WOULD BE AGREED UPON BETWEEN NPS AND THE CONCESSIONER AFTER COMPLETION OF THE 1971 OPERATING SEASON. IN THIS CONNECTION, THE FACT SHEET STATED: THIS REPRESENTS THE PRESENT OBJECTIVES OF THE NATIONAL PARK SERVICE, BUT IT IS RECOGNIZED THAT THE SPECIFIC DETAILS MAY BE SUBJECT TO AMENDMENT BY MUTUAL AGREEMENT BETWEEN THE SERVICE AND THE CONCESSIONER. THE PRINCIPAL OBJECTIVE, HOWEVER, IS TO PROVIDE NEEDED IMPROVEMENTS WITHIN THE NEXT FIVE YEARS FOR THE CONVENIENCE OF VISITORS AT A COST OF NOT LESS THAN $3,000,000, AND TO PROVIDE SUCH ADDITIONAL FACILITIES AS MAY BE DETERMINED NECESSARY AT A COST OF NOT LESS THAN $2,000,000 AFTER THE SPECIFIC PROGRAM HAS BEEN COMPLETED.

ADDITIONALLY, THE FACT SHEET: (1) QUOTED SECTION 5 OF THE ACT OF OCTOBER 9, 1965, 16 U.S.C. 20D, CONCERNING THE PREFERENCE TO BE GIVEN INCUMBENT CONCESSIONERS; (2) DESCRIBED THE CONCESSIONER'S RIGHT TO BE COMPENSATED FOR STRUCTURES AND IMPROVEMENTS HE CONSTRUCTS ON FEDERAL LAND IF HIS RIGHT TO USE THEM FOR CONCESSION OPERATIONS IS TERMINATED; AND (3) QUOTED SECTION 13 OF HARVEY'S THEN CURRENT CONTRACT WHICH RELATES TO COMPENSATION FOR THIS POSSESSORY INTEREST IF THE CONCESSION WERE AWARDED TO ANOTHER PARTY. THE FACT SHEET ALSO NOTED THAT BECAUSE OF THE PRESSING NEED FOR ADDITIONAL VISITOR FACILITIES, THE CONCESSIONER, WITH THE APPROVAL OF NPS, COULD INITIATE CONSTRUCTION UNDER THE CONTRACT IN ADVANCE OF THE EFFECTIVE DATE OF THE CONTRACT.

A NOTICE OF THE INTENTION TO NEGOTIATE THE CONCESSION CONTRACT WITH HARVEY FOR THE 30-YEAR PERIOD FROM JANUARY 1, 1969, THROUGH DECEMBER 31, 1998, WAS PUBLISHED IN THE FEDERAL REGISTER ON SEPTEMBER 5, 1968. THE NOTICE READS, IN PART, AS FOLLOWS: THE FOREGOING CONCESSIONER (FRED HARVEY) HAS PERFORMED ITS OBLIGATIONS UNDER PRIOR CONTRACTS TO THE SATISFACTION OF THE NATIONAL PARK SERVICE, AND, THEREFORE, PURSUANT TO THE ACT CITED ABOVE (10 U.S.C. 20D), IS ENTITLED TO BE GIVEN PREFERENCE IN THE RENEWAL OF THE CONTRACT AND IN THE NEGOTIATION OF A NEW CONTRACT. HOWEVER, UNDER THE ACT CITED ABOVE, THE SECRETARY IS ALSO REQUIRED TO CONSIDER AND EVALUATE ALL PROPOSALS RECEIVED AS A RESULT OF THIS NOTICE. ANY PROPOSAL TO BE CONSIDERED AND EVALUATED MUST BE SUBMITTED WITHIN 30 DAYS AFTER THE PUBLICATION DATE OF THIS NOTICE.

PRIOR TO THE PUBLICATION OF THIS NOTICE, HARVEY STATED IN A LETTER DATED AUGUST 26, 1968, THAT IT WAS IN AGREEMENT WITH THE FACT SHEET.

IN RESPONSE TO THE SEPTEMBER 5 NOTICE IN THE FEDERAL REGISTER, HOST PRESENTED ITS PROPOSAL ON OCTOBER 3, 1968. THIS PROPOSAL WHICH WAS ACCOMPANIED BY ARCHITECTS' PLANS AND RENDERINGS, CONTEMPLATED A MINIMUM INVESTMENT OF $10 MILLION AND A MAXIMUM INVESTMENT OF $15 MILLION DURING THE FIRST 5 YEARS OF THE CONTRACT.

THE HOST PROPOSAL PROVIDED FOR A NUMBER OF FACILITIES WHICH WERE IN ADDITION TO THOSE CALLED FOR IN THE FACT SHEET. THE MORE SIGNIFICANT ADDITIONAL FACILITIES WERE:

1. A 20 MILLION GALLON UNDERGROUND WATER STORAGE UNIT AND COMPLETION OF APPROXIMATELY 9 MILES OF PIPELINE TO THE DESERT VIEW AREA.

2. REPLACING THE EXISTING HOTEL AT EL TOVAR WITH A NEW 300 ROOM HOTEL. THIS WOULD PROVIDE 209 ADDITIONAL ROOMS AT EL TOVAR. THE NEW HOTEL WAS PROPOSED FOR CONSTRUCTION DIRECTLY ON THE RIM.

3. SIXTY ADDITIONAL CABIN UNITS RECOMMENDED AT THE BRIGHT ANGEL AREA; 50 ADDITIONAL ROOMS RECOMMENDED AT YAVAPAI AREA AND 50 ADDITIONAL ROOMS RECOMMENDED AT DESERT VIEW AREA.

4. A GENERAL STORE.

5. A NEW CAFETERIA AT THE MOTOR LODGE.

6. A REBUILDING OF PHANTOM RANCH.

BY LETTER OF NOVEMBER 8, 1968, NPS REJECTED HOST'S PROPOSAL. THIS LETTER, IN PERTINENT PART, READS:

AS YOU WERE ADVISED IN EARLIER DISCUSSIONS, FRED HARVEY, INC., HAS PROVIDED SERVICE FOR THE PUBLIC TO THE SATISFACTION OF THE SECRETARY, AND IS, THEREFORE, ENTITLED TO A PREFERENCE IN THE RENEWAL OF ITS CONTRACT. MOREOVER, FRED HARVEY, INC., HAS AGREED IN ALL PARTICULARS TO THE CONSTRUCTION AND IMPROVEMENT PROGRAM AS WELL AS ALL OTHER CONDITIONS AS DETAILED IN THE FACT SHEET. IN OUR EVALUATION OF YOUR PROPOSAL, WE FIND IT UNACCEPTABLE BECAUSE OF A HIGH CONCENTRATION OF FACILITIES AND AN OVERDEVELOPMENT ON THE RIM. ACCORDINGLY, WE PROPOSE TO NEGOTIATE A CONCESSION CONTRACT WITH FRED HARVEY, INC.

THIS REJECTION OF ITS PROPOSAL WAS APPEALED BY HOST ON NOVEMBER 15, 1968. AMONG OTHER THINGS, THE APPEAL LETTER POINTED OUT THAT AT ALL POINTS IN ITS PRESENTATION TO NPS, HOST EMPHASIZED THE NEGOTIABILITY OF THE DETAILS OF THE PROPOSAL AND ITS FLEXIBILITY AND WILLINGNESS TO REVISE DETAILS OF DESIGN AND FACILITY SIZE AND LOCATION BY MUTUAL AGREEMENT WITH NPS. ACCORDINGLY, HOST CONTENDED THAT "REJECTION OF THE HOST PROPOSAL ON GROUNDS THAT WERE SPECIFICALLY AND ADMITTEDLY SUBJECT TO NEGOTIATION IS PLAINLY AN ABUSE OF DISCRETION AND, THUS, SHOULD BE REVERSED."

IN RESPONSE TO THIS APPEAL THE ASSISTANT SECRETARY OF THE INTERIOR ADVISED HOST BY LETTER OF JANUARY 7, 1969, THAT:

YOUR LETTER AND STATEMENTS SUGGEST THAT THE PARK SERVICE MAY HAVE REJECTED HOST'S PROPOSAL BECAUSE IT BELIEVED IT WAS COMPELLED UNDER THE CIRCUMSTANCES TO ACCEPT HARVEY'S PROPOSAL AS A MATTER OF LAW. AT THE CONFERENCES ON DECEMBER 5, IT WAS MADE CLEAR THAT THE SERVICE'S DECISION WAS NOT BASED ON ANY SUCH CONSTRUCTION OF THE LAW; THAT ITS OFFICERS RECOGNIZED, HAD THEY CONCLUDED HOST'S PROPOSAL WAS PREFERABLE TO THE DEVELOPMENT CALLED FOR BY THE FACT SHEET, THAT THEY COULD HAVE ISSUED A NEW FACT SHEET INCORPORATING THE FEATURES OF THAT PROPOSAL. THE DEPUTY SOLICITOR ADVISES THAT IN HIS VIEW THIS REPRESENTS A CORRECT INTERPRETATION OF THE STATUTE.

WITH RESPECT TO THE FIRST AND SECOND POINTS RAISED IN YOUR LETTER, WE ARE SATISFIED, IN SPITE OF THE POSSIBLY MISLEADING LANGUAGE ABOUT "HIGH CONCENTRATION OF FACILITIES AND AN OVERDEVELOPMENT ON THE RIM," CONTAINED IN MR. HUMMEL'S LETTER OF NOVEMBER 8, THAT THE SERVICE UNDERSTOOD AND ACTED ON THE BASIS THAT SUCH THINGS AS THE SIZE AND LOCATION OF SPECIFIC FACILITIES CONTEMPLATED BY THE HOST PROPOSAL WERE NEGOTIABLE. THE SERVICE'S DECISION WAS ESSENTIALLY BASED ON ITS CONCLUSION THAT THE DEVELOPMENT CALLED FOR BY THE FACT SHEET IS ALL THAT IS WARRANTED OR DESIRABLE ON THE SOUTH RIM OF THE GRAND CANYON NATIONAL PARK AT THIS TIME. AS ITS REPRESENTATIVES ADVISED DURING THE CONFERENCES, IT IS THEIR VIEW THAT BOTH THE PROPOSAL OF HOST (WITH MODIFICATIONS WHICH THEY UNDERSTOOD THE COMPANY WOULD HAVE BEEN WILLING TO MAKE) AND THE PROPOSAL OF HARVEY ARE COMPATIBLE WITH THE FACT SHEET AND THEIR DEVELOPMENTAL OBJECTIVES FOR THE AREA. THIS BEING THE CASE THEY DETERMINED THAT HARVEY WAS ENTITLED TO THE CONCESSION CONTRACT UNDER THE PREFERENCE PROVISION OF THE STATUTE.

BY LETTERS DATED JANUARY 16, 1969, TO THE PRESIDENT OF THE SENATE AND SPEAKER OF THE HOUSE OF REPRESENTATIVES THE INTERIOR DEPARTMENT TRANSMITTED COPIES OF THE PROPOSED CONTRACT TO BE AWARDED TO FRED HARVEY IN ACCORDANCE WITH THE PROVISIONS OF 16 U.S.C. 17B-1. THE LETTERS NOTED THAT THE PROPOSED CONTRACT WOULD SUPERSEDE AND CANCEL THE EXISTING CONTRACT AND THAT ITS TERM WAS CONDITIONED UPON A TWO-PHASE BUILDING AND IMPROVEMENT PROGRAM OF NOT LESS THAN $5 MILLION TO BE COMPLETED DURING THE FIRST 10 YEARS OF THE CONTRACT. THE LETTERS FURTHER NOTED THAT AFTER EVALUATION OF THE HOST AND HARVEY PROPOSALS IT WAS DETERMINED THAT BOTH WERE COMPATIBLE WITH THE OBJECTIVES OF THE NATIONAL PARK SERVICE FOR THE AREA BUT IT WAS DETERMINED THAT A CONTRACT SHOULD BE NEGOTIATED WITH HARVEY ON THE BASIS THAT IT WAS, AS A SATISFACTORY CONCESSIONER, ENTITLED TO PREFERENCE IN THE RENEWAL OF ITS CONTRACT.

WE EXAMINED INTO THE REASONABLENESS OF THE DECISION BY THE DEPARTMENT THAT FRED HARVEY HAD PERFORMED SATISFACTORILY BY REVIEWING VISITORS' COMPLAINTS, HEALTH AND SANITATION INSPECTION REPORTS, AND SAFETY AND FIRE HAZARD REPORTS. OUR REVIEW OF COMPLAINTS, INSPECTION REPORTS, AND DISCUSSIONS WITH COGNIZANT OFFICIALS DID NOT DISCLOSE ANY BASIS FOR QUESTIONING THE VALIDITY OF THE SECRETARY'S DETERMINATION THAT HARVEY'S PERFORMANCE HAD BEEN SATISFACTORY.

ON JANUARY 25, 1969, HOST AGAIN APPEALED THE REJECTION OF ITS PROPOSAL BY FILING A PETITION OF RECONSIDERATION WITH THE SECRETARY OF THE INTERIOR.

THEREAFTER, ON MARCH 14, 1969, DURING THE 60-DAY REPORTING PERIOD SPECIFIED IN 16 U.S.C. 17B-1, THE DIRECTOR OF THE NATIONAL PARK SERVICE SENT THE PRESIDENT OF FRED HARVEY A TELEGRAM READING AS FOLLOWS:

ADVISE RETURN TELETYPE THAT FRED HARVEY WILL MEET IN ALL RESPECTS THE

EQUIVALENT INVESTMENT PROPOSALS OF HOST INTERNATIONAL AS MAY BE REQUIRED

BY THE SECRETARY PURSUANT TO PROPOSED NEW CONTRACT.

ON MARCH 17, 1969, THE PRESIDENT OF FRED HARVEY WIRED THE DIRECTOR, NPS:

IN RESPONSE TO YOUR TWX OF MARCH 17 I WISH TO ADVISE THAT

FRED HARVEY INC. WILL MEET IN ALL RESPECTS THE EQUIVALENT INVESTMENT

PROPOSALS OF HOST INTERNATIONAL AS MAY BE REQUIRED BY THE SECRETARY

PURSUANT TO THE PROPOSED NEW CONTRACT. HOST WAS ADVISED ON MARCH 25, 1969, BY TELEGRAM FROM THE DEPARTMENT OF THE INTERIOR THAT ITS PETITION FOR RECONSIDERATION WAS DENIED. THE NEXT DAY, ON MARCH 26, THE CONTRACT WAS EXECUTED BY SIGNATURE OF THE ACTING DIRECTOR, NPS.

WHILE HOST RAISES A NUMBER OF CONTENTIONS REGARDING THE ACTIONS OF THE INTERIOR DEPARTMENT IN THE SELECTION PROCESS FOR THE CONTRACT AND THE REASONS GIVEN BY DEPARTMENT OFFICIALS FOR REJECTION OF HOST'S PROPOSAL, THE THRUST OF HOST'S PROTEST TO OUR OFFICE CONCERNS THE LEGAL EFFECT OF THE MARCH 14 AND 17 EXCHANGE OF TELEGRAMS. HOST CONTENDS THAT THE MARCH 14 TELEGRAM TO FRED HARVEY CONSTITUTED A SOLICITATION IN CONTRAVENTION OF SECTION 5 OF THE 1965 CONCESSION ACT, 16 U.S.C. 20D (SUPP. III). HOST ARGUES THAT ITS PROPOSAL IN EFFECT BECAME A MODIFIED FACT SHEET TO WHICH FRED HARVEY, AND NO ONE ELSE, WAS PERMITTED TO RESPOND. THIS, IT IS CONTENDED, IS A VIOLATION OF 16 U.S.C. 20D.

THE PROVISIONS OF 16 U.S.C. 20D READ AS FOLLOWS:

THE SECRETARY SHALL ENCOURAGE CONTINUITY OF OPERATION AND FACILITIES AND SERVICES BY GIVING PREFERENCE IN THE RENEWAL OF CONTRACTS OR PERMITS AND IN THE NEGOTIATION OF NEW CONTRACTS OR PERMITS TO THE CONCESSIONERS WHO HAVE PERFORMED THEIR OBLIGATIONS UNDER PRIOR CONTRACTS OR PERMITS TO THE SATISFACTION OF THE SECRETARY. TO THIS END, THE SECRETARY, AT ANY TIME IN HIS DISCRETION, MAY EXTEND OR RENEW A CONTRACT OR PERMIT, OR MAY GRANT A NEW CONTRACT OR PERMIT TO THE SAME CONCESSIONER UPON THE TERMINATION OR SURRENDER BEFORE EXPIRATION OF A PRIOR CONTRACT OR PERMIT. BEFORE DOING SO, HOWEVER, AND BEFORE GRANTING EXTENSIONS, RENEWALS OR NEW CONTRACTS PURSUANT TO THE LAST SENTENCE OF SECTION 20C OF THIS TITLE, THE SECRETARY SHALL GIVE REASONABLE PUBLIC NOTICE OF HIS INTENTION SO TO DO AND SHALL CONSIDER AND EVALUATE ALL PROPOSALS RECEIVED AS A RESULT THEREOF. IN A REPORT DATED MAY 22, 1969, THE INTERIOR DEPARTMENT STATES THAT THE EXCHANGE OF TELEGRAMS DID NOT CHANGE OR ATTEMPT TO CHANGE THE POSITION OF THE NATIONAL PARK SERVICE IN LIMITING DEVELOPMENTS ON THE SOUTH RIM OF GRAND CANYON TO THOSE FACILITIES CALLED FOR IN THE FACT SHEET AND AS SET FORTH IN THE CONTRACT. THE REPORT CONTINUES: *** THE FACT SHEET ESTABLISHED THE PARAMETERS OF WHAT THE SERVICE BELIEVED WOULD BE REASONABLE AND DESIRABLE FOR THE FORESEEABLE FUTURE. THERE WAS A MEETING OF THE MINDS BETWEEN FRED HARVEY, INC., AND THE SERVICE. ACCORDINGLY, A CONTRACT WAS SIGNED ON BEHALF OF FRED HARVEY, INC., BY ITS PRESIDENT ON JANUARY 14. THE USUAL 60 DAY WAITING PERIOD, DURING WHICH CERTAIN COMMITTEES OF THE CONGRESS HAD THE OPPORTUNITY TO CONSIDER THE PROPOSED CONTRACT, FOLLOWED THE SIGNING OF THE CONTRACT BY FRED HARVEY, INC.

IT WAS DURING THE WAITING PERIOD THAT THE EXCHANGE OF TELEGRAMS TOOK PLACE. SECTION 17 OF THE CONCESSION CONTRACT WITH FRED HARVEY PROVIDES THAT THE CONCESSIONER WILL CONSTRUCT SUCH ADDITIONAL FACILITIES, OVER AND BEYOND THOSE SPECIFICALLY REQUIRED IN THE CONTRACT, AS THE SECRETARY, IN HIS JUDGMENT, MAY AT A LATER DATE DEEM APPROPRIATE. THE PURPOSE OF THE SERVICE TELEGRAM WAS TO OBTAIN A PRELIMINARY REACTION FROM FRED HARVEY, INC. AS TO ITS WILLINGNESS, AT A LATER DATE AND AS MIGHT CONCEIVABLY BECOME NECESSARY, TO CONSIDER AN INVESTMENT OF THE DOLLAR MAGNITUDE SUGGESTED BY THE HOST INTERNATIONAL PROPOSAL. WE BELIEVE FRED HARVEY, INC. RECOGNIZED THE PRELIMINARY NATURE OF THE SERVICE INTEREST AS EVIDENCED BY THE WORDING OF THE TELEGRAPHIC RESPONSE BY FRED HARVEY, INC.

THE REFERENCE TO THE HOST INTERNATIONAL PROPOSAL IN THIS TELEGRAM WAS PERHAPS UNFORTUNATE; HOWEVER, THERE WAS NEVER ANY DESIRE OR INTENT TO MODIFY, QUALIFY, OR AFFECT OUR DECISION TO RESTRICT THE DEVELOPMENTS AT THE SOUTH RIM.

OUR INVESTIGATION INTO THE REASONS FOR THE EXCHANGE OF TELEGRAMS REVEALED THAT THE DEPARTMENT WAS PROMPTED BY A DESIRE TO HAVE IN WRITING AN INDICATION FROM HARVEY THAT IT WAS READY TO UNDERTAKE ANY ADDITIONAL DEVELOPMENT THAT MIGHT BE REQUESTED UNDER SECTION 17 OF THE CONTRACT SHOULD IT BE DECIDED, 2 OR 3 YEARS FROM THE PRESENT, THAT A $15 MILLION DEVELOPMENT SUCH AS THAT PROPOSED BY HOST WAS DESIRED FOR THE PARK. SINCE SUCH A WRITTEN STATEMENT FROM HARVEY WAS NOT ON HAND THE DIRECTOR, NPS, SENT THE TELEGRAM OF MARCH 14, 1969, TO OBTAIN WRITTEN CONFIRMATION THAT HARVEY WOULD MEET THE EQUIVALENT INVESTMENT PROPOSALS OF HOST.

AN EXAMINATION OF THE DEPARTMENT'S NEGOTIATION FILE ON THE CONTRACT REVEALS THAT AFTER THE EXCHANGE OF TELEGRAMS, BUT BEFORE EXECUTION OF THE CONTRACT, THE LEGAL EFFECT OF THE TELEGRAM EXCHANGE WAS GIVEN CONSIDERATION BY RESPONSIBLE OFFICIALS OF THE INTERIOR DEPARTMENT. IN A MEMORANDUM DATED MARCH 21, 1969, THE ASSISTANT TO THE DIRECTOR FOR CONCESSION MANAGEMENT, NPS, AND A MEMBER OF THE STAFF OF THE OFFICE OF THE SOLICITOR, CONCLUDED THAT THERE WAS NO LEGAL OBSTACLE TO THE EXECUTION OF THE CONTRACT SINCE THE EXCHANGE OF TELEGRAMS WAS NOTHING MORE THAN A REAFFIRMATION OF SECTION 17 BY HARVEY.

WE CANNOT AGREE THAT THE EXCHANGE OF TELEGRAMS WAS A MERE REAFFIRMATION OF SECTION 17 OF THE CONTRACT. IN OUR OPINION, THE EXCHANGE RESULTED IN A SUBSTANTIVE AND FULLY EFFECTIVE AMENDMENT OR MODIFICATION OF THE CONTRACT.

SECTION 17 OF THE CONTRACT, WHICH WAS ALSO SET FORTH IN THE FACT SHEET, PROVIDES, IN PERTINENT PART:

SEC. 17. PREFERENTIAL RIGHT. (A) *** THE SECRETARY WILL REQUEST THE CONCESSIONER TO PROVIDE SUCH NEW OR ADDITIONAL ACCOMMODATIONS, FACILITIES, OR SERVICES, OF THE SAME CHARACTER AS THE SECRETARY MAY CONSIDER NECESSARY OR DESIRABLE FOR THE ACCOMMODATION AND CONVENIENCE OF THE PUBLIC. IF THE CONCESSIONER DOUBTS THE NECESSITY, DESIRABILITY, TIMELINESS, REASONABLENESS, OR PRACTICABILITY OF SUCH NEW OR ADDITIONAL FACILITIES, THE CONCESSIONER SHALL BE ALLOWED SIXTY (60) DAYS IN WHICH TO PREPARE AND PRESENT ITS CASE BUT, AFTER CONSIDERATION OF THE CONCESSIONER'S PRESENTATION AND SUCH HEARINGS OR TESTIMONY AS THE SECRETARY MAY CONSIDER APPROPRIATE, THE DECISION OF THE SECRETARY IN THE PREMISES SHALL BE FINAL. IF, AFTER SUCH DECISION, THE CONCESSIONER DECLINES OR FAILS WITHIN A REASONABLE TIME TO COMPLY WITH THE REQUEST OR DEMAND OF THE SECRETARY, THEN THE SECRETARY MAY, IN HIS DISCRETION, AUTHORIZE OTHERS TO PROVIDE SUCH ACCOMMODATIONS, FACILITIES, OR SERVICES, BUT ONLY UPON TERMS AND CONDITIONS SUBSTANTIALLY EQUIVALENT TO THOSE OFFERED OR ALLOWED TO THE CONCESSIONER. ***

UNDER THE EXPRESS TERMS OF SECTION 17 THERE IS NO DEFINITE COMMITMENT THAT THE CONCESSIONER WILL PROVIDE SUCH NEW OR ADDITIONAL ACCOMMODATIONS, FACILITIES OR SERVICES REQUESTED BY THE SECRETARY. HE MAY DECLINE TO DO SO AND IF HE DOES THE SECRETARY MAY AUTHORIZE OTHERS TO PROVIDE THE ACCOMMODATIONS AND FACILITIES. UNDER THE TERMS OF THE CONTRACT AS THEY EXISTED PRIOR TO THE EXCHANGE OF TELEGRAMS FRED HARVEY WAS LEGALLY OBLIGATED TO EXPEND NO MORE THAN $5 MILLION IN THE FIRST 10 YEARS OF THE TERM. HOWEVER, BY EXPRESSLY AGREEING TO "MEET IN ALL RESPECTS THE EQUIVALENT INVESTMENT PROPOSALS OF HOST INTERNATIONAL AS MAY BE REQUIRED BY THE SECRETARY PURSUANT TO THE PROPOSED NEW CONTRACT" FRED HARVEY HAS OBLIGATED ITSELF TO EXPEND $15 MILLION WITHIN THE FIRST 5 YEARS OF THE TERM IF THE SECRETARY REQUIRES THAT THIS BE DONE. THE TELEGRAMS CONSTITUTED AN OFFER AND AN ACCEPTANCE AND, IN OUR OPINION, EFFECTIVELY MODIFIED THE CONTRACT INITIALLY PROPOSED.

WE DO NOT BELIEVE, HOWEVER, THAT THE PROVISIONS OF SECTION 5 OF THE 1965 ACT WERE VIOLATED BY THE ABOVE ACTIONS OF THE PARTIES. THE TERMS OF SECTION 5 VEST BROAD DISCRETION IN THE SECRETARY OF THE INTERIOR IN AWARDING CONCESSION RENEWAL CONTRACTS. WHILE THE AWARD OF THE CONTRACT TO FRED HARVEY UNDER THE CIRCUMSTANCES PRESENTED HERE WOULD HAVE BEEN HIGHTLY QUESTIONABLE UNDER NORMAL COMPETITIVE RULES APPLICABLE TO THE AWARDING OF FEDERAL CONTRACTS, THERE IS NOTHING IN THE STATUTE THAT REQUIRES THAT THE CONTRACT BE AWARDED UNDER THE NORMAL RULES. INDEED, SECTION 5 OF THE 1965 ACT WAS NOT INTENDED BY THE CONGRESS TO SET UP A BIDDING PROCEDURE BUT ONLY TO ASSURE ALL INTERESTED PARTIES THAT IN NEGOTIATING THE CONTRACT ALL RELEVANT FACTORS WOULD BE TAKEN INTO ACCOUNT. ONE OF THESE FACTORS, AND A VERY IMPORTANT ONE IN THE EYES OF THE CONGRESS, WAS THE DESIRABILITY OF MAINTAINING CONTINUITY OF OPERATIONS AND OPERATORS. SEE H.R. NO. 591 TO ACCOMPANY H.R. 2091 (THE BILL WHICH BECAME LAW), 89TH CONG., 1ST SESS., PAGE 5, AND S. REPT. NO. 765 TO ACCOMPANY H.R. 2091, 89TH CONG., 1ST SESS., PAGES 4 AND 5. BOTH REPORTS CONTAIN THE FOLLOWING IDENTICAL COMMENTS ON SECTION 5 OF H.R. 2091:

SIXTH, THE BILL PROVIDES THAT ESTABLISHED CONCESSIONERS WHO HAVE PERFORMED SATISFACTORILY SHALL BE GIVEN PREFERENCE IN THE RENEWAL OF OLD CONTRACTS AND IN THE NEGOTIATION OF NEW CONTRACTS. THE SECRETARY MAY ALSO, IF CIRCUMSTANCES SUGGEST THE DESIRABILITY OF SUCH A COURSE OF ACTION, EXTEND OR RENEW EXISTING CONTRACTS UPON OR BEFORE THEIR EXPIRATION. EXTENSIONS OR RENEWALS BEFORE EXPIRATION ARE SOMETIMES NECESSARY TO ENABLE A CONCESSIONER TO RAISE CAPITAL FOR EXPANDED IMPROVEMENTS OR, IN CASES OF CONTRACTS DUE TO EXPIRE WITHIN A YEAR OR TWO, TO PERMIT BOTH THE GOVERNMENT AND THE CONCESSIONAIRE TO KNOW WHERE THEY WILL STAND IN THE FUTURE AND THUS TO ASSURE CONTINUITY OF PARK OPERATIONS.

NEITHER THE PREFERENCE JUST SPOKEN OF NOR THE RIGHT TO EXTEND OR RENEW IS ABSOLUTE. THE BILL REQUIRES THE SECRETARY TO GIVE PUBLIC NOTICE OF HIS INTENTIONS TO EXTEND OR RENEW AND TO CONSIDER AND EVALUATE ALL PROPOSALS RECEIVED AS A RESULT THEREOF. THIS IS NOT, AND IS NOT INTENDED TO BE, A BIDDING PROCEDURE, WITH THE AWARD AUTOMATICALLY GOING TO THE HIGH BIDDERS, BUT IT IS INTENDED TO BRING TO THE ATTENTION OF THE PUBLIC, THE SECRETARY, AND ALL INTERESTED PARTIES THE SITUATION AND TO ASSURE ALL CONCERNED THAT IN NEGOTIATING THE NEW CONTRACT ALL RELEVANT FACTORS ARE TAKEN INTO ACCOUNT. ONE OF THESE FACTORS, OF COURSE, AND A VERY IMPORTANT ONE, IS THE DESIRABILITY OF CONTINUITY OF OPERATIONS AND OPERATORS. TO THE SAME EFFECT SEE THE STATEMENTS OF REPRESENTATIVE WAYNE N. ASPINALL, CHAIRMAN OF THE HOUSE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, DURING THE DEBATE ON THE BILL REPORTED ON PAGE 22786, CONGRESSIONAL RECORD, SEPTEMBER 14, 1965 (111 CONG. REC. 23632).

ON THE BASIS OF THE STATUTE AND ITS LEGISLATIVE HISTORY WE CANNOT CONCLUDE THAT THE INTERIOR DEPARTMENT MISAPPLIED THE PREFERENCE PROVISION WHEN IT ALLOWED FRED HARVEY, IN EFFECT, TO MATCH THE HOST INVESTMENT PROPOSAL.

WE VIEW THE EXCHANGE OF TELEGRAMS AS A CONTINUATION OF THE NEGOTIATION PROCESS INITIATED BY THE NOTICE IN THE FEDERAL REGISTER IN SEPTEMBER 1968 AND, AS SUCH, DID NOT REQUIRE THE ISSUANCE OF A NEW FACT SHEET UNDER WHICH NEW PROPOSALS WOULD BE SOLICITED. MOREOVER, ASSUMING THAT ANY NEW FACT SHEET TO BE ISSUED WOULD BE BASED ON THE INVESTMENT PROPOSALS OF HOST, WE SEE NO USEFUL PURPOSE TO BE SERVED BY A RESOLICITATION OF PROPOSALS AT THIS LATE DATE IN VIEW OF THE PREFERENCE PROVISIONS OF THE 1965 ACT AND HARVEY'S ALREADY ESTABLISHED OBLIGATION TO MEET HOST'S INVESTMENT PROPOSALS IF REQUIRED BY THE SECRETARY.

OF MORE SERIOUS IMPORT, IN OUR OPINION, IS THE FAILURE OF THE INTERIOR DEPARTMENT TO ABIDE BY THE REQUIREMENTS OF 16 U.S.C. 17B-1 WHICH READS AS FOLLOWS:

THE SECRETARY OF THE INTERIOR SHALL ON AND AFTER JULY 31, 1953, REPORT IN DETAIL ALL PROPOSED AWARDS OF CONCESSION LEASES AND CONTRACTS INVOLVING A GROSS ANNUAL BUSINESS OF $100,000 OR MORE, OR OF MORE THAN FIVE YEARS IN DURATION, INCLUDING RENEWALS THEREOF, SIXTY DAYS BEFORE SUCH AWARDS ARE MADE, TO THE PRESIDENT OF THE SENATE AND SPEAKER OF THE HOUSE OF REPRESENTATIVES FOR TRANSMISSION TO THE APPROPRIATE COMMITTEES.

SINCE, IN OUR OPINION, THE EXCHANGE OF TELEGRAMS EFFECTIVELY MODIFIED THE CONTRACT REPORTED TO THE CONGRESS ON JANUARY 16, 1969, THE CONTRACT EXECUTED ON MARCH 26, 1969, BY THE INTERIOR DEPARTMENT WAS NOT THE SAME CONTRACT REPORTED TO THE CONGRESS EARLIER AND, THUS, THE 60-DAY WAITING PERIOD SET FORTH IN THE STATUTE WHICH REQUIRES REPORTING IN DETAIL WAS NOT MET. WHILE IT IS TRUE THAT THE STATUTE DOES NOT SET FORTH THE CONSEQUENCES RESULTING FROM A FAILURE TO MEET ITS PROVISIONS AND CANNOT, THEREFORE, BE CONSTRUED AS AUTOMATICALLY VOIDING ANY CONTRACT MADE IN VIOLATION OF ITS TERMS, WE THINK THAT THE CONTRACT IS VOIDABLE AT THE SOLE OPTION OF THE GOVERNMENT. COMPARE UNITED STATES V NEW YORK AND PORTO RICO STEAMSHIP COMPANY, 239 U.S. 88, WHICH IN OUR OPINION INVOLVED A VIOLATION OF A MORE SIGNIFICANT PROCEDURAL STATUTORY REQUIREMENT THAN THAT IN THE PRESENT CASE AND IN WHICH THE SUPREME COURT OBSERVED:

*** EVEN WHEN A STATUTE IN SO MANY WORDS DECLARES A TRANSACTION VOID FOR WANT OF CERTAIN FORMS, THE PARTY FOR WHOSE PROTECTION THE REQUIREMENT IS MADE OFTEN MAY WAIVE IT, VOID BEING HELD TO MEAN ONLY VOIDABLE AT THE PARTY'S CHOICE.

THE QUESTION WHETHER THE CONTRACT SHOULD BE VOIDED IS A MATTER WITHIN THE DISCRETION OF THE INTERIOR DEPARTMENT WHICH MADE THE CONTRACT AND NOT THIS OFFICE SINCE WE CAN TAKE APPROPRIATE ACTION IN SUCH CASES ONLY WHEN WE CONCLUDE THAT THE CONTRACT IS VOID, NOT VOIDABLE. BY LETTER OF TODAY WE ARE ADVISING THE SECRETARY OF THE INTERIOR OF OUR CONCLUSIONS IN THIS RESPECT.

IN VIEW OF THE FOREGOING CONSIDERATIONS YOUR PROTEST IS DENIED.