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ing commercial sector approaches to the financing, development, 

 and operation of hospitality and recreational facilities. 



We take great pride in this work as we feel we are agents of posi- 

 tive change to bureaucracy which, quite frankly, can be slow mov- 

 ing and steeped in tradition. Furthermore, I must stress that we 

 always introduce change, recognizing the needs and desires of the 

 end users and, most importantly, the U.S. taxpayers. 



I would like to focus my testimony on two issues, the need for 

 open competition in Federal, State, and local government contracts 

 as we see it, and the concept of possessory interest as it relates to 

 other Federal Government contracts of this type particularly with 

 the Department of Defense with which I am most familiar. 



My experience suggests that the concept of open and fair com- 

 petition exists in most Federal, State, and local hospitality develop- 

 ment and management contracts. Moreover, I have not experienced 

 a situation where any form of preferential right of renewal exists 

 for contracts of this type. 



Generally, when government entities contract for hospitality 

 management and/or development services, they focus on the opera- 

 tor's similar experience in contracts in both the private and public 

 sectors, as well as the contractor's success in meeting the terms of 

 the contract, i.e., contractors can be penalized for poor perform- 

 ance. They are not necessarily given credit for good performance, 

 but they can be penalized, particularly if they have done a poor job. 



If preferential right of renewal were eliminated, the existing con- 

 cessioners would continue to be given credit for their experience in 

 developing and/or operating concessions in national parks provided 

 that they were effective in serving the needs of the National Park 

 Service and park visitors. However, with open competition, the ex- 

 isting concessioner would be forced to compete with other com- 

 parable and well-qualified operators to provide the Park Service 

 with the best possible deal. 



As an advisor to government agencies on contracts of this type, 

 I can assure you that this approach yields positive results for the 

 government, and that the best qualified operators have little dif- 

 ficulty in securing and maintaining government contracts. 



In my work with all types of public sector agencies, I have never 

 encountered the concept of possessory interests. In leases where a 

 developer-operator must invest capital up-front, the agreement will 

 allow sufficient time for the lessee to depreciate the asset to ensure 

 a good deal for both the developer and for the government. At the 

 expiration of the contract, ownership of the facility then reverts to 

 the government at little or no cost. 



Over the course of the lease term, the developer-operator is gen- 

 erally responsible for maintaining and effectively operating the fa- 

 cilities. Based on the economics of the deal structure, the operator 

 pays the government a monthly or annual lease fee. In return, the 

 government will typically guarantee a payment for early contract 

 termination. This amount is normally the undepreciated value of 

 the improvements. 



One example of this is use of concession contracts on military in- 

 stallations by the Army and Air Force Exchange Service, AAFES, 

 a nonappropriated fund instrumentality of the Department of De- 

 fense. AAFES has numerous contracts for food and beverage and 



