B-125035, FEBRUARY 1, 1962, 41 COMP. GEN. 493

B-125035: Feb 1, 1962

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ARE NOT LICENSE AGREEMENTS BUT LEASES INSOFAR AS THE CONCESSIONERS HAVE EXCLUSIVE RIGHT TO THE USE OF THE REAL PROPERTY AND A PROVISION IN SUCH LEASE AGREEMENTS REQUIRING THE CONCESSIONERS TO REPAIR AND MAINTAIN THE GOVERNMENT-OWNED BUILDINGS MUST BE CONSTRUED AS A PART OF THE RENTAL CONSIDERATIONS AND. THE ADMINISTRATIVE ASSISTANT SECRETARY STATES THAT THE NECESSITY FOR A DECISION ARISES AS A RESULT OF CONFLICTING VIEWS BETWEEN YOUR DEPARTMENT AND OUR CIVIL ACCOUNTING AND AUDITING DIVISION AS TO WHETHER THE CONTRACT PROVISION IS CONTRARY TO SECTION 321 OF THE ECONOMY ACT OF JUNE 30. YOUR DEPARTMENT IS OF THE VIEW THAT CONCESSION CONTRACTS ENTERED INTO BY THE NATIONAL PARK SERVICE ARE NOT "LEASE/S) OF BUILDINGS AND PROPERTIES OF THE UNITED STATES" WITHIN THE MEANING OF THAT PHRASE AS USED IN 40 U.S.C. 303B.

B-125035, FEBRUARY 1, 1962, 41 COMP. GEN. 493

CONCESSIONS - REPAIR, ETC., OF GOVERNMENT PROPERTY CONTRACTS FOR THE OPERATION OF CONCESSIONS IN NATIONAL PARKS WHICH PROVIDE FOR THE USE OF LANDS AND GOVERNMENT-OWNED BUILDINGS BY THE CONCESSIONERS, SUBJECT TO THE RIGHT OF ENTRY ON THE LANDS BY THE GOVERNMENT AND RESERVATION OF THE MINERAL RIGHTS, ARE NOT LICENSE AGREEMENTS BUT LEASES INSOFAR AS THE CONCESSIONERS HAVE EXCLUSIVE RIGHT TO THE USE OF THE REAL PROPERTY AND A PROVISION IN SUCH LEASE AGREEMENTS REQUIRING THE CONCESSIONERS TO REPAIR AND MAINTAIN THE GOVERNMENT-OWNED BUILDINGS MUST BE CONSTRUED AS A PART OF THE RENTAL CONSIDERATIONS AND, THEREFORE, IN VIOLATION OF SECTION 321 OF THE ECONOMY ACT OF 1932, 40 U.S.C. 303B, WHICH PROHIBITS THE INCLUSION IN LEASES OF PROVISIONS FOR REPAIR OR IMPROVEMENT OF GOVERNMENT BUILDINGS AS A PART OF THE CONSIDERATION TO BE PAID FOR THE USE OF THE PROPERTY.

TO THE SECRETARY OF THE INTERIOR, FEBRUARY 1, 1962:

LETTER DATED NOVEMBER 21, 1961, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY OF THE INTERIOR REQUESTS A DECISION AS TO THE AUTHORITY OF THE SECRETARY OF THE INTERIOR, THROUGH THE DIRECTOR, NATIONAL PARK SERVICE, TO ENTER INTO CONCESSION CONTRACTS WHICH PROVIDE THAT "THE CONCESSIONER SHALL PROVIDE ALL NECESSARY MAINTENANCE AND REPAIRS OF SUCH GOVERNMENT IMPROVEMENTS.'

THE ADMINISTRATIVE ASSISTANT SECRETARY STATES THAT THE NECESSITY FOR A DECISION ARISES AS A RESULT OF CONFLICTING VIEWS BETWEEN YOUR DEPARTMENT AND OUR CIVIL ACCOUNTING AND AUDITING DIVISION AS TO WHETHER THE CONTRACT PROVISION IS CONTRARY TO SECTION 321 OF THE ECONOMY ACT OF JUNE 30, 1932, AS AMENDED, 40 U.S.C. 303B. THIS SECTION PROVIDES THAT:

EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED BY LAW, THE LEASING OF BUILDINGS AND PROPERTIES OF THE UNITED STATES SHALL BE FOR A MONEY CONSIDERATION ONLY, AND THERE SHALL NOT BE INCLUDED IN THE LEASE ANY PROVISION FOR THE ALTERATION, REPAIR, OR IMPROVEMENT OF SUCH BUILDINGS OR PROPERTIES AS A PART OF THE CONSIDERATION FOR THE RENTAL TO BE PAID FOR THE USE AND OCCUPATION OF THE SAME. THE MONEYS DERIVED FROM SUCH RENTALS SHALL BE DEPOSITED AND COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. ( ITALICS SUPPLIED.)

YOUR DEPARTMENT IS OF THE VIEW THAT CONCESSION CONTRACTS ENTERED INTO BY THE NATIONAL PARK SERVICE ARE NOT "LEASE/S) OF BUILDINGS AND PROPERTIES OF THE UNITED STATES" WITHIN THE MEANING OF THAT PHRASE AS USED IN 40 U.S.C. 303B. THE LETTER ALSO REFERS TO 16 U.S.C. 1 WHICH PROVIDES:

THERE IS CREATED IN THE DEPARTMENT OF THE INTERIOR A SERVICE TO BE CALLED THE NATIONAL PARK SERVICE, WHICH SHALL BE UNDER THE CHARGE OF A DIRECTOR. THE SECRETARY OF THE INTERIOR SHALL APPOINT THE DIRECTOR, AND THERE SHALL ALSO BE IN SAID SERVICE SUCH SUBORDINATE OFFICERS, CLERKS, AND EMPLOYEES AS MAY BE APPROPRIATED FOR BY CONGRESS. THE SERVICE THUS ESTABLISHED SHALL PROMOTE AND REGULATE THE USE OF THE FEDERAL AREAS KNOWN AS NATIONAL PARKS, MONUMENTS, AND RESERVATIONS HEREINAFTER SPECIFIED, EXCEPT SUCH AS ARE UNDER THE JURISDICTION OF THE SECRETARY OF THE ARMY, AS PROVIDED BY LAW, BY SUCH MEANS AND MEASURES AS CONFORM TO THE FUNDAMENTAL PURPOSE OF THE SAID PARKS, MONUMENTS, AND RESERVATIONS, WHICH PURPOSE IS TO CONSERVE THE SCENERY AND THE NATURAL AND HISTORIC OBJECTS AND THE WILD LIFE THEREIN AND TO PROVIDE FOR THE ENJOYMENT OF THE SAME IN SUCH MANNER AND BY SUCH MEANS AS WILL LEAVE THEM UNIMPAIRED FOR THE ENJOYMENT OF FUTURE GENERATIONS.

THE LETTER STATES THAT IT IS IN FULFILLMENT OF THIS STATUTORY RESPONSIBILITY THAT GOVERNMENT-OWNED BUILDINGS IN THE PARKS ARE NOT LEASED IN THE USUAL SENSE BUT ARE MADE AVAILABLE TO CONCESSIONERS UNDER CONTRACTS WHICH REQUIRE THEM TO PROVIDE CERTAIN VISITOR FACILITIES AND SERVICES. ARE INFORMED THAT THE CONGRESS RECOGNIZED THE SPECIAL NATURE OF THE CONCESSION CONTRACT BETWEEN THE GOVERNMENT AND THE "GRANTEES, PERMITTEES, OR LICENSEES" IN THE PARKS WHEN IT GRANTED THE SECRETARY OF THE INTERIOR AUTHORITY TO ENTER INTO CONTRACTS WITH SUCH CONCESSIONERS ,WITHOUT ADVERTISING AND WITHOUT COMPETITIVE BIDS" (16 U.S.C. 3). THE LETTER STATES THAT ESSENTIALLY THE PURPOSE OF A CONCESSION CONTRACT IS TO FURNISH THE BEST POSSIBLE SERVICE TO THE PUBLIC THROUGH A CONCESSIONER WHO MUST OPERATE UNDER THE HIGH STANDARDS REQUIRED BY YOUR DEPARTMENT, FREQUENTLY UNDER VERY DIFFICULT CIRCUMSTANCES.

THE LETTER CONTINUES:

IN ENTERING INTO A CONCESSION CONTRACT WITH THE NATIONAL PARK SERVICE, THE CONCESSIONER MAKES IT POSSIBLE FOR THE GOVERNMENT TO CARRY OUT THE GOVERNMENT'S OBLIGATION TO PROVIDE SUCH FACILITIES AND SERVICES AS MAY BE NECESSARY FOR THE FULL ENJOYMENT OF THE PARKS. THE PRIMARY PURPOSE IN GRANTING A LEASE, HOWEVER, IS TO PERMIT THE USE BY THE LESSEE OF GOVERNMENT-OWNED FACILITIES WITHOUT A BENEFIT, OTHER THAN MONETARY, FLOWING TO THE GOVERNMENT. UNDER NATIONAL PARK SERVICE CONTRACTS THE CONCESSIONER OCCUPIES AND USES GOVERNMENT-OWNED LAND AND ALSO BUILDINGS OR EQUIPMENT. IN ADDITION, THE CONCESSIONER IS AUTHORIZED TO OPERATE A BUSINESS IN AN AREA OTHERWISE CLOSED TO COMMERCIAL ACTIVITY AND THE CONTRACT MAY INCLUDE OTHER PRIVILEGES OR PROTECTIONS. " CONSIDERATION" INCLUDES NOT ONLY MONEY BUT ALSO A CONCESSIONER'S OBLIGATION TO PROVIDE PLANT, PERSONNEL AND EQUIPMENT; TO OPERATE SATISFACTORILY; TO ACCEPT GOVERNMENT REGULATION OF CHARGES, ACTIVITIES, ETC.; TO PROVIDE UNDER CERTAIN CONDITIONS FREE TRANSPORTATION AND ACCOMMODATIONS AT REDUCED RATES; TO PAY FRANCHISE FEES IN MONEY; AND TO ASSUME OTHER MINOR OBLIGATIONS. UNDER THE , MISSION 66" PROGRAM OF THE NATIONAL PARK SERVICE, AND PURSUANT TO NUMEROUS SEPARATE CONCESSION CONTRACTS, CONCESSIONERS ARE CURRENTLY INVESTING MILLIONS OF DOLLARS OF THEIR OWN MONEY TO IMPROVE PHYSICAL FACILITIES AND SERVICES WITHIN THE NATIONAL PARKS.

WE ARE ALSO INFORMED THAT CONGRESSIONAL HEARINGS HAVE BEEN HELD ON MANY OF THESE CONTRACTS AND NO QUESTION HAS EVER BEEN RAISED REGARDING THE LONGSTANDING PROVISION REQUIRING CONCESSIONERS TO MAINTAIN THE GOVERNMENT- OWNED IMPROVEMENTS ASSIGNED TO THEM. YOUR DEPARTMENT IS OF THE VIEW THAT SUCH LONG ADMINISTRATIVE CONSTRUCTION SUPPORTS THE VIEW THAT CONCESSION CONTRACTS ARE NOT "LEASE/S) OF BUILDINGS AND PROPERTIES" WITHIN THE MEANING OF THAT PHRASE AS USED IN 40 U.S.C. 303B.

AS A GENERAL RULE WORDS USED IN A STATUTE ARE TO BE GIVEN THEIR USUAL AND COMMONLY UNDERSTOOD MEANING, UNLESS IT IS PLAIN FROM THE STATUTE THAT A DIFFERENT MEANING IS INTENDED. 82 C.J.S. STATUTES 329. THERE IS NOTHING IN 40 U.S.C. 303B OR THE LEGISLATIVE HISTORY OF THAT PROVISION TO INDICATE THAT IT WAS NOT INTENDED TO ENCOMPASS ALL LEASES FOR BUILDINGS AND PROPERTIES OF THE UNITED STATES. THE PURPOSE OF THE PROVISION IS SET FORTH ON PAGES 14 AND 15 OF SENATE REPORT NO. 556, 72ND CONGRESS, ST SESSION, AS FOLLOWS:

THE ENACTMENT OF THIS SECTION WILL PUT A STOP TO THE MORE OR LESS GENERAL PRACTICE WHICH HAS BEEN ADOPTED OF INCLUDING AS A PART OF THE RENTAL CONSIDERATION PROVISIONS IN THE LEASE THAT THE TENANT SHALL MAKE CERTAIN REPAIRS, ALTERATIONS, OR IMPROVEMENTS TO PUBLIC PROPERTY. BY THIS METHOD IMPROVEMENTS ARE MADE ON PUBLIC PROPERTY WHICH MAY OR MAY NOT BE AUTHORIZED BY LAW, AND INDIRECTLY THERE IS AN EXPENDITURE OF FUNDS WHICH SHOULD BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. ( ITALICS SUPPLIED.)

A CONCESSION IS DEFINED BY WEBSTER'S UNABRIDGED DICTIONARY AS "A GRANT OR LEASE OF A PORTION OF PREMISES FOR SOME SPECIFIC USE, OR OF A RIGHT TO ENTER UPON PREMISES FOR SOME SPECIFIC PURPOSE; AS, A CONCESSION AT A FAIR FOR A LUNCH COUNTER.' FOR ALL PRACTICAL PURPOSES IF A CONCESSION GIVES A CONCESSIONER THE EXCLUSIVE RIGHT TO THE USE OF REAL PROPERTY HIS RIGHTS ARE IDENTICAL WITH THAT OF A LESSEE AND THE RELATION OF LANDLORD AND TENANT IS CREATED. IF THE RIGHT IS NOT EXCLUSIVE THE OCCUPANT IS A MERE LICENSEE. THE RELATIONSHIP OF PERSONS UNDER SUCH CIRCUMSTANCES IS PRIMARILY A QUESTION OF FACT TO BE DETERMINED FROM THE INTENT OF THE PARTIES, ASCERTAINED FROM A CONSIDERATION OF THE AGREEMENT BETWEEN THE PARTIES. IF EXCLUSIVE POSSESSION OR CONTROL OF THE PREMISES OR A PORTION THEREOF IS GRANTED, EVEN THOUGH THE USE IS RESTRICTED BY RESERVATIONS, THE INSTRUMENT OR AGREEMENT WILL BE CONSIDERED TO BE A LEASE AND NOT A LICENSE. REND ALL V. PIONEER HOTEL, 222 P.2D 986.

AN EXAMINATION OF THE STANDARD CONTRACT FORM, TRANSMITTED WITH YOUR DEPARTMENT'S LETTER AS EXHIBIT "A" INDICATES THE CONCESSIONER WILL BE ASSIGNED CERTAIN LANDS AND ANY GOVERNMENT IMPROVEMENTS THEREON FOR HIS USE IN CONNECTION WITH THE OPERATIONS AUTHORIZED UNDER THE CONCESSION CONTRACT. ALSO, THE CONTRACT FORM PROVIDES THAT THE SECRETARY SHALL HAVE THE RIGHT TO ENTER ON THE LANDS ASSIGNED BUT NOT SO AS TO DESTROY OR UNREASONABLY INTERFERE WITH THE CONCESSIONER'S USE OF SUCH LANDS. FURTHER THE CONTRACT FORM PROVIDES THAT CERTAIN MINERALS IN DEPOSITS IN THE LANDS COVERED BY THE CONTRACT ARE RESERVED FOR THE USE OF THE UNITED STATES. MOREOVER, WE UNDERSTAND THAT THE CONTRACTS ARE GENERALLY FOR A 20-YEAR TERM WHEN THE CONCESSIONER IS TO PROVIDE A SUBSTANTIAL INVESTMENT. THE CONCESSIONER IS ALSO AUTHORIZED TO CONSTRUCT IMPROVEMENTS ON THE LAND SUBJECT TO THE PRIOR APPROVAL OF THE SECRETARY. IN LIGHT OF THE FOREGOING, IT IS OUR VIEW THAT THE STANDARD FORM CONCESSION CONTRACTS ARE IN FACT LEASES INSOFAR AS THE CONTRACTS PROVIDE FOR THE USE OF GOVERNMENT- OWNED REAL PROPERTY BY THE CONCESSIONER.

SINCE 1928 WE HELD CONSISTENTLY THAT THE OPERATION OF A CONCESSION UTILIZING GOVERNMENT-OWNED FACILITIES CONSTITUTES A VALUABLE PRIVILEGE FOR WHICH THE GOVERNMENT SHOULD BE COMPENSATED AND THAT CONTRACTUAL AND OTHER ARRANGEMENTS RELATING TO THE ESTABLISHMENT AND OPERATION OF SUCH ACTIVITIES SHOULD BE SUBJECT TO EXISTING STATUTORY PROVISIONS GOVERNING PUBLIC CONTRACTS. 7 COMP. GEN. 806; 19 ID. 887; B-157, B-32837, APRIL 11, 1950. THE FACT THAT THE ESTABLISHMENT AND OPERATION OF SUCH COMMERCIAL ENTERPRISES MAY BE ADMINISTRATIVELY DETERMINED TO BE ESSENTIAL TO THE TRANSACTION OF OFFICIAL BUSINESS OF THE GOVERNMENT OR NECESSARY TO PROVIDE FACILITIES FOR VISITORS TO THE NATIONAL PARKS, OR THE CHARACTERIZATION OF PAYMENTS FOR THE USE OF SPACE AND FACILITIES AS "COMMISSIONS," ,PERCENTAGES" OR "FRANCHISE FEES" CERTAINLY SHOULD NOT CHANGE THE INTRINSIC CHARACTER OF SUCH PAYMENTS AS RENTAL PAID FOR THE USE OF GOVERNMENT PROPERTY.

IN B-117919, DATED FEBRUARY 5, 1954, WE HELD THAT A CONTRACT EXECUTED BY THE ADMINISTRATOR OF CIVIL AERONAUTICS WITH AIR TERMINAL SERVICES, INC., WHICH PROVIDED FOR THE LEASE OF CERTAIN SPACE ON THE TERRACE PORCH OF THE TERMINAL BUILDING AT THE WASHINGTON AIRPORT, AND FOR THE ERECTION AND OPERATION BY THE LESSEE OF A RESTAURANT THEREON CAME WITHIN THE PROVISIONS OF 40 U.S.C. 303B. THIS CONTRACT WAS, OF COURSE, A CONCESSION AGREEMENT, AND PRESUMABLY ENTERED INTO BECAUSE THE ADMINISTRATOR HAD DETERMINED PURSUANT TO SECTION 3 OF THE WASHINGTON NATIONAL AIRPORT ACT, AS AMENDED, 48 U.S.C. 485D, THAT A RESTAURANT WAS ESSENTIAL OR APPROPRIATE TO THE OPERATION OF THE AIRPORT IN THAT IT WOULD BE FOR CONVENIENCE OF PERSONS USING OR VISITING THE AIRPORT. WE CAN SEE NO DIFFERENCE BETWEEN A CONCESSION CONTRACT PROVIDING FOR THE USE OF GOVERNMENT-OWNED REAL PROPERTY AT NATIONAL AIRPORT AND A CONCESSION CONTRACT PROVIDING FOR THE USE OF GOVERNMENT-OWNED REAL PROPERTY IN A NATIONAL PARK.

MOREOVER, WHILE BROAD DISCRETIONARY POWERS ARE VESTED IN THE SECRETARY OF THE INTERIOR BY 16 U.S.C. 1, THAT SECTION DOES NOT EXPRESSLY OR IMPLIEDLY EXEMPT THE SECRETARY FROM COMPLYING WITH THE PROVISIONS OF 40 U.S.C. 303B, RELATIVE TO REDUCED RENTALS IN RETURN FOR REPAIRS, ETC., BY LESSEES. FURTHER, WHERE THE CONGRESS HAS FOUND IT NECESSARY TO AUTHORIZE THE USE OF RENTALS FOR REPAIRS OR IMPROVEMENTS IT HAS EXPRESSLY DONE SO--- SEE SECTION 12 OF THE ACT OF SEPTEMBER 1, 1937, 50 STAT. 894, 42 U.S.C. 1412; SECTION 1 OF THE ACT OF JULY 2, 1940, 54 STAT. 712, 50 U.S.C. APP. 1171 (1952 USED.); SECTION 1 OF THE ACT OF AUGUST 5, 1947, 61 STAT. 774; AND SECTION 402 OF THE PUBLIC BUILDINGS ACT OF 1949, PUBLIC LAW 105, APPROVED JUNE 16, 1949, 40 U.S.C. 345.

THE FACT THAT CONGRESSIONAL HEARINGS HAVE BEEN HELD ON MANY OF THESE CONTRACTS AND NO QUESTION HAS EVER BEEN RAISED REGARDING THE LONGSTANDING PROVISION REQUIRING CONCESSIONERS TO REPAIR AND MAINTAIN THE GOVERNMENT- OWNED IMPROVEMENTS ASSIGNED TO THEM WOULD NOT JUSTIFY CONTINUANCE OF THE PRACTICE IN VIOLATION OF A SPECIFIC STATUTE. MOREOVER, THE FACT THAT NO QUESTION HAS EVER BEEN RAISED AT THE CONGRESSIONAL HEARINGS DOES NOT NECESSARILY REQUIRE THE CONCLUSION THAT THE CONGRESS HAS APPROVED OF SUCH PROVISIONS. NOR DOES THE LONG ADMINISTRATIVE PRACTICE SATISFY THE REQUIREMENT OF 40 U.S.C. 303B THAT EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED BY LAW THERE SHALL NOT BE INCLUDED IN A LEASE ANY PROVISIONS FOR THE REPAIR OR BUILDINGS OR PROPERTIES AS PART OF THE CONSIDERATION TO BE PAID FOR THE USE AND OCCUPATION OF THE SAME.

IN LIGHT OF THE FOREGOING, IT IS OUR VIEW THAT CONCESSION CONTRACTS OF THE TYPE ATTACHED TO YOUR DEPARTMENT'S LETTER AS EXHIBIT "A" ARE LEASES INSOFAR AS A CONCESSIONER HAS THE EXCLUSIVE RIGHT TO USE ASSIGNED REAL PROPERTY OF THE GOVERNMENT. IN VIEW THEREOF, THERE IS NO AUTHORITY FOR THE PROVISION IN THE LEASE PROVIDING FOR THE REPAIR AND MAINTENANCE OF THE GOVERNMENT PROPERTY BY THE CONCESSIONER, SINCE PRESUMABLY WITHOUT THE INCLUSION OF SUCH A PROVISION THE RENTAL CHARGED THE CONCESSIONER WOULD BE HIGHER. IN OTHER WORDS, THIS PROVISION IS PART OF THE CONSIDERATION FOR THE RENTAL TO BE PAID AND THEREFORE IN VIOLATION OF 40 U.S.C. 303B.

IF YOU BELIEVE THAT THE COSTS OF REPAIRS AND IMPROVEMENTS SHOULD BE FINANCED BY THE CONCESSIONERS UNDER SUCH CONTRACTUAL ARRANGEMENTS RATHER THAN THROUGH DIRECT APPROPRIATIONS BY THE CONGRESS, SPECIFIC STATUTORY AUTHORITY THEREFOR SHOULD BE OBTAINED FROM THE CONGRESS AS CONTEMPLATED BY 40 U.S.C. 303B.