I frequently have to review and sign hotel agreements. I have problems with the following routine commercial clauses. Can anyone offer any feedback?

Rooms Attrition. Hotel is relying on Government Agency to use ___ rooms. Should the room nights actually used by Government Agency to less than ___% of the Total Room nights, Government Agency agrees to pay, as liquidated damages and not as a penalty ____.

Minimum Revenue Requirement. Government Agency agrees to be responsible for payment of the following minimum food and beverage revenue from catered functions, $____ per day.

By Anon2 on Wednesday, July 18, 2001 - 01:07 pm:

If the participants in this forum would address cancellation of the agreements and the government's liability for the "unrented" rooms along with the other questions/issues above, I would appreciate the feedback. We recently had a cancellation, received a claim and request for reimbursement. Although we denied the "claim" I don't think we have heard the end of it.

P.S. The terms of the agreement were almost identical to those above.

By Anonymous on Wednesday, July 18, 2001 - 01:56 pm:

I learned more than I wanted to when I tried to use a government credit card to arrange for an off-site conference.

Most of these conferences had been done using written contracts.

I was determined to do the job using the credit card. For various reasons, it wasn’t easy.

Note that the policies cited are local Washington area policies. Policy may be different in other areas of the country.

The normal nonrefundable deposit, which the hotel required, includes amounts to cover all of the revenues, which the hotel would lose if we canceled the conference at the last moment. This includes allowable costs like the rooms for the participants and the conference facilities. It also includes unallowables like alcohol, wives etc.

From the hotel’s point of view it doesn’t matter whether these revenues are reimbursed by the agency or paid out of pocket by the participants. If the conference is canceled at the last minute, the hotel loses all of the revenue.

A few years back, some of our legal geniuses decided that it would violate government policy to cover lost profits related to improper costs (booze, golf, wives, etc.) if the government paid the full amount of the deposit. Hence, it was improper to pay the full amount of the deposit using government funds.

The fellow in our organization responsible for the credit card was well briefed on these issues, and very careful not misuse the credit card in any way.

In this case we did a bit of hard bargaining and convinced the hotel that it would be in their best interest to forgo the deposit.

It seems to me that an equally rigorous legal mind could have concluded that the make up of the potential lost revenues imputed to the deposit was the hotel’s business, and that the agency should only be concerned that the deposit be a reasonable amount in relation to the total cost.

Supposedly we are in an era of doing commercial contracts in a commercial manner,.empowering our people, and encouraging them to use their good business judgment, and we are getting hung-up on hypothetical lost profits related to hypothetical booze for a hypothetical cancellation.

If we are really serious about doing commercial contracting in a commercial fashion, higher management needs to clean out some of these cobwebs.

By Anon3 on Wednesday, July 18, 2001 - 03:06 pm:

To add one more log on the fire, I have heard from two different agencies that have to have personnel at the Winter Olympics that the hotels require 100% advance payment when the FAR only allows a max of 15%. Both agencies paid up anyway because the job has to get done. It is also understandable that the hotels want their money up front at an event like the Olympics.

By Ron Vogt on Wednesday, July 18, 2001 - 05:15 pm:

To Anon2: I'm curious. If you cancelled your hotel arrangements, and your contract was similar to the one cited by Anonymous 948, on what grounds did you deny the hotel's claim?

By Anon3 on Wednesday, July 18, 2001 - 08:02 pm:

Anon 1:56

Hope you competed that hotel or had a sole source justification handy when you pulled out the credit card. The total had to be more than $2500. This is the Federal Government and no matter how much lip service we give to be more commercial, we have laws that our represenatives have deemed more important than cost or convienience.

By ex fed on Thursday, July 19, 2001 - 09:37 am:

In regard to the ancillary "lost profits" that seem to be involved I have to wonder just how commercial this "commercial contract" really is. It sounds more like a mirror image - a special hotel industry contract for government functions.

Would a Fortune 500 company allow itself to become somehow responsible for "hypothetical lost profits related to hypothetical booze for a hypothetical cancellation" in a similar case? I really doubt that. The hotel is in the business of selling rooms and supporting events. It hopes that core sale will generate incidental profits from things like bar tabs. I somehow doubt a commercial firm would get involved in any guarantee beyond the core business being done and even there work for reasonable limits. A cancellation has effects reasonable people will agree as being "damage." A last minute cancellation certainly means empty rooms that could have been rented if not reserved. Recovery there is reasonable. A business would negotiate limits on applying the same standard to cancellation weeks in advance. It probably would not even consider those ancillary profits falling in the category of "hoped for" rather than actual.

I used to hear "everything is negotiable." Even commercial items are negotiable. The government is playing a fool if it pretends otherwise and simply rubber stamps anything presented as a "commercial practice."

By Anon3 on Thursday, July 19, 2001 - 10:41 am:

Another thought about credit cards and making hotel reservations - I believe a lot of agencies have, at least mine does, a contract specialist who specializes in hotels, conferences, and special events. They have developed working relationships with every large hotel chain in the Washington area. This relationship allows them to get special rates, deposits reduced or eliminated, and short notice conferences scheduled after the hotels say they are full up.

When you use a credit card yourself instead of seeing a procurement professional, you "learned more than you wanted to". See the professional, then use the card to pay if you want.

By Anonymous on Thursday, July 19, 2001 - 11:12 am:

QUESTION: If some type of dispute should arise, would any of the implied Government clauses (Part 12 or 13) be in effect or would the Government be bound by the commercial hotel agreement? Most of the high class hotel we deal with insist own their own standard commercial agreements.

Here are the procedures at my agency:

The Program Manager does market research and has the hotel of choice send an agreement to the 1102 (warranted) contracting professional for review and signature. The 1102 negotiates and signs the hotel agreement (sometimes attaches Government clauses as an addendum). Nearly all of the agreements are for less than $50,000. The 1102 prepares an internal obligation document with no clauses or provisions (not a Government order per FAR Parts 12 nor 13) for lodging, catering, and rooms rental. The Financial Officer and the head of the organization sign the obligation document. The internal document is then sent to the hotel, as a reference document only. The contractor is paid via check by a Government finance office---not by credit card.


Thanks for your badly needed feedback.

By Dan Cronin on Friday, July 27, 2001 - 01:48 pm:

This is interesting. It's a problem we have struggled with for years.

I'd like to ask Anonymous who posted at 11:12 on 7/19 to clarify the procedures at his/her agency. You say the 1102 prepares an internal obligation document that is not a government order per FAR Parts 12 or 13. Then the Financial Officer signs the obligation document. Does the Financial Officer have contracting officer authority? Did the 1102 comply with FAR 5.2 (Synopsizing) and the competition requirements of FAR 13.106-1? Since you say it was not an order per FAR 12 or 13, I think I know the answers to all 3 questions. But I'd like to know the rationale. How can an agreement between the Government and a commercial vendor for commercial services rendered be anything other than an order subject to the FAR?

By Anonymous on Friday, July 27, 2001 - 03:56 pm:

Dan,

Also see string titled "disputes" for more on this subject.

By anonx on Saturday, July 28, 2001 - 10:45 am:

Direct address for that discussion. Vern Edwards' comment "It is unorthodox, to say the least, for a Government contracting officer to sign a contractor's form and then send a different document to the finance office for obligation purposes" sort of sums this up.