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Please see the documents listed below as references. We have many, many more, but here are some key documents:
“After lodging is privatized, it will no longer be considered government lodging and will not be subject to availability requirements under travel regulations. As a result, if no other government lodging is available on the installation, travelers can choose to stay either in the privatized lodging on-base…or in a commercial hotel in the community.” GAO Report to Congress – PAL 7.10
““THE ARMY HAS ENTERED INTO AN IN-LICENSE AGREEMENT WITH THE PAL PARTNER, ACTUS-LEND LEASE. THIS ALLOWS THE ARMY TO MAINTAIN LODGING ON-POST AS GOVERNMENT PROVIDED LODGING.” DA Msg – PAL 4.18.11
–This “In-License Agreement” was the work-around, needed by Lend Lease to guarantee occupancy. Without it they could not obtain close to a $Billion in funding by selling bonds to investors in the private market. Without this “In-License Agreement” the entire PAL Program would fail
–Rather than admit to a failed program…This “In-License Agreement” was privately signed and not sent to Congress for approval. This “In-License Agreement” goes against the founding tenet of the PAL program, that there is no guarantee of occupancy!
Army continues privatizing guest lodging – Aug 2011
“The Army provides no guarantees to the private investors with regard to the loan or occupancy.”
This is one of several bond offerings on the private market where Lend Lease had to raise money for the project
- The bond rating corresponds to the interest rate they have to pay back
- The “In-License Agreement” was needed to obtain a solid rating to be able to meet their debt-service ratio on the loans
“Half of the installations benefit from the Army In-License Agreement, whereby the Army can advance book blocks of rooms for training classes, providing greater demand certainty similar to advance group bookings at commercial hotels. In-License demand is expected to be about half of the annual portfolio total” “50% of annual Room Nights Sold expected to be generated from the In-License Agreement”
$551 Million Bond Note
$420 Million Bond Note
Standard & Poor’s Rates Bonds ‘BBB’
“The rating is based on our opinion of the project’s following strengths: — Rest Easy LLC’s ability to receive an in-license agreement”
The “In-License Agreement”
What exactly is an In-License Agreement?
This agreement was referenced in some 50+ documents, but the “In-License Agreement” is nowhere to be found…It must be requested from the government through a FOIA (Freedom of Information Act) request. We managed to get a copy of it. The biggest issues we have with it:
- The PAL program states “No Guarantee of Occupancy for Lend Lease or IHG”
- They must “Compete for business like everyone else”
- “Soldiers can vote with their feet”
- “PAL is no longer Government Lodging”…(therefore no requirement for Soldiers to stay there).
- IHG Hotels are a private entity operating on a Federal Installation
The In-License Agreement was a work around. Australian Lend Lease could not raise funds to build/renovate because there was “no guarantee of occupancy,” it was not a sure bet, but they won the sole source contract and now needed a guarantee….They got an In-License Agreement and modified the contract after it was awarded.
This In-License Agreement was not posted anywhere in the public domain until we obtained it to expose the monopoly granted Lend Lease and IHG; without this “In-License Agreement” the entire PAL program would fail.PAL In-License_Active Component_DACA65-9-09-0005
More Legal Issues: A Lease—Lease Back
- The Privatization of Army Lodging program leases federal land to Lend Lease for 50 years on 42 Military Bases…This “In-License Agreement” leases those same rooms right back to the Army
The Authority Cited is Mis-used
“The authority to execute this In-License is contained within the authority for the Privatization of Army Lodging Program (10 U.S.C. 2878).” This statute authorizes the Secretary of the Army to lease out government property, but the statute in no way states that such private company can in turn lease it right back to the government.
This is the original “In-License Agreement” not available to the public. It must be obtained through a US Freedom of Information Act Request. It has been renewed in 12-months increments several times and is up for renewal on August 10, 2012.
-Includes accounting changes & POC information
Fort Sam Houston, Fort Rucker, Fort Sill, Fort Leavenworth
Supplemental Agreement No. 3 Extends the “In-License Agreement” until 10 August 2012
Fort Belvoir, Fort Bliss, Fort Gordon, Fort Huachuca, Fort Knox, Fort Leonard Wood
“THE ODCS, G-37/TR GOAL IS TO MAXIMIZE THE USE OF ON-POST LODGING FOR TEMPORARY DUTY STUDENTS WHEN TRAINING TRAVEL COSTS ARE FUNDED UNDER THE PURVIEW OF THE ODCS, G-3/5/7, DIRECTOR, ARNG AND USARC. TO ACHIEVE ABOVE GOAL AND MAINTAIN STUDENT COMMAND AND CONTROL, THE ARMY HAS ENTERED INTO AN IN-LICENSE AGREEMENT WITH THE PAL PARTNER, ACTUS-LEND LEASE. THIS ALLOWS THE ARMY TO MAINTAIN LODGING ON-POST AS GOVERNMENT PROVIDED LODGING”. “TO MAINTAIN OFF-POST AS GOVERNMENT PROVIDED LODGING AT NO COST TO THE SOLDIER THE ARMY MUST MODIFY THE CURRENT OFF-POST LODGING MANAGEMENT AND FUNDING PROCESS. WITH THE LOSS OF THE NAF LODGING MISSION, THE ARMY CAN NO LONGER UTILIZE NAF LODGING CONTRACTS”. The Army modified the funding process to guarantee occupancy for Actus-Lend Lease (& IHG). Without this modification of funding and the In-License Agreement–>The PAL Program would fail.
The decision issued by the Government Accountability Office was subject to a GAO Protective Order. A redacted version was scrubbed & approved for public release. Why was the Bid Protest edited for Public Release?
“GAO found that lodging privatization could increase costs to the government by about $75 million per year”
Lend Lease is not assuming these hotels will be an easy sell. “Soldiers don’t have to stay at a hotel,” said Charles Smith, a senior vice president for lodging at Lend Lease. “We still have to provide a high class of service. Otherwise, they can vote with their feet.”
U.S. Army War College -Research Paper on the Privatization of Army Lodging & its Effects
“It has been assumed in our projections of occupancy that prior to financial closing, the project entity has a year-to-year contract for MTSS group business and, therefore, that this business will be accommodated in the privatized Army lodging.”
“PAL hotels are not government quarters – travelers can vote with their feet.” “Since closing, Group A has experienced No financial challenges…Occupancy is above pro forma expectations” (Because of this In-License Agreement)
Environmental Reports – PAL Installations - Environmental Assessments were made, but no Socio-Economic Reports were conducted to assess the effect of PAL on local economies surrounding the 42 Army Bases.
Defense Travel Lodging Fact Sheet – “Government lodging converted to PAL will be developed into full service hotels and will no longer be considered
government lodging, making them exempt from travel regulations requiring statements of non-availability.” (This means the Soldiers are supposed to have a choice, but with the work-around “In-License Agreement” they do not)
Civilian Education System (CES) Travel/Funding Information – “Lodging. DO NOT make your hotel reservation through DTS – AMSC has reserved a block of rooms with IHG Army Hotel. REMOVE lodging per diem. Lodging should indicate $0.00. For centrally funded students, lodging is paid for by the Privatization of Army Lodging (PAL) Contract. You will not be charged or receive a billing statement for lodging expense. Those students who are NOT centrally funded should include lodging expense and will receive a billing statement – please contact the IHG Army Hotel for room rate.”
PHMA Privatization Update – page 16,”PAL Parameters: Private developer assumes the business risk, NO occupancy guarantees, NO guarantees against base closure, downsizing, or deployment, NOT classified as government quarters, Travelers choose where they stay.”
Army MWR Lodging Letter to Guests – Ft Huachuca “After transition you will no longer be required to stay at this hotel”
Email from COL Jeffrey E. Jennings Deputy Commander for Training – Ft Huachuca “Folks–PAL is causing a stir here…PAL requires us to move students on-post when space becomes available.”