Senate Armed Services Committee Letter

PAL Exposed

On Behalf of Military Veterans & U.S. Business Owners

August 10, 2012

The Honorable Carl Levin
Chairman
Senate Armed Services Committee
U.S.  Senate

 

The Honorable John McCain
Ranking Member
Senate Armed Services Committee
U.S.  Senate

 

The Honorable Buck McKeon
Chairman
House Armed Services Committee
U.S.  House of Representatives
The Honorable Adam Smith
Ranking Member
House Armed Services Committee
U.S.  House of Representatives

 

Dear Senator Levin, Senator McCain, Congressman McKeon, and Congressman Smith,

On behalf of Veteran owned businesses, we are writing to express our concerns regarding certain aspects of the Privatization of Army Lodging (PAL) program. Our biggest concern stems from forcing U.S. soldiers into substandard facilities when, under privatization, they should have the ability to choose their own temporary lodging accommodation, and the impact this policy is having on Veteran owned companies.

The PAL program is the Army’s primary means of revitalizing transient housing facilities and providing for their long –term sustainment.  In September 2006, the Army selected Actus Lend Lease, an Australian owned corporation, as the developer for the PAL project.  Lend Lease then chose InterContinental Hotels Group (IHG), a British owned corporation, as the hotel operator and manager. To date, 21 of the 42 Army installations have been privatized, and the remaining 21 will privatize in 2013.

Before this contract was given to Lend Lease, the Army made it clear that the PAL program “provides no guarantees to the private investors with regard to the loan or occupancy.”  A Government Accountability Office (GAO) report to Congress in July 2010 stated that “after lodging is privatized, it will no longer be considered government lodging…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 10-771)

To finance this lodging project, Lend Lease had to sell bonds to private investors.  In 2008, two credit rating agencies rated this project as “below investment grade.”  The overriding risk factor cited was “the ability of authorized military travelers to select their hotel of choice if no other government lodging is available.”  Lend Lease needed a guaranteed occupancy rate in order to increase the investment rating, or risk failure of the entire PAL program.  After a mysterious In-License Agreement between Lend Lease and the Army suddenly began appearing in official Army messages, Moody’s raised the bond’s credit rating indicating that 50% of the annual IHG Army Hotels room nights would come from this In-License agreement. This In-License agreement is creating a de facto monopoly for these foreign owned corporations. The privatized hotels need to be completely full before any other businesses can provide lodging for the majority of traveling soldiers.

Many of the facilities conveyed by the Army to Lend Lease are operating without significant renovations. This is “in order to generate income until the developer can obtain additional funding to continue with the large-scale renovations and the construction of the new facilities.” Essentially, Lend Lease is collecting money on facilities they did not build, and the In-License agreement requires soldiers to check-in with IHG hotels on bases.  It does not matter if these facilities are in the same neglected condition that the PAL program purports to be rectifying, nor does it matter if there are cheaper and better options in the local communities.

A recent article in the New York Times quoted Charles Smith, senior vice president for lodging at Lend Lease, as saying “soldiers don’t have to stay at [our] hotel. We still have to provide a high class of service. Otherwise, they can vote with their feet.”  If this In-License Agreement requires travelers to stay in privatized hotels run by IHG, then we do not see how soldiers can vote with their feet. Take the case of Fort Huachuca, AZ. Before the base privatized in August 2011, the manager of the on-post lodging at the time sent out a letter to all of the service members staying in the hotel. He informed them of the upcoming privatization, and also informed them that they were no longer required to stay at the hotel once IHG took over. Many of the soldiers staying there “voted with their feet” and checked out of the hotel for off-post accommodations.  After this severe drop in occupancy, IHG got the Army involved and the chain of command mandated that no one can stay off post until the privatized IHG hotel is 100% full.

As Veterans, we support anything that improves the quality of life for our men and women in uniform, but forcing our soldiers to stay in substandard facilities so that these corporations can finance the development of new facilities is just plain wrong. Veteran owned businesses are shutting their doors permanently because of the monopoly created by this In-License agreement.

We would like to know the answers to the following:

1)      Was Congress made aware of this In-License Agreement and did your office know about it?

2)      How can this In-License Agreement be justified between the Army and Lend Lease when the government stated that there was no guarantee with regard to the loan or occupancy?

3)      How will you explain to your constituents in the local community surrounding these Army bases that they are losing business to a foreign based corporation with a de facto monopoly?

As Veteran businesses, we have worked hard to provide soldiers and their families with first-rate lodging options for years. We are not asking for a hand out, but we are asking that you ensure the playing field is level. As stated in the PAL Frequently Asked Question section on the Installation Management Command’s (IMCOM) website, “the PAL hotels must compete for all business, including that of the official government traveler.” If Lend Lease cannot manage raising enough capital for the PAL program, then the contract should be given to another company that can raise it. This is exactly the type of “corporate welfare” that the American public is tired of seeing happen. Let the free market determine where the soldiers choose to stay, and not an “In-License” agreement that monopolizes the Army’s transient lodging on behalf of foreign owned corporations.

For more information please visit our website at palexposed.com

Sincerely,

PAL Exposed

www.palexposed.com

On Behalf of Military Veterans & U.S. Business Owners

Comments

  1. This is nothing but another back door deal by our Goverment. We are losing our jobs at ARMY LODGING for APG MD 21005 to IHG a overseas company for one when I have been here for 28 years and do everything I can to make it better fo our military at low wages under NAF compared to APF side and acconting for our time because we punch a clock not like the APFside with no accontablity and just like the other side of MWR at APG . Then what really takes the cake they are getting rid of us at ARMY LODGING at APG MD when the other side of MWR IS RUNNIG A REC LODGING that never existed before until about 3 years ago or so with APF and MWR NAF funding that we should be running and we have the same Big Bosses which are Michael Lupacchino and Linda Edwards under MWR at APG which many of us here wont to know why are GOVERMENT OFFICALS are letting this happen.Im going to lose everything that I work for when this takes place in 2013 unlees there is a big change in plans. NO WONDER IS BODY IS SICK OF OUR POLITICIANS.

  2. This PAL deal is nothing but another back door deal by our goverment like the BRAC deal that cost way more then the tax payers even know about at APG MD 21005.We are losing our jobs at ARMY LODGING at APG MD 21005 to IHG a overseas company and most of the employees here have 12 years or more and I have worked here for 28 years and doing everything possible to make it a great place for our MILITARY to stay and all of our other guest also.This just is unjust when we are paid low wages by NAF for MWR and the other side of MWR gets funds from THE APF side .We punch a time clock also and the other side of MWR at APG and THE APF side dosent with no accountability.This really takes the cake when they are getting rid of us at ARMY LODGIING at APG MD 21005 when our COMMANDERS and Politicians are funding and running this under the table deal called REC LODGING RAN BY MWR when the BRAC came here. We fall under MWR at APG MD 21005 and the bosses are Linda Edwards and Michael Cupacchino.TtHIS should not be taking place when we were the only Lodging that existed on APG and they gave this to them when we our losing our jobs and many of my fellow employees have already lost there job. Im going to lose everthing that I worked for when this takes place in APRIL 2013 unless there is a big change in plans but we all know that wont happen.NO WONDER EVERYBODY IS SICK OF OUR POLITICIANS BECAUSE THEY SURELY DONT CARE ABOUT THE WORKING PERSON AND DAMN SURE DONT CARE ABOUT SAVING MONEY.

  3. Jason Willis says:

    Violation of DOD issuance 5500.07-R, AR 210-7 chapter 2-9 and AR 210-22 chapters 3 and 4

    I feel completely betrayed by my own service as an active duty service member with multiple deployments and family sacrifices. This should not be a sacrifice my family has to bare. Severely disappointed.

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