GAO validates use of no-cost contract

Federal agencies can sign no-cost contracts for conference planning services in cases when the contractor recoups its costs by charging fees to exhibitors, sponsors and attendees, under a legal opinion announced Monday by the Government Accountability Office.

In its decision (GAO-B-308968), GAO ruled that a contract proposal by National Conference Services Inc. of Columbia, Md., would not violate the federal Antideficiency Act, which prohibits government agencies from accepting voluntary services without statutory authority.

John Skipper, chief executive officer of NCSI, said the decision was "a win-win for everybody [because] the government will be able to save millions of dollars" in contract costs while following a best practices model that allows agencies to avoid the time and money associated with arranging conferences.

In a typical government no-cost contract, a vendor provides a service to a federal agency, but rather than receiving compensation, it charges and retains fees assessed from a third party.

NCSI has been providing event planning services for such events as information technology conferences, industry days and technology expositions for government agencies, including the Defense Department, through such no-cost arrangements for several years, Skipper said.

In 2005, however, GAO advised the National Institutes of Health to avoid a proposed contract in which the agency, or a contractor acting on its behalf, would collect fees from conference participants. In the ruling, GAO told NIH not to charge a registration fee specifically to defray the costs of providing meals because "doing so would impermissibly augment NIH's appropriation."

The NIH ruling created a level of ambiguity for NCSI's government customers, some of whom declined to sign future no-cost contracts until the issue was clarified, Skipper said. The company then sought the help of Sen. Barbara Mikulski, D, Md., who requested that GAO review NCSI's contract model.

The proposed NCSI contract would "provide for all services as required by the task order at no cost to the government. The contractor is entitled to all of the registration, exhibition, sponsorship and/or other fees collected as payment for performance under the task order if there is no cost to the government. In this case, the contractor is liable for all costs related to the performance of the task order as defined in the task order and the government's liability for payment of services under this task order is 'zero.' "

In formulating its ruling, GAO made reference to a pair of no-cost arrangements that had previously been negotiated by federal agencies.

In 1928, GAO permitted the Federal Trade Commission to enter into a no-cost contract for stenography services. The contractor was provided the exclusive right to report FTC proceedings and provide free copies to the agency. In exchange, the firm could sell copies of transcripts to the public.

More recently, the General Services Administration was allowed to sign four no-cost contracts with real estate brokers as part of its National Brokers Contract for agencies seeking office space to lease. In exchange for their lease acquisition services, the brokers receive compensation from the landlords they do business with.

"As with the FTC and GSA contracts, an agency agreeing to the NCSI contract would have no financial liability to NCSI, nor would NCSI have any expectation of payment from the government," GAO General Counsel Gary Kepplinger wrote in a Nov. 27 letter to Mikulski. "Consequently, an agency entering into the NCSI contract would neither augment its appropriation nor run afoul of the voluntary services prohibition."

Despite its approval of NCSI's proposal, the congressional watchdog warned that any agency that signs a no-cost contract should weigh the value of the services provided by the contractor with any concessions the firm is offering to determine if the arrangement is in the government's best interest.

"Agency officials … should consider possible conflicts of interest before signing a no-cost contract, keeping in mind that control of the agenda, selection of speakers and other matters concerning content should serve the government's, not the contractor's, purpose," Kepplinger wrote. "Ultimately, an agency must not lose sight of its objectives for a particular event and should ensure that in avoiding costs to the agency, it does not take actions that compromise the effectiveness of its conference, undermine the achievement of agency goals, or violate ethics rules."