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Can the Government be charge attrition rates for hoteling services?


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Hello,

I am working with an order that requires conference rooms and equipment as well as a reservation on hotel rooms with fixed rates. The Government will pay for the conference rooms and equipment, but the hotel rooms will be paid by participants. A hotel submitted a quote with an 80% attrition rate, meaning if the reserved hotel rooms are not booked at least 80%, the hotel will charge the Government for those rooms or some penalties. The problem is that not all participants are Government employees, so we could run the risk of not meeting the 80% attrition rate. Also, if there is a Government shutdown, we would be at a loss here. 

My question is both legal and ethical. I understand why hotels do this because they could lose money if the participants fail to fulfill their reservations. However, can the Government legally pay for services not rendered associated with this attrition rate? On another note, if the Government cannot pay for these unused rooms, is this unfair to hotel businesses?

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4 hours ago, Don Mansfield said:

I don't see this as paying for unused hotel rooms. It's a method of settlement in the event the Government breaches the contract.

Okay, thank you. I just found out it's common for my agency to not allow attrition rates in the order.

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6 hours ago, CSJas said:

My question is both legal and ethical. I understand why hotels do this because they could lose money if the participants fail to fulfill their reservations. However, can the Government legally pay for services not rendered associated with this attrition rate? On another note, if the Government cannot pay for these unused rooms, is this unfair to hotel businesses?

 

1 hour ago, CSJas said:

Okay, thank you. I just found out it's common for my agency to not allow attrition rates in the order.

While you have found an answer I am passing along some thoughts regarding your question.

In the end it would seem it is a matter of negotiation.   I wonder if the 80% is not provided if the hotel per room rate goes up?   Personal experience not related to the government I have found that it is customary for hotels to offer a better rate if the guarantee is provided.  Ability to negotiate a great rate and no guarantee is the perfect scenerio.  I have accomplished in some cases and not in others.

With regard to legally okay it would require some in depth GAO research (Red Book, actual cases, etc.)  In a quick search I found this quote in an aged GAO decision - "in absence of valid contractual agreement between Government and hotel" - that I want to point out is not exactly on point but all the same raises something for me.  For reference see https://www.gao.gov/assets/b-181266.pdf

In todays world of "commercial service" if market research suggests such an agreement on "attritition rate" is customary practice one could wonder - Why not? - considering FAR part 12.  I say this noting that the payment paragraph of FAR clause 52.212-4 can not be tailored.   Then I think of Don's posted thought and wonder why breach, why not termination for the convenience of the government for the unused rooms below the 80% with a settlement agreement.   

If the below 80% is solely due to non-government personnel not coming complicates the matter a whole bunch.  If the less than 80% is completely at the non-governments failure to book anticipated rooms then why not have them pay for the unused as a condition of coming/not coming to the meeting, conference, or what ever?  Or even better two agreements one for the private folks and one for the government folks, who cares if doing so results in different rates for each grouping.

All in all the solution of your agency is the best approach but your question did raise my interest and I felt compelled to share.

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19 hours ago, Don Mansfield said:

I don't see this as paying for unused hotel rooms. It's a method of settlement in the event the Government breaches the contract.

I would agree with that assessment.

13 hours ago, C Culham said:

In the end it would seem it is a matter of negotiation. 

This is of overall importance.  The person(s) making Hotel conference arrangements should negotiate the details of such “attrition” terms, regardless of whether or not competition is involved. For instance, if the hotel occupancy rate isn’t affected by a certain under attendance (e.g., they are able to rent those unused reservations), then it wouldn’t suffer any loss and shouldn’t assess a penalty, in my opinion.

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45 minutes ago, joel hoffman said:

if the hotel occupancy rate isn’t affected by a certain under attendance

Looking from the side of the hotel I would think they might be, again by experience.   Staffing plans change for hotels based on their expereinced and anticipated occupancy.  As such cost of performance on their part is affected.   I know we all experience looking and seeking the best rate possible on an individual basis so while one might think rates are static and consistent many times they are not again by my experience.  Maybe it applies in such a service industry and maybe is does not but usually greater quantity generates less cost to a contractor.

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52 minutes ago, C Culham said:

Looking from the side of the hotel I would think they might be, again by experience.   Staffing plans change for hotels based on their expereinced and anticipated occupancy.  As such cost of performance on their part is affected.   I know we all experience looking and seeking the best rate possible on an individual basis so while one might think rates are static and consistent many times they are not again by my experience.  Maybe it applies in such a service industry and maybe is does not but usually greater quantity generates less cost to a contractor.

Carl, I don’t necessarily disagree. It may depend upon the season, circumstances, location, etc. I’m advocating negotiating the terms of any proposed penalty for under attendance . I’d shoot for having the hotel show that they were, in fact impacted by the under attendance. Lately, it’s been very difficult to find room availability in certain areas but not always.

i don’t have a fundamental problem with the concept of an pre-agreed term or restitution for a breach, as Don suggests. Just add some condition to establish impact damages. It is likely that no shows are very likely to impact a hotel’s  ability to fill those rooms on the first night but they might be able to adjust and accommodate other travelers during a multiple day conference. 

I don’t think that a partial termination for convenience after the fact here is possible or practical. The dirty deed would already have be done. 

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8 hours ago, joel hoffman said:

I don’t think that a partial termination for convenience after the fact here is possible or practical. The dirty deed would already have be done. 

Assumption?  Usually, as experienced by all the blocks I have been involved in, there is a prefunction cut-off, discussion with facility and an anticipated occupancy conclusion and if the percent was reached.   By my reality the deed has not been done,  but I guess I could see where can be as well.   I just wonder  if Don's suggestion is anticipartory breach?  Are not contract terms and conditions and the associated remedies intended as best efforts to avoid such legal doctirnes?   And if my thinking is right why not find a way to avoid such a situation in contract language?    Just a thought we could go to great lengths in discussing but as the OP has a solution seems a dragged out discussion would be moot?

As an aside I had this thought to bolster my thought of why a "attrition" benchmark as the OP calls it.   In this day and age when I make my individual hotel reservation more times than not the best rate I can get is based on "nonrefundable".

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