Soldiers not allowed to "vote with their feet," and veteran-owned businesses are sent packing
WASHINGTON, Aug. 13, 2012 — On its surface, the Privatization of Army Lodging program (PAL) is helping to rectify decades of neglect to Army transient lodging facilities; however, PAL Exposed has uncovered serious issues with the program.
The PAL contract was awarded to Actus Lend Lease, an Australian-based corporation, through a sole source (no-bid) contract with a 50-year lease to build and run privatized hotels on 42 U.S. Army bases. Lend Lease chose U.K.-based InterContinental Hotels Group (IHG) as their hotel operator.
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."
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.
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 PAL Exposed does not see how soldiers can vote with their feet.
Improving the quality of life for soldiers and their families is a resonating theme that has been used to market the PAL program. This In-License Agreement creates a monopoly which negatively impacts American-owned businesses, including veteran and minority-owned companies, according to PAL Exposed. Without changes to these policies, PAL Exposed expects that the companies that have supported these army bases for years will continue to be put out of business.
On August 10, palexposed.com sent a Letter to the Senate and House Armed Services Committees asking for their official position.
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Website: PAL Exposed
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