When the GSA dropped an economic bomb on St. Louis by canceling sponsorship of the GovEnergy Conference, it may have opened the door for other government agencies to cancel major events if the move goes unpenalized, experts said.
New rules governing conferences may in fact give GSA a legal escape clause from the contract.
GSA’s cancellation left St. Louis with 2,500 empty hotel rooms and less $6 million in anticipated profits. The overall economic impact of the cancellation of the GovEnergy conference, an annual event which was planned Aug. 19-22 this year, won’t be figured out for months or even years.
“After a rigorous review of the 2012 GovEnergy conference, GSA has decided to postpone this year’s conference,” a GSA statement said this week. “GSA has decided to postpone the GovEnergy conference because of new standards that GSA has put in place for conferences and contracts surrounding conferences. There was not sufficient time to make the GovEnergy compliant with these new standards for an August 2012 conference.”
Until now, the government’s standard contract with hotels and other entities allows cancellation for what is called “force majeure” clause – essentially an “Act of God,” or other unforeseen event such as epidemic, war, or natural disasters. In recent years, that clause has been expanded to include changes in law that would invalidate the conference, or government “defunding” of an agency or department. The question is whether GSA’s new internal regulations, which the agency cited in cancelling, measure up to the “force majeure” standard.
The GSA was forced to come up with new convention standards in the wake of revelations of a $822,000 leadership conference in Las Vegas in October, 2010. The event featured several posh and questionable details, including $7 sushi rolls for 300 attendees, hot tub cavorting and public YouTube videos and led to several employees resigning or being ousted.
As for St. Louis, GSA agreed to reimburse those who registered for the conference and vendors who were planning display booths, but did not specifically mention the hotels. That issue is likely to be fought out in arbitration, negotiation or in the courts. If the escape clause doesn’t hold up, the legal process will eventually reveal how much GSA may be forced to pay for cancelling the contract.
“This is going to be a hard contract for GSA to get out of, unless they specifically said ‘we have the right to change our mind,’” said attorney John Foster of Atlanta, an expert in convention contracting law. “No hotel is going to write and sign a contract like that. The question is whether this meets the example of government fiat that gives them the right to walk away. I doubt that it does.”
While the contract that GSA signed with the St. Louis Convention and Visitors Commission and the hotels in St. Louis are private, a sample GSA contract says that performance of the contract will be “subject to events or occurrences beyond their control such as, but not limited to, the following: acts of God, war; specific threats of war: government regulation or domestic travel advisory; government laws, regulations; disasters … civil disorder or terrorist acts….”
The standard contract also has a place to list penalties if the contract is breached, and the numerical values are left blank.
Foster says the negotiation over termination of the contract may influence future contracting with the government if the GSA is made to pay only a minor penalty to cancel because of new, internal regulations governing travel.
“The question is how much is GSA going to have to pay to get out of this,” he said.
St. Louis officials are apoplectic.
“It’s impossible to fill almost 2,500 hotel rooms for four or five nights in a month,” said Kathleen “Kitty” Ratcliffe, president of the St. Louis Convention and Visitors Commission, told the St. Louis Post-Dispatch. “Those hotels are going to sit empty. Cab drivers won’t be working. Restaurants won’t be as busy.”
She told the newspaper that the GSA invoked the “force majeure” clause, but that the hotels and city officials may pursue a mediation process in an effort to get cancellation fees.
Washington Attorney Jerry Panaro, an expert on contracting with government agencies, said the cancellation clause is likely to play a big part in the negotiations. “Contract law is very well established,” he said. “Changes in policy are not necessarily going to excuse performance on the part of the GSA.”