Hearings and Business Meetings
July 14, 2005
SD-366 Energy Committee Hearing Room 02:30 PM
Mr. Geoff Baekey
Geoffrey A. Baekey
Senior Manager, PricewaterhouseCoopers, LLP
Subcommittee On National Parks
United States Senate
July 14, 2005
Mr. Chairman and distinguished members of the Committee, I want to thank you for the opportunity to testify today regarding business practices within the National Park Service. I am Geoff Baekey, a Senior Manager at PricewaterhouseCoopers, and I work extensively with the National Park Service on business related issues.
Over the next few minutes, I would like to provide you with my perspective on how PwC has worked with the National Park Service to incorporate best business practices. Furthermore, I plan to provide you with specific examples of how the NPS has utilized these new practices to enhance their mission.
Since 2000, PricewaterhouseCoopers has been working closely with the National Park Service to enhance their concessions program. As you know, this is one of the largest business-based programs in the NPS, generating over $800 Million in gross revenues and serving millions of visitors. Back when PwC was first hired, the NPS faced a significant backlog of small and large concessions contracts. In addition, the Park Service was just beginning to implement changes resulting from a new law governing concessions. These major hurdles required a new way of looking at the business of managing the concessions program.
Initially, the NPS engaged PwC to complete a comprehensive review of the concession program. One of the major findings from this review was that the NPS needed to treat the largest and most complex of the concessions contracts with a much higher level of business and financial scrutiny than the smaller ones. PwC identified 50 contracts which necessitated this heightened set of business procedures.
From 2000 until today, PwC and the NPS have worked closely to develop detailed strategic contracting plans for the “big 50” contracts. This involved having a multi-disciplined team of experts (financial, legal, engineering, valuation, etc.) to assemble new contracts. Most of these new contracts have 10 to 20 year terms, so in essence, we were developing and implementing long-term business plans for visitor services with local park and regional support.
When we first commenced our work, PwC and their subcontractors were responsible for most aspects of the contracting process. Over time, however, NPS professionals have been taking on a greater share of the contract due diligence and prospectus development processes. One recent example of this is in the Intermountain Region.
The Intermountain Region has the greatest proportion of large concession contracts in the NPS. Over the past year, the Region has been recruiting and hiring managers with MBAs from top business schools or from recognized consulting firms to work in their business management division. In addition, the Region has been conducting on the job training with these managers to provide them with the tools they need to be effective in the field. Today, IMRO managers are taking on a more significant role in the contracting process for “big 50” contracts. With their strong business backgrounds, these professionals can handle overall project management, as well as much of the drafting of the prospectus documents.
The NPS is more than half-way through the contracting workload that they commenced in 2000. Much is left to be accomplished. However, with the introduction of new NPS business professionals, and the knowledge that has been gained by the NPS, the next few years should be very productive.
Another area where PwC has worked closely with the NPS is in business process improvement of concessions. With a new law and new regulations, the NPS engaged PwC to help enhance some of the procedures used to oversee the concessions contracts. In the private sector, we call this Asset Management. Mr. Chairman, the law that you passed in 1998 contemplated this need for enhanced oversight.
Once a new contract has been executed, much has to be done to provide quality control and compliance. Contract oversight activities include financial and operational reviews, environmental compliance, maintenance oversight and other compliance activities. One of the most significant activities is in the areas of Concessioner evaluation and rate approval. In 2003, the NPS engaged PwC to overhaul the concessions’ standards, evaluation and rate approval system, also known as SERA.
Much of the work on SERA involves attempting to instill private sector operating and facility standards to concessioner operated assets throughout the NPS. In fact, when PwC first started work on SERA, we tried to overlay industry standards and best practices to the large concession contracts. We found that this did not work. Park Service assets have unique characteristics which are not generally found in the private sector. For instance, many NPS locations are historic and require special consideration. Working closely with the NPS, PwC and others tailored best practices from the hospitality and travel industry for all asset types. The end result was a set of standards which can be used for objective evaluation and rate setting.
Perhaps the most important benefit of this contract oversight reengineering has been the close collaboration between the NPS, the concessioners and industry experts. Over the past two years, the NPS has formed a close-knit group of experts within and outside the Service whom can effectively address all necessary business and financial changes. The feedback from all involved has been very positive.
Over the past five years, the NPS concessions program has undergone dramatic change. This has been due in part to our efforts. But, the real change has come from within the NPS. Today’s NPS managers have a much better grasp of current business and financial best practices, and how this applies to their jobs. Perhaps most importantly, NPS managers now understand what needs to be completed within the Service and when they need to engage outside advisors.
Mr. Chairman, thank you once again for the opportunity to testify. I would be pleased to answer any questions that you or the Committee members may have.