69–010 

Calendar No. 671 

110TH CONGRESS REPORT " ! SENATE 2d Session 110–319 

SUBCONTRACTORS PAYMENT AUTHORIZATION FOR 

SERVICES AT THE GRAND CANYON NATIONAL PARK 

APRIL 10, 2008.—Ordered to be printed 

Mr. BINGAMAN, from the Committee on Energy and Natural 

Resources, submitted the following 

R E P O R T 

[To accompany H.R. 1191] 

The Committee on Energy and Natural Resources, to which was 

referred the Act (H.R. 1191) to authorize the National Park Service 

to pay for services rendered by subcontractors under a General 

Services Administration Indefinite Deliver/Indefinite Quantity Contract issued for work to be completed at the Grand Canyon National Park, having considered the same, reports favorably thereon 

without amendment and recommends that the Act do pass. 

PURPOSE

The purpose of H.R. 1191 is to authorize the Secretary of the Interior to make payments to subcontractors who performed work at 

Grand Canyon National Park in 2002 and 2003 but were not paid 

by the primary contractor. 

BACKGROUND AND NEED

H.R. 1191 would authorize the Secretary of the Interior to pay 

approximately $1.4 million from appropriated funds to subcontractors who worked on authorized construction projects at Grand Canyon National Park in 2002 and 2003, but who were not paid by the 

primary contractor, Pacific General, Inc. (PGI). After working on 

several projects for the park, PGI defaulted, leaving many of its 

subcontractors unpaid. Although PGI certified that it was making 

payments to its subcontractors, approximately $1.4 million was 

never paid. National Park Service contracting policy required PGI 

to obtain payment and performance bonds; however it never did so. 


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The National Park Service paid PGI in full for all of the work 

orders. The Park Service contends that because it has made payment, and because it has no direct contractual relationship with 

the subcontractors, it has no legal authority to make additional 

payments to the subcontractors. Most of the subcontractors are 

small businesses and default has caused them significant economic 

hardship. In light of the equitable circumstances, H.R. 1191 would 

authorize the Secretary of the Interior to pay all of the subcontractors the remaining unpaid amounts. 

LEGISLATIVE HISTORY

H.R. 1191, sponsored by Congressman Renzi, passed the House 

of Representatives by voice vote on April 17, 2007. (S. Hrg. 110–

282.) The House of Representatives passed a similar measure in 

the 109th Congress, H.R. 3961. That bill was not considered in the 

Senate. 

The Subcommittee on National Parks held a hearing on H.R. 

1191 on November 8, 2007. At its business meeting on January 30, 

2008, the Committee on Energy and Natural Resources ordered 

H.R. 1191 favorably reported, without amendment. 

COMMITTEE RECOMMENDATION

The Committee on Energy and Natural Resources, in open business session on January 30, 2008, by a voice vote of a quorum 

present, recommends that the Senate pass H.R. 1191. 

SECTION-BY-SECTION ANALYSIS

Section 1 defines key terms used in the bill. 

Section 2 authorizes the Secretary of the Interior, subject to the 

appropriation of such funds as may be necessary, to pay the 

amount owed to subcontractors of Pacific General, Inc. for work 

performed at Grand Canyon National Park in 2002 and 2003, if the 

primary construction contract between the Park Service and PGI is 

terminated; if the amount owed to the subcontractors is verified; 

where the subcontractors have exhausted all reasonable legal avenues to recover the amounts owed directly from PGI; and where 

the subcontractors provide a written statement that the verified 

amount due represents payment in full for the work performed. 

COST AND BUDGETARY CONSIDERATIONS

The following estimate of costs of this measure has been provided 

by the Congressional Budget Office: 

H.R. 1191—An act to authorize the National Park Service to pay for 

services rendered by subcontractors under a General Services 

Administration Indefinite Deliver/Indefinite Quantity Contract 

issued for work to be completed at the Grand Canyon National 

Park 

H.R. 1191 would allow the National Park Service (NPS) to make 

payments to certain subcontractors associated with Pacific General, 

Inc. (PGI), a California-based firm for construction work performed 

in 2002 and 2003. The NPS has paid about $10 million to PGI 

through a General Services Administration contract for numerous 

construction projects in Grand Canyon National Park; $1.4 million 


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of that amount was owed but not paid to the firm’s subcontractors. 

PGI has since gone out of business. The legislation would authorize 

the appropriation of such sums as may be necessary to pay the 

amount owed to the subcontractors. 

Assuming the availability of appropriated funds, CBO estimates that implementing the legislation would cost the NPS $1.4 million 

in 2008 to pay the subcontractors for their previous work. The legislation would not affect direct spending or revenues. The legislation contains no intergovernmental or private-sector mandates as 

defined in the Unfunded Mandates Reform Act and would not affect the budgets of state, local, or tribal governments. 

The CBO staff contact for this estimate is Matthew Pickford. The 

estimate was approved by Theresa Gullo, Deputy Assistant Director for Budget Analysis. 

REGULATORY IMPACT EVALUATION

In compliance with paragraph 11(b) of rule XXVI of the Standing 

Rules of the Senate, the Committee makes the following evaluation 

of the regulatory impact which would be incurred in carrying out 

H.R. 1191. The Act is not a regulatory measure in the sense of imposing Government-established standards or significant economic 

responsibilities on private individuals and businesses. 

No personal information would be collected in administering the 

program. Therefore, there would be no impact on personal privacy. 

Little, if any, additional paperwork would result from the enactment of H.R. 1191, as ordered reported. 

CONGRESSIONALLY DIRECTED SPENDING

H.R. 1191, as reported, does not contain any congressionally directed spending items, limited tax benefits, or limited tariff benefits as defined by rule XLIV of the Standing Rules of the Senate. 

EXECUTIVE COMMUNICATIONS

The testimony provided by the National Park Service at the November 8, 2007 subcommittee hearing on H.R. 1191 follows: 

STATEMENT OF KATHERINE H. STEVENSON, ACTING ASSISTANT DIRECTOR, BUSINESS SERVICES, NATIONAL PARK

SERVICE, DEPARTMENT OF THE INTERIOR

Mr. Chairman, thank you for the opportunity to present 

the views of the Department of the Interior on H.R. 1191, 

a bill that would authorize the National Park Service to 

pay for services rendered by subcontractors under a General Services Administration Indefinite Deliver Indefinite 

Quantity Contract issued for work to be completed at the 

Grand Canyon National Park. 

The Department appreciates the subcommittee’s efforts 

to address this situation but opposes H.R. 1191. The Department also testified in opposition to H.R. 3961, a similar bill, in testimony before the House Subcommittee on 

National Parks on March 30, 2006. 

H.R. 1191 would authorize payment, through the appropriation of such funds as are necessary, to subcontractors 

who completed work under task orders to Pacific General, 


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Incorporated (PGI) for which PGI was paid, but subcontractors were not. The work was completed under National Park Service (NPS) task orders issued against PGI’s 

Indefinite Deliver Indefinite Quantity (IDIQ) contract with 

the General Services Administration. 

PGI’s default has created a financial burden on the affected firms. The NPS had a contractual relationship with 

the prime contractor, PGI. The NPS does not have a contractual relationship with the subcontractors and NPS 

does not have the legal authority to pay subcontractors 

who completed work under PGI’s IDIQ contract for which 

PGI failed to render payment. 

H.R. 1191 would authorize the Secretary to pay these 

subcontractors under certain conditions. The bill would authorize payment if: 1) the task orders issued to PGI by 

NPS have been terminated, 2) the amount owed to the 

subcontractors is verified, 3) all reasonable legal avenues 

or recourse have been exhausted by the subcontractors to 

recoup amounts owed directly from PGI, and 4) the subcontractors provide a written statement that payment of 

the amount verified represents payment in full by the 

United States for all work performed at the park under 

PGI task orders issued by NPS between Fiscal Years 2002 

and 2003. 

Between Fiscal Years 2002 and 2003, the Grand Canyon 

National Park (park) issued approximately 40 task orders 

to PGI under this IDIQ contract. Those task orders totaled 

an estimated $17 million for various construction projects 

throughout the park. Invoices sent to the park indicated 

that PGI certified payments were being sent to subcontractors and suppliers. The NPS paid more than $10 million 

to PGI, of which approximately $1.4 million, based on our 

most recent estimates, was owed, but never paid, to subcontractors. PGI has been indicted by the U.S. District Attorney’s Office in Arizona on 26 counts of fraud involved 

with these task orders. 

In January 2004, the park began receiving complaints 

from subcontractors citing lack of payment by PGI. In February 2004, the NPS suspended further payment to PGI 

and issued a suspension notice ordering PGI to cease activity, followed by termination for default of 17 remaining 

task orders. PGI has had every reasonable opportunity to 

resolve the situation, but has since ceased doing business. 

Following PGI’s default, the NPS withheld payment to 

PGI and began paying subcontractors directly for work 

completed on PGI task orders, valued at $906,335. Contract law generally prohibits payments directly to subcontractors because of the lack of a direct, contractual relationship between the parties. However, in this case, NPS 

consulted with the Government Accountability Office 

(GAO) and with their approval, began paying subcontractors directly for these claims. NPS has used approximately 

92% of the withheld funds to pay 41 claims of an estimated total of 76 claims submitted. 


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The impact of PGI’s default was compounded by lapses 

in the contracting operations at Grand Canyon National 

Park. An acquisition management review conducted by the 

NPS Washington Contracting and Procurement Office, determined that the park had failed to obtain payment and 

performance bonds from PGI required by the IDIQ contract and the Miller Act (40 U.S.C. § 3131). To prevent future lapses, we have strengthened internal controls both at 

the park and regional level. For example, the park superintendent is now annually evaluated for management of 

the park’s contracting program. In addition, the NPS 

Intermountain Region will be conducting periodic acquisition management reviews of the Grand Canyon contracting 

program. 

The Department understands the hardships PGI’s default and NPS’ actions have placed upon the involved subcontractors. The payment bonds required of the contractor 

under the Miller Act are designed to protect subcontractors 

who do not have the recourse of placing a lien on the property at issue, since liens cannot be placed on government 

property. The courts have held that, while the contractor 

has an obligation to provide such bonds, the Miller Act 

places no affirmative obligation on the federal government 

to ensure the bonds have been obtained. The Department 

recognizes that H.R. 1191 is intended to be an equitable 

resolution to a difficult situation. However, it singles out 

one situation for relief not available to others under the 

Miller Act and would effectively have NPS pay for the 

same services twice. 

Although we are sympathetic about the position of the 

subcontractors, the Administration is concerned about the 

precedent that would be set by requiring the federal government to assume the liability for the contractor’s default, 

particularly in a situation where no contractual relationship exists. 

Mr. Chairman, this concludes my prepared remarks. I 

will be happy to answer any questions you or other members of the subcommittee might have. 

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, the Committee notes that no changes in existing law are made by the Act H.R. 1191, as ordered reported. 

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