Oh, for the days of the $16 muffin. Although the mundane reality of that “scandal” never quite caught up with the sensational headlines—the muffin morphed into a continental breakfast, complete with tax and tip—last year’s uproar over federal government meetings seems almost welcome comic relief in the wake of this year’s bombshell.
The public outrage that exploded in early April over a report that the General Services Administration (GSA) spent $823,000 for an internal, 300-person meeting at a Las Vegas resort forced the agency head to resign and may very well send to prison the GSA official who expressly ordered an “over-the-top” event.
Congress already rushed to enact legislation to slash federal meetings expenditures and ratchet up oversight. The House passed a measure to cap all government nonmilitary meeting travel at 80 percent of fiscal 2010 levels and limit spending on any one event to $500,000. Another congressional proposal requires government managers to obtain Inspector General (IG) approval for any meeting costing over $20,000.
In addition, the scandal has widened to other GSA meetings, including those in Palm Springs and Hawaii, and it may possibly bleed over to other federal agencies. The House Oversight Committee is reviewing travel records for nearly two dozen federal agencies dating back to 2005. It’s likely the committee will find some new perceived outrage, producing more sensational headlines and more calls for cuts in government meetings.
Collateral Damage
As is usually the case, the meetings industry will probably suffer much of the collateral damage. Such proposals don’t bode well for the hotel industry either, particularly in resort destinations, and doubly for Las Vegas, as nervous bureaucrats cancel meetings for fear of being hauled before Congress. Already, a one-day GSA meeting for fewer than 100 people, scheduled for April 25 at the Hampton Inn Tropicana, was cancelled, according to Las Vegas news reports.
Joan Eisenstodt, principal of event consultancy Eisenstodt Associates and a noted speaker at industry events, compares the scandal’s potential impact to the one that broke in 2008 over insurance giant AIG’s decision to proceed with a meeting at the St. Regis Resort Monarch Beach, in Dana Point, Calif., shortly after the company received a multibillion-dollar taxpayer bailout.PageBreak
“It is causing many to question the excesses at meetings that crept back after the AIG Effect wore off,” Eisenstodt says. “Any C-level executive at a corporation or association is likely to wonder what their meetings spend is and how meetings are planned.”
David Scypinski, senior vice president of third-party planner ConferenceDirect and a former hotel executive, also recalls the AIG scandal, but he suggests corporations learned their lessons then about excessive spending, referring to a rash of corporate meeting cancellations that followed the AIG incident.
“Corporations already have been through the wringer,” he says. “This time it’s going to be government meetings. They’ll go under the microscope, and some meetings will be cancelled or moved. And if an association is involved with government business or has a lot of government attendees at their meetings, they’ll have to subscribe to new regulations.”
Third-Party Suffering
Third parties that depend on government meetings business, especially site-selection companies, may suffer the greatest blow. While the GSA IG’s report slammed the 2010 conference at the M Resort Spa & Casino Las Vegas, in Henderson, Nev.—on numerous counts of excessive spending, rules violations and lax oversight—it categorically condemned the GSA’s use of a third-party company for sourcing.
“The M Resort’s willingness to pay over $12,000 as a finder’s fee strongly indicates that further discounts might have been available to the GSA if the agency had contacted the hotel directly,” the report stated.
Event planners of all kinds could refute the IG’s argument but since Congress appears in no mood to consider the finer points of event management, federal bureaucrats likely will cut back on third parties.
Site-selection companies sourcing a broad base of meetings will fare better than those focusing on government meetings, which is a specialized business due to the intricacies of government contracting. Plus, the hotel clients of more general site-selection companies often avoid federal meetings business; the government requires that employees pay the published federal per diem rate for their sleeping rooms at the time a conference occurs even if the agency negotiated a higher rate when it booked the meeting.
In fact, just such a problem arose for GSA’s 2010 Western Regions Conference among its thousands of employees in the West.
In May 2009, a government event planner contracted for sleeping rooms at $105 per night for the event. But the planner failed to note the rate was subject to per diem changes, according to the IG report. Some 16 months later, just one month before the conference, the GSA and the hotel signed a revised agreement lowering the rate to the new government per diem for Las Vegas of $93, a difference totaling $16,800 for the four-day GSA conference, according to the IG.
As a result, the report said, the GSA agreed to increase the meeting’s food-and-beverage budget by $41,480, including gratuity—a 44 percent spike in total F&B spend. The IG concluded the arrangement circumvented the per diem requirement, thereby breaking federal regulations.
Site-selection specialists like Location Solvers, which sourced the 2010 GSA conference, face a precarious future. On its website, the company lists two federal agencies as clients, along with McDonald’s and General Mills. Location Solvers did not respond to requests for comment by press time.
Among the company’s written endorsements on its website is one from NASA. It expresses a cozy relationship between government meeting managers and third-party planners that both sides surely must now reconsider: “Their attention to my needs makes me feel like I’m their favorite customer!”PageBreak
Powerful Friends and Foes
While tighter regulations on government meetings are sure to result from the General Services Administration conference scandal, the meetings and hospitality industries enjoy a powerful ally to beat back the more draconian proposals swirling around Congress: Senate Majority Leader Harry Reid, a Democrat whose home state is Nevada.
Reid pointedly criticized House Transportation Committee Chairman John Mica, who is leading one of two congressional investigations; Darrell Issa, Chairman of the House Oversight Committee and a Republican from San Diego County, is leading the other.
Reid contends that the resignation of former GSA head Martha Johnson and the termination of two top agency officials was the proper response to the Inspector General’s critical report on the 2010 GSA conference in Las Vegas. He contends that further congressional investigation is unnecessary and accused Mica of grandstanding.
Mica is a Florida Republican whose district includes Daytona Beach and borders on Orlando, a rival to Las Vegas for conventions.
“Mica, who is doing this, should get a life and do what he’s supposed to do,” Reid told a Las Vegas television station.
Mica, in response, says his “life is dedicated to uncovering waste and inefficiencies in the federal government.”
Of the scandal itself, and in defense of the country’s No. 1 destination for conventions and trade shows, Reid says, “What the GSA did has everything to do with stupidity; it has nothing to do with Las Vegas.”
Industry organizations echoed Reid’s comments, warning Congress against rash action.
“Any member of Congress who thinks this issue is about a particular destination is missing the forest for the trees,” says Roger Dow, CEO of the U.S. Travel Association. “Congress should hold accountable those individuals who choose to flout the federal travel rules.”
“Decades of experience demonstrate that the vast majority of government conferences are productive and cost effective,” adds Charles Sadler, CEO of the 5,000-member Society of Government Meeting Professionals. “No one will want to endure the economic hardship that individuals and businesses would experience if leaders take the knee-jerk approach and drastically reduce—or shutdown—government meetings and travel.”
Marshall Krantz, a freelance journalist, is a long-time chronicler of meetings industry issues.
