Ober United Travel Agency, Inc. v. United States Department of Labor

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 13, 1998 Decided February 13, 1998

No. 97-5046

Ober United Travel Agency, Inc. and

Society of Travel Agents in Government (STAG),

Appellants

v.

United States Department of Labor,

Appellee

Appeal from the United States District Court

for the District of Columbia

No. 94cv1111

Barry Roberts argued the cause and filed the briefs for
appellants.

Marina Utgoff Braswell, Assistant United States Attorney,
argued the cause for appellee, with whom Mary Lou Leary,
United States Attorney at the time the brief was filed, R.
Craig Lawrence, Assistant United States Attorney, and Wil-

liam J. Stone, Attorney, United States Department of Labor,
were on the brief.

Before: Silberman, Williams, and Sentelle, Circuit
Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: Appellants Ober United Travel
Agency, Inc. (Ober) and the Society of Travel Agents in
Government challenge the Department of Labor's determina-
tion, affirmed by the district court, that travel management
contracts are covered by the provisions of the Service Con-
tract Act. We agree with the district court.

I.

For many years, General Accounting Office (GAO) regula-
tions prevented the federal government from using travel
agents; government agencies purchased airline tickets direct-
ly from air carriers. Following the deregulation of the airline
industry in the late 1970s, however, the demand for travel
agents' services increased. With many new airlines and a
myriad of discount fares now available to passengers, travel
agents' expertise could reduce costs dramatically for custom-
ers. Following a successful experimental program, the GAO
ended the prohibition against the government's use of travel
agents in 1984.

The government now gives travel agencies business
through a competitive bidding process. Government agen-
cies, either on their own or through the General Services
Administration, issue bid solicitations for travel management
contracts. While these contracts differ in some respects, they
typically are "no-cost" contracts. The government neither
directly pays a travel agency for its services nor is obligated
to buy any tickets through that travel agency; instead, almost
all travel management contracts oblige the travel agency to
pay the government for the right to service its employees.
The government agency may not utilize the services of anoth-
er travel agency, although it is still free to deal directly with
air carriers and other principals. The travel agency receives

its compensation in the form of commission from air carriers
and other travel suppliers, such as rental car companies.

The United States Air Force issued a bid solicitation for a
travel management contract. Ober protested the inclusion of
provisions requiring bidders to comply with the Service Con-
tract Act (SCA), 41 U.S.C. s 351 et seq. (1994). The SCA
mandates that service contracts specify the minimum level of
wages and benefits, as determined by the Secretary of Labor,
provided to employees working on those contracts. By its
terms, it applies to "[e]very contract (and any bid specifica-
tion therefor) entered into by the United States ... in excess
of $2,500 ... the principal purpose of which is to furnish
services in the United States through the use of service
employees." 41 U.S.C. s 351(a) (1994) (emphasis added).

Appellants petitioned the Administrator of the Department
of Labor's Wage and Hour Division for a ruling regarding the
applicability of the SCA to travel management contracts.
The Administrator, in a signed letter, determined that travel
management contracts were covered. The Board of Service
Contract Appeals (BSCA) affirmed the Administrator's rul-
ing. Appellants challenged the BSCA's ruling as arbitrary
and capricious. But the district court granted summary
judgment in favor of the Department.

II.

Appellants are not explicit as to their arbitrary and capri-
cious charge, but it would seem they are claiming that the
Secretary unreasonably characterized the principal purpose
of travel management contracts. Appellants rely on our only
previous case to consider the SCA's principal purpose re-
quirement. In American Federation of Labor and Congress
of Industrial Organizations v. Donovan, 757 F.2d 330 (D.C.
Cir. 1985), we rejected a challenge to the Secretary's regula-
tion providing that contracts for the sale of timber were not
covered by the Act. Although timber sale contracts generally
include provisions requiring buyers to perform certain ser-
vices such as building temporary roads and performing ero-
sion control activities, these services, the Secretary reasoned,

were ancillary to the principal purpose of the contracts: the
sale of timber. Appellants similarly insist that the "principal
purpose" of travel management contracts is not "to furnish
services," as the Secretary concluded, but rather to sell
concession rights to travel agencies. Donovan is of little help
to appellants, however, since we deferred in that case to the
Secretary's appraisal of the contracts' principal purpose. In
any event, although the government does often receive com-
pensation for awarding travel management contracts, we
think it is impossible to conclude that the Secretary's deter-
mination as to their principal purpose is unreasonable. It
seems to us that the contracts involved in Donovan were
much more aimed at the selling of timber, and the services
were ancillary, whereas here the reverse is so. After all, the
government did not enter into these contracts until deregula-
tion of the airlines made the reservation and ticketing ser-
vices offered by travel agents particularly important, and
appellants do not show that the government seeks to raise
significant revenue through this device.

Appellants would buttress their rather weak argument by
asserting that the Secretary's decision is inconsistent with the
way the government interprets "procurement contract" in
other statutory provisions. A "procurement contract" must
be used when "the principal purpose of [an] instrument is to
acquire ... property or services for the direct benefit or use
of the United States Government." 31 U.S.C. s 6303(1)
(1994). The government's regulation defines a procurement
contract as "a mutually binding legal relationship obligating
the seller to furnish the supplies or services ... and the
buyer to pay for them. It includes all types of commitments
that obligate the Government to an expenditure of appropri-
ated funds...." 48 C.F.R. s 2.101 (1996) (emphasis added).
It is undisputed that travel management contracts do not
directly draw upon appropriated funds.1 Appellants there-

__________
1 Appellants, though, do not suggest that the payments to
carriers, which ultimately supply the funds for the travel agents'
commissions, come from any source other than appropriated funds.

fore argue that they could not have as their principal purpose
the government's acquisition of services.

The government is rather unclear as to whether travel
management contracts are actually treated as procurement
contracts. It suggests that its regulation, including commit-
ments to expenditures of appropriated funds, does not neces-
sarily exclude commitments not implicating appropriated
funds, but it never says whether the latter are covered.
Assuming arguendo, however, that appellants are correct--
that the government regulation restricts the definition of a
procurement contract to those commitments involving the
expenditure of appropriated funds--it does not follow that the
Secretary's determination is vulnerable. It could mean, for
instance, that the government's procurement regulation is
underinclusive or it might mean the statutes have different
coverage--they do have different purposes. One seeks to
bring efficiency to the procurement process; the other aims
to protect labor standards among contractors' employees. If
the statutes were thought to have a different reach, it would
be because the term "property or services" or the word
"contract" had a different meaning under 31 U.S.C. s 6303
than comparable language under the SCA. Be that as it may,
none of this has much to do with the interpretation or
application of the SCA's "principal purpose" language.

Appellants' alternative claims directly dispute the Secre-
tary's interpretation of other SCA language. They argue
that the SCA only applies to government contracts that draw
upon appropriated funds because the SCA states that "sub-
ject to limitations in annual appropriation Acts ... contracts
to which [the SCA] applies may ... be for any term of years
not exceeding five." 41 U.S.C. s 353(d) (1994). But, as
should be quite apparent, that language, by acknowledging
that further appropriations Acts could limit the period of
contracts covered by the statute, hardly indicates that the
SCA applies solely to contracts that are funded through
appropriations.

To be sure, as appellants observe, a companion section, 41
U.S.C. s 354 (1994), directs the Comptroller General to aid in

the enforcement of the SCA by distributing the names of
violating persons or firms to all government agencies. At the
time this provision was passed, appellants point out that the
Comptroller General dealt only with accounts involving ap-
propriated funds--which they infer supports their interpreta-
tion of s 353(d)--but it could just as easily mean only that
this enforcement technique was not available (then) if the
particular contract involved did not implicate appropriated
funds.

Nor are we persuaded by appellants' contention that the
SCA provision stating that its coverage extends to contracts
"in excess of $2,500" means no-cost contracts are excluded.
The statute does not specify how one is to determine whether
a contract is in excess of $2,500; it certainly does not say that
the government must be obligated to pay $2,500, which
appellants seem to assert.2 Accordingly, the Secretary of
Labor has issued a regulation stating that "concession con-
tracts are considered to be contracts in excess of $2,500 if the
contractor's gross receipts under the contract may exceed
$2,500." 29 C.F.R. s 4.141(a) (1997). And, appellants do not
dispute that travel management contracts produce more than
$2,500 in revenue for travel agencies.

Appellants finally claim that travel management contracts
are entirely exempt from the SCA because 41 U.S.C. s 356(3)
(1994) excludes from coverage "any contract for the carriage
of ... personnel ... where published tariff rates are in
effect." The direct sale of air, bus, and rail tickets obviously
falls within this language, so appellants contend that the
exemption also includes tickets purchased from an indepen-
dent travel agent acting on behalf of the carrier. The Secre-
tary, however, does not so expansively interpret the exemp-

__________
2 Appellants claim that at a minimum the phrase "in excess of
$2,500" must mean that a party has an obligation under the
contract in excess of $2,500. We see nothing, however, in the SCA
which requires that the value of the contract be measured by a
party's obligated expenditures, as opposed to actual revenues or
actual expenditures.

tion. She contends that travel management contracts are not
"for carriage" but are only for reservation and ticketing
services.

The government, in defense of its regulation and interpre-
tations of the statute, characterizes the SCA as remedial
legislation and reminds us of the old maxim of statutory
interpretation that remedial statutes are to be liberally con-
strued. Although courts have often used the maxim (the
Supreme Court referred to it 30 years ago in Peyton v. Rowe,
391 U.S. 54, 65 (1968)), it is not at all apparent just what is
and what is not remedial legislation; indeed all legislation
might be thought remedial in some sense--even massive
codifications. We suspect that the phrase typically has been
used to give judicial approval to a particular set of policy
viewpoints. And, we have recognized that in a post-Chevron
era such policy-oriented canons of statutory construction may
not be used to evaluate agency interpretations of ambiguous
statutes. See Michigan Citizens for an Indep. Press v.
Thornburgh, 868 F.2d 1285, 1292 (D.C. Cir.), aff'd by an
equally divided Court, 493 U.S. 38 (1989) (declining to employ
the canon that exemptions to antitrust laws should be narrow-
ly construed to override a department's interpretation of a
particular statute).

On the other hand, as we have implied, we think the
Secretary's regulation setting forth how the SCA's monetary
threshold for coverage is to be measured, and her interpreta-
tion of the reference to "appropriation Acts" certainly rests
on a permissible interpretation of the ambiguities in the
statute. See Chevron U.S.A. Inc. v. Natural Resources De-
fense Council, Inc., 467 U.S. 837 (1984). The travel agency
profits by virtue of its contract with the government, and the
SCA is designed to ensure that a contractor's employees also
benefit under such contracts by having their wages raised to
a prevailing standard. From the employee's vantage point, it
does not matter whether the contractor is paid directly by the
government or indirectly through commissions paid by the
carriers who in turn charge the government.

Similarly, we think the Secretary's interpretation of the
"carriage of personnel" exemption easily passes the permissi-
bility test.

* * * *

Accordingly, the judgment of the district court is hereby
affirmed.