[Federal Register: March 22, 2005 (Volume 70, Number 54)]
[Rules and Regulations]
[Page 14495-14519]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr05-8]
[[Page 14495]]
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Part II
Department of Transportation
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Office of the Secretary
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49 CFR Part 23
Participation by Disadvantaged Business Enterprises in Airport
Concessions; Final Rule and Proposed Rule
[[Page 14496]]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Part 23
[Docket No. OST-97-2550]
RIN 2105-AC91
Participation by Disadvantaged Business Enterprises in Airport
Concessions
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: This rule revises and updates the Department's regulation
concerning participation by airport concessionaire disadvantaged
business enterprises (ACDBEs) in the concessions activities of airports
receiving Federal financial assistance from the airport improvement
program (AIP) of the Federal Aviation Administration (FAA). It makes
the ACDBE concessions rule parallel in many important respects to the
Department's DBE regulation for Federally-assisted contracts. It also
addresses issues such as goal-setting, personal net worth and business
size standards, and counting ACDBE participation by car rental
companies.
DATES: Effective Date: This rule is effective April 21, 2005.
FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant
General Counsel for Regulation and Enforcement, Department of
Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590,
phone numbers (202) 366-9310 (voice), (202) 366-9313 (fax), (202) 755-
7687 (TTY), bob.ashby@ost.dot.gov (e-mail); and Michael Freilich,
National External Program Manager, Office of Civil Rights, Federal
Aviation Administration, 800 Independence Avenue, SW., Washington, DC
20591. Phone numbers 202-267-7551 (voice), 202-267-5565 (fax).
SUPPLEMENTARY INFORMATION:
Background
This final rule revises and updates the Department's regulation to
ensure nondiscrimination in the provision of opportunities for
disadvantaged business enterprises in airport concessions (49 CFR Part
23). The regulation is mandated by 49 U.S.C. 47107(e), originally
enacted in 1987 and amended in 1992. The current language of this
section is the following:
(e) Written Assurances of Opportunities for Small Business
Concerns. (1) The Secretary of Transportation may approve a project
grant application under this subchapter for an airport development
project only if the Secretary receives written assurances,
satisfactory to the Secretary, that the airport owner or operator
will take necessary action to ensure, to the maximum extent
practicable, that at least 10 percent of all business at the airport
selling consumer products or providing consumer services to the
public are small business concerns (as defined by regulations of the
Secretary) owned and controlled by a socially and economically
disadvantaged individual (as defined in section 47113(a) of this
title).
(2) An airport owner or operator may meet the percentage goal of
paragraph (1) of this subsection by including any business operated
through a management contract or subcontract. The dollar amount of a
management contract or subcontract with a disadvantaged business
enterprise shall be added to the total participation by
disadvantaged business enterprises in airport concessions and to the
base from which the airport's percentage goal is calculated. The
dollar amount of the management contract or subcontract with a non-
disadvantaged business enterprise and the gross revenue of business
activities to which the management contract or subcontract pertains
may not be added to this base.
(3) Except as provided in paragraph (4) of this subsection, an
airport owner or operator may meet the percentage goal of paragraph
(1) of this subsection by including the purchase from disadvantaged
business enterprises of goods and services used in businesses
conducted at the airport, but the owner or operator and the
businesses conducted at the airport shall make good faith efforts to
explore all available options to achieve, to the maximum extent
practicable, compliance with the goal through direct ownership
arrangements, including joint ventures and franchises.
(4)(A) In complying with paragraph (1) of this subsection, an
airport owner or operator shall include the revenues of car rental
firms in the base from which the percentage goal in paragraph (1) is
calculated.
(B) An airport owner or operator may require a car rental firm
to meet a requirement under paragraph (1) of this subsection by
purchasing or leasing goods or services from a disadvantaged
business enterprise. If an owner or operator requires such a
purchase or lease, a car rental firm shall be permitted to meet the
requirement by including purchases or leases of vehicles from any
vendor that qualifies as a small business concern owned and
controlled by a socially and economically disadvantaged individual.
(C) This subsection does not require a car rental firm to change
its corporate structure or to provide for direct ownership
arrangement to meet the requirement of this subsection.
(5) This subsection does not preempt--
(A) A State or local law, regulation, or policy enacted by the
governing body of an airport owner or operator or;
(B) The authority of a State or local government or airport
owner or operator to adopt or enforce a law, regulation, or policy
related to disadvantaged business enterprises.
(6) An airport owner or operator may provide opportunities for a
small business concern owned and controlled by a socially and
economically disadvantaged individual to participate through direct
contractual agreement with that concern.
(7) An air carrier that provides passenger or property-carrying
services or another business that conduct aeronautical activities at
an airport may not be included in the percentage goal of paragraph
(1) * * *.
.The present version of Part 23 was issued in 1992 (57 FR 18410,
April 30, 1992) and amended in 1999 (64 FR 5126, February 2, 1999).
There have been three proposed rules to revise Part 23: in 1993 (58 FR
52050, October 8, 1993), 1997 (62 FR 24548, May 30, 1997), and 2000 (65
FR 54454; September 8, 2000). This final rule responds to comments on
the most recent of these proposals.
In the 2000 proposal, the Department suggested making the DBE
concessions rule a subpart of 49 CFR Part 26, the DBE rule for DOT-
assisted contracts. However, the DOT-assisted contracts and concessions
rules are based on different statutes. They apply to different kinds of
businesses, and concern distinct types of relationships between
recipients of DOT financial assistance and businesses. There are a
number of substantive differences between the two regulatory schemes
(e.g., business size standards). For these reasons, the Department has
decided to keep the two regulations separate. ACDBEs will continue to
be governed by Part 23, as revised by this issuance, and DOT-assisted
contracts DBE provisions will remain in Part 26. Keeping the regulatory
provisions separate should help to avoid confusion.
The Supreme Court's decision in Adarand v. Pena, which established
the requirement that race-conscious affirmative action programs meet
the ``strict scrutiny'' standard of review, was rendered in 1995. In
1999, when the Department made major changes to Part 26 in order to
meet Adarand requirements, we did not issue a comprehensive revision of
the airport concessions DBE requirements. Consequently, one of the most
important functions of this final rule is to ensure that the airport
concessions requirements of Part 23 meet Adarand requirements.
In 2003-04, the Department's Office of Inspector General (IG)
issued two reports that addressed fraud and abuse problems in the
Department's DBE program. Many of the IG's recommendations focused on
the need for more effective oversight of the DBE program by state and
local recipients and by DOT operating administrations. However, some of
the IG's recommendations directly concerned
[[Page 14497]]
regulatory provisions governing the airport concessions DBE program.
Probably the two most significant IG recommendations were that the
Department expeditiously complete this rulemaking and that it include a
specific personal net worth standard for owners of ACDBEs. The
Department takes the IG's findings and recommendations very seriously,
and we believe that the prevention of fraud and abuse in all portions
of the DBE program is a very high priority. This final rule, like the
2000 proposed rule, includes a specific personal net worth standard.
The accompanying supplemental notice of proposed rulemaking asks for
comment on additional steps the Department might take to prevent fraud
and abuse.
Major Issues
The Department identified the following issues as the most
important in developing this final rule: Small business size standards,
personal net worth standards, counting of ACDBE participation by car
rental companies, and the goal-setting process. The bulk of comments on
the 2000 NPRM concerned these issues. This portion of the preamble
describes each of these issues, notes how the Department proposed to
resolve it in the 2000 NPRM, summarizes comments on it, and provides a
rationale for the Department's decision.
1. Small Business Size Standards
Size standards in this ACDBE regulation are important for a number
of reasons. They implement the statutory requirement that participants
be small businesses. They provide a means to ensure that a firm's
participation in DBE programs is not necessarily of indefinite
duration: if a firm grows to exceed size standards, it ceases to be
eligible for the program. They are calibrated to help meet the
objectives of the program, including permitting ACDBE firms to compete
in the airport concessions market.
In Part 26, businesses seeking DBE certification must, by statute,
meet SBA size standards and an additional cap on average annual gross
receipts, currently set at $17.42 million and subject to periodic
adjustments for inflation. These requirements do not apply to Part 23,
since the ACDBE statute gives the Secretary discretion to set size
standards for concessions. For most airport concessions, the size
standard under current Part 23 is $30 million average annual gross
receipts. The proper business size standard for the ACDBE program has
been the subject of comment on all the Part 23 NPRMs that the
Department has issued. For the reasons stated in the supplemental
notice of proposed rulemaking (SNPRM) that we are publishing in today's
Federal Register, the Department is seeking additional comment on a
number of size-related issues.
In the interim, we will maintain the status quo with respect to
Part 23 size standards, with the two exceptions discussed below. First,
since goods and services purchased by concessionaires from ACDBE
businesses can count toward ACDBE goals, we think it is important to
clarify in the regulatory text our understanding of the application of
the rule's size standards to ACDBE goods and services providers. For
certification purposes, a firm that provides goods and services to
airport concessionaires is an ACDBE if, assuming it meets other
eligibility criteria, it meets the size standards for ACDBE
concessionaires. A firm that provides restaurant equipment to a
restaurant at the airport, for purposes of Part 23, must meet the
general Part 23 size standard, rather than the smaller SBA or Part 26
standards, to be an eligible ACDBE, so that the restaurant and the
airport can count the purchase toward DBE goals.
Second, with respect to banks, the Department received a petition
for rulemaking from a financial institution saying that organizations
in its position were unable to compete against much larger institutions
(i.e., in the hundred billion dollars in assets range) at the current
size standard of $150 million in assets. The petitioner had been
certified by an airport sponsor as an MBE (in a local MBE program) and
a DBE with assets of $275 million. However, because this exceeded the
$150 million standard, the petitioner was subsequently decertified. We
believe that the petitioner has a fair point, with respect to the
competitive disadvantages it faces against far larger institutions.
Consequently, we will increase the banks and financial institutions
size standards to $275 million, which will allow DBE financial
institutions to participate at a level that is more competitive.
We also note that the SBA business size standards no longer use an
employee number standard for car dealers, but rather use a gross
receipts standard. We believe that this approach, consistent with the
way the Department approaches most business size standards in this
rule, is sensible. Consequently, we are using the $30 million gross
receipts standard for car dealers as well as for other concession-
related businesses, rather than the previous employee number standard.
2. Personal Net Worth
In order to meet narrow tailoring requirements, it is essential
that a DBE program not be overinclusive. The statutory scope of the
ACDBE program is to ensure nondiscrimination for airport concession
businesses owned and controlled by individuals who are socially and
economically disadvantaged. To prevent the program from becoming
overinclusive, the ACDBE program should ensure that persons who are not
disadvantaged do not have the opportunity to participate.
By statute, persons in certain designated groups are presumed to be
socially and economically disadvantaged. The Department has always held
this presumption to be rebuttable. That is, if a member of a designated
group is shown to be non-disadvantaged, he or she would no longer be
able to participate as an ACDBE owner. (Likewise, a person who is not
presumed to be disadvantaged could participate if he demonstrated, on
an individual basis, that he is socially and economically
disadvantaged.) This rebuttable presumption feature of the existing
rule is intended to provide a safeguard against the program becoming
overinclusive, since a UCP (or recipient in a state where a UCP is not
yet in effect)--on its own or in response to a complaint--has the
authority to determine that an individual should no longer be regarded
as disadvantaged.
The Department has recognized, however, that in the absence of a
specific criterion for determining whether the presumption of
disadvantage has been rebutted, there are difficult problems of proof
and judgment when an issue is raised concerning the application of the
presumption to an individual. For this reason, in the 1999 revision to
Part 26, the Department adopted a numerical standard for this purpose.
The absence of such a specific numerical standard in Part 23 has caused
confusion. As noted above, the Department's Office of Inspector General
(OIG) has recommended that Part 23 include a PNW numerical standard.
The Department agrees that Part 23 should include a PNW numerical
standard. The question confronting the Department in this rulemaking is
what that standard should be. In the 2000 NPRM, we proposed a $2
million PNW standard. This was higher than the $750,000 standard of
Part 26 in recognition of the generally accepted proposition that
airport concession businesses are more capital intensive, higher cash
flow businesses than many businesses working under Part 26. The
[[Page 14498]]
owners of concessions therefore need more assets in order to enter and
thrive.
There were a variety of comments on the PNW proposal. Many of the
airport commenters generally said that we should not impose ``onerous''
requirements on ACDBEs or airports in the PNW area. They did not
provide any specifics, however. Some airports supported the proposed $2
million cap, while an airport trade association and other airports said
that $2 million or an unspecified higher standard would be appropriate.
However, other airports and a union said that the $2 million proposal
was too high. Generally, these comments said that a cap at this level
or higher would undermine the reason for having a PNW standard, allow
persons into the program that were too rich, and lead to
overinclusiveness problems. One of these commenters suggested a $1
million standard and another suggested $750,000. Another comment said
that whatever the PNW level was, it should be the same for concessions
and DOT-assisted contracts.
Many comments from ACDBEs and from an ACDBE trade association, as
well as some airports, said that the final rule should not include any
PNW standard or that the cap should be significantly higher (e.g., $3-
10 million). Their main argument, which some comments fleshed out with
real-world examples, is that in order to finance business expansion in
a capital-intensive field like concessions, lenders required very high
asset levels on the part of owners. If a business could not expand
without its owners accumulating enough assets to exceed the $2 million
cap, the ACDBE program would create a glass ceiling.
Some comments suggested ways of limiting the adverse effects of
PNW. These included (1) making PNW a rebuttable presumption; (2)
establishing a sliding scale for PNW, relative to the projected gross
sales of the business; (3) having a two-tier (e.g., entry and
retention) standard; (4) establishing some system that would reflect
the individual situations of businesses and owners, and (5) excluding
from the PNW calculation assets encumbered (e.g., as collateral for a
loan) for business purposes. A number of commenters also favored
grandfathering existing concessionaires, so they did not lose their
certification and contracts because of a new PNW standard coming into
being.
Since the 2000 SNPRM, Federal courts have decided a number of cases
upholding Part 26 as being narrowly tailored. The existence of the
$750,000 PNW cap in Part 26 was one of the factors leading to these
successful defenses of the regulation. This strengthens the
Department's belief that a PNW cap of this kind is appropriate to add
to Part 23.
The Department has concluded that $750,000 is an appropriate
standard for PNW. It is consistent with the Part 26 standard, and it
has been approved by the courts in that context. Having only one PNW
standard will avoid confusion between the Part 23 and Part 26 portions
of the Department's DBE program. It will avoid concerns about
overinclusiveness in the program by ensuring that persons who would
fairly be perceived as too wealthy for a program aimed at assisting
``disadvantaged'' individuals do not participate. It responds to the
concerns about confusion and fraud that were the basis for the OIG's
recommendation.
At the same time, the Department is sensitive to the concern of
commenters that a PNW standard at this level could inhibit
opportunities for business owners to enter the concessions field and
expand existing businesses.
We do not believe that having a substantially higher PNW standard
across the board is the best way to respond to this concern: too high a
standard would undermine the rationale for having a PNW standard in the
first place. It could lead to concerns about overinclusiveness and to
the perception that the program was not appropriately focused on
disadvantaged individuals.
In calculating PNW, Part 26 makes reasonable exclusions for the
business owner's equity in his or her owner's primary residence and the
business applying for certification. In the different business context
of concessions, the Department will add a third exclusion. Assets that
the owner/applicant can demonstrate are necessary to obtain financing
to enter or expand a concessions business at an airport subject to Part
23 (e.g., by producing letters from banks to that effect) would also be
excluded from the PNW calculation, as would assets that have in fact
been encumbered to support existing financing for the applicant's
business. This provision would extend only to ``recourse'' assets
(i.e., those that were encumbered or to be encumbered in order to
obtain financing, as in a case where an asset is used a collateral for
a loan).
For example, if the owner/applicant for ACDBE certification to
operate a fast food franchise at an airport could document that
MegaBurger Corporation requires the franchisee to have $X in assets
before it will grant the franchise, that amount would be excluded from
the PNW calculation. Likewise, if the owner of an ACDBE retail or
service business who wished to expand operations to another airport
could document that a number of financial institutions required $Y in
personal assets to back a loan needed for the expansion, $Y would be
excluded from the PNW calculation. Airports/UCPs would be responsible
for verifying the documentation pertinent to this exclusion.
Without unduly expanding the well-accepted $750,000 standard, this
approach will take into account individual circumstances and avoid the
``glass ceiling'' effect of an across-the-board PNW standard about
which commenters were concerned. There will be additional information
that owners will have to obtain and recipients and UCPs will have to
evaluate, but we believe that this is justified in the interest of a
narrowly tailored regulation that remains fair and flexible regulation
that achieves the objectives of nondiscrimination and opening business
opportunities to ACDBEs.
To prevent the eligibility standards from becoming too open-ended,
resulting in the participation of individuals so wealthy that it would
be difficult to justify their inclusion in a program aimed at
disadvantaged individuals, we are adding a $3 million cap on this third
exclusion. This figure is consistent with many comments concerning the
appropriate extent of a PNW threshold. That is, an applicant could
present documentation to the certifying authority that he or she
required a certain amount of assets to open or expand a concessions
business. If that amount exceeded $3 million, the amount of the
individual's net worth above $3 million would be added to the PNW
calculation.
Here is an example of how these provisions would work. A
hypothetical business owner, Ms. T, has a gross PNW of $4.6 million.
The equity in her primary residence is $400,000. Her equity in the
business is $500,000. She produces adequate documentation from at least
two financial institutions that they will require $3.6 million in
assets to support their granting the loan necessary to open a
concession business at a particular airport. (Ms. T's documentation
would also need to justify the need for a loan of the amount referenced
in the letters from the financial institutions, documenting the build-
out costs and other capital investment needed to begin operating the
concession.)
Because $3.6 million exceeds the $3 million cap on the third
exclusion from the PNW calculation, $600,000 would count toward that
calculation. In this case, her net PNW would be $700,000
[[Page 14499]]
($4.6 million--$3 million--$400,000--$500,000). This amount is less
than the PNW threshold, so Ms. T would be an eligible ACDBE owner.
However, if her gross PNW were $5 million, then her net PNW, after
subtracting all three exclusions, would be $1.1 million, putting her
over the PNW threshold and making her ineligible to be an ACDBE owner.
Certifying authorities need to carefully evaluate accounting
mechanisms that applicants may use to try to circumvent the PNW
threshold. For example, if within two years prior to or following an
application for certification, an applicant transfers assets (e.g., to
a family member or to a trust), the certifying authority should regard
those assets as continuing to count against the applicant's PNW.
Because we often receive questions on this point, we want to
emphasize that PNW is calculated separately for each individual who the
applicant business claims to be a disadvantaged owner and controller of
the business. In a situation where there is more than one disadvantaged
individual involved in a business, PNW is not aggregated for the
owners. It remains an individual-by-individual calculation. It is never
necessary to obtain PNW statements from people who do not claim to be
disadvantaged individuals for purposes of ownership or control (e.g., a
white male who is a participant in the company).
3. Counting ACDBE Credit for Car Rental Companies
The issue of how to assign DBE credit to car rental companies is
the longest-running, most divisive issue in the history of Part 23.
Briefly stated, the issue concerns situations in which a car rental
company purchases an often large number of cars (a ``fleet purchase'')
from a motor vehicle manufacturer. Typically, the vehicles themselves
are transported directly (``drop-shipped'') from the manufacturer
(e.g., Ford or General Motors) to the car rental company's airport
facility, never physically touching the property of a car dealer.
However, usually because of state laws that require vehicles to be
purchased from a car dealer, the transactions are invoiced through a
dealer, who receives a small fee for processing the paperwork.
If the dealer in this situation is an ACDBE, how much ACDBE credit
is it appropriate for the car rental company to claim? Is it the entire
value of the vehicle (many thousands of dollars) or merely the
transaction fee that the dealer receives (perhaps $50-200)? Under
normal DBE counting principles, such as those of Sec. 26.55, the
answer is clearly the latter. A DBE whose commercially useful function
is limited to processing or expediting a transaction, and who does not
meet the rule's definition of a regular dealer with respect to the
items in question, receives only its fee or commission for the work it
actually does. Even if it is acting as a regular dealer, credit is
limited to 60 percent of the value of the goods purchased.
However, subsection (e)(4)(B) of the ACDBE statute provides that
``a car rental firm shall be permitted to meet the [ACDBE goal]
requirement by including purchases or leases of vehicles from any
vendor that qualifies as'' an ACDBE. Car rental industry commenters
have argued strongly, in response to the 2000 SNPRM and its
predecessors, that this provision means that airports must count the
entire value of cars purchased via ACDBE car dealers, however contrary
such a result would be to the way DBE credit is counted in any other
context.
Prior to the 2000 SNPRM, trade associations for ACDBEs and car
rental companies made a joint recommendation to DOT to resolve the
issue. They proposed that, of the first 10 percent of an airport's
concession-specific goal for a car rental company, 70 percent could be
achieved by counting the full value of cars purchased through ACDBE
dealers, with the remaining 30 percent accounted for by other purchases
of goods and services from ACDBEs. However, for any increment of an
airport's concession-specific goal over 10 percent, the car rental
company could achieve all of that increment through counting the full
value of cars purchased through ACDBE car dealers. The 2000 SNPRM
proposed to adopt the recommendation, except for the provision calling
for being able to meet all of the portion of a goal exceeding 10
percent via counting the full price of cars purchased through ACDBE car
dealers.
Comments to the 2000 SNPRM took a variety of positions on the
proposal. Three airports and an airport trade association opposed
permitting car rental vehicle purchases to count toward goals. Another
airport said that airports should get DBE participation by
subcontracting with DBEs that directly own a concession. The airport
trade association and four airports opposed the ``10 per cent''
provision of the trade associations' recommendation, which the
Department had not included in the SNPRM. A car rental trade
association, on the other hand, insisted that the Department must
accept all provisions of the recommendation, including the 10 percent
provision, and the ACDBE trade association that had joined in the
recommendation continued to support it.
In the SNPRM, the Department also proposed a two-goal structure,
with separate overall goals for car rental companies and all other
concessionaires, respectively. As discussed later in this preamble, the
Department is adopting this proposal. This provision has the important
benefit of preventing the often very large gross receipts of car rental
companies and potentially very high DBE participation dollar amounts
resulting from counting the full value of vehicles in toward DBE goals
from overwhelming DBE goals and participation in other areas of
concessions. Having this separate goal for car rental companies
therefore significantly reduces the possibility of skewing the program
and limiting opportunities to other DBEs as the result of permitting
car rental companies to count the full value of vehicles purchased
through ACDBE car dealers.
For this reason, and in order to avoid any possibility of conflict
with the statute, the Department has decided that the final rule will
permit car rental companies to count the full value of vehicle
purchases from ACDBE car dealers. We are not adopting the trade
associations' recommendation. While we appreciate the associations'
efforts to find a compromise resolution to this issue, we believe that
there is no sound basis for mandating the proposed 70/30 division or
for the use of the statute's aspirational 10 percent goal to play an
operational role in determining how ACDBE credit is counted. In fact,
we believe the use of the 10 percent goal in this way is inconsistent
with a narrowly tailored ACDBE program.
Nevertheless, the Department is concerned that this resolution of
the issue could have adverse effects on ACDBEs who seek to sell
services or goods other than vehicles to car rental companies.
Consequently, airports would require car rental companies to document
to the airport the good faith efforts they have made to obtain
participation from ACDBE vendors of goods and services (other than car
dealers). Airports would not set a numerical goal for the use of these
vendors, and there are many ways that car rental companies could show
good faith efforts to this end. One of these might be for a car rental
company, as suggested by the trade associations' recommendation, to
obtain 30 percent of its ADCBE credit from the use of ACDBE vendors of
goods and services.
[[Page 14500]]
4. Overall Goals
In Part 26, the Department established a data-driven overall goal-
setting mechanism that directed recipients, including airports, to
establish a goal estimating the amount of DBE participation that they
would expect if there were a ``level playing field'' in contracting,
free from the effects of discrimination. Recipients were also required
to estimate how much of that goal could be achieved through race-
neutral means. Recipients were permitted to use race-conscious means,
such as contract goals, only to obtain that part of their overall goal
they could not achieve through race-neutral means. The rule made clear
that recipients were not to be penalized for not making their overall
goal, and that the statutory 10 percent goal was an ``aspirational''
goal that did not affect the operation of recipients' DBE programs.
Since Part 26 was issued, every Federal court that has considered the
question has determined that this goal setting mechanism is consistent
with narrow tailoring requirements of constitutional law.
The 2000 SNPRM for Part 23 essentially proposed to adopt, in a
somewhat shortened form, the Part 26 goal-setting concepts. In
addition, the SNPRM proposed a two-goal structure for concessions. That
is, airports would set one overall goal for car rental companies and
another overall goal for all other concessions. The purpose of this
structure was to ensure that the much larger dollar volumes and much
broader counting rules involved in the car rental industry at many
airports did not so skew the airport's goal that other types of DBE
businesses could not benefit from the program. The Department also
sought comment on the idea of having a nationwide goal for major car
rental companies, somewhat analogous to the transit vehicle
manufacturer goal provision of Part 26.
Six airports, an ACDBE trade association, and an ACDBE favored, and
one airport and a consultant opposed, separate goals for car rental and
non-car rental activities. A car rental association gave qualified
support to the idea, but commented that it thought that each airport
would need to make a separate compelling need finding with respect to
car rentals. Five airports supported and one opposed allowing an option
for national car rental goals; ACDBE and car rental industry trade
associations expressed doubt that the idea was workable. Another large
airport suggested separate goals for goods and services on one hand,
and direct ownership arrangements for car rental companies on the
other.
An airport trade association and nine airports asked for greater
guidance and clarification on how the goal-setting system would work in
the concessions area, saying that such factors as the absence of data
comparable to the DOT-assisted contracting world and the difficulty of
integrating goods and services, management contracts, and direct
ownership arrangements under the same overall goal made implementation
very burdensome and confusing. Three of these commenters plus an ACDBE
trade association said the same point applied to the race neutral/race
conscious split in the concessions context. One airport supported the
NPRM as written.
One airport wanted to use set-asides for car rentals. An airport
trade association wanted airports to be able to set goals based on the
number of concessions without going through a wavier procedure, and one
airport supported the waiver process. A car rental industry trade
association argued that race-neutral methods must be used
chronologically before race-conscious methods could be used.
The Department believes that it is very important to include the
two-goal structure in the final rule. We agree that it does, to an
extent, increase the administrative workload of airports. However, it
recognizes the differences between the car rental industry and other
types of concessions, a difference that is meaningful in the context of
a narrowly tailored regulation. Most important, in light of the
statutory provision concerning the counting of vehicle purchases as a
means of meeting car rental companies' ACDBE goals, it avoids a
distortion resulting from the very large dollar amounts of
participation attributed to ACDBE car dealers that could otherwise skew
an airport's ADCBE program. Having a separate goal for non-car rental
activities will ensure that retail businesses, management contractors,
and other concessionaires will have the opportunity to compete on a
level playing field not only vis-[agrave]-vis non-ACDBE firms, but also
vis-[agrave]-vis firms in a very different industry where ACDBE
participation is counted very differently. Having a separate goal for
car rental companies does not, in our view, require a localized finding
of discrimination pertaining specifically to the car rental industries.
There is a national determination of compelling need for the entire
program, and a division of overall goals into two segments for
administrative purposes does not call for additional findings of need
for the program.
Particularly given that courts have found that Part 26, including
its goal-setting mechanism, meets narrow tailoring requirements, the
Department believes it is essential to conform the Part 23 goal-setting
provisions as closely as possible to those of Part 26. These
requirements are spelled out in greater detail here than in the 2000
SNPRM, which should assist airports in complying with them. We also
give airports from 1-3 years to establish new goals, which should allow
them time to complete the work involved. Of course, by this time,
airports have had five years' experience in working with Part 26 goals,
and so using a parallel mechanism in Part 23 should be an easier and
more familiar exercise than it might have seemed in 2000. We would also
call airports' attention to the goal-setting ``Tips'' on the
Department's DBE Web site (http://osdbuweb.dot.gov/business/dbe/tips.html
). The Department plans to develop a revised version of these
Tips specifically pertaining to airport concessions in the near future.
Because the Department believes it would be difficult to devise an
overall goal based on the number of concession businesses or contracts,
as distinct from the receipts of concession firms, the final rule does
not include the provision allowing recipients to seek waivers to
establish a goal on that basis, as the 2000 SNPRM proposed. However,
airports can use the program waiver provision of Sec. 23.13 to request
authority to use a goal-setting mechanism that differs from that of
Subpart D of Part 23.
While the idea of a transit vehicle manufacturer-like nationwide
goal for large car rental companies remains intriguing, the Department
is not sure that this approach is feasible. Therefore, rather than
include such a provision in the final rule, we are asking for further
comment on this subject in the SNPRM. Set-asides and quotas are not an
appropriate part of a narrowly tailored rule, and Part 23 prohibits
airports from using these measures.
The argument that recipients must, in a chronological sense, use
race-neutral methods before they can use race-conscious methods has
been raised in litigation under Part 26. It has not prevailed. Nor does
it make sense as policy. Airports are required to give priority to the
use of race-neutral means, meaning that they must achieve as much as
possible of their overall goals through race-neutral means. The utility
of race-neutral means, or the necessity of race-conscious means, is
likely to vary throughout the year as different sorts of business
opportunities occur. For example, obtaining ACDBE
[[Page 14501]]
participation in one business opportunity in February of a certain year
may require race-conscious measures, while an excellent race-neutral
opportunity may occur in November of that year.
Section-by-Section Analysis
This portion of the preamble discusses, in turn, each section of
the final rule, providing, as appropriate, responses to comments,
additional information about the Department's rationale for adopting
individual provisions, and the Department's intent for how the
provisions should be interpreted and implemented.
Section 23.1 What Are the Objectives of This Part?
The objectives of this program are very similar to those stated for
Part 26. Extensive information has been developed over the years, which
may be found in such sources as disparity studies of which the
Department is aware and data presented to Congress (e.g., in the
context of the floor discussion of the 1998 reauthorization of the DBE
program for Federal Highway Administration and Federal Transit
Administration financial assistance) that supports the proposition that
there is not a level playing field for small disadvantaged businesses
in the U.S. The legislative history of the original ACDBE statute
itself shows that Congress was very concerned that DBE firms had the
``fair'' (i.e., nondiscriminatory) access to concession opportunities
(see 133 Congressional Record 25986-87; October 1, 1987).
Under Part 26, many airports have had to continue race-conscious
methods to achieve their overall goals, which are in turn a measure of
the level of DBE participation they could expect absent the effects of
discrimination. There is no reason to believe, and no one has submitted
any information to the Department's rulemakings to suggest, that
airport concession programs are exempt from the effects of
discrimination to which other public sector business activities at
airports and elsewhere are subject. Race-conscious methods continue to
be a necessary part of a narrowly tailored strategy to ensure
nondiscrimination in concessions.
Section 23.3 What Do the Terms Used in This Part Mean?
Most of the comment on this section concerned the issue of whether
advertising firms should be included in the definition of
``concession.'' A substantial number of letters from mostly small-to-
medium sized airports supported including advertising companies. One
large airport opposed doing so. Three of the comments favoring
advertising suggested limitations. One said that only billboards on
public access roads to the terminal or other facilities for travelers
should count. Another said only in-terminal ads should count. The third
said that only companies ``primarily'' in the business of advertising
in terminals should be viewed as concessions (as opposed, for instance,
to telecommunications or internet companies whose terminal ads were
tangential to their main business).
While the existing Part 23 does not explicitly address the issue,
many airports have certified advertising firms as DBEs for many years.
Advertising appears to be a field in which DBE firms have had some
success. It is also a field in which small businesses, including
ACDBEs, must often compete against very large corporations. The level
playing field that Part 23 attempts to provide is of considerable
importance to firms in that position.
Like management contractors and some providers of
telecommunications services, advertising firms often do not have stores
located on the airport. Nevertheless, firms of these kinds provide
important services to members of the public who use the airport. These
firms have the objective of selling products to the public, and their
existence at airports provides services to the public. They have
financial relationships with the airport similar to those of more
traditional food and retail concessions. We do not believe it would be
sound policy, or required by law, to oust advertising firms from the
ACDBE program. Consequently, to avoid confusion, we have explicitly
included such firms in the ``concession'' definition. We do not think
it would be useful to limit their participation to a particular
advertising location on the airport, such as terminals or billboards
along access roads; the legal and policy situation of one such location
is not readily distinguishable from others.
Consistent with the 1992 amendment to the statute, the definition
of ``concession'' now specifically includes firms with management
contracts or subcontracts and businesses that provide goods and
services to other concessionaires. Of course, businesses of this kind
must be certified as ACDBEs in order to generate ACDBE credit in this
program.
The definition of an ACDBE is consistent with that of Part 26. With
some exceptions, the certification provisions of Part 26 apply to
ACDBEs. Some comments addressed the provision of certification
standards stating that an ACDBE must be an existing business. Four
large airports opposed this requirement (one suggested that a firm
could be certified based on its business plan). Their main rationale
was that the requirement would be a barrier to new businesses. One
large airport supported the requirement. We believe that it is
important to retain this requirement, in order to ensure that only
genuinely eligible businesses are certified as ACDBEs. When a business
is still in the process of formation, it is all the more difficult to
determine whether disadvantaged individuals really own and control it.
It is difficult to make a site visit to a business plan. Given the
increased emphasis on preventing DBE fraud, we believe that the
existing business requirement is essential. At the same time, as under
Part 26, it is not appropriate to refuse to certify a business solely
because it is a new business, but it must exist.
A car rental association continued to advocate the position, which
it had taken in comments on previous proposed rules, that so-called
``dealers in development'' (i.e., dealers participating in
manufacturers' development programs that did not fully meet Part 23
ownership and control criteria, such as 51 percent ownership by
disadvantaged individuals) should be certified as ACDBEs. In the
preambles to its 1997 and 2000 proposals, the Department had explained
at some length why we concluded that a business that did not meet
generally applicable DBE ownership and control criteria should not be
certified as an ACDBE. Nothing in the comments in the docket for this
rulemaking has provided a persuasive reason to change the Department's
position.
Concession businesses must serve the public on the airport. Airport
and ACDBE trade associations, one business, and nine airports supported
the consequent concept that businesses on airport property that do not
primarily serve travelers should not be counted as concessions. One
commenter suggested waiving this requirement for small airports in
Alaska. We agree that businesses that do not primarily serve the public
should not be viewed as concessions. If one or more small businesses or
airports in Alaska wish to seek a waiver from this provision, they may
apply under the provisions of Sec. 23.13.
One commenter asked whether management contracts included contracts
for the management of hotels on the airport. While it is not necessary
to include this level of detail in the regulatory text, we see no
reason to
[[Page 14502]]
believe that hotel management contracts would be treated differently
from any other kind of management contracts. In evaluating whether a
management contractor provides a commercially useful function and the
amount of ACDBE credit that should be given for the contractor's work,
an airport should scrutinize carefully the actual tasks performed by
the ACDBE as an entity to make sure that they are consistent with the
credit claimed.
One large airport suggested that the joint venture definition not
require that the DBE partner perform an independent part of the work,
arguing that concessions joint ventures did not operate in this way. We
have become aware that some concessions joint ventures indeed do not
involve an ACDBE performing an independent part of the work; some of
these have been the focus of fraud investigations by the Department's
Inspector General and other law enforcement organizations. If the ADCBE
participant is not required to perform independently a distinct portion
of the joint venture's work, it becomes very easy for a prime
concessionaire seeking to circumvent ACDBE requirements by having an
ACDBE ``silent partner'' on its payroll. We believe that changing this
provision would adversely affect the integrity of the program. Because
joint ventures have become a problematic part of the ACDBE program, the
Department is drafting additional guidance on the subject, which we
intend to post on the DOT DBE Web site as soon as it is available.
We also note that UCPs and airports should not certify joint
ventures themselves as ACDBEs, and the definition makes this point
explicit. By definition, a joint venture is an association of an ACDBE
and another firm to carry out a single business enterprise. As noted in
Part 26 (Sec. 26.73(e)), ``[a]n eligible DBE firm must be owned by
individuals who are socially and economically disadvantaged * * * [A]
firm that is not owned by such individuals, but instead is owned by
another firm--even a DBE firm--cannot be an eligible DBE.'' Even if a
joint venture is more than 51 percent owned by a ACDBE firm, therefore,
the joint venture--because it is owned by other firms, not directly by
disadvantaged individuals--cannot be an eligible ACDBE firm. (This same
point applies to DBEs under Part 26.) We note that, given the counting
rule for joint ventures in Parts 23 and 26, this fact should not make
any difference in the way that ACDBE credit is counted. Credit toward
DBE goals is awarded under both rules only for the distinct, clearly
defined portion of the work of the joint venture performed by the DBE
or ACDBE participant, regardless of the certification status of the
joint venture entity. In reviewing currently certified firms (see Sec.
23.31(c)), airports and UCPs should remove joint venture entities
(though not certified DBE firms that participate in joint ventures)
from their directories, consistent with this direction.
The other definitions are consistent with those in Part 26 and have
not changed substantively from the 2000 SNPRM. They were not the source
of additional comment. We have added, for administrative purposes,
definitions of small, medium, large hub, and non-hub primary airports.
Section 23.5 To Whom Does This Part Apply?
This section recites that Part 23 applies to airports that have
received FAA financial assistance for airport development since January
1988, when the Department's airport concessions DBE rules first went
into effect. Note that, under Sec. 23.21, not all airports covered by
Part 23 are required to have an ACDBE program.
Section 23.7 How Long Do the Provisions of This Part Remain in Effect?
The Department is introducing a ``sunset'' provision into the final
rule as a way of addressing the durational element of narrow tailoring.
A narrowly-tailored rule is not intended to remain in effect
indefinitely. Rather, the rule should be reviewed periodically to
ensure that it continues to be needed and that it remains a
constitutionally appropriate way of implementing its objectives.
Consequently, this provision states that this rule will terminate and
cease being operative in five years, unless the Department extends it.
We intend, beginning four years from now, to review the rule to
determine whether it should be extended, modified, or allowed to
expire. Of course, the underlying DBE statute remains in place, and its
requirements continue to apply regardless of the status of this
regulation, absent future Congressional action.
Section 23.9 What Are the Nondiscrimination and Assurance Requirements
of This Part for Recipients?
This section cross references the nondiscrimination requirements of
Part 26 and provides the text of assurances that airports must include
in concession agreements and management contracts in the future. The
section does not require airports to revise existing contracts to
include the assurance text.
Section 23.11 What Compliance and Enforcement Provisions Are Used Under
This Part?
This section recites that standard FAA/DOT enforcement procedures--
the same ones used for Part 26--apply to Part 23.
Section 23.13 How Does the Department Issue Guidance, Interpretations,
Exemptions, and Waivers Pertaining to This Part?
This section parallels Part 26, Sec. 26.15, concerning guidance,
interpretations, exemptions and waivers. Program participants should
note that guidance provided concerning existing Part 23 should not be
relied upon in the future, given the many changes made in this final
rule. The Department will issue new or revised guidance concerning the
revised Part 23.
Section 23.21 Who Must Submit an ACDBE Program to FAA, and When?
The basic trigger for the requirement to have an ACDBE program is
being a primary airport and receiving FAA financial assistance. Other
categories of airports (e.g., non-primary or general aviation airports)
do not have to submit an ACDBE program. Airports that currently have a
DBE program under the existing Part 23 must update their programs to
meet the requirements of this new rule. They will do so on the same
three-year staggered schedule provided for submission of ACDBE goals
(i.e., next January for large and medium hubs, next year for small
hubs, and the following year for non-hub primary airports).
Until FAA approves revised programs, airports will continue to use
their existing concessions DBE programs. Airports should review their
programs immediately to ensure that they do not contain any provisions
that are contrary to this part, however. For example, this part
prohibits the use of set-asides. If an airport's current program
provides for the use of set-asides, that provision should be deleted at
once, even though the airport's revised program is not due be submitted
to FAA until one to three years from now.
[[Page 14503]]
Section 23.23 What Administrative Provisions Must Be in a Recipient's
ACDBE Program?
Section 23.25 What Measures Must Recipients Include in Their ACDBE
Programs To Ensure Nondiscriminatory Participation of ACDBEs in
Concessions?
Section 23.23 provides a structure for a recipient's ACDBE program
that is parallel to that for Part 26 DBE programs. Indeed, where an
airport must have both an ACDBE program and a DBE program, the
administrative provisions can be combined to a considerable degree.
Section 23.25 requires goal-setting as provided in Subpart D of
Part 26, the use of race-neutral measures by airports themselves to
obtain DBE participation, and the use of race-conscious measures like
concession-specific goals when race-neutral measures standing alone are
not sufficient to meet overall goals. Airports are expected to include
the race-neutral and, if needed, race-conscious measures they will
implement in the ACDBE programs they submit to the FAA. The section
notes that concession opportunities are to be sought in all areas of
the concession industry, so that different kinds of businesses have the
chance to participate. It is not appropriate to have a single area of
concessions or a few firms so dominating ACDBE participation that
others lack a realistic opportunity to help meet the overall goal.
Section 23.25(f) is a new paragraph incorporating the last clause
of subsection (e)(3) of the statute. Paragraph (f) provides that an
airport's ACDBE program ``must require businesses subject to ACDBE
goals at the airport (except car rental companies) make good faith
efforts to explore all available options to meet goals, to the maximum
extent practicable, through direct ownership arrangements with DBEs.''
Both in the statute and in paragraph (f), this requirement operates in
the context of the ability of airport businesses to meet ACDBE goals
through the purchase of goods and services from ACDBE vendors. While
meeting goals through the purchase of goods and services is authorized,
it is important for ACDBE goals to encourage the participation of
ACDBEs in a variety of ways. It is a healthier situation for ACDBE
programs, for example, if ACDBE participation a business or airport
comes not only through goods and services purchases but also through
individual concessions run by ACDBEs.
The parenthetical ``except car rental companies'' reflects another
provision of the statute (subsection (e)(4)(C)), which provides that
car rental firms are not required to change their corporate structure
to provide for direct ownership arrangements. This means, for example,
that car rental companies that operate corporation-owned stores cannot
be required to obtain ACDBE participation through such means as
subleases or joint ventures. This limitation does not apply to non-car
rental concession businesses, however. Even if a non-car rental
business (e.g., a news and gift shop company) normally operates
corporation-owned stores, direct ownership arrangements with ACDBEs
that might alter or create an exception to the firm's normal way of
doing business are among the options the business must make good faith
efforts to explore under this provision.
Section 23.27 What Information Does a Recipient Have To Retain and
Report About Implementation of Its ACDBE Program?
Recipients must save compliance information for three years.
Beginning March 1, 2006, recipients will submit a report of ACDBE
participation (see Appendix A). The report is a modification of the
Part 26 reporting form that the Department issued in June 2003, with
instructions adapted for purposes of the ACDBE program.
Section 23.29 What Monitoring and Compliance Procedures Must Recipients
Follow?
Ensuring that participants in the ACDBE program comply with the
requirements of this rule and preventing fraudulent activities in the
program are among the most important responsibilities of recipients. It
is not enough merely to set goals and award concessions; airports must
make sure that promised ACDBE participation really occurs after award
and that participants are not able to circumvent the requirements of
the program to the detriment of actual ACDBE participation. Each ACDBE
program must include the monitoring and compliance measures the airport
will use, including levels of effort and resources devoted to this
task. For example, the program would describe the frequency of reviews
of records, on-site reviews of concession workplaces, etc., to
determine whether ACDBEs are actually performing the work for which
credit is being claimed and that participants are not circumventing
program requirements. This kind of oversight is crucial to combating
ACDBE fraud, and FAA will closely scrutinize this aspect of ACDBE
programs to ensure that levels of effort are sufficient.
In addition, if an airport includes additional provisions beyond
what Part 23 requires (see Sec. 23.77), FAA has a responsibility to
review such provisions and work with airports to ensure that additional
provisions do not create policy or legal problems. FAA will reject
program submissions that are inconsistent with Part 26.
Subpart C--Certification of ACDBEs
Certification under Part 23 basically follows the model of Part 26,
with the exception of those areas--such as size standards, discussed
above--in which the Department recognizes differences in the ACDBE and
DOT-assisted contracts marketplaces. Firms certified under Part 26 are
eligible under Part 23 as well, provided they can control the firm with
respect to the concession activities involved. Part 26 certification
standards and procedures--even if not specifically referenced in Part
23--are intended to apply to the ACDBE program except where otherwise
provided.
Section 23.39 mentions a number of other differences between Part
23 and Part 26 certification. These differences are self-explanatory,
for the most part. The reason for not applying Part 26's special
provision for Alaska Native Corporation-owned firms is that the statute
requiring this provision in DOT-assisted contracts does not apply in
the ACDBE context, since this context does not involve DOT-assisted
contracts.
The eligibility of joint ventures has been a continuing problem
under the DBE program, including both eligibility and operational
issues that have called the legitimacy of joint venture arrangements
into question. The Inspector General has pointed to situations in which
joint ventures or similar arrangements appear to have been used as a
subterfuge by firms seeking to evade or defraud the program. The rule's
definition of joint ventures makes explicit that these entities should
not be certified as DBEs in their own right. As noted above, the
Department is planning to make available additional guidance concerning
the use of joint ventures in the ACDBE program, including certification
issues pertaining to joint ventures.
When the rule says that suppliers of goods and services to
concessionaires are to be evaluated for certification as ACDBEs
according to the provisions of this part (Sec. 23.39(i)), we mean that
Part 23 provisions (e.g., concerning personal net worth and business
size) are to be used for this purpose. Firms that provide goods and
services to concessionaires are not subject to the
[[Page 14504]]
somewhat different certification provisions of Part 26.
In certain respects, particularly with respect to personal net
worth, this rule changes the eligibility criteria for ACDBEs.
Consequently, airports or UCPs, are required to review the eligibility
of currently certified firms. These reviews must take place within
three years of the most recent certification of the firm, or a year
from the rule's effective date, whichever comes later. Any firm that
loses eligibility because of the new PNW requirements would be able to
complete work on an existing contract or other concession agreement,
with its participation counted toward ACDBE goals. Options, extensions,
renewals, etc., of the firm's participation beyond the termination of
the agreement in force at the time of the firm's decertification would
not count as DBE participation, however.
We emphasize that Part 26 standards do apply to certifications
under Part 23 for most aspects of ownership and control. For example,
absentee ownership of firms raises the same control issues in a Part 23
context as it does in a Part 26 context (see Sec. 26.71(j)). Also, as
the definition of ``concession'' now explicitly provides, recipients
should not certify holding companies as ACDBEs. Holding companies do
not perform concession activities. While holding companies may play a
narrow role in DBE and ACDBE firms (see Sec. 26.73(e)), the holding
companies themselves are not certified in this role. Recipients should
pay careful attention to affiliation relationships between and among
holding companies and their concession subsidiaries. It is likely that,
when a concession that is owned by a holding company seeks
certification, the concession is affiliated with both the holding
company itself and other subsidiaries of the holding company. These
relationships can have important effects on the ability of the
applicant firm to meet size standards.
Recipients should also pay close attention to affiliation
relationships that may arise in joint venture arrangements. If one
participant in a joint venture--or other business arrangement--exerts
too much control over the business decisions and operational activities
of another, then there may be an affiliation relationship between the
two and/or an issue of whether the second firm is sufficiently
independent to be certified.
On-site reviews are a key part of the concession certification
process. The Department realizes that, particularly for a concession
that does not yet have a location established on an airport, it may be
difficult to identify a ``job site'' at which to conduct such a review.
In this case, recipients could conduct the on-site review solely at the
firm's headquarters or other principal place of doing business.
At the time that this rule is being issued, not all states have
approved unified certification programs (UCPs). Until a UCP is approved
and in operation for a given state, individual airports in that state
continue to have responsibility for certifying ACDBEs. Once a UCP is
approved and in operation in a state, certification of ACDBEs becomes
the responsibility of the UCP, rather than of individual airports.
Section 23.41 What Is the Basic Overall Goal Requirement for
Recipients?
Having overall goals is a basic requirement of airports' ACDBE
programs, without which airports are not eligible for FAA financial
assistance. Overall goals cover periods of three years, rather than one
year as in the case of Part 26, in recognition of the longer time
frames involved in concession relationships between businesses and
airports. As discussed above, recipients are required to have two
separate overall goals: One for car rentals, and one for all
concessions other than car rentals.
There is an important exception to this general rule, designed to
reduce administrative burdens on airports that have little or no
concessions activity. If an airport has less than $200,000 in
concessions revenue (averaged over three years), in either the car
rental or non-car rental category, then the airport does not have to
submit an overall goal in that category. The Department believes that
requiring airports that have little or no concession revenues to pursue
the overall-goal setting process is likely to be unproductive, if not
altogether futile. At the same time, this provision focuses ACDBE goal-
setting efforts on those airports where these efforts are most likely
to result in meaningful ACDBE participation. Airports that did not have
to set an overall goal for one or both categories would still be
required to pursue race-neutral means to provide opportunities for
ACDBEs in their concessions activities.
This determination is made separately for each of the two overall
goal categories. For example, suppose Airport X has had non-car rental
concession revenues of $150,000, $200,000, and $175,000 in 2002, 2003,
and 2004, respectively. Under this rule, it would not have to submit a
non-car rental overall goal in 2005, because the average of its non-car
rental revenues over the preceding three years was less than $200,000.
On the other hand, if Airport X's average car rental concession
revenues were $300,000 for the same period, it would have to submit an
overall goal for car rentals in 2005.
Based on recent FAA data, virtually all larger airports (large and
medium hubs) would have to submit both overall goals. These airports
account for the vast majority of all concession revenues in both the
car rental and non-car rental categories. Among intermediate-size
airports (small hubs), all but five of 69 would have to submit car
rental goals, and 50 of the 69 would have to submit non-car rental
goals. Among 390 small airports (non-hubs), 309 would not have to
submit car rental goals and 233 would not have to submit non-car rental
goals. Many of these small airports (165 with respect to car rentals,
and 92 with respect to non-car rental concessions) report no concession
revenues in those categories.
As under Part 26, goals must be for DBEs in general, as opposed to
group-specific goals for one or another subgroup of DBEs. Also as under
Part 26, airports can apply for a program waiver of this provision if,
based on evidence (e.g., from a disparity study) showing
underutilization only of certain groups, they believe that use of
group-specific goals is necessary to achieve the objectives of a
narrowly-tailored program.
Section 23.43 What Are the Consultation Requirements in the Development
of Recipients' Overall Goals?
Section 23.45 What Are the Requirements for Submitting Overall Goal
Information to the FAA?
The process of setting overall goals includes consultation with
stakeholders in the ACDBE program. A public comment period, as such, is
not required, however. In the Department's experience with Part 26's
requirement for a comment period, few comments have been received by
most recipients. We do not believe that such a requirement would be
productive in the concessions context, which is even more specialized
and less likely to be the subject of meaningful comment from anyone
except stakeholders, who are covered by the consultation requirement.
The rule requires recipients to submit overall goals every three
years. In order to give smaller airports more time to work with the
goal-setting process, we are establishing the following schedule for
submitting new overall goals and
[[Page 14505]]
new ACDBE programs: January 2006 for large and medium hubs, October
2006 for small hubs, and the October 2007 for smaller primary airports.
Revised goals are then due October 2008, 2009, and 2010, respectively,
and every three years thereafter. If an airport changes status (e.g., a
small hub increases in size to become a medium hub), it will stay on
the original schedule. This will also mean that FAA will not have to
focus on reviewing goals from all airports in any one year, making its
review process more efficient. In the time before an airport has its
first new goals under this rule approved by FAA, it must continue using
its existing goals.
Some airport commenters asked for additional flexibility in terms
of submission dates for goals (e.g., with respect to airports' fiscal
years, which differ from the Federal fiscal year in some cases). In our
view, it is not as necessary to tie the submission of concessions goals
to fiscal years as it may be for Part 26 goals, since the latter are
more dependent on contracting under a particular fiscal year's Federal
funds. However, if an airport has difficulty with the standard goal
submission dates in the final rule, it can ask FAA for a program waiver
to establish a different date for its submissions.
Section 23.47 What Is the Base for a Recipient's Goal for Concessions
Other Than Car Rentals?
Section 23.49 What Is the Base for a Recipient's Goal for Car Rentals?
Section 23. 47 concerns the base for the first of the two overall
goals that airports must set. The base for this goal includes the gross
receipts of all concessions at the airport, with three important
exceptions. First, as the title of the section indicates, the receipts
of car rental concessions are not counted in the base for this goal.
Secondly, companies' receipts that are not generated from concession
activities do not become part of the base. In the example provided in
the regulatory text, the receipts generated by a restaurant in the
terminal are added to the base, while the receipts of the same food
service company's flight catering activities are not.
The third exception is statutory, required by the plain language of
49 U.S.C. 47107(e)(2). Under this statutory provision, the dollar
amount of the management contract or subcontract with an ACDBE and the
gross receipts of a business activity to which such a management
contract or subcontract pertains are added to the base for this goal,
while the dollar amount of the management contract or subcontract with
a non-ACDBE firm and the gross receipts of business activities to which
such a management or subcontract pertains are not.
Section 23.49 concerns the second of the two goals, that for car
rentals. It is straightforward: the base for this goal includes the
total gross receipts of car rental operations at your airport, and
nothing else. In setting car rental goals, airports may take into
account the way in which car rental participation is counted, so that
goals remain proportional to the type of participation submitted by the
car rental companies.
Section 23.51 How Are a Recipient's Overall Goals Expressed and
Calculated?
This section concerns the very important subject of airports'
calculation of overall goals. It applies to both the overall goal for
car rentals and the overall goal for other concession activities. It is
designed to parallel the goal-setting mechanism of Part 26, which has
withstood a number of legal challenges.
We recognize that, particularly for some large airports, it is
possible that the market area for many types of concessions could be
nationwide in scope. Even some of the smaller airports may have
national or regional market areas in some or all of their concession
categories. As the Department develops goal-setting guidance for
airports, we will explore, in cooperation with the Census Bureau and
airports, whether it would be possible to establish national
availability estimates in particular categories. If this approach
proves feasible, it would allow the Department to go ahead and set
availability estimates in a number of industry categories, which could
allow concerned airports to simply use those estimates with whatever
weights are appropriate for each airport.
We are aware of the concern some airport commenters expressed about
the utility of existing data to set goals for concessions. In this
context, it is important to remember that what the rules call for is
the best available data. The rules do not demand perfect data. It is
likely true that Census data and the NAICS codes do not specify what
firms are willing to work in the airport context. This, of course, is
also true in the DOT-assisted contracting context. For example, the
NAICS codes do not tell us which florists are willing to be florists at
airports. By the same token, the codes do not indicate which heavy
construction firms are willing to perform heavy construction at
airports. Despite this, we still use the NAICS codes to provide an
indication of availability in the construction context, and we can use
the same codes in the florist context as well.
Looking at the Census Bureau's County Business Patterns database,
it appears that that the primary codes most likely to be useful to
airports will probably be 44 (Retail Trade) and 72 (Accommodation and
food services). Both of these categories break down into 6 digit codes
in most (even small) metropolitan areas and counties. For instance, 44
includes tape, CD and pre-recorded music stores (451220), florists
(453110), and gift, novelty and souvenir stores (453220). NAICS code 72
includes, among other things, cafeterias (722212), full-service
restaurants (722110) and drinking places (alcoholic beverages)
(722410).
We would point out that even some specialized types of business
that operate as concessions have NAICS codes of their own (e.g., 812113
for nail salons and 454210 for vending machine operators). Even
shoeshine kiosks, which do not have a specific NAICS code, can be
included a broader category of ``other personal services.'' The fact of
the matter is that these categories are probably more specific than the
categories available for construction and other activities frequently
used under Part 26. We see no reason that the Census databases and
NAICS codes cannot be used for goal-setting under Part 23.
One potential problem that we would ask airports and UCPs to
address is the potential under-representation of ACDBEs in directories.
That is, program participants have expressed concern that, because
concession opportunities occur less frequently than Part 26 contracting
opportunities, and because certification offices may have been more
focused on Part 26 contracting, fewer ACDBEs may appear on some
certification lists. This could lead, in turn, to Step 1 relative
availability calculations being unrealistically low. The Department
recommends that airports and UCPs conduct outreach activities to
encourage potential ACDBEs to seek certification. Airports could also
augment their counts of available DBEs with firms in local MBE/WBE
directories and Part 26 DBE directories (i.e., with respect to firms on
those lists in concession-relevant NAICS codes), or trade association
lists. Moreover, to the extent they have evidence of ACDBE under-
representation in directories, airports could use this evidence as part
of a Step 2 adjustment.
The regulatory text does not use the term ``bidders list'' that
Part 26 uses.
[[Page 14506]]
Rather, Part 23 uses the term ``active participants list.'' This is
because ``bidding,'' in the sense the term is used in DOT-assisted
contracting, is often not used in the concessions context. In any case,
the idea is to identify interested firms and build a list from that
source. It is likely that many airports may have a strong sense of
those firms that are likely to be interested in seeking concession
opportunities. Their information comes from a number of sources, such
as past experience with firms that have run concessions or sought
concession contracts or leases, knowledge about the universe of firms
in certain areas of retail and food and beverage service that tend to
be interested in participating in airport concessions, and attendance
lists from informational and outreach meetings about upcoming
concessions opportunities. While these sources do not represent bidders
lists in the traditional sense, they appear feasible to develop and can
provide a good source of availability data.
When the rule says that an airport can use the goal of another
recipient as the basis for Step 1 of its goal-setting exercise, it
should be noted that this concept is not necessarily limited to other
airports in the same geographical area. For instance, suppose a large
airport on the East Coast and a large airport on the West Coast both
have a national market area for certain types of concessions. With
appropriate adjustments for differences in local market areas and the
airports' concession programs, these two airports might be able to use
the same analysis in setting their goals.
Section 23.53 How Do Car Rental Companies Count ACDBE Participation
Toward Their Goals?
Section 23.55 How Do Recipients Count ACDBE Participation Toward Goals
for Items Other Than Car Rentals?
Section 23.53 addresses the issue of counting ACDBE participation
for car rental companies, which is discussed at length under ``major
issues'' above. Section 23.55 is the counting provision for other types
of concessions, and it generally follows the counting provisions of
Part 26. For example, when an ACDBE enters into a sub-concession
agreement or lease with a non-ACDBE, the part of the work performed by
the non-ACDBE is not counted toward goals. One exception to this
pattern concerns regular dealers. Under Part 26, recipients may count
toward goals only 60 percent of the value of goods purchased from DBE
regular dealers. Under this section, however, recipients may count 100
percent of the value of items purchases from an ACDBE regular dealer.
This difference is based on the greater role that goods and services
purchases play in the concessions context and a lesser concern that
overuse of goods and services purchases will distort opportunities for
other contractors. In response to a question from a commenter, goods
and services purchased from ACDBEs by management contractors would also
count toward goals, assuming that the goods and services are used for
the management contractor's operations at the airport. This section
also includes a few provisions peculiar to the concessions context,
such as a provision directing that so-called ``build out'' costs of a
concession not be counted toward ACDBE goals.
We wish to emphasize the provision of this section concerning
counting the participation of ACDBE participants in joint ventures.
Credit may be counted only for the independent, distinct portion of the
work performed by the ACDBE with its own forces.
It is very important to avoid overcounting the value of the ACDBE's
participation. For example, suppose a joint venture asserts that the
portion of its work performed by the ACDBE participant involves the
performance of professional or back office services. The joint venture
claims credit amounting to 30 percent of its gross receipts for this
function. If the business sought similar legal, accounting, payroll,
personnel administration, etc. services from an outside firm, would the
fees paid the outside firm amount to around 30 percent of its gross
receipts? If not, then it is likely the joint venture is overvaluing
the contribution of the ACDBE participant, and the airport should not
count all the DBE credit requested.
As a policy matter, we believe it is preferable for ACDBE joint
venture participants to actually have a defined role in the revenue-
generating activities of the business (e.g., the joint venture runs
four food service locations in the airport, and the ACDBE is directly
responsible for one of them). There is a greater likelihood of
confusion, counting, and other administrative difficulties, as well as
of abuse, when ACDBE participation is claimed for joint ventures in
which the ACDBE participant has only a vaguely defined role in the
entity as a whole.
Section 23.57 What Happens if a Recipient Falls Short of Meeting Its
Overall Goals?
Section 23.59 What Is the Role of the Statutory 10 Percent Goal in the
ACDBE Program?
Section 23.61 Can Recipients Use Quotas or Set-Asides as Part of Their
ACDBE Programs?
These three sections emphasize that recipients are not penalized
for failing to meet their overall goals (i.e., failure to ``hit the
number''), that the statutory 10 percent goal is an aspirational goal
that does not play an operational role in airports' ACDBE programs, and
that the use of quotas and set-asides is forbidden. All three
provisions are taken from Part 26 (except that the prohibition on the
use of set-asides has been strengthened), where they have been part of
the narrowly tailored approach to the DBE program that the Federal
courts have approved.
Section 23.71 Does a Recipient Have To Change Existing Concession
Agreements?
This section emphasizes that the changes in Part 23 do not require
airports to change or abrogate existing concession agreements with
private businesses. A few commenters had asked for reassurance on this
point. However, airports must take advantage of opportunities that
arise at the time of the renewal, modification, or extension of
existing concession agreements to obtain a modified amount of ACDBE
participation in the renewed or amended agreement.
Section 23.73 What Requirements Apply to Privately Owned or Leased
Terminal Buildings?
This provision is virtually identical to the version in the 1997
and 2000 proposals. We did not receive any comments on it.
Section 23.75 Can Recipients Enter Into Long-Term, Exclusive Agreements
With Concessionaires?
This provision continues the long-standing requirement that long-
term, exclusive leases are prohibited, except where the airport obtains
FAA approval. The section includes a procedure for obtaining such
approval, including a list of information FAA needs before it can grant
this approval. ACDBE participation is a key part of this information.
Comments on the various proposed versions of this section generally
favored requiring opportunities for DBE participation as part of a
long-term, exclusive lease arrangement. Consistent with the
[[Page 14507]]
Department's prior proposals, only FAA approval under this section will
be needed for long-term exclusive leases. DOT approval through an
exemption process will no longer be required.
One airport suggested making 10 years rather than 5 years the
criterion for a long-term exclusive lease subject to this section. We
have not adopted this comment because doing so would reduce the degree
of oversight FAA can exercise under the rule to make sure that long-
term concession agreements include adequate ACDBE participation.
FAA is currently working on revised guidance concerning long-term
exclusive lease issues. FAA will issue this guidance, on the DOT DBE
web site among other places, as soon as it is ready.
Section 23.77 Does This Part Preempt Local Requirements?
This section restates the statutory provision that the regulation
does not automatically preempt all local requirements. However, local
laws, regulations, and policies may not directly conflict with this
regulation, and airports would have to take steps to avoid situations
where a local requirement conflicts with a Federal requirement. It
should be noted also that this provision refers to substantive DBE and
similar requirements of local entities, and it in no way avoids the
need to comply with Federal requirements for confidentiality (e.g.,
with respect to information submitted in response to PNW requirements).
A car rental trade association asked the Department to prohibit
airports from having requirements involving such measures as bid
preferences, preferences for the allocation of space, or good faith
efforts pertaining to direct ownership arrangements. We have not
adopted specific prohibitions, but have instead specified what is
required of airports. Airports will be expected to comply with these
Federal requirements and not impose any conflicting requirements.
The Department is concerned, however, that additional or more
stringent local or state requirements that go beyond the provisions of
Part 23 could implicate the Federal ACDBE program in matters of
questionable constitutionality. We are adding a provision directing
airports to attach copies of any provisions additional to those needed
to carry out Part 23 requirements to their ACDBE program submissions.
FAA will review these provisions, and FAA will not approve an ACDBE
program if there are ``go-beyond'' provisions that are inconsistent
with this rule. In any case, even where FAA has reviewed a state or
local provision and determined that it does not conflict with Part 23,
there should be a clear firewall between the ACDBE program and such
additional state or local requirements. There must be a separate
program document for them, and the Federal and state/local additional
programs, respectively, must be administered in a clearly distinct
manner.
Section 23.79 Does This Part Permit Recipients To Use Local Geographic
Preferences?
The 2000 SNPRM proposed that, in some cases, airports could use
local geographic preferences in selecting concessionaires if they
obtained a program waiver from the FAA. On further reflection, the
Department has decided that the disadvantages of local preferences that
we noted in the SNPRM, such as the elimination of the benefits of wider
competition for business opportunities and the possible loss of
opportunities for DBEs who are not located in the locality served by an
airport, are important enough to warrant prohibiting local preferences
altogether. The ACDBE program is a national program, and at least some
concession markets are national markets. In this context, a local
preference program is out of place. It is also out of character with a
narrowly tailored program, in that it would limit selections of ACDBEs
to something less than their actual availability in the marketplace.
Among commenters, one airport favored local preferences and a car
rental trade association opposed them; there was not widespread
interest or support for retaining local preferences, in any case.
Regulatory Analyses and Notices
This rule is nonsignificant for purposes of Executive Order 12866
and the Department of Transportation's Regulatory Policies and
Procedures. While the rule is of considerable interest to the airport
community and businesses that work on airports, it is essentially an
update of a long standing, continuing program that does not break new
policy ground in most areas. It does not impose significant new costs
on airports or businesses. The rule does not have Federalism impacts
sufficient to warrant the preparation of a Federalism Assessment.
The Department certifies that this rule will not have a significant
economic effect on a substantial number of small entities. The rule
clearly affects small entities: ACDBEs are, by definition, small
businesses. However, the economic effect of the rule on these small
entities is not likely to be significant. Until the Department takes
action based on the accompanying SNPRM, there are no changes from the
current rule with respect to business size standards. The personal net
worth standard may affect some existing ACDBE owners, but these effects
are significantly mitigated by ``grandfathering'' of existing contracts
and, more importantly, by the exclusion of documented needs to hold
assets to support business growth. In other respects, compared to the
existing rule, the new rule is not expected to have noticeable
incremental economic effects on small businesses.
A number of provisions of this rule involve information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA). With
some modifications, these information collection requirements of the
rule continue existing Part 23 requirements, major elements of the
ACDBE program that airports and concessionaires have been implementing
since at least 1992. Overall, the Department believes the overall
burden of these requirements will remain the same or shrink. These
requirements are the following:
Firms applying for DBE certification must provide
information (including PNW data) to recipients/uniform certification
programs (UCPs) to allow them to make eligibility decisions. Currently
certified firms must provide information to recipients/UCPs to allow
them to review the firms' continuing eligibility.
When firms bid on concession opportunities that have
concession-specific goals, they must document their ACDBE participation
and/or the good faith efforts they have made to meet the contract
goals.
Recipients must calculate overall goals and transmit them
to the FAA for approval. There are two sets of overall goals: One for
car rentals and one for non-car rental concessions. Many smaller
airports will not have to submit overall goals.
Recipients must have a revised ACDBE program approved by
the FAA. This is a one-time requirement.
Recipients must retain ACDBE data for three years and
submit an annual report to the FAA.
The Department estimates that these program elements will result in a
total of approximately 41,000 annual burden hours to recipients and
contractors, plus an additional 44,000 burden hours in the first year
for the revision and submission of ACDBE programs.
Both as the result of comments and what the Department learns as it
implements the ACDBE program under Part 23, it is possible for the
[[Page 14508]]
Department's information needs and the way we meet them to change.
Sometimes the way we collect information can be changed informally
(e.g., by guidance telling recipients they need not repeat information
that does not change significantly from year to year). In other
circumstances, a technical amendment to the regulation may be needed.
In any case, the Department will remain sensitive to situations in
which modifying information collection requirements becomes
appropriate.
As required by the PRA, the Department has submitted an information
collection approval request to OMB. You should direct comments to the
Office of Information and Regulatory Affairs (OIRA), OMB, Room 10235,
New Executive Office Building, Washington, DC 20503; Attention: Desk
Officer for U.S. Department of Transportation. Because mail service to
OIRA is very difficult because of security measures, it is preferable
for interested persons to fax comments to OMB. The fax number for this
purpose is 202-395-6974. You may also transmit copies of your comments
to the Department's docket for this rulemaking.
The Department considers comments by the public on information
collections for several purposes:
Evaluating the necessity of information collections for
the proper performance of the Department's functions, including whether
the information has practical utility.
Evaluating the accuracy of the Department's estimate of
the burden of the information collections, including the validity of
the methods and assumptions used.
Enhancing the quality, usefulness, and clarity of the
information to be collected.
Minimizing the burden of the collection of information on
respondents, including through the use of electronic and other methods.
The Department points out that all the information collection elements
discussed in this section of the preamble have not only been part of
the Department's ACDBE program for many years, but have also been the
subject of extensive public comment following the 1993, 1997, and 2000
proposed rules on this subject. Among the many comments received in
response to these notices were a number addressing administrative
burden issues surrounding these program elements. In this final rule,
the Department has responded to these comments.
OMB is required to make a decision concerning information
collections within 30-60 days of the publication of this notice.
Therefore, for best effect, comments should be received by DOT/OMB
within 30 days of publication. Following receipt of OMB approval, the
Department will publish a Federal Register notice containing the
applicable OMB approval numbers.
There are a number of other statutes and Executive Orders that
apply to the rulemaking process that the Department considers in all
rulemakings. However, none of them are relevant to this rule. These
include the Unfunded Mandates Reform Act (which does not apply to
nondiscrimination/civil rights requirements), the National
Environmental Policy Act, E.O. 12630 (concerning property rights), E.O.
12988 (concerning civil justice reform), and E.O. 13045 (protection of
children from environmental risks).
Issued this 8th day of March, 2005, at Washington, DC.
Norman Y. Mineta,
Secretary of Transportation.
0
For the reasons stated in the preamble, the Department takes the
following actions:
0
1. Revise part 23 to read as follows:
PART 23--PARTICIPATION OF DISADVANTAGED BUSINESS ENTERPRISE IN
AIRPORT CONCESSIONS
Subpart A--General
Sec.
23.1 What are the objectives of this part?
23.3 What do the terms used in this part mean?
23.5 To whom does this part apply?
23.7 How long do the provisions of this part remain in effect?
23.9 What are the nondiscrimination and assurance requirements of
this part for recipients?
23.11 What compliance and enforcement provisions are used under this
part?
23.13 How does the Department issue guidance, interpretations,
exemptions, and waivers pertaining to this part?
Subpart B--ACDBE programs
23.21 Who must submit an ACDBE program to FAA, and when?
23.23 What administrative provisions must be in a recipient's ACDBE
program?
23.25 What measures must recipients include in their ACDBE programs
to ensure nondiscriminatory participation of ACDBEs in concessions?
23.27 What information does a recipient have to retain and report
about implementation of its ACDBE program?
23.29 What monitoring and compliance procedures must recipients
follow?
Subpart C--Certification of ACDBEs
23.31 What certification standards and procedures do recipients use
to certify ACDBEs?
23.33 What size standards do recipients use to determine the
eligibility of ACDBEs?
23.35 What is the personal net worth standard for disadvantaged
owners of ACDBEs?
23.37 Are firms certified under 49 CFR part 26 eligible to
participate as ACDBEs?
23.39 What other certification requirements apply in the case of
ACDBEs?
Subpart D--Goals, Good Faith Efforts, and Counting
23.41 What is the basic overall goal requirement for recipients?
23.43 What are the consultation requirements in the development of
recipients' overall goals?
23.45 What are the requirements for submitting overall goal
information to the FAA?
23.47 What is the base for a recipient's goals for concessions other
than car rentals?
23.49 What is the base for a recipient's goals for car rentals?
23.51 How are a recipient's overall goals expressed and calculated?
23.53 How do car rental companies count ACDBE participation toward
their goals?
23.55 How do recipients count ACDBE participation toward goals for
items other than car rentals?
23.57 What happens if a recipient falls short of meeting its overall
goals?
23.59 What is the role of the statutory 10 percent goal in the ACDBE
program?
23.61 Can recipients use quotas or set-asides as part of their their
ACDBE programs?
Subpart E--Other Provisions
23.71 Does a recipient have to change existing concession
agreements?
23.73 What requirements apply to privately-owned or leased terminal
buildings?
23.75 Can recipients enter into long-term, exclusive agreements with
concessionaires?
23.77 Does this part preempt local requirements?
23.79 Does this part permit recipients to use local geographic
preferences?
Appendix A to Part 23--Uniform Report of ACDBE Participation
Authority: 49 U.S.C. 47107; 42 U.S.C. 2000d; 49 U.S.C. 322;
Executive Order 12138.
Subpart A--General
Sec. 23.1 What are the objectives of this part?
This part seeks to achieve several objectives:
(a) To ensure nondiscrimination in the award and administration of
opportunities for concessions by airports receiving DOT financial
assistance;
(b) To create a level playing field on which ACDBEs can compete
fairly for opportunities for concessions;
(c) To ensure that the Department's ACDBE program is narrowly
tailored in accordance with applicable law;
[[Page 14509]]
(d) To ensure that only firms that fully meet this part's
eligibility standards are permitted to participate as ACDBEs;
(e) To help remove barriers to the participation of ACDBEs in
opportunities for concessions at airports receiving DOT financial
assistance; and
(f) To provide appropriate flexibility to airports receiving DOT
financial assistance in establishing and providing opportunities for
ACDBEs.
Sec. 23.3 What do the terms used in this part mean?
Administrator means the Administrator of the Federal Aviation
Administration (FAA).
Affiliation has the same meaning the term has in the Small Business
Administration (SBA) regulations, 13 CFR part 121, except that the
provisions of SBA regulations concerning affiliation in the context of
joint ventures (13 CFR Sec. 121.103(f)) do not apply to this part.
(1) Except as otherwise provided in 13 CFR part 121, concerns are
affiliates of each other when, either directly or indirectly:
(i) One concern controls or has the power to control the other; or
(ii) A third party or parties controls or has the power to control
both; or
(iii) An identity of interest between or among parties exists such
that affiliation may be found.
(2) In determining whether affiliation exists, it is necessary to
consider all appropriate factors, including common ownership, common
management, and contractual relationships. Affiliates must be
considered together in determining whether a concern meets small
business size criteria and the statutory cap on the participation of
firms in the ACDBE program.
Airport Concession Disadvantaged Business Enterprise (ACDBE) means
a concession that is a for-profit small business concern --
(1) That is at least 51 percent owned by one or more individuals
who are both socially and economically disadvantaged or, in the case of
a corporation, in which 51 percent of the stock is owned by one or more
such individuals; and
(2) Whose management and daily business operations are controlled
by one or more of the socially and economically disadvantaged
individuals who own it.
Alaska Native Corporation (ANC) means any Regional Corporation,
Village Corporation, Urban Corporation, or Group Corporation organized
under the laws of the State of Alaska in accordance with the Alaska
Native Claims Settlement Act (43 U.S.C. 1601 et seq.)
Car dealership means an establishment primarily engaged in the
retail sale of new and/or used automobiles. Car dealerships frequently
maintain repair departments and carry stocks of replacement parts,
tires, batteries, and automotive accessories. Such establishments also
frequently sell pickup trucks and vans at retail. In the standard
industrial classification system, car dealerships are categorized in
NAICS code 441110.
Concession means one or more of the types of for-profit businesses
listed in paragraph (1) or (2) of this definition:
(1) A business, located on an airport subject to this part, that is
engaged in the sale of consumer goods or services to the public under
an agreement with the recipient, another concessionaire, or the owner
or lessee of a terminal, if other than the recipient.
(2) A business conducting one or more of the following covered
activities, even if it does not maintain an office, store, or other
business location on an airport subject to this part, as long as the
activities take place on the airport: Management contracts and
subcontracts, a web-based or other electronic business in a terminal or
which passengers can access at the terminal, an advertising business
that provides advertising displays or messages to the public on the
airport, or a business that provides goods and services to
concessionaires.
Example to paragraph (2): A supplier of goods or a management
contractor maintains its office or primary place of business off the
airport. However the supplier provides goods to a retail
establishment in the airport; or the management contractor operates
the parking facility on the airport. These businesses are considered
concessions for purposes of this part.
(3) For purposes of this subpart, a business is not considered to
be ``located on the airport'' solely because it picks up and/or
delivers customers under a permit, license, or other agreement. For
example, providers of taxi, limousine, car rental, or hotel services
are not considered to be located on the airport just because they send
shuttles onto airport grounds to pick up passengers or drop them off. A
business is considered to be ``located on the airport,'' however, if it
has an on-airport facility. Such facilities include in the case of a
taxi operator, a dispatcher; in the case of a limousine, a booth
selling tickets to the public; in the case of a car rental company, a
counter at which its services are sold to the public or a ready return
facility; and in the case of a hotel operator, a hotel located anywhere
on airport property.
(4) Any business meeting the definition of concession is covered by
this subpart, regardless of the name given to the agreement with the
recipient, concessionaire, or airport terminal owner or lessee. A
concession may be operated under various types of agreements, including
but not limited to the following:
(i) Leases.
(ii) Subleases.
(iii) Permits.
(iv) Contracts or subcontracts.
(v) Other instruments or arrangements.
(5) The conduct of an aeronautical activity is not considered a
concession for purposes of this subpart. Aeronautical activities
include scheduled and non-scheduled air carriers, air taxis, air
charters, and air couriers, in their normal passenger or freight
carrying capacities; fixed base operators; flight schools; recreational
service providers (e.g., sky-diving, parachute-jumping, flying guides);
and air tour services.
(6) Other examples of entities that do not meet the definition of a
concession include flight kitchens and in-flight caterers servicing air
carriers, government agencies, industrial plants, farm leases,
individuals leasing hangar space, custodial and security contracts,
telephone and electric service to the airport facility, holding
companies, and skycap services under contract with an air carrier or
airport.
Concessionaire means a firm that owns and controls a concession or
a portion of a concession.
Department (DOT) means the U.S. Department of Transportation,
including the Office of the Secretary and the Federal Aviation
Administration (FAA).
Direct ownership arrangement means a joint venture, partnership,
sublease, licensee, franchise, or other arrangement in which a firm
owns and controls a concession.
Good faith efforts means efforts to achieve an ACDBE goal or other
requirement of this part that, by their scope, intensity, and
appropriateness to the objective, can reasonably be expected to meet
the program requirement.
Immediate family member means father, mother, husband, wife, son,
daughter, brother, sister, grandmother, grandfather, grandson,
granddaughter, mother-in-law, father-in-law, brother-in-law, sister-in-
law, or registered domestic partner.
Indian tribe means any Indian tribe, band, nation, or other
organized group or community of Indians, including any ANC, which is
recognized as eligible for the special programs and services provided
by the United States to Indians because of their status as Indians, or
is
[[Page 14510]]
recognized as such by the State in which the tribe, band, nation,
group, or community resides. See definition of ``tribally-owned
concern'' in this section.
Joint venture means an association of an ACDBE firm and one or more
other firms to carry out a single, for-profit business enterprise, for
which the parties combine their property, capital, efforts, skills and
knowledge, and in which the ACDBE is responsible for a distinct,
clearly defined portion of the work of the contract and whose shares in
the capital contribution, control, management, risks, and profits of
the joint venture are commensurate with its ownership interest. Joint
venture entities are not certified as ACDBEs.
Large hub primary airport means a commercial service airport that
has a number of passenger boardings equal to at least one percent of
all passenger boardings in the United States.
Management contract or subcontract means an agreement with a
recipient or another management contractor under which a firm directs
or operates one or more business activities, the assets of which are
owned, leased, or otherwise controlled by the recipient. The managing
agent generally receives, as compensation, a flat fee or a percentage
of the gross receipts or profit from the business activity. For
purposes of this subpart, the business activity operated or directed by
the managing agent must be other than an aeronautical activity, be
located at an airport subject to this subpart, and be engaged in the
sale of consumer goods or provision of services to the public.
Material amendment means a significant change to the basic rights
or obligations of the parties to a concession agreement. Examples of
material amendments include an extension to the term not provided for
in the original agreement or a substantial increase in the scope of the
concession privilege. Examples of nonmaterial amendments include a
change in the name of the concessionaire or a change to the payment due
dates.
Medium hub primary airport means a commercial service airport that
has a number of passenger boardings equal to at least 0.25 percent of
all passenger boardings in the United States but less than one percent
of such passenger boardings.
Native Hawaiian means any individual whose ancestors were natives,
prior to 1778, of the area that now comprises the State of Hawaii.
Native Hawaiian Organization means any community service
organization serving Native Hawaiians in the State of Hawaii that is a
not-for-profit organization chartered by the State of Hawaii, and is
controlled by Native Hawaiians
Noncompliance means that a recipient has not correctly implemented
the requirements of this part.
Nonhub primary airport means a commercial service airport that has
more than 10,000 passenger boardings each year but less than 0.05
percent of all passenger boardings in the United States.
Part 26 means 49 CFR part 26, the Department of Transportation's
disadvantaged business enterprise regulation for DOT-assisted
contracts.
Personal net worth means the net value of the assets of an
individual remaining after total liabilities are deducted. An
individual's personal net worth does not include the following: The
individual's ownership interest in an ACDBE firm or a firm that is
applying for ACDBE certification; the individual's equity in his or her
primary place of residence; and other assets that the individual can
document are necessary to obtain financing or a franchise agreement for
the initiation or expansion of his or her ACDBE firm (or have in fact
been encumbered to support existing financing for the individual's
ACDBE business), to a maximum of $3 million. An individual's personal
net worth includes only his or her own share of assets held jointly or
as community property with the individual's spouse.
Primary airport means a commercial service airport that the
Secretary determines to have more than 10,000 passengers enplaned
annually.
Primary industry classification means the North American Industrial
Classification System (NAICS) code designation that best describes the
primary business of a firm. The NAICS Manual is available through the
National Technical Information Service (NTIS) of the U.S. Department of
Commerce (Springfield, VA, 22261). NTIS also makes materials available
through its Web site (http://www.ntis.gov/naics).
Primary recipient means a recipient to which DOT financial
assistance is extended through the programs of the FAA and which passes
some or all of it on to another recipient.
Principal place of business means the business location where the
individuals who manage the firm's day-to-day operations spend most
working hours and where top management's business records are kept. If
the offices from which management is directed and where business
records are kept are in different locations, the recipient will
determine the principal place of business for ACDBE program purposes.
Race-conscious means a measure or program that is focused
specifically on assisting only ACDBEs, including women-owned ACDBEs.
For the purposes of this part, race-conscious measures include gender-
conscious measures.
Race-neutral means a measure or program that is, or can be, used to
assist all small businesses, without making distinctions or
classifications on the basis of race or gender.
Secretary means the Secretary of Transportation or his/her
designee.
Set-aside means a contracting practice restricting eligibility for
the competitive award of a contract solely to ACDBE firms.
Small Business Administration or SBA means the United States Small
Business Administration.
Small business concern means a for-profit business that does not
exceed the size standards of Sec. 23.23 of this part.
Small hub airport means a publicly owned commercial service airport
that has a number of passenger boardings equal to at least 0.05 percent
of all passenger boardings in the United States but less than 0.25
percent of such passenger boardings.
Socially and economically disadvantaged individual means any
individual who is a citizen (or lawfully admitted permanent resident)
of the United States and who is--
(1) Any individual determined by a recipient to be a socially and
economically disadvantaged individual on a case-by-case basis.
(2) Any individual in the following groups, members of which are
rebuttably presumed to be socially and economically disadvantaged:
(i) ``Black Americans,'' which includes persons having origins in
any of the Black racial groups of Africa;
(ii) ``Hispanic Americans,'' which includes persons of Mexican,
Puerto Rican, Cuban, Dominican, Central or South American, or other
Spanish or Portuguese culture or origin, regardless of race;
(iii) ``Native Americans,'' which includes persons who are American
Indians, Eskimos, Aleuts, or Native Hawaiians;
(iv) ``Asian-Pacific Americans,'' which includes persons whose
origins are from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam,
Laos, Cambodia (Kampuchea), Thailand, Malaysia, Indonesia, the
Philippines, Brunei, Samoa, Guam, the U.S. Trust Territories of the
Pacific Islands (Republic of Palau), the Commonwealth of the Northern
Marianas Islands,
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Macao, Fiji, Tonga, Kirbati, Juvalu, Nauru, Federated States of
Micronesia, or Hong Kong;
(v) ``Subcontinent Asian Americans,'' which includes persons whose
origins are from India, Pakistan, Bangladesh, Bhutan, the Maldives
Islands, Nepal or Sri Lanka;
(vi) Women;
(vii) Any additional groups whose members are designated as
socially and economically disadvantaged by the SBA, at such time as the
SBA designation becomes effective.
Recipient means any entity, public or private, to which DOT
financial assistance is extended, whether directly or through another
recipient, through the programs of the FAA.
Tribally-owned concern means any concern at least 51 percent owned
by an Indian tribe as defined in this section.
You refers to a recipient, unless a statement in the text of this
part or the context requires otherwise (i.e., ``You must do XYZ'' means
that recipients must do XYZ).
Sec. 23.5 To whom does this part apply?
If you are a recipient that has received a grant for airport
development at any time after January 1988 that was authorized under
Title 49 of the United States Code, this part applies to you.
Sec. 23.7 How long do the provisions of this part remain in effect?
Unless extended by the Department, the provisions of this rule will
terminate and become inoperative on April 21, 2010.
Sec. 23.9 What are the nondiscrimination and assurance requirements
of this part for recipients?
(a) As a recipient, you must meet the non-discrimination
requirements provided in part 26, Sec. 26.7 with respect to the award
and performance of any concession agreement, management contract or
subcontract, purchase or lease agreement, or other agreement covered by
this subpart.
(b) You must also take all necessary and reasonable steps to ensure
nondiscrimination in the award and administration of contracts and
agreements covered by this part.
(c) You must include the following assurances in all concession
agreements and management contracts you execute with any firm after
April 21, 2005:
(1) ``This agreement is subject to the requirements of the U.S.
Department of Transportation's regulations, 49 CFR part 23. The
concessionaire or contractor agrees that it will not discriminate
against any business owner because of the owner's race, color, national
origin, or sex in connection with the award or performance of any
concession agreement, management contract, or subcontract, purchase or
lease agreement, or other agreement covered by 49 CFR part 23.
(2) ``The concessionaire or contractor agrees to include the above
statements in any subsequent concession agreement or contract covered
by 49 CFR part 23, that it enters and cause those businesses to
similarly include the statements in further agreements.''
Sec. 23.11 What compliance and enforcement provisions are used under
this part?
The compliance and enforcement provisions of part 26 (Sec. Sec.
26.101 and 26.105 through 26.107) apply to this part in the same way
that they apply to FAA recipients and programs under part 26.
Sec. 23.13 How does the Department issue guidance, interpretations,
exemptions, and waivers pertaining to this part?
(a) Only guidance and interpretations (including interpretations
set forth in certification appeal decisions) consistent with this part
23 and issued after April 21, 2005 have definitive, binding effect in
implementing the provisions of this part and constitute the official
position of the Department of Transportation.
(b) Written interpretations and guidance are valid and binding, and
constitute the official position of the Department of Transportation,
only if they are issued over the signature of the Secretary of
Transportation or if they contain the following statement:
The General Counsel of the Department of Transportation has
reviewed this document and approved it as consistent with the
language and intent of 49 CFR part 23.
(c) You may apply for an exemption from any provision of this part.
To apply, you must request the exemption in writing from the Office of
the Secretary of Transportation or the FAA. The Secretary will grant
the request only if it documents special or exceptional circumstances,
not likely to be generally applicable, and not contemplated in
connection with the rulemaking that established this part, that make
your compliance with a specific provision of this part impractical. You
must agree to take any steps that the Department specifies to comply
with the intent of the provision from which an exemption is granted.
The Secretary will issue a written response to all exemption requests.
(d) You can apply for a waiver of any provision of subpart B or D
of this part including, but not limited to, any provisions regarding
administrative requirements, overall goals, contract goals or good
faith efforts. Program waivers are for the purpose of authorizing you
to operate an ACDBE program that achieves the objectives of this part
by means that may differ from one or more of the requirements of
subpart B or D of this part. To receive a program waiver, you must
follow these procedures:
(1) You must apply through the FAA. The application must include a
specific program proposal and address how you will meet the criteria of
paragraph (d)(2) of this section. Before submitting your application,
you must have had public participation in developing your proposal,
including consultation with the ACDBE community and at least one public
hearing. Your application must include a summary of the public
participation process and the information gathered through it.
(2) Your application must show that--
(i) There is a reasonable basis to conclude that you could achieve
a level of ACDBE participation consistent with the objectives of this
part using different or innovative means other than those that are
provided in subpart B or D of this part;
(ii) Conditions at your airport are appropriate for implementing
the proposal;
(iii) Your proposal would prevent discrimination against any
individual or group in access to concession opportunities or other
benefits of the program; and
(iv) Your proposal is consistent with applicable law and FAA
program requirements.
(3) The FAA Administrator has the authority to approve your
application. If the Administrator grants your application, you may
administer your ACDBE program as provided in your proposal, subject to
the following conditions:
(i) ACDBE eligibility is determined as provided in subpart C of
this part, and ACDBE participation is counted as provided in Sec. Sec.
23.53 through 23.55.
(ii) Your level of ACDBE participation continues to be consistent
with the objectives of this part;
(iii) There is a reasonable limitation on the duration of the your
modified program; and
(iv) Any other conditions the Administrator makes on the grant of
the waiver.
(4) The Administrator may end a program waiver at any time and
require you to comply with this part's provisions. The Administrator
may also extend the waiver, if he or she determines that all
requirements of this section continue to be met. Any such extension
shall be for no longer than
[[Page 14512]]
period originally set for the duration of the program waiver.
Subpart B--ACDBE Programs
Sec. 23.21 Who must submit an ACDBE program to FAA, and when?
(a) Except as provided in paragraph (e) of this section, if you are
a primary airport that has or was required to have a concessions DBE
program prior to April 21, 2005, you must submit a revisesd ACDBE
program meeting the requirements of this part to the appropriate FAA
regional office for approval.
(1) You must submit this revised program on the same schedule
provided for your first submission of overall goals in Sec. 23.45(a)
of this part.
(2) Timely submission and FAA approval of your revised ACDBE
program is a condition of eligibility for FAA financial assistance.
(3) Until your new ACDBE program is submitted and approved, you
must continue to implement your concessions DBE program that was in
effect before the effective date of this amendment to part 23, except
with respect to any provision that is contrary to this part.
(b) If you are a primary airport that does not now have a DBE
concessions program, and you apply for a grant of FAA funds for airport
planning and development under 49 U.S.C. 47107 et seq., you must submit
an ACDBE program to the FAA at the time of your application. Timely
submission and FAA approval of your ACDBE program are conditions of
eligibility for FAA financial assistance.
(c) If you are the owner of more than one airport that is required
to have an ACDBE program, you may implement one plan for all your
locations. If you do so, you must establish a separate ACDBE goal for
each location.
(d) If you make any significant changes to your ACDBE program at
any time, you must provide the amended program to the FAA for approval
before implementing the changes.
(e) If you are a non-primary airport, non-commercial service
airport, a general aviation airport, reliever airport, or any other
airport that does not have scheduled commercial service, you are not
required to have an ACDBE program. However, you must take appropriate
outreach steps to encourage available ACDBEs to participate as
concessionaires whenever there is a concession opportunity.
Sec. 23.23 What administrative provisions must be in a recipient's
ACDBE program?
(a) If, as a recipient that must have an ACDBE program, the program
must include provisions for a policy statement, liaison officer, and
directory, as provided in part 26, Sec. Sec. 26.23, 26.25, and 26.31,
as well as certification of ACDBEs as provided by Subpart C of this
part. You must include a statement in your program committing you to
operating your ACDBE program in a nondiscriminatory manner.
(b) You may combine your provisions for implementing these
requirements under this part and part 26 (e.g., a single policy
statement can cover both Federally-assisted airport contracts and
concessions; the same individual can act as the liaison officer for
both part 23 and part 26 matters).
Sec. 23.25 What measures must recipients include in their ACDBE
programs to ensure nondiscriminatory participation of ACDBEs in
concessions?
(a) You must include in your ACDBE program a narrative description
of the types of measures you intend to make to ensure nondiscriminatory
participation of ACDBEs in concession and other covered activities.
(b) Your ACDBE program must provide for setting goals consistent
with the requirements of Subpart D of this part.
(c) Your ACDBE program must provide for seeking ACDBE participation
in all types of concession activities, rather than concentrating
participation in one category or a few categories to the exclusion of
others.
(d) Your ACDBE program must include race-neutral measures that you
will take. You must maximize the use of race-neutral measures,
obtaining as much as possible of the ACDBE participation needed to meet
overall goals through such measures. These are responsibilities that
you directly undertake as a recipient, in addition to the efforts that
concessionaires make, to obtain ACDBE participation. The following are
examples of race-neutral measures you can implement:
(1) Locating and identifying ACDBEs and other small businesses who
may be interested in participating as concessionaires under this part;
(2) Notifying ACDBEs of concession opportunities and encouraging
them to compete, when appropriate;
(3) When practical, structuring concession activities so as to
encourage and facilitate the participation of ACDBEs
(4) Providing technical assistance to ACDBEs in overcoming
limitations, such as inability to obtain bonding or financing;
(5) Ensuring that competitors for concession opportunities are
informed during pre-solicitation meetings about how the recipient's
ACDBE program will affect the procurement process;
(6) Providing information concerning the availability of ACDBE
firms to competitors to assist them in obtaining ACDBE participation;
and
(7) Establishing a business development program (see part 26, Sec.
26.35); technical assistance program; or taking other steps to foster
ACDBE participation in concessions.
(e) Your ACDBE program must also provide for the use of race-
conscious measures when race-neutral measures, standing alone, are not
projected to be sufficient to meet an overall goal. The following are
examples of race-conscious measures you can implement:
(1) Establishing concession-specific goals for particular
concession opportunities.
(i) If the objective of the concession-specific goal is to obtain
ACDBE participation through a direct ownership arrangement with a
ACDBE, calculate the goal as a percentage of the total estimated annual
gross receipts from the concession.
(ii) If the goal applies to purchases and/or leases of goods and
services, calculate the goal by dividing the estimated dollar value of
such purchases and/or leases from ACDBEs by the total estimated dollar
value of all purchases to be made by the concessionaire.
(iii) To be eligible to be awarded the concession, competitors must
make good faith efforts to meet this goal. A competitor may do so
either by obtaining enough ACDBE participation to meet the goal or by
documenting that it made sufficient good faith efforts to do so.
(iv) The administrative procedures applicable to contract goals in
part 26, Sec. 26.51-53, apply with respect to concession-specific
goals.
(2) Negotiation with a potential concessionaire to include ACDBE
participation, through direct ownership arrangements or measures, in
the operation of the concession.
(3) With the prior approval of FAA, other methods that take a
competitor's ability to provide ACDBE participation into account in
awarding a concession.
(f) Your ACDBE program must require businesses subject to ACDBE
goals at the airport (except car rental companies) to make good faith
efforts to explore all available options to meet goals, to the maximum
extent practicable, through direct ownership arrangements with DBEs.
(g) As provided in Sec. 23.61 of this part, you must not use set-
asides and quotas as means of obtaining ACDBE participation.
[[Page 14513]]
Sec. 23.27 What information does a recipient have to retain and
report about implementation of its ACDBE program?
(a) As a recipient, you must retain sufficient basic information
about your program implementation, your certification of ACDBEs, and
the award and performance of agreements and contracts to enable the FAA
to determine your compliance with this part. You must retain this data
for a minimum of three years following the end of the concession
agreement or other covered contract.
(b) Beginning March 1, 2006, you must submit an annual report on
ACDBE participation using the form found in appendix A to this part.
You must submit the report to the appropriate FAA Regional Civil Rights
Office.
Sec. 23.29 What monitoring and compliance procedures must recipients
follow?
As a recipient, you must implement appropriate mechanisms to ensure
compliance with the requirements of this part by all participants in
the program. You mus