[Federal Register Volume 65, Number 175 (Friday, September 8, 2000)]
[Proposed Rules]
[Pages 54454-54471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22839]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Parts 23 and 26
[Docket OST-97-2550]
RIN 2105-AB92
Participation by Disadvantaged Business Enterprises in Department
of Transportation Programs
AGENCY: Office of the Secretary, DOT.
ACTION: Supplemental notice of proposed rulemaking (SNPRM).
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SUMMARY: In May 1997, the Department issued a supplemental notice of
proposed rulemaking (SNPRM) to revise its disadvantaged business
enterprise (DBE) regulation. The SNPRM included proposals for revising
the airport concessions portion of the DBE program. When the
Department, in February 1999, issued the final rule based on the SNPRM,
we did not publish a final version of the airport concessions proposal.
This SNPRM seeks comments on an airport concessions subpart to part
26 that takes into account comments on the May 1997 SNPRM, adapts
provisions of the rest of part 26 to the concessions context, and
proposes options for provisions affecting car rental operations at
airports. These options are based in part on a recent memorandum of
understanding between the American Car Rental Association and the
Airport Minority Advisory Council making recommendations to the
Department on this aspect of the rulemaking.
DATES: Comments should be received by October 23, 2000. Late-filed
comments will be considered to the extent practicable.
ADDRESSES: Comments should be sent to Docket Clerk, Attn: Docket No.
OST-97-2550, Department of Transportation, 400 7th Street, SW., Room
PL401, Washington DC, 20590. For the convenience of persons wishing to
review the docket, it is requested that comments be sent in triplicate.
Persons wishing their comments to be acknowledged should enclose a
stamped, self-addressed postcard with their comments. The docket clerk
will date stamp the postcard and return it to the sender. Comments may
be reviewed at the above address from 9 a.m. through 5:30 p.m. Monday
through Friday. Commenters may also submit their comments
electronically. Instructions for electronic submission may be found at
the following web address: http://dms.dot.gov/submit/. The public may
also review docketed comments electronically. The following web address
provides instructions and access to the DOT electronic docket: http://dms.dot.gov/search/.
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 (TDD), [email protected] (e-mail).
SUPPLEMENTARY INFORMATION: The airport concessions provision of the DBE
regulation implements statutory authority that is separate from the
authority for the DBE program for DOT-assisted contracting. It applies
to an industry--airport concessions--that
[[Page 54455]]
differs in a number of respects from the industries involved in DOT-
assisted contracting, whether in airports, transit, or highways.
The types of business opportunities this subpart concerns include
concessionaires, management contractors, and firms that supply goods or
services to them. None of this work is eligible for FAA grant funds.
Concession agreements generally involve high rent payments to the
airport, often computed as a percentage of the concessionaire's annual
gross receipts or a fixed amount, whichever is greater. Larger
concessionaires are often required to make a substantial investment in
a leased facility, which may be amortized over a period exceeding five
years. In some instances, airports grant a firm the exclusive privilege
to provide a particular type of concession, such as food and beverage
services, to the entire airport.
Because of these unique features of airport concessions, this
subpart differs in a number of respects from the provisions of the DOT-
assisted contracting portions of the DBE rule. For example, the
counting provisions of the rule, particularly with respect to car
rental operations, differ significantly from those in the remainder of
our DBE rules. Many provisions are parallel, however. Except with
respect to size and personal net worth standards, which differ because
of the economic characteristics of concessions, this subpart uses the
certification standards of the rest of part 26. The basic narrow
tailoring principles of part 26, including those pertaining to goal
setting, apply here as well.
We sought comment on this subpart in our May 1997 DBE supplemental
notice of proposed rulemaking (SNPRM). Because three years have elapsed
since the 1997 notice and because this version of the document is
different from the 1997 version in a number of respects, we have
decided to seek additional comment. This new SNPRM reflects many of the
comments we received on the May 1997 notice. When we refer to comments
in discussing the provisions of the SNPRM, we are referring to comments
on the May 1997 notice.
Section-by-Section Discussion
FAA Guidance
One comment asked whether the final rule modifies FAA guidance
interpreting 49 CFR part 23. As under the rest of part 26 (see
Sec. 26.15), the new rule would completely replace the old rule.
Guidance issued under the concessions portion of old part 23 would no
longer be in effect, once this subpart takes effect, because it
interprets and implements a rule that has been removed from the Code of
Federal Regulations. The provisions of the final version of this SNPRM
would now govern and will be incorporated into any new technical
assistance that FAA or DOT may issue. One piece of guidance we
anticipate issuing at the time of, or shortly after, the publication of
the final rule is a ``sample plan'' to assist airports in drafting
their concessions program. We would put this sample plan on our web
site, as we did for the sample plan we issued for the Federally-
assisted contracts portion of part 26.
Section 26.111 Do the Provisions of Subparts A-F of this Part Apply to
This Subpart?
This provision says that the rest of part 26 applies to the airport
concessions program, except where this subpart provides differently.
Section 26.113 What Do the Terms Used in This Subpart Mean?
The concession provisions in 49 CFR part 23 incorporated the
definition of ``affiliation'' from regulations of the Small Business
Administration (SBA) 13 CFR part 121. Under part 121, affiliation may
arise through joint venture arrangements, requiring the parties to
combine their gross receipts in making a determination of business
size. The SNPRM proposed to delete this provision from affiliation
rules employed in the concession program. Two comments concurred with
the proposal, and this SNPRM would adopt it. This SNPRM also reflects
an amendment made to SBA's definition, which was published in the
January 31, 1996 Federal Register (61 FR 3280).
This SNPRM would add a new definition of ``car dealership,'' which
is intended to clarify the SNPRM's provisions concerning purchase of
vehicles by car rental operations and others.
Five comments addressed the proposed exclusion from the definition
of ``concession'' of firms that only pick up and/or discharge customers
at the airport, and that have no on-airport facility. Three supported
the change, while two requested clarification. This SNPRM clarifies
that a car rental is considered ``at the airport'' if it has an on-
airport facility, including a counter at which its services are sold to
the public, or a ready return facility. The types of facilities cited
in the SNPRM are intended as examples, and a firm need not have a
particular one to qualify as a concessionaire.
In addition, in response to comments and because the Department has
received numerous questions on the issue, we are proposing to make
contracts for on-airport advertising part of the definition of
``concession.'' Placing advertising signs and other media in public
portions of an airport (e.g., the terminal, the roadways leading to the
terminal) is analogous to other businesses that we view as concessions.
A firm typically pays to lease space from the airport and places
objects in airport buildings and grounds that are directed at the
traveling public. This can be a significant business opportunity for
small businesses, including DBEs. However, the advertising agency
usually does not have an office or store on the airport from which it
sells goods or services to the traveling public. As a result, there has
been uncertainty about whether advertising meets the current definition
of ``concession.'' To resolve this uncertainty, and because we believe
that, as a matter of policy, it makes sense to make this type of
business opportunity more readily available to DBEs, we are proposing
to add this kind of advertising to the program. We seek comment on this
proposal.
Under this SNPRM, all entities meeting the definition of
``concession'' are included in the base from which overall DBE goals
are calculated, regardless of when the contract was awarded. At the
same time, the proposed rule makes clear that sponsors are not required
to modify or abrogate an existing concession agreement (one executed
prior to the effective date of the final rule) during its term. The
same procedure was used when subpart F of 49 CFR part 23, was published
in 1992.
One issue of which we have become aware concerns businesses that
may occupy a portion of airport property, serve the public in general,
but do not focus on serving passengers who use airport for air
transportation. For example, an airport may lease space on its
property, perhaps some miles from the terminal, for a supermarket or
other retail establishment that serves the local population but is not,
except perhaps incidentally, used by persons who go to the terminal to
catch a flight. We seek comment on whether we should exclude such
businesses from the definition of concession. We might do so, for
example, by changing this definition to refer to businesses that
``primarily serve the traveling public on the airport.''
In response to a comment, the term ``concessionaire'' has been
modified to include firms that own and control a portion of a
concession, in addition to those that own 100 percent of one. This
[[Page 54456]]
is in accord with our policy established at the inception of the
program that concessionaires include sublessees and joint venture
partners.
The term ``direct ownership arrangement'' has been modified to
include a reference to licensees. We concur with a comment stating that
while some corporations use licenses, others use franchises to
establish non-company owned locations at airports. Since the two
arrangements are not interchangeable as a matter of law, both are
named. This SNPRM adopts the term ``management contract or
subcontract'' with minor changes to clarify the coverage of
subcontractors.
This SNPRM retains the 1997 SNPRM's proposal that a ``small
business concern'' must be an ``existing'' business. Of three comments
on the matter, one concurred, a second opposed it, while a third
requested clarification. The one opposed believes that the provision
will unreasonably limit a sponsor's flexibility. It stated that it is
relatively common for existing firms to form new, separate corporations
or other legal entities for each of its airport concessions. The
comment said that such firms have either formed the new legal entity or
have applied for certification for the existing entity with the proviso
that the new entity would be formed if awarded the contract.
The Department believes that only existing firms should be
permitted to apply for certification as a DBE. Approval of an
application based on an assurance that an entity will subsequently form
a firm would pose legal difficulties and undermine the integrity of the
certification process.
For example, an entity might refuse to form the legal structure
that it represented in its application, leaving the sponsor with no
recourse but to impose contract sanctions.
An existing firm need not be operational or demonstrate that it
previously performed contracts at the time of its application for
certification. However, it would be required to specify its legal form
and meet applicable eligibility standards. We have retained the
provision that a firm cannot be denied certification solely because it
was newly formed. For a sole proprietorship, which consists of a single
individual, the applicant must, like other firms, submit appropriate
information sufficient for the sponsor to make an eligibility
determination.
The 1997 SNPRM invited comments on whether the concession program
should employ a personal net worth (PNW) standard. Under such a
provision, if an individual presumed to be socially and economically
disadvantaged has a PNW above the standard, the presumption of economic
disadvantage would be rebutted. Six commenters favored using a PNW
standard in the concession program, while one commenter (a firm)
generally opposed the use of any standard, for many of the same reasons
that commenters opposed adopting the standard in the rest of part 26
(e.g., a PNW standard ``penalizes success,'' the information collection
requirements are too intrusive).
Two sponsors recommended a threshold of $750,000 in order to be
consistent with the figure proposed by DOT in the 1992 NPRM, and
subsequently adopted in part 26, for the contracting program. Any
higher level, said one, would raise an issue of fairness and
credibility with the public. Others recommended $1.5 million and $2
million for the threshold, while another favored tying it to the
relative difference in size standards in the contracting and concession
programs. Another sponsor commented that it does not consider itself
qualified to determine an appropriate level and asked the Department to
provide a rationale for any that is selected. It suggested that an
individual's ability or inability to obtain a letter of credit or a
bond of a certain value would be a better indicator. It also commented
that not all wealth (e.g., undeveloped land) appearing on a personal
net worth statement has economic value for the owner.
The Department discussed in some detail why it adopted a PNW
standard in the rest of part 26, and this discussion applies in the
concessions context as well. While we are well aware that this approach
has disadvantages (e.g., some firms may be unable to participate in the
program as a result), we believe that a PNW standard can be a useful
safeguard against including in the program firms owned by individuals
who it is difficult to view as economically disadvantaged. We believe
that the concept of program eligibility based on economic disadvantage
appears to call for a threshold for determining when an owner is no
longer disadvantaged. The DBE concession program is not intended to
assist enterprises owned and controlled by socially disadvantaged
individuals who have accumulated substantial wealth. Also, in a
narrowly tailored program that is subject to judicial review, we
believe that using a PNW standard to ensure that the program is not
overinclusive can be very important in defending the program in
litigation.
Because of differences between the concessions program and the DOT-
assisted contracting program, however (e.g., the higher cash flow of
concessions, the need to raise significant capital to compete at
multiple airports), DOT has decided to adopt a different personal net
PNW standard for the concessions program. We believe that $2 million
will be a standard that will achieve the objectives of a PNW standard
while not interfering unduly with the ability of firms to succeed in
the concessions business. We believe that the $2 million limitation is
high enough to enable an owner to expand to several airports, yet is
sufficiently low to prevent the individual from amassing unlimited
assets. The figure also considers the substantial capital investment
and higher operating costs generally associated with a concession,
compared to DOT-assisted contracts. The figure would be subject to the
same exclusions as the PNW standard in the contracting program (see
Sec. 26.67, ``What rules determine social and economic disadvantage?'')
Section 26.115 To Whom Does This Subpart Apply?
Since we received no substantive comments opposed to this section,
it has been included without change.
Section 26.117 What Are the Nondiscrimination and Assurance
Requirements of This Subpart for Sponsors?
These requirements were not the subject of substantive comments to
the previous SNPRM, and have been included without change.
Section 26.119 What Information Do Sponsors Have to Retain and Report
About the DBE Concession Program?
This provision is essentially parallel to Sec. 26.11 and was
included for the same reasons as discussed in the preamble to that
section. The bidders' list requirement of that section is not repeated
here, but does apply to firms seeking concession opportunities.
Section 26.121 Who Must Implement a DBE Concessions Plan?
One comment concurred with this May 1997 version of this section,
while another urged the Department to require small primary airports to
submit DBE concession plans every two years, rather than annually. This
SNPRM would retain the provision that requires only primary airport
sponsors to implement a DBE concession plan. Sponsors of general
aviation airports, reliever airports, and nonprimary commercial
[[Page 54457]]
service airports are not subject to this requirement. Rather, they must
take appropriate outreach steps to encourage available DBEs to
participate as concessionaires whenever there is a concession
opportunity. This provision significantly reduces burdens on them.
As a clarification, the language of this version of the proposed
regulatory text gives sponsors who own more than one airport the option
to submit a concessions plan covering all of the airports. There would
be separate goals for each, however. Under the SNPRM, submitting a plan
would be a one-time exercise, with additional submissions needed only
in the case of significant changes to a plan that FAA had approved.
The FAA intends to issue, in conjunction with the publication of
the final rule, guidance for the drafting of concessions plans. This
will take the form of a sample concessions plan analogous to the sample
DBE program currently on the Department's web site for the financial
assistance portion of the DBE program.
Section 26.123 What is the basic DBE goal requirement for sponsors?
Section 26.125 What is the base for a sponsor's goal for concessions
and covered activities other than car rentals?
Section 26.129 How are a sponsor's goals expressed and calculated?
Section 26.131 What are public participation requirements concerning a
sponsor's goals?
Section 26.133 What are the contents of a sponsor's goal submissions
to FAA?
Section 26.135 What does FAA do with your goal submission?
Section 26.137 What are the sponsor's obligations concerning the use
of race-neutral and race-conscious measures?
Section 26.139 What are the steps a sponsor takes to meet its DBE
goals?
This proposed set of requirements for goal-setting differs from
that of the May 1997 SNPRM in some respects. Most importantly, this
SNPRM proposes the requirement that sponsors must have two overall
goals: One for concessions and covered activities other than car
rentals, and the second for car rentals. Car rental goals are discussed
separately below. Consistent with statutory requirements, management
contracts and purchases by concessions from DBE suppliers form part of
the goal.
Sponsors' goal submissions would cover a period of three to five
years, in order to reduce the administrative burdens associated with
the goal calculation and review process. The submissions would include
goals for each year in the period, however. If circumstances changed
significantly during this period, recipients would have to make a mid-
course adjustment.
We propose that sponsors would calculate their goals by using
methods parallel to those used in Federally-assisted contracting under
the rest of part 26. This approach to goal-setting is by now familiar
to airports, since they have already used it in their Federally-
assisted contracting DBE programs. We seek comment on whether there
should be any adjustments made to these requirements in view of the
differences between contracting and concessions.
In the May 1997 SNPRM and the current rule, the Department proposed
that sponsors could base goals on the number of concessions, rather
than the dollar volume of concessions. While this approach appears
permitted by the language of the concessions statute, it has been used
infrequently. It may be less suited to measuring the ``level playing
field'' that we seek to describe in the goal setting process. For this
reason, we propose that a sponsor would have to use the program waiver
process of Sec. 26.15 to employ this approach. To ensure legal
sufficiency of such a waiver request, the FAA Chief Counsel's office
would concur in any waiver request before it was sent to the
Administrator for action.
The only situation we foresee in which this approach would be
necessary is one in which the airport does not know the gross receipts
of all or a significant portion of its concessionaires. One alternative
would be to require concessionaires to make this information available
to airports, though we recognize that the businesses might prefer to
keep this information confidential. We seek comment on the best way of
resolving this issue.
The proposed rule notes that a firm's overall receipts from non-
concession activities do not form part of the base for goals. For
example, airline and other aeronautical activities are not considered
concessions. Therefore, the portion of a food service business's
receipts from catering to airlines would not be part of the base for
goals.
Comments were mixed on the 1997 SNPRM's proposals to require
sponsors to provide for public participation in setting overall goals.
Some felt the process would be burdensome and of little value. Since
sponsors are generally public agencies, information on their concession
plans is readily available to the public, commenters said. While this
true, sponsors do not uniformly invite input from interested persons or
groups when establishing overall goals. We believe that the process
will assist in setting the goals at levels that are reasonable and
consistent with the factors upon which goals are based. The objective
of the process is to involve as many stakeholders as possible and to do
so prior to setting the goals.
Therefore, this SNRM retains the public participation provision
with some modifications. It adds to the organizations that sponsors
must consult. They now include, in addition to minority, women's, and
concessionaire groups (changed from ``general contractor'' groups),
trade associations representing concessionaires currently located at
the airport as well as existing concessionaires themselves. The SNPRM
would not pre-empt state or local freedom of information or sunshine
act procedures.
A sponsor is required to provide for public participation at the
beginning of each 3-5 year goal submission process. The requirement to
``consult'' with organizations as referenced in the rule means that
sponsors should conduct informal outreach and actively solicit their
views. A public hearing is not required.
Comments said that the public participation process is intended to
benefit the sponsor, which is responsible for adopting and submitting
acceptable goals. Further, the process does not confer any third party
rights or private rights of action. While we concur with these
statements, we have not adopted a recommendation to include disclaimers
to this effect. Since the notice to be published advises that comments
are for informational purposes only, we believe that it adequately
expresses the intent and limitations of the public participation
process.
In connection with the public participation process, several
comments recommended that overall goals for concessions be set on the
same cycle as goals for DOT-assisted contracting, so that a single
notice can be published concerning both. The Department has no
objection to this approach. We will require goals (except for the first
time) to be submitted on August 1, as is the case for Federally-
assisted contracting goals, though of course concessions goals would
not have to be submitted every year.
The public participation process is not intended to substitute for
the requirement that sponsors and concessionaires make good faith
efforts in notifying and soliciting the interest of DBEs in specific
concession offerings. We concur with a comment that public prebid or
preproposal conferences provide an excellent forum in which to
[[Page 54458]]
discuss all aspects of a contract offering, including DBE contract
goals. However, such goals should initially be submitted as part of the
sponsor's concession plan. The intent of the rule is that overall goals
and contract goals are to be reviewed and approved by FAA prior to
contract solicitation.
As under the rest of part 26, this subpart prohibits group-specific
goals. Goals must cover DBEs as a whole. However, as under the rest of
part 26, recipients may seek a program waiver if they believe group-
specific goals are necessary (see Sec. 26.15).
In a narrowly tailored affirmative action program, sponsors need to
consider two types of measures for meeting their goals: Race-neutral
and race-conscious measures. This SNPRM lists several examples of each.
The SNPRM notes that these efforts should be spread among various types
of business opportunities, and not concentrated in one place. As under
the rest of part 26, sponsors must estimate the portion of their goals
they project meeting through race-conscious and race-neutral means.
Sponsors would make this estimate in the same way they make the
parallel estimate under the rest of part 26. Maintaining data on race-
conscious and race-neutral participation would also be required. As
generally under part 26, sponsors would not be penalized simply for
failing to meet their overall goal, as long as they operate their
program in good faith.
Section 26.141 How do concessionaires and covered activities other
than car rentals meet concession-specific DBE goals?
Section 26.145 How do sponsors count DBE participation toward goals
for items other than car rentals?
The most common race-conscious measure sponsors are likely to use
to obtain DBE participation is the concession-specific goal, analogous
to the contract goal in the DOT-assisted contracting portion of part
26. As with contract goals, a concessionaire must either meet a
concession-specific goal or demonstrate good faith efforts to the
sponsor. For the most part, counting DBE participation toward
concession-specific goals follows the same rules as counting DBE
participation under the rest of part 26.
There are some differences, however. The SNPRM would specify that
costs in building concession facilities could count toward concession
goals. One comment on the 1997 SNPRM concurred with the proposal to not
require a DBE who performs a concession or management contract to
perform at least 30 percent of the work with its own forces in order to
be considered to perform a commercially useful function. Another
comment disagreed, saying that 30 percent represents a reasonable
minimum amount in a joint venture and anything less reduces the DBE's
role to a passive one.
The Department believes that the 30 percent rule may impose an
unrealistically high standard for concessions and management contracts.
DBE participation in these arrangements often is less, yet DBEs
participate meaningfully. Moreover, a DBE partner in a joint venture
must have a clearly defined role in order to qualify as eligible for
participation. Accordingly, the SNPRM would not apply the 30 percent
requirement to either concessions or management contracts.
Nevertheless, recipients would be responsible for ensuring that DBEs
perform a commercially useful function in order for their participation
to count toward DBE goals.
This section also proposes counting 100 percent of the amount of
cost of materials and supplies obtained from DBE regular dealers. This
differs from the contracts portion of part 26. The reason for the
difference is that the 100 percent rule here appears more consistent
with the concessions statute and its legislative history. We seek
comment on this issue and on whether there should be additional
concession-specific counting provisions.
Section 26.127 What is the base for a sponsor's goal for car rentals?
Section 26.143 How do car rental companies meet concession-specific
DBE goals?
Section 26.147 How do sponsors count DBE participation toward car
rental goals?
Car rentals have long been the most difficult and contentious
subject in the concessions rulemaking. Recently, the American Car
Rental Association (ACRA), which represents many car rental companies,
and the Airport Minority Advisory Committee (AMAC), which represents
many DBE firms that work at airports, agreed on a memorandum of
understanding concerning the treatment of car rental operations under
this rule. The MOU makes a number of recommendations to the Department
on this issue. For commenters' information, we are reproducing the text
of this agreement below (signature lines and some duplicative heading
material have been omitted):
Memorandum of Understanding Between the Airport Minority Advisory
Council and the American Car Rental Association Members Including Alamo
Rent-A-Car, Inc.; Budget Rent A Car Corp.; Dollar Rent A Car Systems
Inc.; Enterprise Rent-A-Car Company; and, National Car Rental System,
Inc.; The Hertz Corporation, and, Avis Rent A Car System, Inc. on
Issues Relating to the Department of Transportation's Pending
Regulations on Disadvantaged Business Enterprise Participation in
Airport Concessions, March 13, 1999
I. The Parties to the Memorandum of Understanding
This Memorandum of Understanding (``MOU'') is between
the Airport Minority Advisory Council (``AMAC''), Alamo Rent-a-Car,
Inc., Budget Rent A Car Corp., Dollar Rent A Car Systems, Inc.,
Enterprise Rent-a-Car Company, and National Car Rental System, Inc.,
each a member company of the American Car Rental Association
(``ACRA''), the Hertz Corporation (``Hertz''), and Avis Rent A Car
System, Inc. (``Avis''). The member companies of ACRA, Hertz and
Avis are hereinafter collectively referred to as ``the car rental
companies''. AMAC and the car rental companies are hereinafter
collectively referred to as ``the Parties'' and individually as a
``Party''.
This MOU expresses the consensus of the Parties
regarding the subject matter hereof, and sets forth each Party's
intent with regard to the issues discussed. This MOU is not intended
as a contract; however, the Parties intend to act in accordance with
the understandings contained herein.
II. Basis for Memorandum of Understanding
Whereas:
The Parties are keenly interested in assuring the
continued viability of the federal disadvantaged business enterprise
(''DBE'') airport concessions program;
The Parties strongly believe that it is in their mutual
interest and the interest of DBEs that the U.S. Department of
Transportation (``DOT'') promulgate a final rule governing DBE
participation in airport concessions as soon as possible;
The Parties desire to assist DOT develop a final DBE
airport concessions rule that is both practical and effective in
terms of public policy and business practices; and
The Parties have engaged in a process of constructive
dialogue concerning certain critical issues regarding the objectives
and content of a final DBE airport concessions program rule and the
implementation of the rule.
AMAC and the car rental companies do hereby agree to advance and
advocate, both together and separately, in public and in private,
the principles embodied in this MOU and to work to assure their
inclusion in a final DOT rule governing DBE participation in airport
concessions. Further, the Parties also agree to explore appropriate
ways in which they can work together to enhance DBE business
opportunities with and within the rental car industry.
III. DBE Dealer Size Standard
AMAC and the car rental companies collectively
recognize that the existing Small
[[Page 54459]]
Business Administration (``SBA'') size standard for new car dealers
should not be applied to the DBE airport concessions program because
of the large volume of vehicles purchased by car rental companies
through their fleet programs; and,
AMAC and the car rental companies collectively urge DOT
to adopt a new car dealer size standard of 500 or fewer employees as
the criteria for determining whether a new car dealer meets the
definition of a small business under the DBE airport concessions
program.
IV. Unified Certification Program
The Parties are aware that DOT has promulgated a new
Unified Certification Program to promote more simplicity and
uniformity in the DBE certification process for all DOT-assisted
contracts, while at the same time maintaining the integrity of the
process. Toward this latter goal, this new requirement includes
appropriate review mechanisms for airports and due process
safeguards for DBE firms. The Parties urge DOT to apply the Unified
Certification Program requirements to the airport concessions
program.
V. Federal and Airport DBE Participation Goals and Compliance by
Car Rental Companies
The Parties agree that 10 percent of the gross revenues
generated by car rental concessions operating at federally-assisted
airports is an appropriate nationwide aspirational goal for the DOT
airport concessions program.
The Parties believe that compliance by a car rental
company with federal and individual airport DBE participation goals
may be achieved either through direct ownership arrangements,
through vendor services and purchases, or through a combination
thereof. Further, the Parties agree that under federal law
applicable to the DBE airport concessions program, with respect to
car rental concessions DBE vendor purchases and/or direct ownership
arrangements are equally valid and, accordingly, no preferences or
quotas are permitted. The Parties urge DOT to include a clear
statement of the law concerning this matter. Specifically, the final
rule promulgated for DBE participation in airport car rental
concessions should clearly state that ``good faith'' compliance
efforts by a car rental company do not require the company to pursue
direct ownership arrangements before pursuing vendor purchases.
VI. ``Good Faith'' Efforts and Compliance with DBE Goals
The Parties believe that a ``good faith efforts''
standard substantially similar to the standard applicable to DBE
participation in DOT-assisted contracts should be included in the
final DOT airport concessions program rule.
The Parties believe that the actions listed below are
primary examples of bona fide good faith efforts with respect to DBE
participation in airport concessions and that they should be
acknowledged as such when undertaken by the car rental industry:
Conduct a comprehensive survey of vendors to determine
which qualify as DBE's for purposes of the airport concessions
program and encourage other vendors who may be eligible to apply for
certification.
Identify opportunities for DBE's to provide goods and
services, and engage in proactive outreach efforts to inform such
firms of the opportunities.
Join and support local and national minority, women,
and small business organizations.
Advertise in local and national DBE-focused
publications for vendors that can provide needed goods and services.
Make DBEs aware of solicitations in a timely manner and
meet with firms to determine whether they fulfill requirements as
car rental operators, or suppliers of goods and services.
Document outreach efforts, including those that are
unsuccessful.
Whenever a new opportunity arises, use a combination of
sources and outreach efforts (such as those cited above) to identify
DBEs that fulfill the need.
VII. Ownership Arrangements
The Parties encourage DOT to acknowledge that in the
first instance a decision to enter into a direct ownership
arrangement with a DBE firm is a discretionary matter for the car
rental company. Thereafter, once a decision has been made the option
to enter into a joint venture, franchise agreement, or other
ownership transaction with a DBE firm for purposes of compliance
with an airport's DBE goal (to operate a rental car concession or
otherwise) is a business decision to be made exclusively by the car
rental company and its potential DBE co-venturer, franchisee, or
partner.
VIII. DBE Participation Goals and Car Rental Company Vehicle
Purchases
The Parties believe that it is essential for the final
DOT airport concessions program rule to acknowledge and take into
account the significance and the cost of new vehicles acquired by
car rental companies (given that new vehicles constitute the bulk of
a car rental company's vendor purchases).
The Parties agree that the functions performed by
dealers in transferring ownership of new vehicles are necessary and
constitute a commercially useful function. Subject to the aggregate
credit percentage limitation outlined below, when those functions
are performed by a certified DBE vehicle dealer the Parties agree
that a car rental company should be given full credit for the
contract price of the vehicle toward the company's DBE compliance
goal. However, the Parties further agree it is critical to encourage
DBE participation in a wide array of business opportunities. Thus,
the Parties recommend that not more than seventy (70) percent of a
car rental company's DBE goal at an airport can be satisfied by new
vehicle acquisitions. Nevertheless when an airport has established
an approved DBE participation goal greater than 10 percent, the
Parties recommend that the portion of the goal beyond 10 percent may
be satisfied through additional vehicle acquisitions.
IX. National and Regional DBE Vendor Contracts; Geographic
Preferences
The Parties believe that the final DBE airport
concessions program rule should take into account the use by car
rental companies of national and regional vendor contracts for the
acquisition of certain products and services utilized at multiple
airport car rental concession locations. Given that such a contract
may represent a potential growth opportunity, the Parties recommend
that an airport serviced under such a contract with a certified DBE
firm allocate and credit a pro rata share of the contract revenues
toward the car rental company's DBE compliance goal. The allocations
would be based on information provided by the car rental company,
which would bear the responsibility for its accuracy, and would be
subject to audit by DOT.
The Parties recommend that, for federal DBE goal
compliance purposes, DOT specify the nation as a whole as the market
area from which a car rental company can seek DBE's to participate
in an airport's concessions program.
X. Duration and Effect of MOU
The Parties agree that policy recommendations contained
in this MOU do not have the effect of law or supercede the DOT
airport concessions program rules and regulations. Nor do the policy
recommendations constitute an admission against interest with
respect to the contents hereof or to the provisions of federal law
authorizing the airport DBE concessions program.
The Parties acknowledge that the car rental companies
are subject to the provisions of the existing DOT airport
concessions program rules until such time as new regulations are
promulgated.
The Parties agree that upon promulgation of a final
airport DBE concessions rule that this MOU shall be of no further
force or effect.
The undersigned officers of AMAC and the car rental companies
agree that their organizations, their members, and their
representatives will support all of the terms of this Memorandum of
Understanding in both public and private. To the extent necessary,
AMAC and the car rental companies agree to meet with DOT
representatives to urge the adoption of a final DOT DBE airport
concessions rule consistent with the terms of this Memorandum of
Understanding.
Addendum to the Memorandum of Understanding
This Addendum to the Memorandum of Understanding dated March 13,
1999, (``Memorandum'') by and between Alamo Rent-a-Car, Inc.; Budget
Rent A Car Corp.; Dollar Rent A Car Systems, Inc.; Enterprise Rent-
A-Car Co.; National Car Rental System, Inc., each a member company
of the American Car Rental Association (``ACRA''), The Hertz
Corporation (``Hertz'') and Avis Rent A Car System, Inc. (``Avis''),
(ACRA , Hertz and Avis are collectively referred to herein as the
``Companies'') and the Airport Minority Advisory Council (``AMAC'')
is by and between the Companies, AMAC, and Thrifty Rent-A-Car
Systems, Inc. (``Thrifty'').
[[Page 54460]]
Whereas, Thrifty is a member of ACRA;
Whereas, Thrifty is by strategy and design a franchise system
with more than 90% of its retail outlets worldwide owned by
independent businesses who are licensed to use the Thrifty trade
names, systems and technologies; and
Whereas, Thrifty has adopted a program especially designed to
increase diversity in our franchise owner base.
Thrifty supports and agrees with all of the principles expressed
in the Memorandum except for the statement in Paragraph 2, Article V
regarding preferences and ``co-equal'' methods of car rental company
compliance with Federal and airport DBE participation goals.
The Department appreciates the efforts of AMAC and ACRA, and notes
that their MOU provides useful information for the development of the
Department's proposals in this SNPRM. Because the approach the MOU
takes toward counting car rental DBE participation differs
significantly from the counting approach taken by the rest of part 26,
and because the dollar volumes of the car rental business at many
airports is very high, we believe that it is best to incorporate the
MOU's concepts in a separate portion of the DBE rule. Airports would
have car rental goals that are separate from their other DBE goals, and
the counting mechanism in this portion of the rule would apply only to
car rental goals. The purpose of this separate treatment is to ensure
that the car rental portion of an airport's concession operations does
not so dominate the DBE concessions program that other types of
concessions (e.g., retail stores in the terminal) are overlooked. The
method for calculating car rental goals would essentially be the same
as described above for other types of concessions. Both are modeled on
the narrowly-tailored methods for goal setting in the DOT-assisted
contracting portion of part 26.
The Department seeks comment on an additional option for
calculating car rental goals. This option envisions that car rental
companies themselves would voluntarily establish nationwide goals for
DBE participation. Following FAA approval, the companies would certify
their compliance with this requirement to airports. The individual
airports would not have the task of calculating their own car rental
goals, and the companies would not have to work with multiple airports
on car rental goals. This approach would therefore reduce
administrative burdens on everyone concerned. It also responds to the
desire of the parties to the MOU for a national approach to car rental
goals. The companies would use a goal calculation approach like that
described above for airports.
We are aware that some airports may be concerned that this national
approach might diminish their ability to respond to local conditions
and constituencies. We seek comment on this point, and on how this
concern is best balanced with this option's greater administrative
efficiency. This option would also include a provision directing car
rental companies to spread their DBE participation equitably throughout
their systems, lest a company meet all its obligations in a few parts
of the country to the exclusion of others.
We do not believe this option is mutually exclusive with the
proposal to authorize airports to set car rental goals. For example,
the final rule might say that, when a car rental company had an FAA-
approved national goal, local airports would accept their
certification. Where a company did not have a national goal, or where
there was a local company, the airport would set its own car rental
goal. The Department seeks comments on these approaches and how they
might work together. In both approaches, the companies would make good
faith efforts to meet goals in a way parallel to that described above
for airports.
The proposed car rental provisions incorporate the list of good
faith efforts mentioned in the MOU. They also restate the statutory
provision that says that car rental companies are not required to
change their corporate structure to comply with this regulation. This
``change to corporate structure'' language was the source of some
comment on the May 1997 SNPRM. Three organizations commented on the
meaning of the phrase. One firm stated that it consists of corporately-
owned and managed operations at large or medium size airports except
for certain pre-existing license agreements. When an opportunity
arises, it acquires licenses at large or medium size airports. It
comments that its firm is very much a system of airport operations
owned and operated by a corporate entity. It believes that any rule
that would compel it to abandon this structure would violate the
statute. Further, the firm stated that any rule compelling it to make
any detailed justification for its existing corporate structure would
be unnecessary.
Another comment expressed concern that DOT may be seeking to adopt
a very narrow definition so that in some circumstances sponsors may
argue that a specific concession bid requirement does not require a
change in corporate structure. This commenter believes that such
ambiguity can only give rise to future disagreements or conflicts
between the car rental industry and sponsors. A summary of other points
made by this comment follows.
Any attempt to force car rentals into direct ownership
arrangements, either as a condition of bidding on a concession
contract or as a determining factor in location of a
concessionaire's facilities at an airport, directly violates both
the language of the statute and intent of Congress. Each time a car
rental sells a license or franchise to operate a car rental
establishment at an airport, a change in corporate structure of the
lessor or franchisor is required. Direct ownership possibilities do
not arise frequently at airports across the country for most
companies in the car rental industry. For larger nationwide car
rentals, most of their airport locations are company owned and
operated. For these larger firms, franchisees or licensees that do
exist almost uniformly have perpetual franchises or licenses to
operate at an airport or in a region. Thus, DOT and sponsors should
not assume that just because a new concession contract is being bid
at an airport, each car rental has an opportunity to engage in a
direct ownership arrangement without changing its corporate
structure.
Car rentals may have franchises and licensees extensively during
the early years of a firm's existence as they attempt to spread
across the country. As these companies mature and reach all their
desired markets, the parent company starts to buy back whatever
franchises or licenses become available. Car rentals follow this
basic strategy because, under federal law, they are prohibited from
dictating pricing policies to franchisees and licensees. In order to
build a truly nationwide car rental company, most corporations
desire to control the quality of service, pricing, quality of
vehicles rented, and as many other aspects of the rental transaction
and the interaction with customers as possible. As a result, as
franchises and licenses become available, car rentals tend to buy
them back.
The Department concurs that a decision to operate a car rental
through a franchise or license, rather than directly by the
corporation, changes a firm's corporate structure. The selling of a
franchise or license is not explicitly referenced in the legislative
history pertaining to change in corporate structure. Nevertheless, we
believe that such a sale does constitute a ``transfer of assets,''
which is cited in the Congressional statement as an indicator of a
change in corporate structure.
We believe that a change in corporate structure includes a decision
by a firm to sell a franchise or license to operate at a particular
airport facility. If a corporation notifies a sponsor that it will sell
a franchise or license to operate at the airport, the sponsor would be
authorized to require the firm to make good faith efforts to meet a DBE
goal. Good faith efforts would include
[[Page 54461]]
notifying DBE firms of this opportunity and taking other appropriate
steps.
A third commenter believes that the provision would perpetuate a
system in which DBEs are not provided opportunities to participate in
direct ownership arrangements in the car rental industry. It comments
that the broad definition of ``change to corporate structure'' proposed
in the May 1997 SNPRM would eliminate any requirements for car rentals
to make good faith efforts to involve DBEs in such arrangements. It
recommends that DOT consider requiring car rentals to demonstrate
positive efforts in this area, just as other concessionaires and DOT-
assisted contractors must do. The Department believes that the current
SNPRM, in its language concerning direct ownership arrangements,
correctly interprets the constraints imposed by statute in levying
requirements on car rentals and responds to the points made in the MOU.
The SNPRM proposes a counting mechanism patterned after that of the
MOU. One difference between the MOU and the SNPRM pertains to the
percentage of a goal that may be met through vehicle purchases. The MOU
provides that a car rental operation could meet up to 70 percent of its
goal through vehicle acquisitions, with the rest presumably coming
through vendor purchases and other means. The SNPRM incorporates this
recommendation. However, the MOU also suggests that when an airport has
established an approved DBE participation goal greater than 10 percent,
the portion of the goal beyond 10 percent could be satisfied through
additional vehicle acquisitions. The SNPRM does not include this latter
provision. In our view, it places too much weight on the statutory
aspirational 10 percent goal as an actual operational portion of the
program. It also would have the effect of capping the proportion of DBE
participation in car rentals from sources other than vehicle
acquisitions to what may be less than one might expect in a ``level
playing field'' situation. We do not think this is advisable as a
matter of law or policy. However, we seek further comment on this
issue.
The SNPRM makes it clear that car rental companies are not required
to meet their goals through direct ownership arrangements. However, any
participation they choose to obtain through such arrangements may be
counted toward their goals.
Section 26.149 What Certification Procedures and Standards Do
Recipients Use To Certify DBE Concessionaires?
The SNPRM proposes that, with the exceptions listed in this
section, certification for the concessions program be treated the same
as certification for other purposes under part 26. The exceptions
concern such subjects as size, personal net worth, and affiliation.
The SNPRM does not propose to adopt certain additional changes that
commenters on the May 1997 SNPRM requested. One comment requested that
sponsors be allowed to report to FAA, but not count toward their goals,
a DBE who is a limited partner in a limited partnership. The comment
said that in a concession such as a duty-free shop, the functions of a
limited partner, although not as substantial as a general partner or a
joint venture partner, are nevertheless meaningful. This sponsor
commented that DBEs were reluctant to enter into joint ventures with
non-DBEs for duty-free concessions because even if the DBE's interest
is relatively small, it would be potentially responsible for
liabilities and obligations of the entire joint venture or partnership.
The limited partner in a limited partnership cannot, by statute,
exercise control over the operations of the business. In view of this,
we take the position that a limited partnership is not eligible for
certification if the general partner is a non-DBE or a non-
disadvantaged individual. The DBE participation that sponsors report to
FAA annually includes accomplishments in meeting the overall goal. Only
those firms certified as DBEs in accordance with this part can be
counted toward meeting the goals. The definition of ``joint venture''
in Sec. 26.5 has been modified to specify that the capital contribution
by the DBE joint venture partner must be commensurate with its
ownership interest.
One commenter recommended that the rule provide guidelines on the
eligibility of Limited Liability Corporations (LLC), saying that this
arrangement is commonly used in concessions throughout the country. The
comment also said:
* * * one of its basic characteristics is that management of the
company may be rotated among its members (same as shareholders in a
corporation). Thus, it is important that sponsors obtain written
assurances that no management responsibility changes will be made
within the firm without prior notification to (the) sponsor. The
rest of the business structure parallels a corporation, and should
be reviewed as such.
The Department's research indicates that LLCs vary in structure
from one state to another. In the absence of a uniform national statute
or standards, we have decided not to specifically address LLCs in the
rule. However, like every other applicant for certification, a business
that proposes to operate as an LLC must meet the eligibility standards
adopted in the final rule.
Under Sec. 26.83(i), a DBE is required to inform the recipient (or
UCP) in writing of any change in its circumstances affecting its
ability to meet eligibility standards, including control, or any
material changes to the information in its application form. The
written notice must be provided within 30 days of occurrence of the
change. We believe that this procedure will enable recipients to decide
whether a firm continues to qualify as a DBE. We do not concur that a
DBE should be required to notify the recipient prior to making changes
to its management responsibilities. As discussed in connection with the
definition of ``existing firm'' in Sec. 26.111, a recipient can deny
certification or recertification only to existing firms. It cannot make
a determination based on a proposed change, nor should it be required
to give advice to a firm on the acceptability of the proposed change.
The May 1997 SNPRM did not propose to permit ``dealers in
development'' (i.e., dealers participating in manufacturers'
development programs that did not fully meet part 26 ownership and
control criteria) to be certified as DBEs. All four comments on the
matter opposed the Department's approach. Comments to the May 1997
SNPRM repeated assurances that although disadvantaged individuals own
less than 51 percent of these businesses, they exercise control over
the daily operations. Further, allowing their participation would
accelerate the redemption by these owners of preferred stock held by
the manufacturer and hence, their road to 51 percent ownership. Other
comments said that the proposal excludes small disadvantaged businesses
from reaping the benefits of the DBE program in favor of larger, ``less
disadvantaged'' businesses that have been able to accumulate the more
than $1 million in start-up costs needed to capitalize a dealership.
Comments requested that DOT grant a narrowly-crafted exception to
the DBE ownership requirements which permits these dealers
participating in a recognized development program to be eligible as DBE
vendors. The car rental industry needs a large number of certified DBE
new car dealers from
[[Page 54462]]
which to purchase cars, a comment says, to assist them in meeting
goals.
In the preamble to the May 1997 SNPRM, we explained why these
arrangements do not meet eligibility standards for ownership or
control. In particular, to qualify as a DBE, the control of the
operations of a business must rest with one or more disadvantaged
individuals who own it. In the case of some dealers in development,
however, disadvantaged individuals own less than 51 percent of the
business. Thus, control of the firm cannot rest with disadvantaged
individuals, as required under the statutory definition of a DBE, if
the manufacturer is a non-DBE. The Department does not have the
authority to grant an exemption, however carefully crafted, from a
statutory requirement.
We also concluded that the dealers in development and the
manufacturers could be viewed as having a franchisor/franchisee
relationship. Under this final rule, a business operating under a
franchise agreement is eligible for certification only if it qualifies
as a DBE and the franchisor is not affiliated with the franchisee. If
the firms are affiliated, then their gross receipts are combined when
making a size determination. Since the manufacturer in a dealer
development program controls the business, affiliation is inferred.
Assuming that the number of employees of the manufacturer exceeds the
limit of 500 set by this regulation, dealers in development would not
meet the applicable size standard.
Based on this analysis, these arrangements do not meet any of the
three statutory standards for DBE eligibility--ownership, control, and
size. Since the manufacturer owns as much as 80 percent of the
business, we would generally presume that it would retain 80 percent of
profits made through participating in the DBE program. We would also
expect the DBE generally to retain 20 percent. We believe that counting
such dollars as meeting DBE goals conflicts with the goals and
objectives of the program. Further, with the very extensive resources
available to the manufacturer, these arrangements could be expected to
compete successfully against smaller firms, including DBEs meeting
eligibility criteria. DBEs could be prevented from gaining the benefits
of the program in favor of firms that do not qualify under such
criteria. This result also runs counter to the program's goals and
objectives.
We stated in the preamble to the May 1997 SNPRM that in the event
the Department adopts a developmental program or a mentor-protege
program for concessions at a future date, we would reexamine our
position to determine if dealers in development qualify. The DOT-
assisted contracting portion of part 26 does provide for a mentor-
protege program. We point this out simply to observe that DBEs
participating as proteges in this program must meet eligibility
standards. For these reasons, we have not adopted the recommendation to
allow dealers in development to qualify as DBE participation in the
concession program.
The fact that the Department cannot make an exception to the
certification standards for dealers in development should by no means
be taken as a disparagement of the program. The Department applauds the
goals of the program and the noteworthy efforts of the major automobile
manufacturers to provide opportunities for fledgling businesses to grow
into self-sustaining entities.
Section 26.151 What Monitoring and Compliance Procedures Must Sponsors
Follow?
This section is not changed substantively from the May 1997
version. The principles established under the DBE contracting program
for monitoring prime contractors' compliance may also be useful in the
concession program. A primary purpose of the procedures is to verify
that the work committed to DBEs as a condition of contract award is
actually performed by the DBEs. Sponsors would generally rely on local
law to enforce contractual provisions in the event of noncompliance.
The grant legislation does not specify contract sanctions.
Section 26.153 Does a Sponsor Have To Change Existing Concession
Agreements?
This SNRM rule would retain the May 1997 provision that sponsors
are not required to modify or abrogate existing concession agreements,
defined as ones executed prior to the effective date of this part.
Under the rule, it is the sponsor that establishes and levies
individual contract goals. One commenter wanted to know whether bidders
and proposers will be responsible for establishing these levels. As
discussed above, however, sponsors must provide for public
participation in goal-setting process, and overall goals depend, in
part, on the percentage levels of individual contract goals.
Section 26.155 What Requirements Apply to Privately-Owned Terminal
Buildings?
This provision is identical to the version in the May 1997 SNPRM.
We did not receive any comments on it.
Section 26.157 Can Sponsors Enter Into Long-Term, Exclusive Agreements
With Concessionaires?
This provision proposes that long-term, exclusive leases are
prohibited, except where the sponsor obtains FAA approval. The section
proposes a procedure for obtaining such approval, including a list of
information FAA needs before it can grant this approval. DBE
participation would be a key part of this information. Comments on the
May 1997 version of this section generally favored requiring
opportunities for DBE participation as part of a long-term, exclusive
lease arrangement.
Section 26.159 Does This Subpart Preempt Local Requirements?
This proposed section restates the statutory provision that the
regulation does not preempt local requirements. Sponsors may, however,
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, not to Federal requirements for confidentiality (e.g., with
respect to information submitted in response to PNW requirements).
Section 26.161 Does This Subpart Permit Sponsors To Use Local
Geographic Preferences?
This SNPRM proposes to allow a geographical preference in
concessions in limited situations. Several comments on the May 1997
SNPRM addressed this subject. One asked if a sponsor could deny a DBE
an opportunity to compete for a contract solely because it resides
outside a given geographic area. Another said that lack of guidance on
the matter further frustrates reasonable means of compliance because
sponsors do not consider the limitations in availability and
competitive pricing in the sponsor's geographic area. Another comment
also opposed local geographic preferences, saying that if the
Department has concluded that Congress made a nationwide determination
of discrimination in the airport concession industry, then any remedial
action it takes, such as the DBE concession program, must be nationwide
in scope. The comment urged the Department to correct this
contradiction and prohibit local
[[Page 54463]]
preferences in the DBE airport concession program unless a local
governmental entity has made an independent determination of racial
discrimination in the airport concession industry in the local
geographic area. The comment states further:
Sponsors must not be permitted to rely on an alleged
congressional determination of nationwide discrimination to adopt
local racial preferences. The Supreme Court declared in Croson: ``We
have never approved extrapolation of discrimination in one
jurisdiction from the experience of another * * *'' (S)everal firms
in the (car rental) industry feature the vehicles of specific
automobile manufacturers in their rental fleets. The industry's
experience in the past has been that new car dealers selling these
featured makes of vehicles are not available in all areas, or that
local preferences encourage those dealers that are available to
quote vehicle prices that are substantially higher than those
dealers outside of the local geographic area.
The Department recognizes that sponsors have a special stake in
facilitating participation by firms doing business in their local
areas, and it is not the purpose of the DBE program to intrude upon
that mission. As noted, the prohibition on local geographical
preferences in 49 CFR part 18 applies only to DOT-assisted contracts
and not to concessions. Further, under part 18, geographical location
can be a selection criterion, subject to certain limitations, when a
recipient contracts for architectural and engineering services (49 CFR
18.36(c)(2)). At the same time, the Department recognizes that local
geographic preferences have disadvantages, 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.
Based on these considerations, the Department has decided to
propose allowing local geographical preferences, but only under limited
circumstances. A sponsor would have to submit a program waiver request
under Sec. 26.15 in order to secure approval for a geographic
preference. The FAA Administrator would decide whether to grant the
request.
The requested waiver would have to conform to several requirements.
The preference would have to be described in detail as to area and
operation. When the procedure is used, the contract solicitation would
have to fully inform competitors of the operation of the preference.
The preference would have to be designed and implemented on a race-
neutral basis, applying equally to DBEs and non-DBEs. Thus, if a
sponsor restricted the geographical area of firms eligible to compete
for a given contract, all DBEs and non-DBEs within the area to which
the preference pertains must be allowed to compete. A preference would
be unacceptable if it conflicted with any provision of the rule or has
the effect of defeating or substantially impairing accomplishment of
the program's objectives. Any goals set on contracts subject to the
preference would have to be based on the relative availability of DBEs
within the area covered by the preference and could not have the effect
of limiting DBE participation. The preference would not have to be
applied to every covered contract, however.
Because of the potential problems that could arise with the use of
local preferences, the Department seeks comment on whether, even with
these safeguards, the final rule should permit preferences.
Appendix F--Size Standards for the Airport Concession Program
All five comments on the proposed size standard for car dealerships
concurred, and the proposal is retained as part of the SNPRM. One
comment concurred with the proposed inflationary adjustment to the size
standards for concessionaires. The adjustment in the final rule has
been updated to reflect more recent statistical information. The
Department of Commerce, Bureau of Economic Analysis, prepares estimates
of personal consumption expenditures of goods and services, many of
which are sold to the public by airport concessionaires. The implicit
price deflator for personal consumption expenditures was 11.3 from June
1992 to March 1998. (In the interim between this time and the
publication of our final rule based on this SNPRM, FAA will update this
information and make adjustments as needed.) Since size standards for
concessionaires were originally established and became effective June
1, 1992, the second quarter of 1992 is used as the base period. 11.3
percent represents the rate of increase since that time. By multiplying
the appropriate size standard by 1.113, we are able to adjust dollar
figures for inflation. Thus, $40,000,000 multiplied by 1.113 yields
$44,520,000 as the new size standard for auto rental concessions.
$30,000,000, when multiplied by 1.113, yields $33,390,000 as the new
size standard for many other categories of concessionaires.
One comment concurred with the proposed size standard of $5.0
million for operators of parking lots. A second comment said that the
standard appeared low when compared to ones for concessionaires. We
point out, however, that a management contractor does not normally
incur the substantial capital costs generally associated with a
concession. The proposed standard of $5 million is taken from the SBA's
regulations at 13 CFR part 121. Further, it applies only if a parking
lot is operated under a management contract. If it is operated as a
concession, the applicable size standard would be $33,390,000.
Under the SNPRM, other activities operated under management
contracts need to meet the appropriate size standard in 13 CFR part
121. Although the legislation delegates authority to the Secretary to
set size standards for the concession program, we have chosen to use
SBA's in this case.
One commenter (a sponsor) on the 1997 SNPRM said that the size
standards for concessionaires cannot withstand strict scrutiny in
determining that a firm is owned and controlled by socially and
economically disadvantaged. The comment said that the public may
question how a barbershop or shoe shine with gross sales of over $33
million could be considered either socially or economically
disadvantaged. It believes that these standards may raise a question of
fairness with the public and challenge the program's credibility.
It should be noted that the size standards for concessionaires were
initially adopted by the Department when subpart F was added to 49 CFR
part 23. The particular standards were selected only after the
Department gave full consideration to all comments. A discussion of the
comments and various alternatives considered can be found in the
preamble to the April 1, 1992 Federal Register (57 FR 18400). This
notice amended 49 CFR part 23 to add subpart F. It should be noted that
size standards employed in the DBE program apply to firms. Owners of
DBE firms, by contrast, must be ``socially and economically
disadvantaged.'' As such, this standard applies to individuals. We
believe that the current size standards conform to the legislative
provisions.
Regulatory Analyses and Notices
Executive Order 12866
This rule is a not a significant rule under Executive Order 12866.
It is significant under the Department's Rulemaking Policies and
Procedures, because of the substantial public interest concerning and
policy importance of programs to ensure nondiscrimination in Federally-
assisted contracting. Moreover, we do not believe that the rule will
have
[[Page 54464]]
significant economic impacts. In evaluating the potential economic
impact of this rule, we begin by noting that it does not create a new
program. It simply revises the rule governing an existing program. The
economic impacts of the DBE program are created by the existing
regulation and the statutes that mandate it, not by these revisions.
Some changes that we propose in this program may have some positive
economic impacts. For example, if car rental companies set goals on a
national basis, there will be some reductions in administrative burdens
and costs for both recipients and the companies.
The rule's ``narrow tailoring'' changes are likely to be neutral in
terms of their overall economic impact. These could have some
distributive impacts (e.g., if the proposed goal-setting mechanism
results in changes in DBE goals, a different mix of firms may work on
recipients' contracts), but there would probably not be net gains or
losses to the economy. There could be some short-term costs to
recipients owing to changes in program administration resulting from
``narrow tailoring,'' however.
In any event, the economic impacts are quite speculative and appear
nearly impossible to quantify. Comments did not provide, and the
Department does not have, any significant information that would allow
the Department to estimate any such impacts. To the extent that we
receive additional information about economic impacts from commenters,
we will incorporate it at the final rule stage.
Regulatory Flexibility Act Analysis
This part of DBE program is aimed at improving contracting
opportunities for small businesses owned and controlled by socially and
economically disadvantaged individuals in airport concessions.
Virtually all the businesses it affects are small entities. There is no
doubt that a DBE rule always affects a substantial number of small
entities.
This proposed rule, while improving program administration and
facilitating DBE participation and responding to legal developments,
appears essentially cost-neutral with respect to small entities in
general. It does not impose new burdens or costs on small entities,
compared to the existing rule. It does not affect the total funds or
business opportunities available to small businesses that seek to work
in airport concessions. To the extent that the proposals in this rule
(e.g., with respect to changes in the methods used to set overall
goals) lead to different goals than the existing rule, some small firms
may gain, and others lose, business.
There is no data of which the Department is aware that would permit
us, at this time, to measure the distributive effects of the revisions
on various types of small entities. It is likely that any attempt to
gauge these effects would be highly speculative. For this reason, we
are not able to make a quantitative, or even a precise qualitative,
estimate of these effects.
Paperwork Reduction Act
A number of provisions of this SNPRM involve information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA).
These requirements continue existing part 23 requirements, major
elements of the DBE program that recipients and contractors have been
implementing since the inception of the concessions part of the
program. While the SNPRM would modify these requirements in some ways,
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 to recipients to allow them to make eligibility decisions.
Currently certified firms must provide information to recipients to
allow them to review the firms' continuing eligibility. (After the UCP
requirements of the rule are implemented, the burdens of the
certification provisions should be substantially reduced.)
Recipients must maintain a directory of certified DBE
firms. (Once UCPs are implemented, there will be 52 consolidated
directories rather than the hundreds now required, reducing burdens
substantially.)
Recipients must calculate concessions goals and transmit
them to the FAA for approval. (The process of setting overall goals is
more flexible, but may also be more complex, than under part 23. As
they make their transition to the final rule's goal-setting process
during the first years of implementation, recipients may temporarily
expend more hours than in the past on information-related tasks.)
Recipients must have a concessions plan approved by the
FAA. (The SNPRM includes a one-time requirement to submit a revised
program document making changes to conform to the new regulation.)
The Department is in the process of estimating the burden hours
resulting from these requirements.
Both as the result of comments and what the Department learns as it
implements the DBE program under part 26, it is possible for the
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 will submit an information
collection approval request to OMB. Organizations and individuals
desiring to submit comments on information collection requirements
should direct them to the Department's docket for this rulemaking. You
may also submit copies of your 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.
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 DBE program for many years, but have also been
the subject of extensive public comment following the 1992 NPRM and
1997 SNPRM. Among the over 900 comments received in response to these
notices were a number addressing administrative burden issues
surrounding these program elements. In the February 1998 final rule for
the rest of part 26, and in this SNPRM, the Department has responded to
these comments.
Federalism
The rule does not have sufficient Federalism impacts to warrant the
preparation of a Federalism assessment. While the rule concerns the
activities of state and local governments in DOT
[[Page 54465]]
financial assistance programs, the rule does not significantly alter
the role of state and local governments vis-a-vis DOT from the present
part 23. The availability of program waivers could allow greater
flexibility for state and local participants, however.
List of Subjects in 49 CFR Part 26
Administrative practice and procedure, Airports, Civil rights,
Concessions, Government Contracts, Grant programs -transportation,
Highways and roads, Mass transportation, Minority business, Reporting
and recordkeeping requirements.
Issued This 31st day of July, 2000, at Washington, D.C.
Rodney E. Slater,
Secretary of Transportation.
For the reasons stated in the preamble, the Department proposes to
take the following actions:
PART 23--[REMOVED]
1. Remove part 23 of Title 49, Code of Federal Regulations.
2. Revise the authority citation for 49 CFR part 26 to read as
follows:
Authority: 23 U.S.C. 324; 42 U.S.C. 2000d, et seq.); 49 U.S.C
1615, 47107, 47113, 47123; 49 U.S.C. 47107 and 47123; Executive
Order 12138, 3 CFR, 1979 Comp., p. 393, Sec. 1101(b), Pub. L. 105-
178, 112 Stat. 107,113.
3. Add a new subpart G of 49 CFR part 26, to read as follows:
Subpart G--DBE Participation in Airport Concessions
Sec.
26.111 Do the provisions of subparts A-F of this Part apply to
this subpart?
26.113 What do the terms used in this subpart mean?
26.115 To whom does this subpart apply?
26.117 What are the nondiscrimination and assurance requirements
of this subpart for sponsors?
26.119 What information do sponsors have to retain and report
about the DBE concession program?
26.121 Who must implement a DBE concessions plan?
26.123 What is the basic DBE goal requirement for sponsors?
26.125 What is the base for a sponsor's goal for concessions and
covered activities other than car rentals?
26.127 What is the base for a sponsor's goal car rentals?
26.129 How are a sponsor's goals expressed and calculated?
26.131 What are public participation requirements concerning a
sponsor's goals?
26.133 What are the contents of a sponsor's goal submissions to
FAA?
26.135 What does FAA do with your goal submission?
26.137 What are the sponsor's obligations concerning the use of
race-neutral and race-conscious measures?
26.139 What are the steps a sponsor takes to meet its DBE goals?
26.141 How do concessionaires and covered activities other than
car rentals meet concession-specific DBE goals?
26.143 How do car rental companies meet concession-specific DBE
goals?
26.145 How do sponsors count DBE participation toward goals for
items other than car rentals?
26.147 How do sponsors count DBE participation toward car rental
goals?
26.149 What certification standards and procedures do recipients
use to certify DBE concessionaires?
26.151 What monitoring and compliance procedures must sponsors
follow?
26.153 Does a sponsor have to change existing concession
agreements?
26.155 What requirements apply to privately-owned terminal
buildings?
26.157 Can sponsors enter into long-term, exclusive agreements
with concessionaires?
26.159 Does this subpart preempt local requirements?
26.161 Does this subpart permit sponsors to use local geographic
preferences?
Appendix F to Part 26--Size Standards for Airport Concessionaires
Sec. 26.111 Do the provisions of subparts A-F of this part apply to
this subpart?
Except where provisions of this subpart differ from or add to those
of subparts A-F of this part, the provisions of subparts A-F apply to
the DBE program for airport concessions of this subpart G.
Sec. 26.113 What do the terms used in this subpart mean?
Affiliation has the same meaning as in Sec. 26.5, except that the
provisions of SBA regulations concerning affiliation in the context of
joint ventures (13 CFR 121.103(f)) do not apply to this subpart.
Car dealership means an establishment primarily engaged in the
retail sale of new automobiles or new and used automobiles. Car
dealerships frequently maintain repair departments and carry stocks of
replacement parts, tires, batteries, and automotive accessories. Such
establishments also frequently sell pickups and vans at retail. In the
standard industrial classification system, car dealerships are
categorized in SIC 5511, ``Motor Vehicle Dealers (New and Used).''
Concession means a for-profit business enterprise, located on an
airport subject to this subpart, that is engaged in the sale of
consumer goods or services to the public under an agreement with the
sponsor, another concessionaire, or the owner of a terminal, if other
than the sponsor.
(1) 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 service, a
booth selling tickets to the public; in the case of a car rental, 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.
(3) Any business meeting the definition of concession is covered by
this subpart, regardless of the name given to the agreement with the
sponsor, concessionaire, or airport terminal owner. A concession may be
operated under various types of agreements, including:
(i) Leases.
(ii) Subleases.
(iii) Permits.
(iv) Contracts or subcontracts.
(v) Other instruments or arrangements.
(4) A company in the business of placing advertising in airport
terminals or on airport grounds on behalf of others is considered to be
a concession, even though its offices are not located on the airport
and it does not sell its services directly to the public.
(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, and skycap services under contract with
an air carrier.
(7) Appendix F to this part contains a listing of the types of
businesses that are frequently operated as concessions.
Concessionaire means a firm that owns and controls a concession or
a portion of a concession.
[[Page 54466]]
Covered activities means concessions, management contracts and
subcontracts, and the provision of goods and services to
concessionaires.
Direct ownership arrangement means a joint venture, partnership,
sublease, licensee, franchise, or other arrangement in which a firm
owns and controls a concession.
Management contract or subcontract means an agreement with a
sponsor or another management contractor (but not with a
concessionaire) under which a firm directs or operates one or more
business activities, the assets of which are owned, leased, or
otherwise controlled by the sponsor. 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 services to the public.
Material amendment means a substantial 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.
Primary airport means a commercial service airport that the
Secretary determines to have more than 10,000 passengers enplaned
annually.
Small business concern means an existing for-profit business that
does not exceed the size standards of appendix F to this part. With
respect to concessionaires and other businesses involved in other
covered activities under this subpart, the annual gross receipts cap of
Sec. 26.65(b) does not apply.
(1) A concessionaire qualifying under this definition that exceeds
the size standard after entering a concession agreement, but which
otherwise remains eligible, may continue to be counted as DBE
participation toward the overall goals and any contract goals set under
this subpart, until the current agreement, including the exercise of
options, expires.
(2) If a concessionaire or business involved in another covered
activity under this subpart was certified as a minority/woman/or
disadvantaged business enterprise (MBE/WBE/DBE) prior to [insert
effective date of this subpart], pursuant to a requirement in former
Sec. 23.43(d) or former subpart F of 49 CFR part 23, and the firm has
exceeded the size standard, it may be counted as DBE participation
until the current agreement, including the exercise of options,
expires, provided that the firm remains otherwise eligible.
(3) Any firm falling under ``Standard Industrial Classification
(SIC)'' code 5511 (which applies to car dealerships) shall be
considered a small business concern for purposes of this subpart, if it
has no more than 500 employees.
(4) The Secretary may periodically adjust the size standards in
appendix F to this part for inflation.
Socially and economically disadvantaged individuals has the same
meaning as provided in Sec. 26.5, Sec. 26.67 and appendix E to this
part, except that for purposes of this subpart, the presumption of
economic disadvantage shall be deemed to be rebutted when the
individual's personal net worth exceeds $2 million.
Sponsor means the recipient of an FAA grant.
Sec. 26.115 To whom does this subpart apply?
If you are a sponsor that has received a grant for airport
development after January 1988 that was authorized under Title 49 of
the United States Code, this subpart applies to you. The threshold of
Sec. 26.21(a)(3) does not apply to requirements of this subpart.
Sec. 26.117 What are the nondiscrimination and assurance requirements
of this subpart for sponsors?
(a) As a sponsor, you must abide by the non-discrimination
requirements of 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 subpart.
(c) You must include the following assurances in all concession
agreements and management contracts you execute with any firm after
[insert effective date of this subpart]:
(1) This agreement is subject to the requirements of the U.S.
Department of Transportation's regulations, 49 CFR part 26, subpart G.
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 26, subpart
G.
(2) The concessionaire or contractor agrees to include the above
statements in any subsequent concession agreement or contract covered
by 49 CFR part 26, subpart G, that it enters and cause those businesses
to similarly include the statements in further agreements.
Sec. 26.119 What information do sponsors have to retain and report
about the DBE concession program?
(a) As a sponsor, you must retain sufficient basic information
about your program implementation, your certification of DBEs, and the
award and performance of agreements and contracts to enable the FAA to
determine your compliance with this subpart. You must retain this data
for a minimum of three years following the end of the concession
agreement or other covered contract.
(b) You must submit to FAA an annual analysis of the
accomplishments you have made toward achieving your goals. This
analysis must show the effect of those results on the overall level of
DBE participation in the your concessions program.
(c) You must report data to the appropriate FAA Regional Office.
You must comply with this requirement in a format, and with a
frequency, determined by the FAA Administrator.
Sec. 26.121 Who must implement a DBE concessions plan?
(a) If you are the owner of a primary airport, you must implement a
DBE concessions plan implementing the requirements of this subpart. If
you are the owner of more than one primary airport, you may implement
one plan for all your locations. If you do so, you must establish
separate overall goals for each location that has received FAA airport
development assistance.
(b) You must submit your plan to the appropriate FAA regional
office for approval by [insert date nine months from the effective date
of this subpart].
(c) If you make any significant changes in this plan, you must
provide them to the FAA as soon as you make them.
(d) If you are a sponsor of a non-commercial service airport, a
general aviation airport, or a reliever airport, you are not required
to implement a DBE concession plan. However, you must take appropriate
outreach steps to encourage available DBEs to participate as
concessionaires whenever there is a concession opportunity.
[[Page 54467]]
Sec. 26.123 What is the basic DBE goal requirement for sponsors?
(a) If you are a sponsor who must implement a DBE concessions plan,
you must establish two different DBE goals. The first is for all
concessions and covered activities other than car rentals. The second
is for car rentals. Follow the provisions of this section and
Secs. 26.125--26.139 of this subpart with respect to both these goals.
(b) Your goal submission must cover a three to five-year period, as
agreed upon between you and the FAA. The submission must include goals
for each year in the period covered by the submission.
Example to Paragraph (b): You make a goal submission for the
period 2001-2005. The submission would include an annual goal for
car rentals and an annual goal for other concessions and covered
activities for 2001, 2002, 2003, 2004, and 2005. You would calculate
each of these goals in the same way, using the same data and
reasoning (i.e., for Step 1 and Step 2 of the goal-setting process).
However, the amount of the goal and the estimate of race conscious/
race neutral participation may differ from year to year within the
period depending on the types of opportunities for concessions and
other covered activities you anticipate during each year of the
period.
(c) You must review your goals annually to make sure they continue
to fit your circumstances appropriately. You must report any
significant adjustments to your goals to FAA.
(d) You must submit your goals to the appropriate FAA regional
office for review. Your first concessions goal is due [insert a date
nine months from the effective date of this subpart]. You then submit
new goals by August 1 of each year in which you establish new goals
(e.g., for a recipient who will submit a new set of goals every three
years, August 1, 2004).
Sec. 26.125 What is the base for a sponsor's goal for concessions and
covered activities other than car rentals?
(a) If you are a sponsor, the base for this goal includes the total
gross receipts of concessions and other covered activities at your
airport.
(b) This figure includes the gross contract amount of management
contracts but does not include the gross receipts of car rental
operations.
(c) This figure includes the estimated dollar value of goods and
services that a concessionaire (except a car rental) will purchase from
DBEs and use in operating the concession.
(d) This figure includes the net payments to the airport for banks
and banking services, including automated teller machines (ATM) and
foreign currency exchanges.
(e) This figure does not include any portion of a firm's estimated
gross receipts that will not be generated from a concession or other
covered activity.
Example to Paragraph (e): A firm operates a restaurant in the
airport terminal which serves the traveling public and, under the
same lease agreement, provides in-flight catering service to air
carriers. The projected gross receipts from the restaurant are
included in the overall goal calculation, while the gross receipts
to be earned by the in-flight catering services are not.
(f) If you have any concession agreements that do not provide for
you to know the value of the gross receipts earned by the concession,
you must use the net payment from the concession to the airport and
combine these figures with the estimated gross receipts from other
agreements for purposes of calculating overall goals. You must identify
any such concession agreements in your goal submission.
Sec. 26.127 What is the base for a sponsor's goal car rentals?
The base for your goal is the total gross receipts of car rental
operations at your airport.
Sec. 26.129 How are a sponsor's goals expressed and calculated?
(a) If you are a sponsor, you must express your goals as a
percentage of the base calculated under Sec. 26.125 or Sec. 26.127.
This percentage represents your estimate of the DBE participation you
would obtain in the absence of discrimination and its effects (i.e.,
the DBE participation you would expect if there were a ``level playing
field'').
(b) You must use a two-step method for calculating the goal.
(1) In Step 1, you determine the relative availability of DBE
concessionaires and other covered entities. You use the best available
data. Depending on how the markets for different types of business are
structured, this relative availability may be determined on a local,
regional, or national basis for particular types of businesses. For
example, using this data, you would establish a percentage of gross
receipts of available DBE concessionsiares/gross receipts of all
available concessionaires.
(2) In Step 2, you adjust this availability figure to reflect such
factors as the past participation of DBEs in your concessions and other
covered opportunities, information from disparity studies, and barriers
to DBEs' ability to participate in these concessions opportunities.
(3) Use Sec. 26.45 for guidance in performing Step 1 and Step 2.
(c) If, as an alternative to establishing a goal meeting the
requirements of this section, you wish to submit a goal based on a
percentage of concession and other covered activity contracts, you must
meet the following requirements:
(1) You must submit a program waiver request meeting the
requirements of Sec. 26.15(b). In the case of such a request, the
Secretary's authority to review and approve the request is delegated to
the FAA Administrator.
(2) Your request must include the following additional showings:
(i) More than half of the concession agreements do not provide for
the sponsor to know the value of the gross receipts earned; or
(ii) Other circumstances at the airport exist that make it
impracticable to use gross receipts as the basis for calculating the
goals.
(d) Your goals established under this subpart must provide for
participation by all certified DBEs and may not be subdivided into
group-specific goals.
(e) If you fail to establish and implement goals as provided in
this section, you are not in compliance with this subpart. If you fail
to comply with this requirement, you are not eligible to receive FAA
financial assistance.
Sec. 26.131 What are public participation requirements concerning a
sponsor's goals?
(a) As a sponsor, you must provide for public participation by
taking at least the steps listed in this paragraphs (b) and (c) of this
section before submitting your overall goals to FAA (i.e., every three
to five years when you submit new concessions goals).
(b) You must consult with minority and women's business groups,
community organizations, trade associations representing
concessionaires currently located at the airport, as well as existing
concessionaires themselves, and other officials or organizations which
could be expected to have information concerning the availability of
disadvantaged businesses, the effects of discrimination on
opportunities for DBEs, and the sponsor's efforts to increase
participation of DBEs.
(c) You must publish a notice announcing your proposed goals and a
description of how they were selected. You must make information on
your goal selection method, process, and data available for inspection
during normal business hours at your main office for 30 days following
the date of the notice. You must accept comments on the goals for 45
days from the date of the notice. Your notice must include addresses
(including electronic addresses, where available) to which comments may
be sent and must be published in general
[[Page 54468]]
circulation media and available minority-focus media and trade
association publications.
Sec. 26.133 What are the contents of a sponsor's goal submissions to
FAA?
(a) You submission must include your goals, a description of the
method used to calculate them, and the data you relied on. You must
``show your work'' to enable the FAA to understand how you concluded
your goals are appropriate. This means that you must provide to the FAA
the data, calculations, assumptions, and reasoning used in establishing
your goals.
(b) You must estimate the portion of your goal you can meet using
race-neutral measures (see Sec. 26.137). You then use race-conscious
measures to meet the remainder of your goal. You must include your
projection of the portions of your goal you expect to be able to meet
through race-neutral and race-conscious measures, and the data and
analysis on which it is based, in your goal submission to FAA. You must
provide data and analysis to FAA supporting your projection.
(c) You must also include information on the concessions that will
operate at the airport during the period covered by the submission. For
each concession agreement, you must provide the following information,
together with any additional information requested by the FAA Regional
Civil Rights Officer:
(1) Name of firm (if known).
(2) Type of business (e.g. bookstore, car rental, baggage carts).
(3) Beginning and expiration dates of agreement, including options
to renew.
(4) For new agreements, method of solicitation proposed by sponsor
(e.g. request for proposals, invitation for bids).
(5) Dates that material amendments will be made to the agreement
(if known).
(6) The estimated gross receipts for each goal period established
in the plan.
(7) Identification of those concessionaires that have been
certified under this subpart as DBEs.
Sec. 26.135 What does FAA do with your goal submission?
(a) FAA will approve or disapprove the way you calculated your
goals as part of its review of your plan or goal submission. Except as
provided in paragraph (b) of this section, the FAA does not approve or
disapprove the goal itself (i.e., the number).
(b) If the FAA determines that way you calculated your goals is
inadequate, the FAA may, after consulting with you, establish an
adjusted goal. The adjusted goal represents the FAA's determination of
an appropriate overall goal for DBE participation in the sponsor's
concession program, based on relevant data and analysis. The adjusted
goal is binding on you.
(c) The provisions of Sec. 26.47 apply in the event you fail to
meet your goals.
Sec. 26.137 What are the sponsor's obligations concerning the use of
race-neutral and race-conscious measures?
(a) As a sponsor, you must give priority to implementing race-
neutral measures. This means that you must meet as much of your goal
through race-neutral efforts as you can. This does not mean that you
must use race-neutral measures chronologically before you begin using
race conscious-measures.
(b) You must provide your projection of the portion of each of your
goals you expect to meet through race-neutral and race-conscious means,
respectively, and the basis for this projection, to the FAA as part of
your goal submission (see Sec. 26.133(b)).
(c) If your actual participation does not reflect this projection,
you must make appropriate adjustments in your use of race-conscious and
race-neutral efforts. For example, if you projected meeting a 12
percent overall goal with 2 percent race-conscious participation and 10
percent race-neutral participation, and midway through the period
covered by the goal you have only obtained 3 percent race-neutral
participation, you would need to consider increasing your use of race-
conscious good faith measures.
(d) In any year in which you project meeting part of your goal
through race-neutral measures and the remainder through race-conscious
measures, you must maintain data separately on DBE achievements
obtained through these respective means. You must report this data to
the FAA Regional Civil Rights office with the other data you submit
under Sec. 26.119 .
Sec. 26.139 What are the steps a sponsor takes to meet its DBE goals?
(a) You must, to the extent practicable, seek to obtain DBE
participation in all types of concessions and other covered activities
and not concentrate participation in one category or a few categories
to the exclusion of others.
(b) You must include in your concessions plan a narrative
description of the types of measures you intend to make to achieve your
goals.
(c) The following are examples of race-neutral measures you can
implement:
(1) Locating and identifying DBEs who may be interested in
participating as concessionaires under this subpart;
(2) Notifying DBEs and other organizations 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 DBEs;
(4) Providing technical assistance to DBEs in overcoming
limitations, such as inability to obtain bonding or financing;
(5) Ensuring that competitors for concession opportunities are
informed of DBE requirements during pre-solicitation meetings;
(6) Providing information concerning the availability of DBE firms
to competitors to assist them in meeting DBE requirements;
(7) Establishing a business development program (see Sec. 26.35);
and
(8) Taking other appropriate steps to foster DBE participation.
(f) The following are examples of race-conscious measures you can
implement:
(1) Establishing concession-specific goals for particular
opportunities for concessions and other covered activities.
(i) If the goal is to attain a direct ownership arrangement with a
DBE, 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 DBEs 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
would have to meet this goal or document that they made sufficient good
faith efforts to do so.
(iv) The administrative procedures applicable to contract goals in
Sec. 26.51-53 apply with respect to concession-specific goals.
(2) Evaluation credits or other methods that take a competitor's
ability to provide DBE participation into account in awarding a
concession.
(3) Negotiation with a potential concessionaire to include DBE
participation, through direct ownership arrangements or otherwise, in
the operation of the concession.
(4) Set-asides, only to the extent permitted in Sec. 26.43(b) .
Sec. 26.141 How do concessionaires and covered activities other than
car rentals meet concession-specific DBE goals?
(a) This section applies to you if you are a concession or covered
activity,
[[Page 54469]]
other than a car rental company, and the sponsor has set a concession-
specific goal concerning your activity.
(b) You must either meet the goal the sponsor has set or
demonstrate sufficient good faith efforts to the sponsor. These two
ways of meeting your goal are equally acceptable under this subpart.
(c) For purposes of this subpart, making sufficient good faith
efforts means taking steps which, by their scope, intensity, and
appropriateness to the objective, can reasonably be expected to achieve
your goal.
(d) Appendix A to this part 26 provides guidance concerning the
kinds of good faith efforts that you are expected to make.
Sec. 26.143 How do car rental companies meet concession-specific DBE
goals?
(a) This section applies to you if you are a car rental company and
the sponsor has set a concession-specific goal concerning your
activity.
(b) You must either meet the goal the sponsor has set or
demonstrate sufficient good faith efforts to the sponsor. These two
ways of meeting your goal are equally acceptable under this subpart.
(c) The following are examples of good faith efforts you can use:
(1) The methods outlined in Sec. 26.139.
(2) Your efforts to obtain DBE participation through direct
ownership arrangements. While this subpart does not require you to seek
direct participation by DBEs in car rental operations, the sponsor will
consider any efforts you make to do so in evaluating your good faith
efforts.
(3) The following additional steps:
(i) Conducting a comprehensive survey of vendors to determine which
qualify as DBEs for purposes of the airport concessions program and
encouraging other vendors who may be eligible to apply for
certification.
(ii) Identifying opportunities for DBE's to provide goods and
services, and engage in proactive outreach efforts to inform such firms
of the opportunities.
(iii) Joining and supporting local and national minority, women,
and small business organizations.
(iv) Advertising in local and national DBE-focused publications for
vendors that can provide needed goods and services.
(v) Making DBEs aware of solicitations in a timely manner and
meeting with firms to determine whether they fulfill requirements as
car rental operators, or suppliers of goods and services.
(vi) Documenting outreach efforts, including those that are
unsuccessful.
(vii) Whenever a new opportunity arises, using a combination of
sources and outreach efforts (such as those cited above) to identify
DBEs that fulfill the need.
(c) You are not required to change your corporate structure in
order to meet your goal.
Sec. 26.145 How do sponsors count DBE participation toward goals for
items other than car rentals?
(a) As a sponsor, you must apply the counting provisions of this
section to your goal for concessions and covered activities other than
car rentals. See Sec. 26.147 for information on how to count DBE
participation for car rentals.
(b) You count only DBE participation that results from a
commercially useful function. For purposes of this subpart, the term
commercially useful function has the same meaning as in Sec. 26.55(c),
except that the requirements of Sec. 26.55(c)(3) shall not apply to a
concession agreement or management contract or subcontract.
(c) Count the total dollar value of a management contract or
subcontract with a DBE. However, if the DBE enters into a subcontract
with a non-DBE, do not count the portion of the value of the
subcontract performed by the non-DBE.
(d) Count the total dollar value of gross receipts a DBE earns
under a concession agreement toward the goals. However, if the DBE
enters into a subconcession agreement with a non-DBE, do not count any
of the gross receipts earned by the non-DBE.
(e) When a DBE performs as a subconcessionaire to a non-DBE, count
only the portion of the gross receipts earned by the DBE under its
subagreement.
(f) When a concession is performed by a joint venture involving a
DBE and a non-DBE, count a portion of the gross receipts equal to the
percentage of the ownership and control by the DBE partner in the joint
venture. To perform a commercially useful function as part of a joint
venture, the DBE must be independently responsible for an identifiable
portion of the work of the joint venture.
(g) Count costs incurred in connection with the renovation, repair,
or construction of a concession facility (sometimes referred to as the
``build-out'').
(h) Count the entire amount of fees or commissions charged by a DBE
firm for a bona fide service, provided that, as the sponsor, you
determine this amount to be reasonable and not excessive as compared
with fees customarily allowed for similar services. Such services may
include, but are not limited to, professional, technical, consultant,
legal, security systems, advertising, building cleaning and
maintenance, computer programming, or managerial.
(i) Count 100 percent of the cost of goods obtained from a DBE
manufacturer. For purposes of this subpart, the term manufacturer has
the same meaning as in Sec. 26.55(e)(1)(ii) .
(j) Count 100 percent of the cost of goods purchased or leased from
a DBE regular dealer.
(k) If you obtain goods purchased from a DBE which is neither a
manufacturer nor a regular dealer, count credit toward DBE goals as
follows:
(1) Count the entire amount of fees or commissions charged for
assistance in the procurement of the goods, provided that this amount
is reasonable and not excessive as compared with fees customarily
allowed for similar services. Do not count any portion of the cost of
the goods themselves.
(2) Count the entire amount of fees or transportation charges for
the delivery of goods required for a concession, provided that this
amount is reasonable and not excessive as compared with fees
customarily allowed for similar services. Do not count any portion of
the cost of goods themselves.
(l) If a firm has not been certified as a DBE in accordance with
the standards in this part, the firm's participation may not count
toward DBE goals.
(m) Except in the case of a concessionaire that exceeds the small
business size standard during the term of a contract, as referenced
under the definition of a ``small business concern,'' the work
performed or gross receipts earned by a firm after its eligibility has
been removed may not be counted toward DBE goals.
Sec. 26.147 How do sponsors count DBE participation toward car rental
goals?
(a) As a sponsor, you must apply the counting provisions of this
section to your goal for car rentals. See Sec. 26.145 for information
on how to count DBE participation for concessions and covered
activities other than car rentals.
(b) Count the full value of vehicles purchased through DBE car
dealers toward your goal. Provided, that neither you nor a car rental
company may meet more than 70 percent of a car rental goal through this
means.
(c) Count the entire amount of the cost charged by a DBE for
repairing vehicles, provided that it is reasonable and not excessive as
compared with fees customarily allowed for similar services.
(d) Count the entire amount of the fee or commission charged by a
DBE to manage a car rental concession under an agreement with the
concessionaire
[[Page 54470]]
toward DBE goals, provided that it is reasonable and not excessive as
compared with fees customarily allowed for similar services.
(e) Do not count any portion of a fee paid by a manufacturer to a
car dealership for reimbursement of work performed under the
manufacturer's warranty.
(f) For other goods and services, count participation toward DBE
goals as provided in Secs. 26.55 and 26.145. In the event of any
conflict between these two sections, Sec. 26.145 will control.
(g) If a car rental company has a national or regional contract for
the purchases of vehicles, other goods, or services, count a pro-rated
share of the amount of that contract toward the goals for your airport.
Use the proportion of the company's applicable gross receipts as the
basis for making this pro-rated assignment of DBE participation.
Example to Paragraph (g): Car Rental Company X signs a regional
contract with a DBE car dealer to supply cars to all five airports
in a state. The five airports each account for 20 percent of X's
gross receipts in that state. Twenty percent of the value of the
cars purchased through the DBE car dealer would count toward the
goal of each airport.
(h) While this subpart does not require you to obtain DBE
participation through direct ownership arrangements, you count
participation through such an arrangement toward your DBE goal.
Sec. 26.149 What certification standards and procedures do recipients
use to certify DBE concessionaires?
(a) If you are a sponsor, you must, except as provided in this
section, use the procedures and standards of Secs. 26.61-91 to certify
DBEs for participation in your concessions program.
(b) The personal net worth threshold used in rebutting the
presumption of disadvantage, referenced in Sec. 26.67(b) and in
appendix E to this part, is $2 million for purposes of this subpart;
(c) The provisions of Sec. 26.71(n), concerning affiliation, do not
apply to this subpart.
(d) Section 26.83 (c)(1) through (c)(6) do not apply to
certifications for airport concessions purposes. Instead, in
determining whether a firm is an eligible DBE, you must take the
following steps:
(1) Obtain the resumes or work histories of the principal owners of
the firm and personally interview these individuals;
(2) Analyze the ownership of stock of the firm, if it is a
corporation;
(3) Analyze the bonding and financial capacity of the firm;
(4) Determine the work history of the firm, including any
concession contracts or other contracts it may have received;
(5) Obtain or compile a list of the licenses of the firm and its
key personnel to perform the concession contracts or other contracts it
wishes to receive;
(6) Obtain a statement from the firm of the type(s) of
concession(s) it prefers to operate or the type(s) of other contract(s)
it prefers to perform.
(7) If you determine it is necessary to validate the certification
information submitted by the firm, perform an on-site visit to the
offices of the firm and to any facilities within the sponsor's
jurisdiction or local area before making an eligibility determination.
(e) In reviewing the affidavit required by Sec. 26.83(h), you must
ensure that the DBE firm meets the appropriate size standard in
appendix F to this part.
(f) For purposes of this subpart, the term ``prime contractor'' in
Sec. 26.87(i) includes a firm holding a prime contract with an airport
concessionaire to provide goods or services to the concessionaire or a
firm holding a prime concession agreement with a sponsor.
(g) The procedures of Sec. 26.87(i)(2) apply to this subpart,
except when you remove a concessionaire's eligibility because the firm
exceeded the size standard after entering a concession agreement. In
such instances, the procedures set forth under the definition of a
``small business concern'' in Sec. 26.113 shall apply.
(h) When UCPs are established in a state (see Sec. 26.81), the UCP,
rather than individual sponsors, will certify firms for the DBE
concessions program.
(i) Car rental companies and private terminal owners are not
authorized to certify firms as DBEs. As a car rental company or private
terminal owner, you must obtain DBE participation from firms that a
sponsor or a UCP has certified as DBEs.
(j) When you certify firms as airport concessionaires, identify
them in your directory in a way that makes it easy for readers to find
them. For example, you could use a special symbol next to a firm's name
in the directory to identify it as a concessionaire or place certified
concessionaires in a separate section of the directory.
Sec. 26.151 What monitoring and compliance procedures must sponsors
follow?
(a) If you are a sponsor, you must implement appropriate mechanisms
to ensure compliance with the requirements of this subpart by all
participants in the program. You must include in your concessions plan
the specific provisions to be inserted into concession agreements and
management contracts, the enforcement mechanisms, and other means you
use to ensure compliance. These provisions shall include a monitoring
and enforcement mechanism to verify that the work committed to DBEs is
actually performed by the DBEs.
(b) This subpart does not authorize or preclude you from imposing
additional requirements on firms engaged, or seeking to be engaged, in
contracting or concessions activities at your airport. However, you
must include in your concessions plan a description, together with a
citation of state or local law, regulation, or policy, to support such
additional requirements.
Sec. 26.153 Does a sponsor have to change existing concession
agreements?
No. Nothing in this subpart requires you to modify or abrogate an
existing concession agreement (one executed prior to the date the
sponsor became subject to this subpart) during its term. When an option
to renew such an agreement is exercised or when a material amendment is
made, you must assess potential for DBE participation and may, if
permitted by the agreement, use any means authorized by this subpart to
obtain DBE participation in the renewed or amended agreement.
Sec. 26.155 What requirements apply to privately-owned terminal
buildings?
(a) If you are a sponsor on whose airport there is a privately-
owned terminal building that has concessions, this section applies to
you.
(b) You must pass through the applicable requirements of this
subpart to the private terminal owner by an agreement with the owner or
by other means. You must ensure that the terminal owner complies with
the requirements of this subpart.
(c) If your airport is a primary airport, you must obtain from the
terminal owner the goals and other elements of the DBE concession plan
required under this subpart. You must incorporate this information into
your concession plan and submit it to the FAA in accordance with this
subpart.
(d) If the terminal building is at a non-primary commercial service
airport general aviation airport, or reliever airport, the sponsor
shall ensure that the owner complies with the requirements in
Sec. 26.121(d).
Sec. 26.157 Can sponsors enter into long-term, exclusive agreements
with concessionaires?
(a) Except as provided in paragraph (b) of this section, you must
not enter into long-term, exclusive agreements for the operation of
concessions. For
[[Page 54471]]
purposes of this section, a long-term agreement is one having a term in
excess of five years. The FAA has issued guidelines for determining
whether an agreement is exclusive, as used in this section. You can
obtain them from any FAA Regional Civil Rights Officer or from the FAA
Office of Civil Rights, 800 Independence Avenue, SW., Washington, DC
20591, Attention, ACR-4.
(b) You may enter into a long-term, exclusive concession agreement
only under the following conditions:
(1) Special local circumstances exist that make it important to
enter such agreement, and
(2) The responsible FAA regional civil rights officer approves of a
plan for meeting the standards of paragraph (c) of this section.
(c) In order to obtain FAA approval of a long-term-exclusive
concession agreement, you must submit the following information to the
FAA regional civil rights officer:
(1) A description of the special local circumstances that warrant a
long-term, exclusive agreement.
(2) A copy of the draft and final leasing and subleasing or other
agreements. This long-term, exclusive agreement must provide that:
(i) A number of DBEs that roughly reflects their availability in
the absence of discrimination to do the types of work required will
participate as concessionaires throughout the term of the agreement and
account for at a percentage of the estimated annual gross receipts
equivalent to a level set in accordance with Secs. 26.125-127 of this
subpart.
(ii) You will review the extent of DBE participation before the
exercise of each renewal option to consider whether an increase or
decrease in DBE participation may be warranted.
(iii) A DBE concessionaire that is unable to perform successfully
will be replaced by another DBE concessionaire, if the remaining term
of the agreement makes this feasible. In the event that such action is
not feasible, you will require the concessionaire to make good faith
efforts during the remaining term of the agreement encourage DBEs to
compete for the purchases and/or leases of goods and services to be
made by the concessionaire.
(3) Assurances that any DBE participant will be in an acceptable
form, such as a sublease, joint venture, or partnership.
(4) Documentation that DBE participants are properly certified.
(5) A description of the type of business or businesses to be
operated (e.g., location, storage and delivery space, ``back-of-the-
house facilities'' such as kitchens, window display space, advertising
space, and other amenities that will increase the DBE's chance to
succeed).
(6) Information on the investment required on the part of the DBE
and any unusual management or financial arrangements between the prime
concessionaire and DBE.
(7) Information on the estimated gross receipts and net profit to
be earned by the DBE.
Sec. 26.159 Does this subpart preempt local requirements?
Nothing in this subpart preempts any State or local law,
regulation, or policy enacted by the governing body of a sponsor, or
the authority of any State or local government or sponsor to adopt or
enforce any law, regulation, or policy relating to DBEs. In the event
that a State or local law, regulation, or policy conflicts with the
requirements of this subpart, the sponsor shall, as a condition of
remaining eligible to receive Federal financial assistance from the
DOT, take such steps as may be necessary to comply with the
requirements of this subpart.
Sec. 26.161 Does this subpart permit sponsors to use local geographic
preferences?
(a) As a sponsor you are permitted to use a local geographic
preference only as provided in this section. By a local geographic
preference, we mean any requirement that you impose that gives a DBE
located near you an advantage over DBEs from other places in obtaining
business as or with a concession or other covered activity at your
airport.
(b) You must submit a program waiver request meeting the
requirements of Sec. 26.15(b). In the case of such a request, the
Secretary's authority to review and approve the request is delegated to
the FAA Administrator.
(c) In order for your request to be granted, you must make the
following additional showings:
(1) The preference does not conflict with any provision of this
part or have the effect of defeating or substantially impairing
accomplishment of the objectives of the program;
(2) The preference does not have the effect of limiting or
foreclosing DBE participation in your concessions and other covered
activities;
(3) The preference will make it possible for you to diversify the
DBE firms participating in your concession and other covered activities
(e.g., by permitting smaller DBEs to participate that otherwise would
be unable to compete in certain fields with larger, better-established
DBEs from other areas);
(4) The preference applies on a race-neutral basis, to DBEs and
non-DBEs alike;
(5) The preference is consistent with Federal law; and
(6) The preference meets any additional conditions established by
the Administrator.
Appendix F to Part 26.--Size Standards for Airport Concessionaires
Maximum Average Annual Gross Receipts in Preceding 3 Years
[In millions of dollars]
------------------------------------------------------------------------
Concession Amount
------------------------------------------------------------------------
Auto Rentals.................................................. 44,520
Toy stores.................................................... 33,390
Beauty shops.................................................. 33,390
Vending machines.............................................. 33,390
Coin-operated lockers......................................... 33,390
Florists...................................................... 33,390
Advertising................................................... 33,390
Taxicabs...................................................... 33,390
Limousines.................................................... 33,390
Duty free shops............................................... 33,390
Local pay telephone service................................... \1\ 1500
Gambling machines............................................. 33,390
Other concessions not shown above............................. 33,390
OTHER PARTICIPANTS
Management contractors:
Parking lots.............................................. 5.0
Other..................................................... (\2\)
Motor vehicle dealers (new and used).......................... \1\ 500
Other providers of goods or services.......................... (\2\)
------------------------------------------------------------------------
\1\ For these types of businesses, the standard is expressed in terms of
number of employees, rather than dollars.
\2\ As defined in 13 CFR Part 121.
[FR Doc. 00-22839 Filed 9-7-00; 8:45 am]
BILLING CODE 4910-62-P