49 CFR Part 23 ACDBE Overview

1. 49 CFR Part 23ACDBE Overview 2009 National DBE Conference FAA Office of Civil Rights“We are who we serve”

2. 49 CFR Part 23 • Airport concessions disadvantaged business enterprise (ACDBE) final rule for airport concessions (49 CFR Part 23) • became effective on April 21, 2005 • rule applies to the approximately 350 primary airports that are required to have an ACDBE program

3. Narrow Tailoring • Provisions ensure that rule narrowly tailored and consistent with statutory requirements • Based on the Department’s DBE regulation for DOT-assisted highway, transit, and airport contracts (49 CFR Part 26) • worked well for six years and withstood numerous court challenges

4. Narrow Tailoring • Personal Net Worth cap • Goal-setting mechanism • Prohibition of set-asides & quotas • Statutory 10% goal is “aspirational” • No penalty for not meeting overall goal • Certification standards • Exemption and waiver • Race-Neutral measures • Sunset provision

5. Sunset Provision – 23.7 • Narrowly tailored rule not intended to run indefinitely • Sunset provision addresses durational element of narrow tailoring • Rule will go out of effect in 2010, unless Department extends it • Department has began its review

6. General Provisions • ACDBE – 23.3(6) - term distinguishes an Airport Concession Disadvantaged Business Enterprise from Part 26 DBE • Concessions now include management contracts, goods and service suppliers, and advertisers • Anti-fraud reporting – incorporates Part 26 requirements for DBEs, like no change affidavit, requirement to report material changes re PNW, size, control etc, and requirements for recipients to have monitoring and compliance mechanisms • Must include levels of effort and resources devoted to this (i.e. frequency of review of records, on-site reviews, etc.)

7. Other Provisions • DBE statute does not preempt State or local law – 23.77 • Rule requires a firewall between ACDBE program and local requirements to avoid subjecting Federal program to constitutional challenge - 23.77 • Waivers and Exemptions available - 23.13

8. PNW- 23.3 and 23.35, and Size Standards – 23.33 • $750,000 cap, with three exclusions • Equity in owner’s primary residence (Also in Part 26) • Assets invested in the business (Also in Part 26) • Assets encumbered or to be encumbered to obtain financing to enter or expand a concessions business (In Part 23 only) • Capped at $3 million • Size Standard $30 Million in gross receipts for most ACDBE firms • $40 M for car rentals • $275 M in assets for banks • 1,500 employees for pay phones

9. Certification - 23.31 and 23.55(j) • If current ACDBE loses eligibility - can’t meet PNW or business size standards • business can continue to be counted as ACDBE for existing concession contract • not for extensions or a new contract • If sponsor plans to enter into new contract with ACDBE before deadline to review certification, should first review eligibility

10. Long Term and Exclusive Leases Prohibited -23.75 • Term longer than five years and exclusive • Five year lease with five year extension controlled solely by the airport is not considered a long-term exclusive. • FAA’s Regional Offices may grant approval for a long-term lease if deemed acceptable and has sufficient ACDBE participation

11. Sample Program • Supersedes guidance under former Part 23 • DOT prepared Sample to help Sponsor Comply with ACDBE requirements • Approved by DOT General Counsel • Use of Sample not required • May Customize Sample to Meet Sponsor’s Needs • Sample refers to Part 26 where applicable

12. Sample Program Specific Provisions • Policy Statement - 23.1 and 23.3 • similar to Part 26 Policy Statement • states objectives including • level playing field • ensure nondiscrimination • Non-Discrimination - 23.9 • contains language that must be used in concession agreements

13. Sample Program Specific Provisions • Compliance and Enforcement - 23.11 and 23.29 • Strict enforcement • ensure ACDBEs meet eligibility requirements • Subjects ACDBEs to suspension and debarment • http://www.dot.gov/ost/m60/grant/DOT_Order_4200.5D.pdf • Can file 14 CFR Part 16 complaint • Sponsor subject to compliance reviews by Office of Civil Rights • Sponsor must identify the monitoring and enforcement mechanisms it will take to ensure compliance

14. Sample Program Specific Provisions • Program Updates – 23.21 and 23.45 • Dates staggered over three years • Primary Airports must submit revised ACDBE program and goals on following schedule • Large/medium Hubs – 1/01/06 • Small Hubs – 10/01/06 • Non-Hub Primaries – 10/01/07 • and every three years in October thereafter • Recognizing longer timeframes involved in concession relationships between business and airports

15. Sample Program Specific Provisions • Administrative Provisions – 23.23 • Policy Statement • ACDBELO • Direct access to chief executive officer • Responsible for monitoring ACDBE Program • Maintains ACDBE Directory together with UCP • Distinguish between firms certified as DBEs and firms certified as ACDBEs

16. Sample Program Specific Provisions • Non-Discriminatory Participation – 23.25 • Sponsor must list out steps to be taken • Including race neutral measures • Require good faith efforts to meet ACDBE goals • No set-asides or quotas • Reporting – 23.27 • Sponsors must submit annual ACDBE participation Reports each March first

17. Sample Program Specific Provisions • Certification – 23.31 • Except for size and PNW standards, the eligibility criteria of Part 23 for ACDBEs are almost identical to those of Part 26 for other DBEs • Certification of ACDBEs and all other DBEs will be handled by the UCP in each state • UCPs/Airports will have up to three years to review certifications of current ACDBEs to ensure that they meet Part 23 criteria • Firms required to submit personal net worth statements, certification of disadvantage and affidavit of no change

18. Sample Program Requirements • Attachment 4 – Over All Goal Calculation for Concessions Other Than Car Rentals -23.45 and 23.47 • Amount of Goal • Methodology • Consultation • Breakout of Race-Neutral and Race-Conscious

19. Sample Program Requirements • Attachment 5 – Over All Goal Calculation for Car Rentals -23.45 and 23.49 • Amount of Goal • Methodology • Consultation • Breakout of Race-Neutral and Race-Conscious

20. Part 23 – Joint Venture Guidance • Main Issue: how to credit the participation of DBE joint venture partners. • FAA has issued Final Guidance

21. “Joint Venture” Definition – 49 CFR § 23.3 • Association of an ACDBE firm and one or more other firms • Carry out a single for-profit business enterprise • Combine property, capital, efforts, skills and knowledge • ACDBE responsible for clearly defined portion of the work and whose share in the capital contribution, control, management, risks, and profits commensurate with its ownership interest.

22. JV Certification • Joint venture entities themselves are not certified as ACDBEs – it is the socially and economically disadvantaged joint venture participant that needs to seek certification.

23. JV Counting - § 23.55(d) • Credit may be counted only for the • distinct, • clearly defined portion of the work • performed by the ACDBE with its own forces.

24. Why need current definition? • Some concession joint ventures do not involve an ACDBE performing an independent part of the work, and have been the focus of fraud investigations by DOT’s Inspector General and other law enforcement organizations. • Avoid prime concessionaire seeking to have an ACDBE “silent partner” on its payroll.

25. Fronts Fronts refer to ACDBE firm which does not perform work to fulfill ACDBE participation requirements under prime contracts • Prime or Subcontractor pays ACDBE a relatively small amount for the use of ACDBE status to falsely represent that ACDBE is performing the work. • Prime or another non-ACDBE contractor actually performs the work and receives the bulk of the payments. • Payments may be funneled through ACDBE to make it appear that ACDBE performed the work.

26. Airport Monitoring and Enforcement – § 23.29 • ACDBE programs must include the monitoring and compliance measures the airport will use, including levels of effort and resources devoted to this task. • Describe the frequency of reviews or records, on-site reviews of concession workplaces, etc., to determine whether ACDBEs are actually performing the work for which credit is being claimed. • This type of oversight is crucial to combating ACDBE fraud, and FAA will closely scrutinize this aspect of ACDBE programs.

27. Enforcement • Airport Sponsor subject to compliance reviews by Office of Civil Rights • 14 CFR Part 16 Airport Enforcement Proceeding • Withhold grant funds • Terminate grant eligibility • DOJ referral for DBE/ACDBE Program Fraud • Jail • Fines • Suspension and Debarment • Listed on the Federal Government’s Excluded Parties List System; not eligible to participate in Federal contracts • DOT directive to UCP to initiate proceeding to remove DBE/ACDBE certification

28. Part 23 – Recent Court Challenges • Pacific Legal Foundation v. Port of Oakland • Challenges Port’s non-car rental Part 23 program • Claim under Proposition 209 • Assoc. Gen. Contractors v. Broward County • Challenges County’s Part 26 program

29. Part 23 – Recent Congressional Activity • Language in FAA’s reauthorization bill to require DOT to conduct DBE certification training • Amendment in Appropriations Bill to prohibit race or gender preferences in DOT programs

30. FAA’s External Civil Rights Website • FAA’s Office of Civil Rights is has updated it’s external civil rights website at: http://www.faa.gov/about/office_org/headquarters_offices/acr/ • There are two external civil rights sections: • Airport Disadvantaged Business Enterprise Program • Airport Civil Rights Programs

31. Questions