Federal Aviation Administration Airport Concession DBE Rule Goal-Setting Presented to: So Reg Transp Civil Rights Trng By: External Program Manager FAA

Federal AviationAdministration

Airport Concession DBE Rule

Goal-Setting

Presented to: So Reg Transp Civil Rights Trng

By: External Program Manager FAA Office of Civil Rights Southern Region

Date: August 3, 2005

Concessions Goal-Setting2Federal Aviation

AdministrationAugust 3, 2005

Part 23 revises and updates the Department’s regulation concerning participation by airport concessionaire disadvantaged business enterprises (ACDBEs) in the concessions activities of primary airports.



• You are not required to submit goals if:

(1) Average car rental revenue <$200k

(2) Non-car rental average revenue<$200k



• If you have an existing ACDBE program, it must remain in effect and you must seek to continue to fulfill the objectives outlined in section 23.1



Part 23 is parallel in many important respects to the Department’s DBE regulation for Federally-assisted

contracts, Part 26.



• Courts have found that Part 26, including its goal-setting mechanism, meets the narrow tailoring requirements.



• Under Part 26, many airports have had to continue race-conscious methods to achieve their goals. There is no information to suggest that airport-concession programs are exempt from the effects of discrimination to which other public-sector business activities are subject.



DOT believes it essential to conform the Part 23 goal-setting provisions as closely as possible to those of Part 26.

Both 23 and 26 require the maximum use of race-neutral measures; and,

Race-conscious methods continue to be a necessary part of a narrowly tailored strategy to ensure nondiscrimination.



• You must establish two separate percentage overall ACDBE goals:

1. Concessions (other than car rentals)

2. Car Rentals.



• Each overall goal must cover a three-year period. You must review your goals annually to make sure they continue to fit your circumstances.

• You must report to the FAA any significant adjustments that you make to your goal in the time before your next scheduled submission.



Base of Goal

• To calculate the base for the goal, project potential concession revenue three years into the future.

• Take into account preceding 3 years of gross concession receipts and upcoming new opportunities.

• Actual dollar amount will vary by airport and by year, and will be a “best estimate” of potential concession revenue.



EXAMPLE 1

• Average concession receipts over past three years is $1 million. Airport expects this level of revenue to continue through next three years.

• Airport estimates that revenues to existing concessions will grow by 5% over the next three years (e.g., inflation + increased passenger traffic).



EXAMPLE 1 - Continued

• Airport does not anticipate any major changes that would markedly increase or decrease concession revenues over next three years.

• Base for goal is $1, 050, 000.



EXAMPLE 2

• Preceding 3-year average concession revenues are $1m, as in Example 1. 5% growth estimate same as in Example 1.

• Airport is opening a new terminal, which is projected to bring in an additional $3m in concession revenues over the next 3 years.

• Apply growth percentage to total of projected continuing and new revenues.



EXAMPLE 2 - continued

• So, $1m + $3m = $4m• 5% of $4m = $200, 000• Total base is $4,200,000



EXAMPLE 3

• Preceding 3-year average concession revenue is $3m.

• In Year 2 of the period to be covered by the goal, Useless Airlines plans to abandon its hub at the airport.

• This is projected to reduce concession revenues by $1m per year.



EXAMPLE 3 - Continued

• So projected continuing revenues for Year 1 are $3m; for Years 2 and 3 corresponding figure is $2m.

• Three-year total is $7m.• Airport estimates a 3% increase in

remaining revenues due to inflation

(3% of $7m = $210,000)• Total base is $7,210,000.



• You must submit your ACDBE goals to the FAA Regional Civil Rights Office for approval. The first goals are due on the following schedule:

• Large or Medium Hub – January 1, 2006

(next submission 10/1/2008);

Small Hub – October 1, 2006;

Non-hub Primary – October 1, 2007



• You must then submit new goals every three years after the date that applies to your Airport. Timely submission of goals is a condition of eligibility for grants.



• Your goals established under this part

must provide for participation by all certified ACDBEs and may not be subdivided into group-specific goals.



• §23.51 talks about how to calculate and express the goals.

• It applies to both the overall goal for car rentals and the overall goal for concession activities.

• It is designed to parallel the goal-setting mechanism of Part 26.



• You must complete the goal-setting process separately for concessions and car rentals.

• Each overall concessions goal must be based on demonstrable evidence of ready, willing, and able ACDBEs.

• You cannot simply rely on the 10% national aspirational goal.



• Your market area is defined by the geographical area in which the substantial majority of firms that seek to do concessions business with the Airport are located, and,

• The geographical area in which the firms which receive the substantial majority of concession-related revenue are located.



Part 23 – Goal Setting

• Subpart D applies to the goal-setting process.



• If you need additional time to collect data or take other steps to develop an approach to setting overall goals, you may request approval for an interim goal and/or goal-setting mechanism.

• Such steps must reflect the relative availability of ready, willing, and able ACDBEs.

• Must avoid imposing burdens on non-ACDBEs.



Goal-Setting – Non-Car Rental

• The base of your goal includes the total gross receipts of concessions including goods and services.

• This base does not include the gross receipts of car rental operations or management contracts/subcontracts with non-ACDBE firms



Goal-Setting-Car Rentals

• The base for this goal is the total gross receipts of car rental operations at your airport.

• Do not include gross receipts of other concessions in this base.



Goal Setting-Procedure

• Your submission must include a description of the method used to calculate your goals and the data you relied on.

• Show your work - provide FAA the data, calculations, assumptions, and reasoning used.



Goal Setting-Procedure

Your submission must include your projection of the portions of your overall goals you propose to meet through use of race-neutral and race-conscious means.



Public Participation

• 23.43 – You must provide for public participation by taking at least the steps listed in (b):

• These steps are identical to the public participation section at 26.45(g)(1) regarding consultation.

• Publication of the goal is not required.



New Opportunities

• If a new concession opportunity arises that offers an estimated average annual gross revenue of $200k or greater, even at a time between normal submission dates, you must submit an appropriate adjustment to your overall goal at least six months in advance of ratifying any new concessions agreement.



Exemptions

• You may apply for an exemptions from any provision of this part by writing to the Office of the Secretary or the FAA. The Secretary will make final decision.

• You must document special or exceptional circumstances not likely to be generally applicable;

• You must agree steps specified by the DOT or FAA.



Waivers

• You can apply for a waiver of any provision of subpart B or D.

• The FAA Administrator has the authority to approve your application.

• Program waivers are for the purpose of operating an ACDBE program that achieves the objectives of Part 23.

• See 23.13 (d) (1).



Counting ACDBE Car Rentals

• You may count the value of purchases or leases from any ACDBE vendor.

• You may count the purchases from ACDBE providers of goods and services.

• You may count fees and commissions charged by an ACDBE to manage a car rental concession.



Counting ACDBE Non-Car Rental Participation

• You may count ACDBE participation that results from a commercially-useful function.

• Count the total dollar value of gross receipts an ACDBE earns under a concession agreement or sub-agreement and count the total dollar value of an ACDBE management contract or subcontract.



Counting ACDBE Non-Car Rental Participation

• Count the portion of the gross receipts earned by an ACDBE under a sub-agreement.

• Count the portion of the gross receipts equal to the distinct, clearly defined portion of the work an ACDBE performs with its own forces under a joint venture agreement.

• You may count fees and commissions charged by an ACDBE firm.



Terminal Leases

• You must pass through applicable requirements of this part to the private terminal operator or lessee via your agreement with the owner or lessee.

• You must ensure that the terminal owner or lessee complies with the requirements of this part.



Terminal Leases

• Primary airports must obtain from the terminal owner or lessee the goals and other elements of the ACDBE program required under Part 23.

• If the terminal building is at a non-primary commercial service airport or general aviation or reliever airport, you must ensure that the owner complies with 23.21(e)



Long-Term Exclusive Agreements

• A long-term, exclusive agreement is one having a term of longer than five years.

• Is a five year lease with a five year extension controlled solely by the airport long-term exclusive? It depends…

• FAA’s Regional Offices can grant approval for a long-term lease if deemed acceptable.



Documents

Federal Aviation Administration Airport Concession DBE Rule Goal-Setting Presented to: So Reg Transp Civil Rights Trng By: External Program Manager FAA