Participation by Disadvantaged Business Enterprises in Airport Concessions, 14496-14519 [05-5530]

Agencies

• Office of the Secretary
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 54 (Tuesday, March 22, 2005)]
[Rules and Regulations]
[Pages 14496-14519]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5530]



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Part II





Department of Transportation





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Office of the Secretary



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49 CFR Part 23



Participation by Disadvantaged Business Enterprises in Airport 
Concessions; Final Rule and Proposed Rule

Federal Register / Vol. 70, No. 54 / Tuesday, March 22, 2005 / Rules 
and Regulations

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Part 23

[Docket No. OST-97-2550]
RIN 2105-AC91


Participation by Disadvantaged Business Enterprises in Airport 
Concessions

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: This rule revises and updates the Department's regulation 
concerning participation by airport concessionaire disadvantaged 
business enterprises (ACDBEs) in the concessions activities of airports 
receiving Federal financial assistance from the airport improvement 
program (AIP) of the Federal Aviation Administration (FAA). It makes 
the ACDBE concessions rule parallel in many important respects to the 
Department's DBE regulation for Federally-assisted contracts. It also 
addresses issues such as goal-setting, personal net worth and business 
size standards, and counting ACDBE participation by car rental 
companies.

DATES: Effective Date: This rule is effective April 21, 2005.

FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant 
General Counsel for Regulation and Enforcement, Department of 
Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590, 
phone numbers (202) 366-9310 (voice), (202) 366-9313 (fax), (202) 755-
7687 (TTY), bob.ashby@ost.dot.gov (e-mail); and Michael Freilich, 
National External Program Manager, Office of Civil Rights, Federal 
Aviation Administration, 800 Independence Avenue, SW., Washington, DC 
20591. Phone numbers 202-267-7551 (voice), 202-267-5565 (fax).

SUPPLEMENTARY INFORMATION:

Background

    This final rule revises and updates the Department's regulation to 
ensure nondiscrimination in the provision of opportunities for 
disadvantaged business enterprises in airport concessions (49 CFR Part 
23). The regulation is mandated by 49 U.S.C. 47107(e), originally 
enacted in 1987 and amended in 1992. The current language of this 
section is the following:

    (e) Written Assurances of Opportunities for Small Business 
Concerns. (1) The Secretary of Transportation may approve a project 
grant application under this subchapter for an airport development 
project only if the Secretary receives written assurances, 
satisfactory to the Secretary, that the airport owner or operator 
will take necessary action to ensure, to the maximum extent 
practicable, that at least 10 percent of all business at the airport 
selling consumer products or providing consumer services to the 
public are small business concerns (as defined by regulations of the 
Secretary) owned and controlled by a socially and economically 
disadvantaged individual (as defined in section 47113(a) of this 
title).
    (2) An airport owner or operator may meet the percentage goal of 
paragraph (1) of this subsection by including any business operated 
through a management contract or subcontract. The dollar amount of a 
management contract or subcontract with a disadvantaged business 
enterprise shall be added to the total participation by 
disadvantaged business enterprises in airport concessions and to the 
base from which the airport's percentage goal is calculated. The 
dollar amount of the management contract or subcontract with a non-
disadvantaged business enterprise and the gross revenue of business 
activities to which the management contract or subcontract pertains 
may not be added to this base.
    (3) Except as provided in paragraph (4) of this subsection, an 
airport owner or operator may meet the percentage goal of paragraph 
(1) of this subsection by including the purchase from disadvantaged 
business enterprises of goods and services used in businesses 
conducted at the airport, but the owner or operator and the 
businesses conducted at the airport shall make good faith efforts to 
explore all available options to achieve, to the maximum extent 
practicable, compliance with the goal through direct ownership 
arrangements, including joint ventures and franchises.
    (4)(A) In complying with paragraph (1) of this subsection, an 
airport owner or operator shall include the revenues of car rental 
firms in the base from which the percentage goal in paragraph (1) is 
calculated.
    (B) An airport owner or operator may require a car rental firm 
to meet a requirement under paragraph (1) of this subsection by 
purchasing or leasing goods or services from a disadvantaged 
business enterprise. If an owner or operator requires such a 
purchase or lease, a car rental firm shall be permitted to meet the 
requirement by including purchases or leases of vehicles from any 
vendor that qualifies as a small business concern owned and 
controlled by a socially and economically disadvantaged individual.
    (C) This subsection does not require a car rental firm to change 
its corporate structure or to provide for direct ownership 
arrangement to meet the requirement of this subsection.
    (5) This subsection does not preempt--
    (A) A State or local law, regulation, or policy enacted by the 
governing body of an airport owner or operator or;
    (B) The authority of a State or local government or airport 
owner or operator to adopt or enforce a law, regulation, or policy 
related to disadvantaged business enterprises.
    (6) An airport owner or operator may provide opportunities for a 
small business concern owned and controlled by a socially and 
economically disadvantaged individual to participate through direct 
contractual agreement with that concern.
    (7) An air carrier that provides passenger or property-carrying 
services or another business that conduct aeronautical activities at 
an airport may not be included in the percentage goal of paragraph 
(1) * * *.

    .The present version of Part 23 was issued in 1992 (57 FR 18410, 
April 30, 1992) and amended in 1999 (64 FR 5126, February 2, 1999). 
There have been three proposed rules to revise Part 23: in 1993 (58 FR 
52050, October 8, 1993), 1997 (62 FR 24548, May 30, 1997), and 2000 (65 
FR 54454; September 8, 2000). This final rule responds to comments on 
the most recent of these proposals.
    In the 2000 proposal, the Department suggested making the DBE 
concessions rule a subpart of 49 CFR Part 26, the DBE rule for DOT-
assisted contracts. However, the DOT-assisted contracts and concessions 
rules are based on different statutes. They apply to different kinds of 
businesses, and concern distinct types of relationships between 
recipients of DOT financial assistance and businesses. There are a 
number of substantive differences between the two regulatory schemes 
(e.g., business size standards). For these reasons, the Department has 
decided to keep the two regulations separate. ACDBEs will continue to 
be governed by Part 23, as revised by this issuance, and DOT-assisted 
contracts DBE provisions will remain in Part 26. Keeping the regulatory 
provisions separate should help to avoid confusion.
    The Supreme Court's decision in Adarand v. Pena, which established 
the requirement that race-conscious affirmative action programs meet 
the ``strict scrutiny'' standard of review, was rendered in 1995. In 
1999, when the Department made major changes to Part 26 in order to 
meet Adarand requirements, we did not issue a comprehensive revision of 
the airport concessions DBE requirements. Consequently, one of the most 
important functions of this final rule is to ensure that the airport 
concessions requirements of Part 23 meet Adarand requirements.
    In 2003-04, the Department's Office of Inspector General (IG) 
issued two reports that addressed fraud and abuse problems in the 
Department's DBE program. Many of the IG's recommendations focused on 
the need for more effective oversight of the DBE program by state and 
local recipients and by DOT operating administrations. However, some of 
the IG's recommendations directly concerned

[[Page 14497]]

regulatory provisions governing the airport concessions DBE program. 
Probably the two most significant IG recommendations were that the 
Department expeditiously complete this rulemaking and that it include a 
specific personal net worth standard for owners of ACDBEs. The 
Department takes the IG's findings and recommendations very seriously, 
and we believe that the prevention of fraud and abuse in all portions 
of the DBE program is a very high priority. This final rule, like the 
2000 proposed rule, includes a specific personal net worth standard. 
The accompanying supplemental notice of proposed rulemaking asks for 
comment on additional steps the Department might take to prevent fraud 
and abuse.

Major Issues

    The Department identified the following issues as the most 
important in developing this final rule: Small business size standards, 
personal net worth standards, counting of ACDBE participation by car 
rental companies, and the goal-setting process. The bulk of comments on 
the 2000 NPRM concerned these issues. This portion of the preamble 
describes each of these issues, notes how the Department proposed to 
resolve it in the 2000 NPRM, summarizes comments on it, and provides a 
rationale for the Department's decision.

1. Small Business Size Standards

    Size standards in this ACDBE regulation are important for a number 
of reasons. They implement the statutory requirement that participants 
be small businesses. They provide a means to ensure that a firm's 
participation in DBE programs is not necessarily of indefinite 
duration: if a firm grows to exceed size standards, it ceases to be 
eligible for the program. They are calibrated to help meet the 
objectives of the program, including permitting ACDBE firms to compete 
in the airport concessions market.
    In Part 26, businesses seeking DBE certification must, by statute, 
meet SBA size standards and an additional cap on average annual gross 
receipts, currently set at $17.42 million and subject to periodic 
adjustments for inflation. These requirements do not apply to Part 23, 
since the ACDBE statute gives the Secretary discretion to set size 
standards for concessions. For most airport concessions, the size 
standard under current Part 23 is $30 million average annual gross 
receipts. The proper business size standard for the ACDBE program has 
been the subject of comment on all the Part 23 NPRMs that the 
Department has issued. For the reasons stated in the supplemental 
notice of proposed rulemaking (SNPRM) that we are publishing in today's 
Federal Register, the Department is seeking additional comment on a 
number of size-related issues.
    In the interim, we will maintain the status quo with respect to 
Part 23 size standards, with the two exceptions discussed below. First, 
since goods and services purchased by concessionaires from ACDBE 
businesses can count toward ACDBE goals, we think it is important to 
clarify in the regulatory text our understanding of the application of 
the rule's size standards to ACDBE goods and services providers. For 
certification purposes, a firm that provides goods and services to 
airport concessionaires is an ACDBE if, assuming it meets other 
eligibility criteria, it meets the size standards for ACDBE 
concessionaires. A firm that provides restaurant equipment to a 
restaurant at the airport, for purposes of Part 23, must meet the 
general Part 23 size standard, rather than the smaller SBA or Part 26 
standards, to be an eligible ACDBE, so that the restaurant and the 
airport can count the purchase toward DBE goals.
    Second, with respect to banks, the Department received a petition 
for rulemaking from a financial institution saying that organizations 
in its position were unable to compete against much larger institutions 
(i.e., in the hundred billion dollars in assets range) at the current 
size standard of $150 million in assets. The petitioner had been 
certified by an airport sponsor as an MBE (in a local MBE program) and 
a DBE with assets of $275 million. However, because this exceeded the 
$150 million standard, the petitioner was subsequently decertified. We 
believe that the petitioner has a fair point, with respect to the 
competitive disadvantages it faces against far larger institutions. 
Consequently, we will increase the banks and financial institutions 
size standards to $275 million, which will allow DBE financial 
institutions to participate at a level that is more competitive.
    We also note that the SBA business size standards no longer use an 
employee number standard for car dealers, but rather use a gross 
receipts standard. We believe that this approach, consistent with the 
way the Department approaches most business size standards in this 
rule, is sensible. Consequently, we are using the $30 million gross 
receipts standard for car dealers as well as for other concession-
related businesses, rather than the previous employee number standard.

2. Personal Net Worth

    In order to meet narrow tailoring requirements, it is essential 
that a DBE program not be overinclusive. The statutory scope of the 
ACDBE program is to ensure nondiscrimination for airport concession 
businesses owned and controlled by individuals who are socially and 
economically disadvantaged. To prevent the program from becoming 
overinclusive, the ACDBE program should ensure that persons who are not 
disadvantaged do not have the opportunity to participate.
    By statute, persons in certain designated groups are presumed to be 
socially and economically disadvantaged. The Department has always held 
this presumption to be rebuttable. That is, if a member of a designated 
group is shown to be non-disadvantaged, he or she would no longer be 
able to participate as an ACDBE owner. (Likewise, a person who is not 
presumed to be disadvantaged could participate if he demonstrated, on 
an individual basis, that he is socially and economically 
disadvantaged.) This rebuttable presumption feature of the existing 
rule is intended to provide a safeguard against the program becoming 
overinclusive, since a UCP (or recipient in a state where a UCP is not 
yet in effect)--on its own or in response to a complaint--has the 
authority to determine that an individual should no longer be regarded 
as disadvantaged.
    The Department has recognized, however, that in the absence of a 
specific criterion for determining whether the presumption of 
disadvantage has been rebutted, there are difficult problems of proof 
and judgment when an issue is raised concerning the application of the 
presumption to an individual. For this reason, in the 1999 revision to 
Part 26, the Department adopted a numerical standard for this purpose. 
The absence of such a specific numerical standard in Part 23 has caused 
confusion. As noted above, the Department's Office of Inspector General 
(OIG) has recommended that Part 23 include a PNW numerical standard.
    The Department agrees that Part 23 should include a PNW numerical 
standard. The question confronting the Department in this rulemaking is 
what that standard should be. In the 2000 NPRM, we proposed a $2 
million PNW standard. This was higher than the $750,000 standard of 
Part 26 in recognition of the generally accepted proposition that 
airport concession businesses are more capital intensive, higher cash 
flow businesses than many businesses working under Part 26. The

[[Page 14498]]

owners of concessions therefore need more assets in order to enter and 
thrive.
    There were a variety of comments on the PNW proposal. Many of the 
airport commenters generally said that we should not impose ``onerous'' 
requirements on ACDBEs or airports in the PNW area. They did not 
provide any specifics, however. Some airports supported the proposed $2 
million cap, while an airport trade association and other airports said 
that $2 million or an unspecified higher standard would be appropriate. 
However, other airports and a union said that the $2 million proposal 
was too high. Generally, these comments said that a cap at this level 
or higher would undermine the reason for having a PNW standard, allow 
persons into the program that were too rich, and lead to 
overinclusiveness problems. One of these commenters suggested a $1 
million standard and another suggested $750,000. Another comment said 
that whatever the PNW level was, it should be the same for concessions 
and DOT-assisted contracts.
    Many comments from ACDBEs and from an ACDBE trade association, as 
well as some airports, said that the final rule should not include any 
PNW standard or that the cap should be significantly higher (e.g., $3-
10 million). Their main argument, which some comments fleshed out with 
real-world examples, is that in order to finance business expansion in 
a capital-intensive field like concessions, lenders required very high 
asset levels on the part of owners. If a business could not expand 
without its owners accumulating enough assets to exceed the $2 million 
cap, the ACDBE program would create a glass ceiling.
    Some comments suggested ways of limiting the adverse effects of 
PNW. These included (1) making PNW a rebuttable presumption; (2) 
establishing a sliding scale for PNW, relative to the projected gross 
sales of the business; (3) having a two-tier (e.g., entry and 
retention) standard; (4) establishing some system that would reflect 
the individual situations of businesses and owners, and (5) excluding 
from the PNW calculation assets encumbered (e.g., as collateral for a 
loan) for business purposes. A number of commenters also favored 
grandfathering existing concessionaires, so they did not lose their 
certification and contracts because of a new PNW standard coming into 
being.
    Since the 2000 SNPRM, Federal courts have decided a number of cases 
upholding Part 26 as being narrowly tailored. The existence of the 
$750,000 PNW cap in Part 26 was one of the factors leading to these 
successful defenses of the regulation. This strengthens the 
Department's belief that a PNW cap of this kind is appropriate to add 
to Part 23.
    The Department has concluded that $750,000 is an appropriate 
standard for PNW. It is consistent with the Part 26 standard, and it 
has been approved by the courts in that context. Having only one PNW 
standard will avoid confusion between the Part 23 and Part 26 portions 
of the Department's DBE program. It will avoid concerns about 
overinclusiveness in the program by ensuring that persons who would 
fairly be perceived as too wealthy for a program aimed at assisting 
``disadvantaged'' individuals do not participate. It responds to the 
concerns about confusion and fraud that were the basis for the OIG's 
recommendation.
    At the same time, the Department is sensitive to the concern of 
commenters that a PNW standard at this level could inhibit 
opportunities for business owners to enter the concessions field and 
expand existing businesses.
    We do not believe that having a substantially higher PNW standard 
across the board is the best way to respond to this concern: too high a 
standard would undermine the rationale for having a PNW standard in the 
first place. It could lead to concerns about overinclusiveness and to 
the perception that the program was not appropriately focused on 
disadvantaged individuals.
    In calculating PNW, Part 26 makes reasonable exclusions for the 
business owner's equity in his or her owner's primary residence and the 
business applying for certification. In the different business context 
of concessions, the Department will add a third exclusion. Assets that 
the owner/applicant can demonstrate are necessary to obtain financing 
to enter or expand a concessions business at an airport subject to Part 
23 (e.g., by producing letters from banks to that effect) would also be 
excluded from the PNW calculation, as would assets that have in fact 
been encumbered to support existing financing for the applicant's 
business. This provision would extend only to ``recourse'' assets 
(i.e., those that were encumbered or to be encumbered in order to 
obtain financing, as in a case where an asset is used a collateral for 
a loan).
    For example, if the owner/applicant for ACDBE certification to 
operate a fast food franchise at an airport could document that 
MegaBurger Corporation requires the franchisee to have $X in assets 
before it will grant the franchise, that amount would be excluded from 
the PNW calculation. Likewise, if the owner of an ACDBE retail or 
service business who wished to expand operations to another airport 
could document that a number of financial institutions required $Y in 
personal assets to back a loan needed for the expansion, $Y would be 
excluded from the PNW calculation. Airports/UCPs would be responsible 
for verifying the documentation pertinent to this exclusion.
    Without unduly expanding the well-accepted $750,000 standard, this 
approach will take into account individual circumstances and avoid the 
``glass ceiling'' effect of an across-the-board PNW standard about 
which commenters were concerned. There will be additional information 
that owners will have to obtain and recipients and UCPs will have to 
evaluate, but we believe that this is justified in the interest of a 
narrowly tailored regulation that remains fair and flexible regulation 
that achieves the objectives of nondiscrimination and opening business 
opportunities to ACDBEs.
    To prevent the eligibility standards from becoming too open-ended, 
resulting in the participation of individuals so wealthy that it would 
be difficult to justify their inclusion in a program aimed at 
disadvantaged individuals, we are adding a $3 million cap on this third 
exclusion. This figure is consistent with many comments concerning the 
appropriate extent of a PNW threshold. That is, an applicant could 
present documentation to the certifying authority that he or she 
required a certain amount of assets to open or expand a concessions 
business. If that amount exceeded $3 million, the amount of the 
individual's net worth above $3 million would be added to the PNW 
calculation.
    Here is an example of how these provisions would work. A 
hypothetical business owner, Ms. T, has a gross PNW of $4.6 million. 
The equity in her primary residence is $400,000. Her equity in the 
business is $500,000. She produces adequate documentation from at least 
two financial institutions that they will require $3.6 million in 
assets to support their granting the loan necessary to open a 
concession business at a particular airport. (Ms. T's documentation 
would also need to justify the need for a loan of the amount referenced 
in the letters from the financial institutions, documenting the build-
out costs and other capital investment needed to begin operating the 
concession.)
    Because $3.6 million exceeds the $3 million cap on the third 
exclusion from the PNW calculation, $600,000 would count toward that 
calculation. In this case, her net PNW would be $700,000

[[Page 14499]]

($4.6 million--$3 million--$400,000--$500,000). This amount is less 
than the PNW threshold, so Ms. T would be an eligible ACDBE owner. 
However, if her gross PNW were $5 million, then her net PNW, after 
subtracting all three exclusions, would be $1.1 million, putting her 
over the PNW threshold and making her ineligible to be an ACDBE owner.
    Certifying authorities need to carefully evaluate accounting 
mechanisms that applicants may use to try to circumvent the PNW 
threshold. For example, if within two years prior to or following an 
application for certification, an applicant transfers assets (e.g., to 
a family member or to a trust), the certifying authority should regard 
those assets as continuing to count against the applicant's PNW.
    Because we often receive questions on this point, we want to 
emphasize that PNW is calculated separately for each individual who the 
applicant business claims to be a disadvantaged owner and controller of 
the business. In a situation where there is more than one disadvantaged 
individual involved in a business, PNW is not aggregated for the 
owners. It remains an individual-by-individual calculation. It is never 
necessary to obtain PNW statements from people who do not claim to be 
disadvantaged individuals for purposes of ownership or control (e.g., a 
white male who is a participant in the company).

3. Counting ACDBE Credit for Car Rental Companies

    The issue of how to assign DBE credit to car rental companies is 
the longest-running, most divisive issue in the history of Part 23. 
Briefly stated, the issue concerns situations in which a car rental 
company purchases an often large number of cars (a ``fleet purchase'') 
from a motor vehicle manufacturer. Typically, the vehicles themselves 
are transported directly (``drop-shipped'') from the manufacturer 
(e.g., Ford or General Motors) to the car rental company's airport 
facility, never physically touching the property of a car dealer. 
However, usually because of state laws that require vehicles to be 
purchased from a car dealer, the transactions are invoiced through a 
dealer, who receives a small fee for processing the paperwork.
    If the dealer in this situation is an ACDBE, how much ACDBE credit 
is it appropriate for the car rental company to claim? Is it the entire 
value of the vehicle (many thousands of dollars) or merely the 
transaction fee that the dealer receives (perhaps $50-200)? Under 
normal DBE counting principles, such as those of Sec.  26.55, the 
answer is clearly the latter. A DBE whose commercially useful function 
is limited to processing or expediting a transaction, and who does not 
meet the rule's definition of a regular dealer with respect to the 
items in question, receives only its fee or commission for the work it 
actually does. Even if it is acting as a regular dealer, credit is 
limited to 60 percent of the value of the goods purchased.
    However, subsection (e)(4)(B) of the ACDBE statute provides that 
``a car rental firm shall be permitted to meet the [ACDBE goal] 
requirement by including purchases or leases of vehicles from any 
vendor that qualifies as'' an ACDBE. Car rental industry commenters 
have argued strongly, in response to the 2000 SNPRM and its 
predecessors, that this provision means that airports must count the 
entire value of cars purchased via ACDBE car dealers, however contrary 
such a result would be to the way DBE credit is counted in any other 
context.
    Prior to the 2000 SNPRM, trade associations for ACDBEs and car 
rental companies made a joint recommendation to DOT to resolve the 
issue. They proposed that, of the first 10 percent of an airport's 
concession-specific goal for a car rental company, 70 percent could be 
achieved by counting the full value of cars purchased through ACDBE 
dealers, with the remaining 30 percent accounted for by other purchases 
of goods and services from ACDBEs. However, for any increment of an 
airport's concession-specific goal over 10 percent, the car rental 
company could achieve all of that increment through counting the full 
value of cars purchased through ACDBE car dealers. The 2000 SNPRM 
proposed to adopt the recommendation, except for the provision calling 
for being able to meet all of the portion of a goal exceeding 10 
percent via counting the full price of cars purchased through ACDBE car 
dealers.
    Comments to the 2000 SNPRM took a variety of positions on the 
proposal. Three airports and an airport trade association opposed 
permitting car rental vehicle purchases to count toward goals. Another 
airport said that airports should get DBE participation by 
subcontracting with DBEs that directly own a concession. The airport 
trade association and four airports opposed the ``10 per cent'' 
provision of the trade associations' recommendation, which the 
Department had not included in the SNPRM. A car rental trade 
association, on the other hand, insisted that the Department must 
accept all provisions of the recommendation, including the 10 percent 
provision, and the ACDBE trade association that had joined in the 
recommendation continued to support it.
    In the SNPRM, the Department also proposed a two-goal structure, 
with separate overall goals for car rental companies and all other 
concessionaires, respectively. As discussed later in this preamble, the 
Department is adopting this proposal. This provision has the important 
benefit of preventing the often very large gross receipts of car rental 
companies and potentially very high DBE participation dollar amounts 
resulting from counting the full value of vehicles in toward DBE goals 
from overwhelming DBE goals and participation in other areas of 
concessions. Having this separate goal for car rental companies 
therefore significantly reduces the possibility of skewing the program 
and limiting opportunities to other DBEs as the result of permitting 
car rental companies to count the full value of vehicles purchased 
through ACDBE car dealers.
    For this reason, and in order to avoid any possibility of conflict 
with the statute, the Department has decided that the final rule will 
permit car rental companies to count the full value of vehicle 
purchases from ACDBE car dealers. We are not adopting the trade 
associations' recommendation. While we appreciate the associations' 
efforts to find a compromise resolution to this issue, we believe that 
there is no sound basis for mandating the proposed 70/30 division or 
for the use of the statute's aspirational 10 percent goal to play an 
operational role in determining how ACDBE credit is counted. In fact, 
we believe the use of the 10 percent goal in this way is inconsistent 
with a narrowly tailored ACDBE program.
    Nevertheless, the Department is concerned that this resolution of 
the issue could have adverse effects on ACDBEs who seek to sell 
services or goods other than vehicles to car rental companies. 
Consequently, airports would require car rental companies to document 
to the airport the good faith efforts they have made to obtain 
participation from ACDBE vendors of goods and services (other than car 
dealers). Airports would not set a numerical goal for the use of these 
vendors, and there are many ways that car rental companies could show 
good faith efforts to this end. One of these might be for a car rental 
company, as suggested by the trade associations' recommendation, to 
obtain 30 percent of its ADCBE credit from the use of ACDBE vendors of 
goods and services.

[[Page 14500]]

4. Overall Goals

    In Part 26, the Department established a data-driven overall goal-
setting mechanism that directed recipients, including airports, to 
establish a goal estimating the amount of DBE participation that they 
would expect if there were a ``level playing field'' in contracting, 
free from the effects of discrimination. Recipients were also required 
to estimate how much of that goal could be achieved through race-
neutral means. Recipients were permitted to use race-conscious means, 
such as contract goals, only to obtain that part of their overall goal 
they could not achieve through race-neutral means. The rule made clear 
that recipients were not to be penalized for not making their overall 
goal, and that the statutory 10 percent goal was an ``aspirational'' 
goal that did not affect the operation of recipients' DBE programs. 
Since Part 26 was issued, every Federal court that has considered the 
question has determined that this goal setting mechanism is consistent 
with narrow tailoring requirements of constitutional law.
    The 2000 SNPRM for Part 23 essentially proposed to adopt, in a 
somewhat shortened form, the Part 26 goal-setting concepts. In 
addition, the SNPRM proposed a two-goal structure for concessions. That 
is, airports would set one overall goal for car rental companies and 
another overall goal for all other concessions. The purpose of this 
structure was to ensure that the much larger dollar volumes and much 
broader counting rules involved in the car rental industry at many 
airports did not so skew the airport's goal that other types of DBE 
businesses could not benefit from the program. The Department also 
sought comment on the idea of having a nationwide goal for major car 
rental companies, somewhat analogous to the transit vehicle 
manufacturer goal provision of Part 26.
    Six airports, an ACDBE trade association, and an ACDBE favored, and 
one airport and a consultant opposed, separate goals for car rental and 
non-car rental activities. A car rental association gave qualified 
support to the idea, but commented that it thought that each airport 
would need to make a separate compelling need finding with respect to 
car rentals. Five airports supported and one opposed allowing an option 
for national car rental goals; ACDBE and car rental industry trade 
associations expressed doubt that the idea was workable. Another large 
airport suggested separate goals for goods and services on one hand, 
and direct ownership arrangements for car rental companies on the 
other.
    An airport trade association and nine airports asked for greater 
guidance and clarification on how the goal-setting system would work in 
the concessions area, saying that such factors as the absence of data 
comparable to the DOT-assisted contracting world and the difficulty of 
integrating goods and services, management contracts, and direct 
ownership arrangements under the same overall goal made implementation 
very burdensome and confusing. Three of these commenters plus an ACDBE 
trade association said the same point applied to the race neutral/race 
conscious split in the concessions context. One airport supported the 
NPRM as written.
    One airport wanted to use set-asides for car rentals. An airport 
trade association wanted airports to be able to set goals based on the 
number of concessions without going through a wavier procedure, and one 
airport supported the waiver process. A car rental industry trade 
association argued that race-neutral methods must be used 
chronologically before race-conscious methods could be used.
    The Department believes that it is very important to include the 
two-goal structure in the final rule. We agree that it does, to an 
extent, increase the administrative workload of airports. However, it 
recognizes the differences between the car rental industry and other 
types of concessions, a difference that is meaningful in the context of 
a narrowly tailored regulation. Most important, in light of the 
statutory provision concerning the counting of vehicle purchases as a 
means of meeting car rental companies' ACDBE goals, it avoids a 
distortion resulting from the very large dollar amounts of 
participation attributed to ACDBE car dealers that could otherwise skew 
an airport's ADCBE program. Having a separate goal for non-car rental 
activities will ensure that retail businesses, management contractors, 
and other concessionaires will have the opportunity to compete on a 
level playing field not only vis-[agrave]-vis non-ACDBE firms, but also 
vis-[agrave]-vis firms in a very different industry where ACDBE 
participation is counted very differently. Having a separate goal for 
car rental companies does not, in our view, require a localized finding 
of discrimination pertaining specifically to the car rental industries. 
There is a national determination of compelling need for the entire 
program, and a division of overall goals into two segments for 
administrative purposes does not call for additional findings of need 
for the program.
    Particularly given that courts have found that Part 26, including 
its goal-setting mechanism, meets narrow tailoring requirements, the 
Department believes it is essential to conform the Part 23 goal-setting 
provisions as closely as possible to those of Part 26. These 
requirements are spelled out in greater detail here than in the 2000 
SNPRM, which should assist airports in complying with them. We also 
give airports from 1-3 years to establish new goals, which should allow 
them time to complete the work involved. Of course, by this time, 
airports have had five years' experience in working with Part 26 goals, 
and so using a parallel mechanism in Part 23 should be an easier and 
more familiar exercise than it might have seemed in 2000. We would also 
call airports' attention to the goal-setting ``Tips'' on the 
Department's DBE Web site (https://osdbuweb.dot.gov/business/dbe/
tips.html). The Department plans to develop a revised version of these 
Tips specifically pertaining to airport concessions in the near future.
    Because the Department believes it would be difficult to devise an 
overall goal based on the number of concession businesses or contracts, 
as distinct from the receipts of concession firms, the final rule does 
not include the provision allowing recipients to seek waivers to 
establish a goal on that basis, as the 2000 SNPRM proposed. However, 
airports can use the program waiver provision of Sec.  23.13 to request 
authority to use a goal-setting mechanism that differs from that of 
Subpart D of Part 23.
    While the idea of a transit vehicle manufacturer-like nationwide 
goal for large car rental companies remains intriguing, the Department 
is not sure that this approach is feasible. Therefore, rather than 
include such a provision in the final rule, we are asking for further 
comment on this subject in the SNPRM. Set-asides and quotas are not an 
appropriate part of a narrowly tailored rule, and Part 23 prohibits 
airports from using these measures.
    The argument that recipients must, in a chronological sense, use 
race-neutral methods before they can use race-conscious methods has 
been raised in litigation under Part 26. It has not prevailed. Nor does 
it make sense as policy. Airports are required to give priority to the 
use of race-neutral means, meaning that they must achieve as much as 
possible of their overall goals through race-neutral means. The utility 
of race-neutral means, or the necessity of race-conscious means, is 
likely to vary throughout the year as different sorts of business 
opportunities occur. For example, obtaining ACDBE

[[Page 14501]]

participation in one business opportunity in February of a certain year 
may require race-conscious measures, while an excellent race-neutral 
opportunity may occur in November of that year.

Section-by-Section Analysis

    This portion of the preamble discusses, in turn, each section of 
the final rule, providing, as appropriate, responses to comments, 
additional information about the Department's rationale for adopting 
individual provisions, and the Department's intent for how the 
provisions should be interpreted and implemented.

Section 23.1 What Are the Objectives of This Part?

    The objectives of this program are very similar to those stated for 
Part 26. Extensive information has been developed over the years, which 
may be found in such sources as disparity studies of which the 
Department is aware and data presented to Congress (e.g., in the 
context of the floor discussion of the 1998 reauthorization of the DBE 
program for Federal Highway Administration and Federal Transit 
Administration financial assistance) that supports the proposition that 
there is not a level playing field for small disadvantaged businesses 
in the U.S. The legislative history of the original ACDBE statute 
itself shows that Congress was very concerned that DBE firms had the 
``fair'' (i.e., nondiscriminatory) access to concession opportunities 
(see 133 Congressional Record 25986-87; October 1, 1987).
    Under Part 26, many airports have had to continue race-conscious 
methods to achieve their overall goals, which are in turn a measure of 
the level of DBE participation they could expect absent the effects of 
discrimination. There is no reason to believe, and no one has submitted 
any information to the Department's rulemakings to suggest, that 
airport concession programs are exempt from the effects of 
discrimination to which other public sector business activities at 
airports and elsewhere are subject. Race-conscious methods continue to 
be a necessary part of a narrowly tailored strategy to ensure 
nondiscrimination in concessions.

Section 23.3 What Do the Terms Used in This Part Mean?

    Most of the comment on this section concerned the issue of whether 
advertising firms should be included in the definition of 
``concession.'' A substantial number of letters from mostly small-to-
medium sized airports supported including advertising companies. One 
large airport opposed doing so. Three of the comments favoring 
advertising suggested limitations. One said that only billboards on 
public access roads to the terminal or other facilities for travelers 
should count. Another said only in-terminal ads should count. The third 
said that only companies ``primarily'' in the business of advertising 
in terminals should be viewed as concessions (as opposed, for instance, 
to telecommunications or internet companies whose terminal ads were 
tangential to their main business).
    While the existing Part 23 does not explicitly address the issue, 
many airports have certified advertising firms as DBEs for many years. 
Advertising appears to be a field in which DBE firms have had some 
success. It is also a field in which small businesses, including 
ACDBEs, must often compete against very large corporations. The level 
playing field that Part 23 attempts to provide is of considerable 
importance to firms in that position.
    Like management contractors and some providers of 
telecommunications services, advertising firms often do not have stores 
located on the airport. Nevertheless, firms of these kinds provide 
important services to members of the public who use the airport. These 
firms have the objective of selling products to the public, and their 
existence at airports provides services to the public. They have 
financial relationships with the airport similar to those of more 
traditional food and retail concessions. We do not believe it would be 
sound policy, or required by law, to oust advertising firms from the 
ACDBE program. Consequently, to avoid confusion, we have explicitly 
included such firms in the ``concession'' definition. We do not think 
it would be useful to limit their participation to a particular 
advertising location on the airport, such as terminals or billboards 
along access roads; the legal and policy situation of one such location 
is not readily distinguishable from others.
    Consistent with the 1992 amendment to the statute, the definition 
of ``concession'' now specifically includes firms with management 
contracts or subcontracts and businesses that provide goods and 
services to other concessionaires. Of course, businesses of this kind 
must be certified as ACDBEs in order to generate ACDBE credit in this 
program.
    The definition of an ACDBE is consistent with that of Part 26. With 
some exceptions, the certification provisions of Part 26 apply to 
ACDBEs. Some comments addressed the provision of certification 
standards stating that an ACDBE must be an existing business. Four 
large airports opposed this requirement (one suggested that a firm 
could be certified based on its business plan). Their main rationale 
was that the requirement would be a barrier to new businesses. One 
large airport supported the requirement. We believe that it is 
important to retain this requirement, in order to ensure that only 
genuinely eligible businesses are certified as ACDBEs. When a business 
is still in the process of formation, it is all the more difficult to 
determine whether disadvantaged individuals really own and control it. 
It is difficult to make a site visit to a business plan. Given the 
increased emphasis on preventing DBE fraud, we believe that the 
existing business requirement is essential. At the same time, as under 
Part 26, it is not appropriate to refuse to certify a business solely 
because it is a new business, but it must exist.
    A car rental association continued to advocate the position, which 
it had taken in comments on previous proposed rules, that so-called 
``dealers in development'' (i.e., dealers participating in 
manufacturers' development programs that did not fully meet Part 23 
ownership and control criteria, such as 51 percent ownership by 
disadvantaged individuals) should be certified as ACDBEs. In the 
preambles to its 1997 and 2000 proposals, the Department had explained 
at some length why we concluded that a business that did not meet 
generally applicable DBE ownership and control criteria should not be 
certified as an ACDBE. Nothing in the comments in the docket for this 
rulemaking has provided a persuasive reason to change the Department's 
position.
    Concession businesses must serve the public on the airport. Airport 
and ACDBE trade associations, one business, and nine airports supported 
the consequent concept that businesses on airport property that do not 
primarily serve travelers should not be counted as concessions. One 
commenter suggested waiving this requirement for small airports in 
Alaska. We agree that businesses that do not primarily serve the public 
should not be viewed as concessions. If one or more small businesses or 
airports in Alaska wish to seek a waiver from this provision, they may 
apply under the provisions of Sec.  23.13.
    One commenter asked whether management contracts included contracts 
for the management of hotels on the airport. While it is not necessary 
to include this level of detail in the regulatory text, we see no 
reason to

[[Page 14502]]

believe that hotel management contracts would be treated differently 
from any other kind of management contracts. In evaluating whether a 
management contractor provides a commercially useful function and the 
amount of ACDBE credit that should be given for the contractor's work, 
an airport should scrutinize carefully the actual tasks performed by 
the ACDBE as an entity to make sure that they are consistent with the 
credit claimed.
    One large airport suggested that the joint venture definition not 
require that the DBE partner perform an independent part of the work, 
arguing that concessions joint ventures did not operate in this way. We 
have become aware that some concessions joint ventures indeed do not 
involve an ACDBE performing an independent part of the work; some of 
these have been the focus of fraud investigations by the Department's 
Inspector General and other law enforcement organizations. If the ADCBE 
participant is not required to perform independently a distinct portion 
of the joint venture's work, it becomes very easy for a prime 
concessionaire seeking to circumvent ACDBE requirements by having an 
ACDBE ``silent partner'' on its payroll. We believe that changing this 
provision would adversely affect the integrity of the program. Because 
joint ventures have become a problematic part of the ACDBE program, the 
Department is drafting additional guidance on the subject, which we 
intend to post on the DOT DBE Web site as soon as it is available.
    We also note that UCPs and airports should not certify joint 
ventures themselves as ACDBEs, and the definition makes this point 
explicit. By definition, a joint venture is an association of an ACDBE 
and another firm to carry out a single business enterprise. As noted in 
Part 26 (Sec.  26.73(e)), ``[a]n eligible DBE firm must be owned by 
individuals who are socially and economically disadvantaged * * * [A] 
firm that is not owned by such individuals, but instead is owned by 
another firm--even a DBE firm--cannot be an eligible DBE.'' Even if a 
joint venture is more than 51 percent owned by a ACDBE firm, therefore, 
the joint venture--because it is owned by other firms, not directly by 
disadvantaged individuals--cannot be an eligible ACDBE firm. (This same 
point applies to DBEs under Part 26.) We note that, given the counting 
rule for joint ventures in Parts 23 and 26, this fact should not make 
any difference in the way that ACDBE credit is counted. Credit toward 
DBE goals is awarded under both rules only for the distinct, clearly 
defined portion of the work of the joint venture performed by the DBE 
or ACDBE participant, regardless of the certification status of the 
joint venture entity. In reviewing currently certified firms (see Sec.  
23.31(c)), airports and UCPs should remove joint venture entities 
(though not certified DBE firms that participate in joint ventures) 
from their directories, consistent with this direction.
    The other definitions are consistent with those in Part 26 and have 
not changed substantively from the 2000 SNPRM. They were not the source 
of additional comment. We have added, for administrative purposes, 
definitions of small, medium, large hub, and non-hub primary airports.

Section 23.5 To Whom Does This Part Apply?

    This section recites that Part 23 applies to airports that have 
received FAA financial assistance for airport development since January 
1988, when the Department's airport concessions DBE rules first went 
into effect. Note that, under Sec.  23.21, not all airports covered by 
Part 23 are required to have an ACDBE program.

Section 23.7 How Long Do the Provisions of This Part Remain in Effect?

    The Department is introducing a ``sunset'' provision into the final 
rule as a way of addressing the durational element of narrow tailoring. 
A narrowly-tailored rule is not intended to remain in effect 
indefinitely. Rather, the rule should be reviewed periodically to 
ensure that it continues to be needed and that it remains a 
constitutionally appropriate way of implementing its objectives. 
Consequently, this provision states that this rule will terminate and 
cease being operative in five years, unless the Department extends it. 
We intend, beginning four years from now, to review the rule to 
determine whether it should be extended, modified, or allowed to 
expire. Of course, the underlying DBE statute remains in place, and its 
requirements continue to apply regardless of the status of this 
regulation, absent future Congressional action.

Section 23.9 What Are the Nondiscrimination and Assurance Requirements 
of This Part for Recipients?

    This section cross references the nondiscrimination requirements of 
Part 26 and provides the text of assurances that airports must include 
in concession agreements and management contracts in the future. The 
section does not require airports to revise existing contracts to 
include the assurance text.

Section 23.11 What Compliance and Enforcement Provisions Are Used Under 
This Part?

    This section recites that standard FAA/DOT enforcement procedures--
the same ones used for Part 26--apply to Part 23.

Section 23.13 How Does the Department Issue Guidance, Interpretations, 
Exemptions, and Waivers Pertaining to This Part?

    This section parallels Part 26, Sec.  26.15, concerning guidance, 
interpretations, exemptions and waivers. Program participants should 
note that guidance provided concerning existing Part 23 should not be 
relied upon in the future, given the many changes made in this final 
rule. The Department will issue new or revised guidance concerning the 
revised Part 23.

Section 23.21 Who Must Submit an ACDBE Program to FAA, and When?

    The basic trigger for the requirement to have an ACDBE program is 
being a primary airport and receiving FAA financial assistance. Other 
categories of airports (e.g., non-primary or general aviation airports) 
do not have to submit an ACDBE program. Airports that currently have a 
DBE program under the existing Part 23 must update their programs to 
meet the requirements of this new rule. They will do so on the same 
three-year staggered schedule provided for submission of ACDBE goals 
(i.e., next January for large and medium hubs, next year for small 
hubs, and the following year for non-hub primary airports).
    Until FAA approves revised programs, airports will continue to use 
their existing concessions DBE programs. Airports should review their 
programs immediately to ensure that they do not contain any provisions 
that are contrary to this part, however. For example, this part 
prohibits the use of set-asides. If an airport's current program 
provides for the use of set-asides, that provision should be deleted at 
once, even though the airport's revised program is not due be submitted 
to FAA until one to three years from now.

[[Page 14503]]

Section 23.23 What Administrative Provisions Must Be in a Recipient's 
ACDBE Program?

Section 23.25 What Measures Must Recipients Include in Their ACDBE 
Programs To Ensure Nondiscriminatory Participation of ACDBEs in 
Concessions?

    Section 23.23 provides a structure for a recipient's ACDBE program 
that is parallel to that for Part 26 DBE programs. Indeed, where an 
airport must have both an ACDBE program and a DBE program, the 
administrative provisions can be combined to a considerable degree.
    Section 23.25 requires goal-setting as provided in Subpart D of 
Part 26, the use of race-neutral measures by airports themselves to 
obtain DBE participation, and the use of race-conscious measures like 
concession-specific goals when race-neutral measures standing alone are 
not sufficient to meet overall goals. Airports are expected to include 
the race-neutral and, if needed, race-conscious measures they will 
implement in the ACDBE programs they submit to the FAA. The section 
notes that concession opportunities are to be sought in all areas of 
the concession industry, so that different kinds of businesses have the 
chance to participate. It is not appropriate to have a single area of 
concessions or a few firms so dominating ACDBE participation that 
others lack a realistic opportunity to help meet the overall goal.
    Section 23.25(f) is a new paragraph incorporating the last clause 
of subsection (e)(3) of the statute. Paragraph (f) provides that an 
airport's ACDBE program ``must require businesses subject to ACDBE 
goals at the airport (except car rental companies) make good faith 
efforts to explore all available options to meet goals, to the maximum 
extent practicable, through direct ownership arrangements with DBEs.'' 
Both in the statute and in paragraph (f), this requirement operates in 
the context of the ability of airport businesses to meet ACDBE goals 
through the purchase of goods and services from ACDBE vendors. While 
meeting goals through the purchase of goods and services is authorized, 
it is important for ACDBE goals to encourage the participation of 
ACDBEs in a variety of ways. It is a healthier situation for ACDBE 
programs, for example, if ACDBE participation a business or airport 
comes not only through goods and services purchases but also through 
individual concessions run by ACDBEs.
    The parenthetical ``except car rental companies'' reflects another 
provision of the statute (subsection (e)(4)(C)), which provides that 
car rental firms are not required to change their corporate structure 
to provide for direct ownership arrangements. This means, for example, 
that car rental companies that operate corporation-owned stores cannot 
be required to obtain ACDBE participation through such means as 
subleases or joint ventures. This limitation does not apply to non-car 
rental concession businesses, however. Even if a non-car rental 
business (e.g., a news and gift shop company) normally operates 
corporation-owned stores, direct ownership arrangements with ACDBEs 
that might alter or create an exception to the firm's normal way of 
doing business are among the options the business must make good faith 
efforts to explore under this provision.

Section 23.27 What Information Does a Recipient Have To Retain and 
Report About Implementation of Its ACDBE Program?

    Recipients must save compliance information for three years. 
Beginning March 1, 2006, recipients will submit a report of ACDBE 
participation (see Appendix A). The report is a modification of the 
Part 26 reporting form that the Department issued in June 2003, with 
instructions adapted for purposes of the ACDBE program.

Section 23.29 What Monitoring and Compliance Procedures Must Recipients 
Follow?

    Ensuring that participants in the ACDBE program comply with the 
requirements of this rule and preventing fraudulent activities in the 
program are among the most important responsibilities of recipients. It 
is not enough merely to set goals and award concessions; airports must 
make sure that promised ACDBE participation really occurs after award 
and that participants are not able to circumvent the requirements of 
the program to the detriment of actual ACDBE participation. Each ACDBE 
program must include the monitoring and compliance measures the airport 
will use, including levels of effort and resources devoted to this 
task. For example, the program would describe the frequency of reviews 
of records, on-site reviews of concession workplaces, etc., to 
determine whether ACDBEs are actually performing the work for which 
credit is being claimed and that participants are not circumventing 
program requirements. This kind of oversight is crucial to combating 
ACDBE fraud, and FAA will closely scrutinize this aspect of ACDBE 
programs to ensure that levels of effort are sufficient.
    In addition, if an airport includes additional provisions beyond 
what Part 23 requires (see Sec.  23.77), FAA has a responsibility to 
review such provisions and work with airports to ensure that additional 
provisions do not create policy or legal problems. FAA will reject 
program submissions that are inconsistent with Part 26.

Subpart C--Certification of ACDBEs

    Certification under Part 23 basically follows the model of Part 26, 
with the exception of those areas--such as size standards, discussed 
above--in which the Department recognizes differences in the ACDBE and 
DOT-assisted contracts marketplaces. Firms certified under Part 26 are 
eligible under Part 23 as well, provided they can control the firm with 
respect to the concession activities involved. Part 26 certification 
standards and procedures--even if not specifically referenced in Part 
23--are intended to apply to the ACDBE program except where otherwise 
provided.
    Section 23.39 mentions a number of other differences between Part 
23 and Part 26 certification. These differences are self-explanatory, 
for the most part. The reason for not applying Part 26's special 
provision for Alaska Native Corporation-owned firms is that the statute 
requiring this provision in DOT-assisted contracts does not apply in 
the ACDBE context, since this context does not involve DOT-assisted 
contracts.
    The eligibility of joint ventures has been a continuing problem 
under the DBE program, including both eligibility and operational 
issues that have called the legitimacy of joint venture arrangements 
into question. The Inspector General has pointed to situations in which 
joint ventures or similar arrangements appear to have been used as a 
subterfuge by firms seeking to evade or defraud the program. The rule's 
definition of joint ventures makes explicit that these entities should 
not be certified as DBEs in their own right. As noted above, the 
Department is planning to make available additional guidance concerning 
the use of joint ventures in the ACDBE program, including certification 
issues pertaining to joint ventures.
    When the rule says that suppliers of goods and services to 
concessionaires are to be evaluated for certification as ACDBEs 
according to the provisions of this part (Sec.  23.39(i)), we mean that 
Part 23 provisions (e.g., concerning personal net worth and business 
size) are to be used for this purpose. Firms that provide goods and 
services to concessionaires are not subject to the

[[Page 14504]]

somewhat different certification provisions of Part 26.
    In certain respects, particularly with respect to personal net 
worth, this rule changes the eligibility criteria for ACDBEs. 
Consequently, airports or UCPs, are required to review the eligibility 
of currently certified firms. These reviews must take place within 
three years of the most recent certification of the firm, or a year 
from the rule's effective date, whichever comes later. Any firm that 
loses eligibility because of the new PNW requirements would be able to 
complete work on an existing contract or other concession agreement, 
with its participation counted toward ACDBE goals. Options, extensions, 
renewals, etc., of the firm's participation beyond the termination of 
the agreement in force at the time of the firm's decertification would 
not count as DBE participation, however.
    We emphasize that Part 26 standards do apply to certifications 
under Part 23 for most aspects of ownership and control. For example, 
absentee ownership of firms raises the same control issues in a Part 23 
context as it does in a Part 26 context (see Sec.  26.71(j)). Also, as 
the definition of ``concession'' now explicitly provides, recipients 
should not certify holding companies as ACDBEs. Holding companies do 
not perform concession activities. While holding companies may play a 
narrow role in DBE and ACDBE firms (see Sec.  26.73(e)), the holding 
companies themselves are not certified in this role. Recipients should 
pay careful attention to affiliation relationships between and among 
holding companies and their concession subsidiaries. It is likely that, 
when a concession that is owned by a holding company seeks 
certification, the concession is affiliated with both the holding 
company itself and other subsidiaries of the holding company. These 
relationships can have important effects on the ability of the 
applicant firm to meet size standards.
    Recipients should also pay close attention to affiliation 
relationships that may arise in joint venture arrangements. If one 
participant in a joint venture--or other business arrangement--exerts 
too much control over the business decisions and operational activities 
of another, then there may be an affiliation relationship between the 
two and/or an issue of whether the second firm is sufficiently 
independent to be certified.
    On-site reviews are a key part of the concession certification 
process. The Department realizes that, particularly for a concession 
that does not yet have a location established on an airport, it may be 
difficult to identify a ``job site'' at which to conduct such a review. 
In this case, recipients could conduct the on-site review solely at the 
firm's headquarters or other principal place of doing business.
    At the time that this rule is being issued, not all states have 
approved unified certification programs (UCPs). Until a UCP is approved 
and in operation for a given state, individual airports in that state 
continue to have responsibility for certifying ACDBEs. Once a UCP is 
approved and in operation in a state, certification of ACDBEs becomes 
the responsibility of the UCP, rather than of individual airports.

Section 23.41 What Is the Basic Overall Goal Requirement for 
Recipients?

    Having overall goals is a basic requirement of airports' ACDBE 
programs, without which airports are not eligible for FAA financial 
assistance. Overall goals cover periods of three years, rather than one 
year as in the case of Part 26, in recognition of the longer time 
frames involved in concession relationships between businesses and 
airports. As discussed above, recipients are required to have two 
separate overall goals: One for car rentals, and one for all 
concessions other than car rentals.
    There is an important exception to this general rule, designed to 
reduce administrative burdens on airports that have little or no 
concessions activity. If an airport has less than $200,000 in 
concessions revenue (averaged over three years), in either the car 
rental or non-car rental category, then the airport does not have to 
submit an overall goal in that category. The Department believes that 
requiring airports that have