Disadvantaged Business Enterprise Program, 15614-15617 [E7-6054]

Agencies

• Office of the Secretary
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 72, Number 62 (Monday, April 2, 2007)]
[Rules and Regulations]
[Pages 15614-15617]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6054]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Parts 23 and 26

[Docket OST-97-2550]
RIN 2105-AD51


Disadvantaged Business Enterprise Program

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: This document adjusts the dollar limits and size limits used 
to define small businesses for the Department of Transportation's 
Airport Concessions Disadvantaged Business Enterprise (ACDBE) program. 
The Department of Transportation amends these size limits in order to 
ensure that the opportunity of small businesses to participate in the 
ACDBE program remains unchanged after taking inflation into account. 
This document, as required by statute, also adjusts the dollar limits 
used to define small businesses for the Department of Transportation's 
Disadvantaged Business Enterprise (DBE) program, which applies to State 
and local highway, transit, and airport recipients of DOT financial 
assistance. This document also corrects a reference error in a previous 
final rule. Finally, this document makes minor changes to the language 
of a previous rule in order to accurately explain the role of 
administrative guidance material.

DATES: This rule is effective May 2, 2007.

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) 3669313 (fax), (202) 755-
7687 (TTY), bob.ashby@dot.gov (e-mail).

SUPPLEMENTARY INFORMATION:

Background

    On March 22, 2005, the Department published a final rule revising 
49 CFR Part 23--the regulation governing the airport concessions 
disadvantaged business enterprise (ACDBE) program. On the same day, the 
Department published a supplemental notice of proposed rulemaking 
(SNPRM) on the business size standards for eligibility in the ACDBE 
program as well as on two other matters concerning implementation of 
the program. This final rule addresses the issues raised in the SNPRM 
and the comments made in response to the SNPRM.

The DBE Airport Concessions and Contracting Programs

    The DOT-assisted contracts DBE rule and airport concessions DBE 
rule are based on different statutes. Each statute applies to a 
distinct type of business that may seek DOT financial assistance. The 
ACDBE program is designed to give business opportunities to certain 
small business concerns that operate at airports and that are owned and 
controlled by socially and economically disadvantaged individuals. The 
ACDBE program is mandated by 49 U.S.C. 47107(e), originally enacted in 
1987 and amended in 1992.
    The DBE program for DOT-assisted contracts is a statutory program 
intended to ensure nondiscriminatory contracting opportunities for 
small business concerns owned and controlled by socially and 
economically disadvantaged individuals in the Department's highway, 
mass transit and airport financial assistance programs. The statutory 
provision governing the DBE program in the highway and mass transit 
financial assistance programs is 1101(b) of the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act: A Legacy for Users 
(SAFETEA-LU), Public Law 109-59, August 10, 2005. The statutory 
provision governing the DBE program as it relates to the airport 
planning and airport development financial assistance programs is 49 
U.S.C. 47113.

ACDBE Gross Receipts Size Standards

    The ACDBE program is designed to help small business concerns, 
owned and controlled by socially and economically disadvantaged 
individuals, become self-sufficient and able to compete with non-
disadvantaged firms. Under the current DOT rule, if the airport 
concessions firm's annual gross receipts averaged over the preceding 
three fiscal years exceed $30 million, then it is not considered a 
small business eligible to be certified as an ACDBE. The Department 
notes that the existing size standards have not been adjusted for 
inflation since June 1, 1992. This final rule adjusts the size 
standards for eligibility as an ACDBE.
    A number of comments submitted to the Department supported 
adjusting the gross receipts size limit for inflation. One comment 
suggested that the Department consider distinct size standards for each 
type of concession. A number of comments also suggested that an 
employee based size standard is inappropriate because businesses may 
operate using different business model configurations with different 
numbers of employees. These comments also point out that verifying the 
number of employees is more complex than verifying gross receipts, 
which are recorded in tax returns.
    This final rule adjusts the general ACDBE gross receipts cap for 
inflation. This rule only applies an employee based size standard if 
the business operates pay telephones or if the business is an 
automobile dealer. The Department views a general gross receipts size 
limit that is adjusted for inflation as the most efficient and fair way 
to establish size limits for the ACDBE program. The adjustment 
compensates for the rise in the general level of prices over time from 
the second quarter of 1992 to the third quarter of 2006. In order to 
ensure that this adjustment is made on a more timely basis in the 
future, the rule provides for a similar adjustment every two years, 
using the same methods. At two year intervals, the Department will 
publish a final rule to update the size standard numbers.
    It should be emphasized that this action does not increase the size 
standard for ACDBEs in real dollar terms. It simply maintains the 
status quo, adjusting to 2006 dollars. A number of comments opposed the 
idea of making Part 23 and Part 26 size standards identical because the 
capitalization requirements for airport concessions are much higher. 
The Department agrees and will not harmonize the standards.
    In order to make an inflation adjustment to the gross receipts 
figures, the Department of Transportation uses a Department of Commerce 
price index. The Department of Commerce's Bureau of Economic Analysis 
prepares constant dollar estimates of state and local government 
purchases of goods and services by deflating current dollar estimates 
by suitable price indexes. These indices include purchases of durable 
and non-durable goods, and other services. Using these price deflators 
enables the Department to adjust dollar figures for past years' 
inflation. Given the nature of the Department's DBE Program and ACDBE 
Program, adjusting the gross receipts cap in the same manner in which 
inflation adjustments are made to the costs of state and local 
government

[[Page 15615]]

purchases of goods and services is simple, accurate, and fair.
    The inflation rate on purchases by State and local governments for 
the current year is calculated by dividing the price deflator for the 
third quarter of 2006 (128.352) by 1992's second quarter price deflator 
(80.583). The result of the calculation is 1.5928, which represents an 
inflation rate of 59.28% from the second quarter of 1992. Multiplying 
the $30,000,000 figure for small business enterprises by 1.5928 equals 
$47,784,000, which will be rounded off to the nearest $10,000, or 
$47,780,000.
    Therefore, under the new rule, if a firm's gross receipts, averaged 
over the firm's previous three fiscal years, exceeds $47,780,000, then 
it exceeds the airport concessions small business size limit contained 
in Part 23.

ACDBE Car Rental Company Size Standards

    Under the existing rule, car rental companies are not eligible to 
participate in the ACDBE program if their average gross receipts over 
the three previous fiscal years exceed $40 million. This final rule 
adjusts the size standard for car rental companies to reflect the 
effects of inflation on the real dollar value.
    The inflation rate on purchases by State and local governments for 
the current year is calculated by dividing the price deflator for the 
third quarter of 2006 (128.352) by 1992's second quarter price deflator 
(80.583). The result of the calculation is 1.5928, which represents an 
inflation rate of 59.28% from the second quarter of 1992. Multiplying 
the $40,000,000 figure for car rental companies by 1.5928 equals 
$63,712,000, which will be rounded off to the nearest $10,000, or 
$63,710,000.
    Therefore, under the new rule, if a car rental company's gross 
receipts, averaged over the company's previous three fiscal years, 
exceeds $63,710,000, then it exceeds the airport concessions car rental 
company size limit contained in Part 23.
    A number of comments also supported establishing car rental goals 
on a nationwide basis for car rental agencies with a nationwide 
presence. The Department recognizes that a number of issues need to be 
considered before such a rule can be published. The Department will 
continue to consider developing a future rulemaking on nationwide car 
rental company goals. The Department will also continue to look for 
input from stakeholders when drafting any future rule on this subject.

ACDBE Banks and Financial Institutions Size Standards

    A number of comments said that financial industry regulators (e.g., 
the Federal Reserve Board of Governors, the Federal Deposit Insurance 
Corporation, the Office of the Comptroller of Currency, and the Office 
of Thrift Supervision) and the banking industry itself consider banks 
with less than $1 billion in assets to be ``small'' institutions. These 
comments went on to point out that the assets needed to operate any 
financial institution are high, even for the smallest banks, because of 
compliance burdens and technology expenses. In its comments, the 
American Bankers Association discussed the difference in efficiency 
between banks with less than $1 billion in assets and banks with over 
$1 billion in assets. A December 5, 2006 report from the American 
Bankers Association stated that the largest minority bank has assets of 
$638 million. The report also states that 61% of all black owned banks 
have assets under $100 million.
    The existing rule imposes a $275 million asset limit for banks and 
financial institutions. This final rule increases the dollar amount of 
assets that a bank or financial institution may have while still 
remaining eligible to participate in the ACDBE program; the new limit 
is $750 million. The new size standard will more closely approach the 
``small'' bank and financial institution standards referenced in the 
comments while accommodating the size of actual minority financial 
institutions. The new standard will also reflect the size differences 
between most minority banks and the banking industry generally.

ACDBE Automobile Dealer Size Standards

    Finally, the current rule has no unique size standard for 
automobile dealers. Some comments suggested that the size standard for 
automobile dealers selling vehicles to car rental concessionaires at 
airports should be based on the number of employees working for a 
dealer. The comments recommend an employee based size standard because 
automobile dealers who process sales of fleets of cars to car rental 
companies (``fleet dealers'') generate high gross sales, with the 
result that few, if any, fleet dealers would qualify as small 
businesses, under the existing standard. A number of commenters 
recommended that a 500-employee size standard be created for car 
dealers, which, in their view, would ensure that all potential DBE car 
dealers would qualify as small businesses.
    The Department believes that commenters made a persuasive case for 
replacing the current gross receipts standard with an employee-based 
standard. However, we are concerned that using the suggested 500 
employee standard would go too far in the other direction, encompassing 
all but a few of all car dealers in the industry (2005 statistics from 
the National Association of Automobile Dealers, for example, state that 
the average number of employees of a dealer was 53). We believe that a 
small business standard should not be so inclusive that the distinction 
between smaller and larger businesses is erased. At the same time, we 
realize that ``fleet dealers,'' who sell large numbers of cars to car 
rental companies and other fleet purchasers, are likely to have more 
employees than the typical retail dealer. Consequently, we are 
establishing a 200 employee standard for purposes of this rule.

Fraud, Abuse, and Administrative Burdens in the ACDBE Program

    In the NPRM, the Department asked for comment on ways to better 
monitor the eligibility of ACDBEs as well as the ongoing performance of 
ACDBEs in the concession business. A number of comments responded to 
this inquiry. These comments suggested creating additional reporting 
requirements, detailed annual reviews, and more detailed initial review 
of certification applications. Some comments voiced concern with the 
administrative burdens from the monitoring and goal setting that is 
already required by the ACDBE program, pointing out that this burden is 
especially significant for small hub airports. The Department has 
reviewed the current administrative requirements of the rule and will 
not change the process in this final rule. The ACDBE program carefully 
balances the benefits of administrative requirements that are designed 
to eliminate fraud and abuse with the burdens associated with those 
requirements, and we do not believe that further regulatory provisions 
are needed at this time.

Business Size Standards for the DBE DOT Financial Assistance Programs

    This rule also adjusts the gross receipts cap for the Department's 
financial assistance programs in 49 CFR Part 26. The existing DBE 
business size limits became effective on August 10, 2005 with the 
passage of SAFETEA-LU. Under the existing rule, if a firm's average 
annual gross receipts over the preceding three fiscal years exceed 
$19,570,000, then it cannot qualify as an eligible DBE firm. SAFETEA-LU

[[Page 15616]]

Section 1101 (b) (1) (a) instructs the Secretary of Transportation to 
adjust this amount annually for inflation. The rule will provide for 
annual calculations to make this adjustment, with future adjustments 
made by final rule.
    The inflation rate on purchases by State and local governments for 
the current year is calculated by dividing the price deflator for the 
third quarter of 2006 (128.352) by 2005's third quarter price deflator 
(123.079). The result of the calculation is 1.0428, which represents an 
inflation rate of 4.28% from the third quarter of 2005. Multiplying the 
$19,570,000 figure for disadvantaged business enterprises in Department 
of Transportation financial assistance programs by 1.0428 equals 
$20,407,596, which will be rounded off to the nearest $10,000, or 
$20,410,000.
    Therefore, if a firm's gross receipts, averaged over the firm's 
previous three fiscal years, exceeds $20,410,000, then it exceeds the 
small business size limit for participation by disadvantaged business 
enterprises in Department of Transportation financial assistance 
programs contained in the statutes and in Part 26.

Corrections

    This rule corrects an error in the definition section of the 
original ACDBE rule. In the first publication of the rule, the 
definition of ``small business concern'' incorrectly referred to Sec.  
23.23 for the applicable size standards. The definition of a ``small 
business concern'' now refers readers to Sec.  23.33 for additional 
information on the size standards necessary to qualify as a ``small 
business concern.'' In addition, we are amending sec. 23.11 to add an 
omitted reference to sec. 26.109, concerning confidentiality of DBE 
information.

Guidance Documents Issued by the Department of Transportation

    The changes to Sec.  26.9 of 49 CFR Part 26 are intended to clarify 
the role of guidance documents in the Department's Disadvantaged 
Business Enterprise (DBE) programs. Guidance documents do not have the 
same binding authority as a final ``legislative'' rule; however, 
guidance documents do express the Department's official view of the 
meaning and application of our rules. Consequently, we are deleting the 
word ``binding.''
    The change also clarifies that this provision applies to guidance 
issued by individual operating administrations as well as by the Office 
of the Secretary of Transportation (OST) or DOT as a whole. For 
example, guidance could not purport to express the official views of 
FHWA, FTA, or FAA if it did not comply with this provision. This 
provision also applies to any guidance or instructional material 
prepared by an outside party (e.g., a trade association) that is 
endorsed in any way or used in training sessions sponsored by DOT or 
any of its modal administrations. Section 26.9, as originally drafted, 
was intended to have this effect. However, because some questions have 
been raised about whether the language of the section effectively 
covers modal-specific, as distinct from Department-wide, guidance we 
are making the language of this section even more specific.
    For the same reasons, this rule makes a parallel change to Sec.  
23.13 of 49 CFR Part 23. We also note that the review mechanism 
specified in these sections would be the method through which the 
Department would comply with provisions of the recently-issued 
Executive Order 13422 and OMB Bulletin on Good Guidance Practices for 
any guidance issued by the Department that would be considered to be 
significant guidance.

Regulatory Analyses and Notices

    This rule is non-significant for purposes of Executive Order 12866 
and the Department of Transportation's Regulatory Policies and 
Procedures. The rule is an essentially ministerial adjustment for 
inflation of a statutory small business size standard that does not 
change the standard in real dollar terms. It will not impose burdens on 
any regulated parties. This rule does not have Federalism impacts 
sufficient to warrant consultation with state and local officials. The 
rule does not impose information collection requirements subject to the 
Paperwork Reduction Act.
    The only effect of the rule on small entities is to allow some 
small businesses to continue to participate in the ACDBE and the DBE 
programs by adjusting for inflation and modifying the size standards as 
measured by average annual gross receipts, total asset amounts, and 
total number of employees. Therefore, I certify that the rule will not 
have a significant economic impact on a substantial number of small 
entities. Since this rule pertains to a nondiscrimination requirement 
and affects only Federal financial assistance programs, the Unfunded 
Mandates Act does not apply.

List of Subjects

49 CFR Part 23

    Administrative practice and procedure, Airports, Civil rights, 
Concessions, Government contracts, Grant programs--transportation, 
Minority businesses, Reporting and recordkeeping requirements.

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.

0
For the reasons stated in the preamble, the Department of 
Transportation amends 49 CFR Parts 23 and 26 as follows:

PART 23--PARTICIPATION OF DISADVANTAGED BUSINESS ENTERPRISE IN 
AIRPORT CONCESSIONS

0
1. The authority citation for part 23 continues to read as follows:

    Authority: 42 U.S.C. 200d et seq.; 49 U.S.C. 47107 and 47123; 
Executive Order 12138, 3 CFR, 1979 Comp., p. 393.


0
2. Amend Sec.  23.3 by revising the definition of ``Small business 
concern'' to read as follows:


Sec.  23.3  What do the terms in this part mean?

    * * *
    Small business concern means a for profit business that does not 
exceed the size standards of Sec.  23.33 of this part.
* * * * *


Sec.  23.11  [Amended]

0
3. Amend Sec.  23.11 by removing ``26.107'' and adding in its place 
``sec. 26.109''.

0
4. Amend Sec.  23.13 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  23.13  How does the Department issue guidance, interpretations, 
exemptions, and waivers pertaining to this part?

    (a) Only guidance and interpretations (including interpretations 
set forth in certification appeal decisions) consistent with this part 
23 and issued after April 21, 2005, express the official positions and 
views of the Department of Transportation or the Federal Aviation 
Administration.
    (b) The Secretary of Transportation, Office of the Secretary of 
Transportation, and the FAA may issue written interpretations of or 
written guidance concerning this part. Written interpretations and 
guidance are valid, and express the official positions and views of the 
Department of Transportation or the FAA, only if they are issued over 
the signature of the

[[Page 15617]]

Secretary of Transportation or if they contain the following statement:

    The General Counsel of the Department of Transportation has 
reviewed this document and approved it as consistent with the 
language and intent of 49 CFR part 23.


0
5. Revise Sec.  23.33 to read as follows:


Sec.  23.33  What size standards do recipients use to determine the 
eligibility of ACDBEs?

    (a) As a recipient, you must, except as provided in paragraph (b) 
of this section, treat a firm as a small business eligible to be 
certified as an ACDBE if its gross receipts, averaged over the firm's 
previous three fiscal years, do not exceed $47.78 million.
    (b) The following types of businesses have size standards that 
differ from the standard set forth in paragraph (a) of this section:
    (1) Banks and financial institutions: $750 million in assets;
    (2) Car rental companies: $63.71 million average annual gross 
receipts over the firm's three previous fiscal years;
    (3) Companies providing pay telephones: 1,500 employees;
    (4) Automobile dealers: 200 employees.
    (c) The Department adjusts the numbers in paragraphs (a) and (b)(2) 
of this section using the Department of Commerce price deflators for 
purchases by state and local governments as the basis for this 
adjustment. These adjustments are made every two years from May 2, 
2007. The Department publishes a final rule informing the public of 
each adjustment.

PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN 
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS

0
1. The authority citation for part 26 continues 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; Sec. 1101(b), Pub. L. 105-178, 112 Stat. 
107, 113.


0
2. Revise Sec.  26.9 to read as follows:


Sec.  26.9  How does the Department issue guidance and interpretations 
under this part?

    (a) Only guidance and interpretations (including interpretations 
set forth in certification appeal decisions) consistent with this part 
26 and issued after March 4, 1999 express the official positions and 
views of the Department of Transportation or any of its operating 
administrations.
    (b) The Secretary of Transportation, Office of the Secretary of 
Transportation, FHWA, FTA, and FAA may issue written interpretations of 
or written guidance concerning this part. Written interpretations and 
guidance are valid, and express the official positions and views of the 
Department of Transportation or any of its operating administrations, 
only if they are issued over the signature of the Secretary of 
Transportation or if they contain the following statement:

    The General Counsel of the Department of Transportation has 
reviewed this document and approved it as consistent with the 
language and intent of 49 CFR part 26.


0
3. Revise Sec.  26.65 to read as follows:


Sec.  26.65  What rules govern business size determinations?

    (a) To be an eligible DBE, a firm (including its affiliates) must 
be an existing small business, as defined by Small Business 
Administration (SBA) standards. As a recipient, you must apply current 
SBA business size standard(s) found in 13 CFR part 121 appropriate to 
the type(s) of work the firm seeks to perform in DOT-assisted 
contracts.
    (b) Even if it meets the requirements of paragraph (a) of this 
section, a firm is not an eligible DBE in any Federal fiscal year if 
the firm (including its affiliates) has had average annual gross 
receipts, as defined by SBA regulations (see 13 CFR 121.402), over the 
firm's previous three fiscal years, in excess of $20.41 million.
    (c) The Department adjusts the number in paragraph (b) of this 
section using the Department of Commerce price deflators for purchases 
by State and local governments as the basis for this adjustment. The 
Department issues a final rule by August 10 of each year making this 
adjustment.

    Issued this 20 day of March 2007, at Washington DC.
Mary E. Peters,
Secretary of Transportation.
 [FR Doc. E7-6054 Filed 3-30-07; 8:45 am]
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