[Federal Register Volume 65, Number 175 (Friday, September 8, 2000)]
[Proposed Rules]
[Pages 54454-54471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22839]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Parts 23 and 26

[Docket OST-97-2550]
RIN 2105-AB92


Participation by Disadvantaged Business Enterprises in Department 
of Transportation Programs

AGENCY: Office of the Secretary, DOT.

ACTION: Supplemental notice of proposed rulemaking (SNPRM).

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SUMMARY: In May 1997, the Department issued a supplemental notice of 
proposed rulemaking (SNPRM) to revise its disadvantaged business 
enterprise (DBE) regulation. The SNPRM included proposals for revising 
the airport concessions portion of the DBE program. When the 
Department, in February 1999, issued the final rule based on the SNPRM, 
we did not publish a final version of the airport concessions proposal.
    This SNPRM seeks comments on an airport concessions subpart to part 
26 that takes into account comments on the May 1997 SNPRM, adapts 
provisions of the rest of part 26 to the concessions context, and 
proposes options for provisions affecting car rental operations at 
airports. These options are based in part on a recent memorandum of 
understanding between the American Car Rental Association and the 
Airport Minority Advisory Council making recommendations to the 
Department on this aspect of the rulemaking.

DATES: Comments should be received by October 23, 2000. Late-filed 
comments will be considered to the extent practicable.

ADDRESSES: Comments should be sent to Docket Clerk, Attn: Docket No. 
OST-97-2550, Department of Transportation, 400 7th Street, SW., Room 
PL401, Washington DC, 20590. For the convenience of persons wishing to 
review the docket, it is requested that comments be sent in triplicate. 
Persons wishing their comments to be acknowledged should enclose a 
stamped, self-addressed postcard with their comments. The docket clerk 
will date stamp the postcard and return it to the sender. Comments may 
be reviewed at the above address from 9 a.m. through 5:30 p.m. Monday 
through Friday. Commenters may also submit their comments 
electronically. Instructions for electronic submission may be found at 
the following web address: http://dms.dot.gov/submit/. The public may 
also review docketed comments electronically. The following web address 
provides instructions and access to the DOT electronic docket: http://dms.dot.gov/search/.

FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant 
General Counsel for Regulation and Enforcement, Department of 
Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590, 
phone numbers (202) 366-9310 (voice), (202) 366-9313 (fax), (202) 755-
7687 (TDD), [email protected] (e-mail).

SUPPLEMENTARY INFORMATION: The airport concessions provision of the DBE 
regulation implements statutory authority that is separate from the 
authority for the DBE program for DOT-assisted contracting. It applies 
to an industry--airport concessions--that

[[Page 54455]]

differs in a number of respects from the industries involved in DOT-
assisted contracting, whether in airports, transit, or highways.
    The types of business opportunities this subpart concerns include 
concessionaires, management contractors, and firms that supply goods or 
services to them. None of this work is eligible for FAA grant funds. 
Concession agreements generally involve high rent payments to the 
airport, often computed as a percentage of the concessionaire's annual 
gross receipts or a fixed amount, whichever is greater. Larger 
concessionaires are often required to make a substantial investment in 
a leased facility, which may be amortized over a period exceeding five 
years. In some instances, airports grant a firm the exclusive privilege 
to provide a particular type of concession, such as food and beverage 
services, to the entire airport.
    Because of these unique features of airport concessions, this 
subpart differs in a number of respects from the provisions of the DOT-
assisted contracting portions of the DBE rule. For example, the 
counting provisions of the rule, particularly with respect to car 
rental operations, differ significantly from those in the remainder of 
our DBE rules. Many provisions are parallel, however. Except with 
respect to size and personal net worth standards, which differ because 
of the economic characteristics of concessions, this subpart uses the 
certification standards of the rest of part 26. The basic narrow 
tailoring principles of part 26, including those pertaining to goal 
setting, apply here as well.
    We sought comment on this subpart in our May 1997 DBE supplemental 
notice of proposed rulemaking (SNPRM). Because three years have elapsed 
since the 1997 notice and because this version of the document is 
different from the 1997 version in a number of respects, we have 
decided to seek additional comment. This new SNPRM reflects many of the 
comments we received on the May 1997 notice. When we refer to comments 
in discussing the provisions of the SNPRM, we are referring to comments 
on the May 1997 notice.

Section-by-Section Discussion

FAA Guidance

    One comment asked whether the final rule modifies FAA guidance 
interpreting 49 CFR part 23. As under the rest of part 26 (see 
Sec. 26.15), the new rule would completely replace the old rule. 
Guidance issued under the concessions portion of old part 23 would no 
longer be in effect, once this subpart takes effect, because it 
interprets and implements a rule that has been removed from the Code of 
Federal Regulations. The provisions of the final version of this SNPRM 
would now govern and will be incorporated into any new technical 
assistance that FAA or DOT may issue. One piece of guidance we 
anticipate issuing at the time of, or shortly after, the publication of 
the final rule is a ``sample plan'' to assist airports in drafting 
their concessions program. We would put this sample plan on our web 
site, as we did for the sample plan we issued for the Federally-
assisted contracts portion of part 26.

Section 26.111  Do the Provisions of Subparts A-F of this Part Apply to 
This Subpart?

    This provision says that the rest of part 26 applies to the airport 
concessions program, except where this subpart provides differently.

Section 26.113  What Do the Terms Used in This Subpart Mean?

    The concession provisions in 49 CFR part 23 incorporated the 
definition of ``affiliation'' from regulations of the Small Business 
Administration (SBA) 13 CFR part 121. Under part 121, affiliation may 
arise through joint venture arrangements, requiring the parties to 
combine their gross receipts in making a determination of business 
size. The SNPRM proposed to delete this provision from affiliation 
rules employed in the concession program. Two comments concurred with 
the proposal, and this SNPRM would adopt it. This SNPRM also reflects 
an amendment made to SBA's definition, which was published in the 
January 31, 1996 Federal Register (61 FR 3280).
    This SNPRM would add a new definition of ``car dealership,'' which 
is intended to clarify the SNPRM's provisions concerning purchase of 
vehicles by car rental operations and others.
    Five comments addressed the proposed exclusion from the definition 
of ``concession'' of firms that only pick up and/or discharge customers 
at the airport, and that have no on-airport facility. Three supported 
the change, while two requested clarification. This SNPRM clarifies 
that a car rental is considered ``at the airport'' if it has an on-
airport facility, including a counter at which its services are sold to 
the public, or a ready return facility. The types of facilities cited 
in the SNPRM are intended as examples, and a firm need not have a 
particular one to qualify as a concessionaire.
    In addition, in response to comments and because the Department has 
received numerous questions on the issue, we are proposing to make 
contracts for on-airport advertising part of the definition of 
``concession.'' Placing advertising signs and other media in public 
portions of an airport (e.g., the terminal, the roadways leading to the 
terminal) is analogous to other businesses that we view as concessions. 
A firm typically pays to lease space from the airport and places 
objects in airport buildings and grounds that are directed at the 
traveling public. This can be a significant business opportunity for 
small businesses, including DBEs. However, the advertising agency 
usually does not have an office or store on the airport from which it 
sells goods or services to the traveling public. As a result, there has 
been uncertainty about whether advertising meets the current definition 
of ``concession.'' To resolve this uncertainty, and because we believe 
that, as a matter of policy, it makes sense to make this type of 
business opportunity more readily available to DBEs, we are proposing 
to add this kind of advertising to the program. We seek comment on this 
proposal.
    Under this SNPRM, all entities meeting the definition of 
``concession'' are included in the base from which overall DBE goals 
are calculated, regardless of when the contract was awarded. At the 
same time, the proposed rule makes clear that sponsors are not required 
to modify or abrogate an existing concession agreement (one executed 
prior to the effective date of the final rule) during its term. The 
same procedure was used when subpart F of 49 CFR part 23, was published 
in 1992.
    One issue of which we have become aware concerns businesses that 
may occupy a portion of airport property, serve the public in general, 
but do not focus on serving passengers who use airport for air 
transportation. For example, an airport may lease space on its 
property, perhaps some miles from the terminal, for a supermarket or 
other retail establishment that serves the local population but is not, 
except perhaps incidentally, used by persons who go to the terminal to 
catch a flight. We seek comment on whether we should exclude such 
businesses from the definition of concession. We might do so, for 
example, by changing this definition to refer to businesses that 
``primarily serve the traveling public on the airport.''
    In response to a comment, the term ``concessionaire'' has been 
modified to include firms that own and control a portion of a 
concession, in addition to those that own 100 percent of one. This

[[Page 54456]]

is in accord with our policy established at the inception of the 
program that concessionaires include sublessees and joint venture 
partners.
    The term ``direct ownership arrangement'' has been modified to 
include a reference to licensees. We concur with a comment stating that 
while some corporations use licenses, others use franchises to 
establish non-company owned locations at airports. Since the two 
arrangements are not interchangeable as a matter of law, both are 
named. This SNPRM adopts the term ``management contract or 
subcontract'' with minor changes to clarify the coverage of 
subcontractors.
    This SNPRM retains the 1997 SNPRM's proposal that a ``small 
business concern'' must be an ``existing'' business. Of three comments 
on the matter, one concurred, a second opposed it, while a third 
requested clarification. The one opposed believes that the provision 
will unreasonably limit a sponsor's flexibility. It stated that it is 
relatively common for existing firms to form new, separate corporations 
or other legal entities for each of its airport concessions. The 
comment said that such firms have either formed the new legal entity or 
have applied for certification for the existing entity with the proviso 
that the new entity would be formed if awarded the contract.
    The Department believes that only existing firms should be 
permitted to apply for certification as a DBE. Approval of an 
application based on an assurance that an entity will subsequently form 
a firm would pose legal difficulties and undermine the integrity of the 
certification process.
    For example, an entity might refuse to form the legal structure 
that it represented in its application, leaving the sponsor with no 
recourse but to impose contract sanctions.
    An existing firm need not be operational or demonstrate that it 
previously performed contracts at the time of its application for 
certification. However, it would be required to specify its legal form 
and meet applicable eligibility standards. We have retained the 
provision that a firm cannot be denied certification solely because it 
was newly formed. For a sole proprietorship, which consists of a single 
individual, the applicant must, like other firms, submit appropriate 
information sufficient for the sponsor to make an eligibility 
determination.
    The 1997 SNPRM invited comments on whether the concession program 
should employ a personal net worth (PNW) standard. Under such a 
provision, if an individual presumed to be socially and economically 
disadvantaged has a PNW above the standard, the presumption of economic 
disadvantage would be rebutted. Six commenters favored using a PNW 
standard in the concession program, while one commenter (a firm) 
generally opposed the use of any standard, for many of the same reasons 
that commenters opposed adopting the standard in the rest of part 26 
(e.g., a PNW standard ``penalizes success,'' the information collection 
requirements are too intrusive).
    Two sponsors recommended a threshold of $750,000 in order to be 
consistent with the figure proposed by DOT in the 1992 NPRM, and 
subsequently adopted in part 26, for the contracting program. Any 
higher level, said one, would raise an issue of fairness and 
credibility with the public. Others recommended $1.5 million and $2 
million for the threshold, while another favored tying it to the 
relative difference in size standards in the contracting and concession 
programs. Another sponsor commented that it does not consider itself 
qualified to determine an appropriate level and asked the Department to 
provide a rationale for any that is selected. It suggested that an 
individual's ability or inability to obtain a letter of credit or a 
bond of a certain value would be a better indicator. It also commented 
that not all wealth (e.g., undeveloped land) appearing on a personal 
net worth statement has economic value for the owner.
    The Department discussed in some detail why it adopted a PNW 
standard in the rest of part 26, and this discussion applies in the 
concessions context as well. While we are well aware that this approach 
has disadvantages (e.g., some firms may be unable to participate in the 
program as a result), we believe that a PNW standard can be a useful 
safeguard against including in the program firms owned by individuals 
who it is difficult to view as economically disadvantaged. We believe 
that the concept of program eligibility based on economic disadvantage 
appears to call for a threshold for determining when an owner is no 
longer disadvantaged. The DBE concession program is not intended to 
assist enterprises owned and controlled by socially disadvantaged 
individuals who have accumulated substantial wealth. Also, in a 
narrowly tailored program that is subject to judicial review, we 
believe that using a PNW standard to ensure that the program is not 
overinclusive can be very important in defending the program in 
litigation.
    Because of differences between the concessions program and the DOT-
assisted contracting program, however (e.g., the higher cash flow of 
concessions, the need to raise significant capital to compete at 
multiple airports), DOT has decided to adopt a different personal net 
PNW standard for the concessions program. We believe that $2 million 
will be a standard that will achieve the objectives of a PNW standard 
while not interfering unduly with the ability of firms to succeed in 
the concessions business. We believe that the $2 million limitation is 
high enough to enable an owner to expand to several airports, yet is 
sufficiently low to prevent the individual from amassing unlimited 
assets. The figure also considers the substantial capital investment 
and higher operating costs generally associated with a concession, 
compared to DOT-assisted contracts. The figure would be subject to the 
same exclusions as the PNW standard in the contracting program (see 
Sec. 26.67, ``What rules determine social and economic disadvantage?'')

Section 26.115  To Whom Does This Subpart Apply?

    Since we received no substantive comments opposed to this section, 
it has been included without change.

Section 26.117  What Are the Nondiscrimination and Assurance 
Requirements of This Subpart for Sponsors?

    These requirements were not the subject of substantive comments to 
the previous SNPRM, and have been included without change.

Section 26.119 What Information Do Sponsors Have to Retain and Report 
About the DBE Concession Program?

    This provision is essentially parallel to Sec. 26.11 and was 
included for the same reasons as discussed in the preamble to that 
section. The bidders' list requirement of that section is not repeated 
here, but does apply to firms seeking concession opportunities.

Section 26.121  Who Must Implement a DBE Concessions Plan?

    One comment concurred with this May 1997 version of this section, 
while another urged the Department to require small primary airports to 
submit DBE concession plans every two years, rather than annually. This 
SNPRM would retain the provision that requires only primary airport 
sponsors to implement a DBE concession plan. Sponsors of general 
aviation airports, reliever airports, and nonprimary commercial

[[Page 54457]]

service airports are not subject to this requirement. Rather, they must 
take appropriate outreach steps to encourage available DBEs to 
participate as concessionaires whenever there is a concession 
opportunity. This provision significantly reduces burdens on them.
    As a clarification, the language of this version of the proposed 
regulatory text gives sponsors who own more than one airport the option 
to submit a concessions plan covering all of the airports. There would 
be separate goals for each, however. Under the SNPRM, submitting a plan 
would be a one-time exercise, with additional submissions needed only 
in the case of significant changes to a plan that FAA had approved.
    The FAA intends to issue, in conjunction with the publication of 
the final rule, guidance for the drafting of concessions plans. This 
will take the form of a sample concessions plan analogous to the sample 
DBE program currently on the Department's web site for the financial 
assistance portion of the DBE program.

Section 26.123  What is the basic DBE goal requirement for sponsors?

Section 26.125  What is the base for a sponsor's goal for concessions 
and covered activities other than car rentals?

Section 26.129  How are a sponsor's goals expressed and calculated?

Section 26.131  What are public participation requirements concerning a 
sponsor's goals?

Section 26.133  What are the contents of a sponsor's goal submissions 
to FAA?

Section 26.135  What does FAA do with your goal submission?

Section 26.137  What are the sponsor's obligations concerning the use 
of race-neutral and race-conscious measures?

Section 26.139  What are the steps a sponsor takes to meet its DBE 
goals?

    This proposed set of requirements for goal-setting differs from 
that of the May 1997 SNPRM in some respects. Most importantly, this 
SNPRM proposes the requirement that sponsors must have two overall 
goals: One for concessions and covered activities other than car 
rentals, and the second for car rentals. Car rental goals are discussed 
separately below. Consistent with statutory requirements, management 
contracts and purchases by concessions from DBE suppliers form part of 
the goal.
    Sponsors' goal submissions would cover a period of three to five 
years, in order to reduce the administrative burdens associated with 
the goal calculation and review process. The submissions would include 
goals for each year in the period, however. If circumstances changed 
significantly during this period, recipients would have to make a mid-
course adjustment.
    We propose that sponsors would calculate their goals by using 
methods parallel to those used in Federally-assisted contracting under 
the rest of part 26. This approach to goal-setting is by now familiar 
to airports, since they have already used it in their Federally-
assisted contracting DBE programs. We seek comment on whether there 
should be any adjustments made to these requirements in view of the 
differences between contracting and concessions.
    In the May 1997 SNPRM and the current rule, the Department proposed 
that sponsors could base goals on the number of concessions, rather 
than the dollar volume of concessions. While this approach appears 
permitted by the language of the concessions statute, it has been used 
infrequently. It may be less suited to measuring the ``level playing 
field'' that we seek to describe in the goal setting process. For this 
reason, we propose that a sponsor would have to use the program waiver 
process of Sec. 26.15 to employ this approach. To ensure legal 
sufficiency of such a waiver request, the FAA Chief Counsel's office 
would concur in any waiver request before it was sent to the 
Administrator for action.
    The only situation we foresee in which this approach would be 
necessary is one in which the airport does not know the gross receipts 
of all or a significant portion of its concessionaires. One alternative 
would be to require concessionaires to make this information available 
to airports, though we recognize that the businesses might prefer to 
keep this information confidential. We seek comment on the best way of 
resolving this issue.
    The proposed rule notes that a firm's overall receipts from non-
concession activities do not form part of the base for goals. For 
example, airline and other aeronautical activities are not considered 
concessions. Therefore, the portion of a food service business's 
receipts from catering to airlines would not be part of the base for 
goals.
    Comments were mixed on the 1997 SNPRM's proposals to require 
sponsors to provide for public participation in setting overall goals. 
Some felt the process would be burdensome and of little value. Since 
sponsors are generally public agencies, information on their concession 
plans is readily available to the public, commenters said. While this 
true, sponsors do not uniformly invite input from interested persons or 
groups when establishing overall goals. We believe that the process 
will assist in setting the goals at levels that are reasonable and 
consistent with the factors upon which goals are based. The objective 
of the process is to involve as many stakeholders as possible and to do 
so prior to setting the goals.
    Therefore, this SNRM retains the public participation provision 
with some modifications. It adds to the organizations that sponsors 
must consult. They now include, in addition to minority, women's, and 
concessionaire groups (changed from ``general contractor'' groups), 
trade associations representing concessionaires currently located at 
the airport as well as existing concessionaires themselves. The SNPRM 
would not pre-empt state or local freedom of information or sunshine 
act procedures.
    A sponsor is required to provide for public participation at the 
beginning of each 3-5 year goal submission process. The requirement to 
``consult'' with organizations as referenced in the rule means that 
sponsors should conduct informal outreach and actively solicit their 
views. A public hearing is not required.
    Comments said that the public participation process is intended to 
benefit the sponsor, which is responsible for adopting and submitting 
acceptable goals. Further, the process does not confer any third party 
rights or private rights of action. While we concur with these 
statements, we have not adopted a recommendation to include disclaimers 
to this effect. Since the notice to be published advises that comments 
are for informational purposes only, we believe that it adequately 
expresses the intent and limitations of the public participation 
process.
    In connection with the public participation process, several 
comments recommended that overall goals for concessions be set on the 
same cycle as goals for DOT-assisted contracting, so that a single 
notice can be published concerning both. The Department has no 
objection to this approach. We will require goals (except for the first 
time) to be submitted on August 1, as is the case for Federally-
assisted contracting goals, though of course concessions goals would 
not have to be submitted every year.
    The public participation process is not intended to substitute for 
the requirement that sponsors and concessionaires make good faith 
efforts in notifying and soliciting the interest of DBEs in specific 
concession offerings. We concur with a comment that public prebid or 
preproposal conferences provide an excellent forum in which to

[[Page 54458]]

discuss all aspects of a contract offering, including DBE contract 
goals. However, such goals should initially be submitted as part of the 
sponsor's concession plan. The intent of the rule is that overall goals 
and contract goals are to be reviewed and approved by FAA prior to 
contract solicitation.
    As under the rest of part 26, this subpart prohibits group-specific 
goals. Goals must cover DBEs as a whole. However, as under the rest of 
part 26, recipients may seek a program waiver if they believe group-
specific goals are necessary (see Sec. 26.15).
    In a narrowly tailored affirmative action program, sponsors need to 
consider two types of measures for meeting their goals: Race-neutral 
and race-conscious measures. This SNPRM lists several examples of each. 
The SNPRM notes that these efforts should be spread among various types 
of business opportunities, and not concentrated in one place. As under 
the rest of part 26, sponsors must estimate the portion of their goals 
they project meeting through race-conscious and race-neutral means. 
Sponsors would make this estimate in the same way they make the 
parallel estimate under the rest of part 26. Maintaining data on race-
conscious and race-neutral participation would also be required. As 
generally under part 26, sponsors would not be penalized simply for 
failing to meet their overall goal, as long as they operate their 
program in good faith.

Section 26.141  How do concessionaires and covered activities other 
than car rentals meet concession-specific DBE goals?

Section 26.145  How do sponsors count DBE participation toward goals 
for items other than car rentals?

    The most common race-conscious measure sponsors are likely to use 
to obtain DBE participation is the concession-specific goal, analogous 
to the contract goal in the DOT-assisted contracting portion of part 
26. As with contract goals, a concessionaire must either meet a 
concession-specific goal or demonstrate good faith efforts to the 
sponsor. For the most part, counting DBE participation toward 
concession-specific goals follows the same rules as counting DBE 
participation under the rest of part 26.
    There are some differences, however. The SNPRM would specify that 
costs in building concession facilities could count toward concession 
goals. One comment on the 1997 SNPRM concurred with the proposal to not 
require a DBE who performs a concession or management contract to 
perform at least 30 percent of the work with its own forces in order to 
be considered to perform a commercially useful function. Another 
comment disagreed, saying that 30 percent represents a reasonable 
minimum amount in a joint venture and anything less reduces the DBE's 
role to a passive one.
    The Department believes that the 30 percent rule may impose an 
unrealistically high standard for concessions and management contracts. 
DBE participation in these arrangements often is less, yet DBEs 
participate meaningfully. Moreover, a DBE partner in a joint venture 
must have a clearly defined role in order to qualify as eligible for 
participation. Accordingly, the SNPRM would not apply the 30 percent 
requirement to either concessions or management contracts. 
Nevertheless, recipients would be responsible for ensuring that DBEs 
perform a commercially useful function in order for their participation 
to count toward DBE goals.
    This section also proposes counting 100 percent of the amount of 
cost of materials and supplies obtained from DBE regular dealers. This 
differs from the contracts portion of part 26. The reason for the 
difference is that the 100 percent rule here appears more consistent 
with the concessions statute and its legislative history. We seek 
comment on this issue and on whether there should be additional 
concession-specific counting provisions.

Section 26.127  What is the base for a sponsor's goal for car rentals?

Section 26.143  How do car rental companies meet concession-specific 
DBE goals?

Section 26.147  How do sponsors count DBE participation toward car 
rental goals?

    Car rentals have long been the most difficult and contentious 
subject in the concessions rulemaking. Recently, the American Car 
Rental Association (ACRA), which represents many car rental companies, 
and the Airport Minority Advisory Committee (AMAC), which represents 
many DBE firms that work at airports, agreed on a memorandum of 
understanding concerning the treatment of car rental operations under 
this rule. The MOU makes a number of recommendations to the Department 
on this issue. For commenters' information, we are reproducing the text 
of this agreement below (signature lines and some duplicative heading 
material have been omitted):

Memorandum of Understanding Between the Airport Minority Advisory 
Council and the American Car Rental Association Members Including Alamo 
Rent-A-Car, Inc.; Budget Rent A Car Corp.; Dollar Rent A Car Systems 
Inc.; Enterprise Rent-A-Car Company; and, National Car Rental System, 
Inc.; The Hertz Corporation, and, Avis Rent A Car System, Inc. on 
Issues Relating to the Department of Transportation's Pending 
Regulations on Disadvantaged Business Enterprise Participation in 
Airport Concessions, March 13, 1999

I. The Parties to the Memorandum of Understanding

     This Memorandum of Understanding (``MOU'') is between 
the Airport Minority Advisory Council (``AMAC''), Alamo Rent-a-Car, 
Inc., Budget Rent A Car Corp., Dollar Rent A Car Systems, Inc., 
Enterprise Rent-a-Car Company, and National Car Rental System, Inc., 
each a member company of the American Car Rental Association 
(``ACRA''), the Hertz Corporation (``Hertz''), and Avis Rent A Car 
System, Inc. (``Avis''). The member companies of ACRA, Hertz and 
Avis are hereinafter collectively referred to as ``the car rental 
companies''. AMAC and the car rental companies are hereinafter 
collectively referred to as ``the Parties'' and individually as a 
``Party''.
     This MOU expresses the consensus of the Parties 
regarding the subject matter hereof, and sets forth each Party's 
intent with regard to the issues discussed. This MOU is not intended 
as a contract; however, the Parties intend to act in accordance with 
the understandings contained herein.

II. Basis for Memorandum of Understanding

    Whereas:
     The Parties are keenly interested in assuring the 
continued viability of the federal disadvantaged business enterprise 
(''DBE'') airport concessions program;
     The Parties strongly believe that it is in their mutual 
interest and the interest of DBEs that the U.S. Department of 
Transportation (``DOT'') promulgate a final rule governing DBE 
participation in airport concessions as soon as possible;
     The Parties desire to assist DOT develop a final DBE 
airport concessions rule that is both practical and effective in 
terms of public policy and business practices; and
     The Parties have engaged in a process of constructive 
dialogue concerning certain critical issues regarding the objectives 
and content of a final DBE airport concessions program rule and the 
implementation of the rule.
    AMAC and the car rental companies do hereby agree to advance and 
advocate, both together and separately, in public and in private, 
the principles embodied in this MOU and to work to assure their 
inclusion in a final DOT rule governing DBE participation in airport 
concessions. Further, the Parties also agree to explore appropriate 
ways in which they can work together to enhance DBE business 
opportunities with and within the rental car industry.

III. DBE Dealer Size Standard

     AMAC and the car rental companies collectively 
recognize that the existing Small

[[Page 54459]]

Business Administration (``SBA'') size standard for new car dealers 
should not be applied to the DBE airport concessions program because 
of the large volume of vehicles purchased by car rental companies 
through their fleet programs; and,
     AMAC and the car rental companies collectively urge DOT 
to adopt a new car dealer size standard of 500 or fewer employees as 
the criteria for determining whether a new car dealer meets the 
definition of a small business under the DBE airport concessions 
program.

IV. Unified Certification Program

     The Parties are aware that DOT has promulgated a new 
Unified Certification Program to promote more simplicity and 
uniformity in the DBE certification process for all DOT-assisted 
contracts, while at the same time maintaining the integrity of the 
process. Toward this latter goal, this new requirement includes 
appropriate review mechanisms for airports and due process 
safeguards for DBE firms. The Parties urge DOT to apply the Unified 
Certification Program requirements to the airport concessions 
program.

V. Federal and Airport DBE Participation Goals and Compliance by 
Car Rental Companies

     The Parties agree that 10 percent of the gross revenues 
generated by car rental concessions operating at federally-assisted 
airports is an appropriate nationwide aspirational goal for the DOT 
airport concessions program.
     The Parties believe that compliance by a car rental 
company with federal and individual airport DBE participation goals 
may be achieved either through direct ownership arrangements, 
through vendor services and purchases, or through a combination 
thereof. Further, the Parties agree that under federal law 
applicable to the DBE airport concessions program, with respect to 
car rental concessions DBE vendor purchases and/or direct ownership 
arrangements are equally valid and, accordingly, no preferences or 
quotas are permitted. The Parties urge DOT to include a clear 
statement of the law concerning this matter. Specifically, the final 
rule promulgated for DBE participation in airport car rental 
concessions should clearly state that ``good faith'' compliance 
efforts by a car rental company do not require the company to pursue 
direct ownership arrangements before pursuing vendor purchases.

VI. ``Good Faith'' Efforts and Compliance with DBE Goals

     The Parties believe that a ``good faith efforts'' 
standard substantially similar to the standard applicable to DBE 
participation in DOT-assisted contracts should be included in the 
final DOT airport concessions program rule.
     The Parties believe that the actions listed below are 
primary examples of bona fide good faith efforts with respect to DBE 
participation in airport concessions and that they should be 
acknowledged as such when undertaken by the car rental industry:
     Conduct a comprehensive survey of vendors to determine 
which qualify as DBE's for purposes of the airport concessions 
program and encourage other vendors who may be eligible to apply for 
certification.
     Identify opportunities for DBE's to provide goods and 
services, and engage in proactive outreach efforts to inform such 
firms of the opportunities.
     Join and support local and national minority, women, 
and small business organizations.
     Advertise in local and national DBE-focused 
publications for vendors that can provide needed goods and services.
     Make DBEs aware of solicitations in a timely manner and 
meet with firms to determine whether they fulfill requirements as 
car rental operators, or suppliers of goods and services.
     Document outreach efforts, including those that are 
unsuccessful.
     Whenever a new opportunity arises, use a combination of 
sources and outreach efforts (such as those cited above) to identify 
DBEs that fulfill the need.

VII. Ownership Arrangements

     The Parties encourage DOT to acknowledge that in the 
first instance a decision to enter into a direct ownership 
arrangement with a DBE firm is a discretionary matter for the car 
rental company. Thereafter, once a decision has been made the option 
to enter into a joint venture, franchise agreement, or other 
ownership transaction with a DBE firm for purposes of compliance 
with an airport's DBE goal (to operate a rental car concession or 
otherwise) is a business decision to be made exclusively by the car 
rental company and its potential DBE co-venturer, franchisee, or 
partner.

VIII. DBE Participation Goals and Car Rental Company Vehicle 
Purchases

     The Parties believe that it is essential for the final 
DOT airport concessions program rule to acknowledge and take into 
account the significance and the cost of new vehicles acquired by 
car rental companies (given that new vehicles constitute the bulk of 
a car rental company's vendor purchases).
     The Parties agree that the functions performed by 
dealers in transferring ownership of new vehicles are necessary and 
constitute a commercially useful function. Subject to the aggregate 
credit percentage limitation outlined below, when those functions 
are performed by a certified DBE vehicle dealer the Parties agree 
that a car rental company should be given full credit for the 
contract price of the vehicle toward the company's DBE compliance 
goal. However, the Parties further agree it is critical to encourage 
DBE participation in a wide array of business opportunities. Thus, 
the Parties recommend that not more than seventy (70) percent of a 
car rental company's DBE goal at an airport can be satisfied by new 
vehicle acquisitions. Nevertheless when an airport has established 
an approved DBE participation goal greater than 10 percent, the 
Parties recommend that the portion of the goal beyond 10 percent may 
be satisfied through additional vehicle acquisitions.

IX. National and Regional DBE Vendor Contracts; Geographic 
Preferences

     The Parties believe that the final DBE airport 
concessions program rule should take into account the use by car 
rental companies of national and regional vendor contracts for the 
acquisition of certain products and services utilized at multiple 
airport car rental concession locations. Given that such a contract 
may represent a potential growth opportunity, the Parties recommend 
that an airport serviced under such a contract with a certified DBE 
firm allocate and credit a pro rata share of the contract revenues 
toward the car rental company's DBE compliance goal. The allocations 
would be based on information provided by the car rental company, 
which would bear the responsibility for its accuracy, and would be 
subject to audit by DOT.
     The Parties recommend that, for federal DBE goal 
compliance purposes, DOT specify the nation as a whole as the market 
area from which a car rental company can seek DBE's to participate 
in an airport's concessions program.

X. Duration and Effect of MOU

     The Parties agree that policy recommendations contained 
in this MOU do not have the effect of law or supercede the DOT 
airport concessions program rules and regulations. Nor do the policy 
recommendations constitute an admission against interest with 
respect to the contents hereof or to the provisions of federal law 
authorizing the airport DBE concessions program.
     The Parties acknowledge that the car rental companies 
are subject to the provisions of the existing DOT airport 
concessions program rules until such time as new regulations are 
promulgated.
     The Parties agree that upon promulgation of a final 
airport DBE concessions rule that this MOU shall be of no further 
force or effect.
    The undersigned officers of AMAC and the car rental companies 
agree that their organizations, their members, and their 
representatives will support all of the terms of this Memorandum of 
Understanding in both public and private. To the extent necessary, 
AMAC and the car rental companies agree to meet with DOT 
representatives to urge the adoption of a final DOT DBE airport 
concessions rule consistent with the terms of this Memorandum of 
Understanding.

Addendum to the Memorandum of Understanding

    This Addendum to the Memorandum of Understanding dated March 13, 
1999, (``Memorandum'') by and between Alamo Rent-a-Car, Inc.; Budget 
Rent A Car Corp.; Dollar Rent A Car Systems, Inc.; Enterprise Rent-
A-Car Co.; National Car Rental System, Inc., each a member company 
of the American Car Rental Association (``ACRA''), The Hertz 
Corporation (``Hertz'') and Avis Rent A Car System, Inc. (``Avis''), 
(ACRA , Hertz and Avis are collectively referred to herein as the 
``Companies'') and the Airport Minority Advisory Council (``AMAC'') 
is by and between the Companies, AMAC, and Thrifty Rent-A-Car 
Systems, Inc. (``Thrifty'').

[[Page 54460]]

    Whereas, Thrifty is a member of ACRA;
    Whereas, Thrifty is by strategy and design a franchise system 
with more than 90% of its retail outlets worldwide owned by 
independent businesses who are licensed to use the Thrifty trade 
names, systems and technologies; and
    Whereas, Thrifty has adopted a program especially designed to 
increase diversity in our franchise owner base.
    Thrifty supports and agrees with all of the principles expressed 
in the Memorandum except for the statement in Paragraph 2, Article V 
regarding preferences and ``co-equal'' methods of car rental company 
compliance with Federal and airport DBE participation goals.

    The Department appreciates the efforts of AMAC and ACRA, and notes 
that their MOU provides useful information for the development of the 
Department's proposals in this SNPRM. Because the approach the MOU 
takes toward counting car rental DBE participation differs 
significantly from the counting approach taken by the rest of part 26, 
and because the dollar volumes of the car rental business at many 
airports is very high, we believe that it is best to incorporate the 
MOU's concepts in a separate portion of the DBE rule. Airports would 
have car rental goals that are separate from their other DBE goals, and 
the counting mechanism in this portion of the rule would apply only to 
car rental goals. The purpose of this separate treatment is to ensure 
that the car rental portion of an airport's concession operations does 
not so dominate the DBE concessions program that other types of 
concessions (e.g., retail stores in the terminal) are overlooked. The 
method for calculating car rental goals would essentially be the same 
as described above for other types of concessions. Both are modeled on 
the narrowly-tailored methods for goal setting in the DOT-assisted 
contracting portion of part 26.
    The Department seeks comment on an additional option for 
calculating car rental goals. This option envisions that car rental 
companies themselves would voluntarily establish nationwide goals for 
DBE participation. Following FAA approval, the companies would certify 
their compliance with this requirement to airports. The individual 
airports would not have the task of calculating their own car rental 
goals, and the companies would not have to work with multiple airports 
on car rental goals. This approach would therefore reduce 
administrative burdens on everyone concerned. It also responds to the 
desire of the parties to the MOU for a national approach to car rental 
goals. The companies would use a goal calculation approach like that 
described above for airports.
    We are aware that some airports may be concerned that this national 
approach might diminish their ability to respond to local conditions 
and constituencies. We seek comment on this point, and on how this 
concern is best balanced with this option's greater administrative 
efficiency. This option would also include a provision directing car 
rental companies to spread their DBE participation equitably throughout 
their systems, lest a company meet all its obligations in a few parts 
of the country to the exclusion of others.
    We do not believe this option is mutually exclusive with the 
proposal to authorize airports to set car rental goals. For example, 
the final rule might say that, when a car rental company had an FAA-
approved national goal, local airports would accept their 
certification. Where a company did not have a national goal, or where 
there was a local company, the airport would set its own car rental 
goal. The Department seeks comments on these approaches and how they 
might work together. In both approaches, the companies would make good 
faith efforts to meet goals in a way parallel to that described above 
for airports.
    The proposed car rental provisions incorporate the list of good 
faith efforts mentioned in the MOU. They also restate the statutory 
provision that says that car rental companies are not required to 
change their corporate structure to comply with this regulation. This 
``change to corporate structure'' language was the source of some 
comment on the May 1997 SNPRM. Three organizations commented on the 
meaning of the phrase. One firm stated that it consists of corporately-
owned and managed operations at large or medium size airports except 
for certain pre-existing license agreements. When an opportunity 
arises, it acquires licenses at large or medium size airports. It 
comments that its firm is very much a system of airport operations 
owned and operated by a corporate entity. It believes that any rule 
that would compel it to abandon this structure would violate the 
statute. Further, the firm stated that any rule compelling it to make 
any detailed justification for its existing corporate structure would 
be unnecessary.
    Another comment expressed concern that DOT may be seeking to adopt 
a very narrow definition so that in some circumstances sponsors may 
argue that a specific concession bid requirement does not require a 
change in corporate structure. This commenter believes that such 
ambiguity can only give rise to future disagreements or conflicts 
between the car rental industry and sponsors. A summary of other points 
made by this comment follows.


    Any attempt to force car rentals into direct ownership 
arrangements, either as a condition of bidding on a concession 
contract or as a determining factor in location of a 
concessionaire's facilities at an airport, directly violates both 
the language of the statute and intent of Congress. Each time a car 
rental sells a license or franchise to operate a car rental 
establishment at an airport, a change in corporate structure of the 
lessor or franchisor is required. Direct ownership possibilities do 
not arise frequently at airports across the country for most 
companies in the car rental industry. For larger nationwide car 
rentals, most of their airport locations are company owned and 
operated. For these larger firms, franchisees or licensees that do 
exist almost uniformly have perpetual franchises or licenses to 
operate at an airport or in a region. Thus, DOT and sponsors should 
not assume that just because a new concession contract is being bid 
at an airport, each car rental has an opportunity to engage in a 
direct ownership arrangement without changing its corporate 
structure.
    Car rentals may have franchises and licensees extensively during 
the early years of a firm's existence as they attempt to spread 
across the country. As these companies mature and reach all their 
desired markets, the parent company starts to buy back whatever 
franchises or licenses become available. Car rentals follow this 
basic strategy because, under federal law, they are prohibited from 
dictating pricing policies to franchisees and licensees. In order to 
build a truly nationwide car rental company, most corporations 
desire to control the quality of service, pricing, quality of 
vehicles rented, and as many other aspects of the rental transaction 
and the interaction with customers as possible. As a result, as 
franchises and licenses become available, car rentals tend to buy 
them back.

    The Department concurs that a decision to operate a car rental 
through a franchise or license, rather than directly by the 
corporation, changes a firm's corporate structure. The selling of a 
franchise or license is not explicitly referenced in the legislative 
history pertaining to change in corporate structure. Nevertheless, we 
believe that such a sale does constitute a ``transfer of assets,'' 
which is cited in the Congressional statement as an indicator of a 
change in corporate structure.
    We believe that a change in corporate structure includes a decision 
by a firm to sell a franchise or license to operate at a particular 
airport facility. If a corporation notifies a sponsor that it will sell 
a franchise or license to operate at the airport, the sponsor would be 
authorized to require the firm to make good faith efforts to meet a DBE 
goal. Good faith efforts would include

[[Page 54461]]

notifying DBE firms of this opportunity and taking other appropriate 
steps.
    A third commenter believes that the provision would perpetuate a 
system in which DBEs are not provided opportunities to participate in 
direct ownership arrangements in the car rental industry. It comments 
that the broad definition of ``change to corporate structure'' proposed 
in the May 1997 SNPRM would eliminate any requirements for car rentals 
to make good faith efforts to involve DBEs in such arrangements. It 
recommends that DOT consider requiring car rentals to demonstrate 
positive efforts in this area, just as other concessionaires and DOT-
assisted contractors must do. The Department believes that the current 
SNPRM, in its language concerning direct ownership arrangements, 
correctly interprets the constraints imposed by statute in levying 
requirements on car rentals and responds to the points made in the MOU.
    The SNPRM proposes a counting mechanism patterned after that of the 
MOU. One difference between the MOU and the SNPRM pertains to the 
percentage of a goal that may be met through vehicle purchases. The MOU 
provides that a car rental operation could meet up to 70 percent of its 
goal through vehicle acquisitions, with the rest presumably coming 
through vendor purchases and other means. The SNPRM incorporates this 
recommendation. However, the MOU also suggests that when an airport has 
established an approved DBE participation goal greater than 10 percent, 
the portion of the goal beyond 10 percent could be satisfied through 
additional vehicle acquisitions. The SNPRM does not include this latter 
provision. In our view, it places too much weight on the statutory 
aspirational 10 percent goal as an actual operational portion of the 
program. It also would have the effect of capping the proportion of DBE 
participation in car rentals from sources other than vehicle 
acquisitions to what may be less than one might expect in a ``level 
playing field'' situation. We do not think this is advisable as a 
matter of law or policy. However, we seek further comment on this 
issue.
    The SNPRM makes it clear that car rental companies are not required 
to meet their goals through direct ownership arrangements. However, any 
participation they choose to obtain through such arrangements may be 
counted toward their goals.

Section 26.149  What Certification Procedures and Standards Do 
Recipients Use To Certify DBE Concessionaires?

    The SNPRM proposes that, with the exceptions listed in this 
section, certification for the concessions program be treated the same 
as certification for other purposes under part 26. The exceptions 
concern such subjects as size, personal net worth, and affiliation.
    The SNPRM does not propose to adopt certain additional changes that 
commenters on the May 1997 SNPRM requested. One comment requested that 
sponsors be allowed to report to FAA, but not count toward their goals, 
a DBE who is a limited partner in a limited partnership. The comment 
said that in a concession such as a duty-free shop, the functions of a 
limited partner, although not as substantial as a general partner or a 
joint venture partner, are nevertheless meaningful. This sponsor 
commented that DBEs were reluctant to enter into joint ventures with 
non-DBEs for duty-free concessions because even if the DBE's interest 
is relatively small, it would be potentially responsible for 
liabilities and obligations of the entire joint venture or partnership.
    The limited partner in a limited partnership cannot, by statute, 
exercise control over the operations of the business. In view of this, 
we take the position that a limited partnership is not eligible for 
certification if the general partner is a non-DBE or a non-
disadvantaged individual. The DBE participation that sponsors report to 
FAA annually includes accomplishments in meeting the overall goal. Only 
those firms certified as DBEs in accordance with this part can be 
counted toward meeting the goals. The definition of ``joint venture'' 
in Sec. 26.5 has been modified to specify that the capital contribution 
by the DBE joint venture partner must be commensurate with its 
ownership interest.
    One commenter recommended that the rule provide guidelines on the 
eligibility of Limited Liability Corporations (LLC), saying that this 
arrangement is commonly used in concessions throughout the country. The 
comment also said:

* * * one of its basic characteristics is that management of the 
company may be rotated among its members (same as shareholders in a 
corporation). Thus, it is important that sponsors obtain written 
assurances that no management responsibility changes will be made 
within the firm without prior notification to (the) sponsor. The 
rest of the business structure parallels a corporation, and should 
be reviewed as such.

    The Department's research indicates that LLCs vary in structure 
from one state to another. In the absence of a uniform national statute 
or standards, we have decided not to specifically address LLCs in the 
rule. However, like every other applicant for certification, a business 
that proposes to operate as an LLC must meet the eligibility standards 
adopted in the final rule.
    Under Sec. 26.83(i), a DBE is required to inform the recipient (or 
UCP) in writing of any change in its circumstances affecting its 
ability to meet eligibility standards, including control, or any 
material changes to the information in its application form. The 
written notice must be provided within 30 days of occurrence of the 
change. We believe that this procedure will enable recipients to decide 
whether a firm continues to qualify as a DBE. We do not concur that a 
DBE should be required to notify the recipient prior to making changes 
to its management responsibilities. As discussed in connection with the 
definition of ``existing firm'' in Sec. 26.111, a recipient can deny 
certification or recertification only to existing firms. It cannot make 
a determination based on a proposed change, nor should it be required 
to give advice to a firm on the acceptability of the proposed change.
    The May 1997 SNPRM did not propose to permit ``dealers in 
development'' (i.e., dealers participating in manufacturers' 
development programs that did not fully meet part 26 ownership and 
control criteria) to be certified as DBEs. All four comments on the 
matter opposed the Department's approach. Comments to the May 1997 
SNPRM repeated assurances that although disadvantaged individuals own 
less than 51 percent of these businesses, they exercise control over 
the daily operations. Further, allowing their participation would 
accelerate the redemption by these owners of preferred stock held by 
the manufacturer and hence, their road to 51 percent ownership. Other 
comments said that the proposal excludes small disadvantaged businesses 
from reaping the benefits of the DBE program in favor of larger, ``less 
disadvantaged'' businesses that have been able to accumulate the more 
than $1 million in start-up costs needed to capitalize a dealership.
    Comments requested that DOT grant a narrowly-crafted exception to 
the DBE ownership requirements which permits these dealers 
participating in a recognized development program to be eligible as DBE 
vendors. The car rental industry needs a large number of certified DBE 
new car dealers from

[[Page 54462]]

which to purchase cars, a comment says, to assist them in meeting 
goals.
    In the preamble to the May 1997 SNPRM, we explained why these 
arrangements do not meet eligibility standards for ownership or 
control. In particular, to qualify as a DBE, the control of the 
operations of a business must rest with one or more disadvantaged 
individuals who own it. In the case of some dealers in development, 
however, disadvantaged individuals own less than 51 percent of the 
business. Thus, control of the firm cannot rest with disadvantaged 
individuals, as required under the statutory definition of a DBE, if 
the manufacturer is a non-DBE. The Department does not have the 
authority to grant an exemption, however carefully crafted, from a 
statutory requirement.
    We also concluded that the dealers in development and the 
manufacturers could be viewed as having a franchisor/franchisee 
relationship. Under this final rule, a business operating under a 
franchise agreement is eligible for certification only if it qualifies 
as a DBE and the franchisor is not affiliated with the franchisee. If 
the firms are affiliated, then their gross receipts are combined when 
making a size determination. Since the manufacturer in a dealer 
development program controls the business, affiliation is inferred. 
Assuming that the number of employees of the manufacturer exceeds the 
limit of 500 set by this regulation, dealers in development would not 
meet the applicable size standard.
    Based on this analysis, these arrangements do not meet any of the 
three statutory standards for DBE eligibility--ownership, control, and 
size. Since the manufacturer owns as much as 80 percent of the 
business, we would generally presume that it would retain 80 percent of 
profits made through participating in the DBE program. We would also 
expect the DBE generally to retain 20 percent. We believe that counting 
such dollars as meeting DBE goals conflicts with the goals and 
objectives of the program. Further, with the very extensive resources 
available to the manufacturer, these arrangements could be expected to 
compete successfully against smaller firms, including DBEs meeting 
eligibility criteria. DBEs could be prevented from gaining the benefits 
of the program in favor of firms that do not qualify under such 
criteria. This result also runs counter to the program's goals and 
objectives.
    We stated in the preamble to the May 1997 SNPRM that in the event 
the Department adopts a developmental program or a mentor-protege 
program for concessions at a future date, we would reexamine our 
position to determine if dealers in development qualify. The DOT-
assisted contracting portion of part 26 does provide for a mentor-
protege program. We point this out simply to observe that DBEs 
participating as proteges in this program must meet eligibility 
standards. For these reasons, we have not adopted the recommendation to 
allow dealers in development to qualify as DBE participation in the 
concession program.
    The fact that the Department cannot make an exception to the 
certification standards for dealers in development should by no means 
be taken as a disparagement of the program. The Department applauds the 
goals of the program and the noteworthy efforts of the major automobile 
manufacturers to provide opportunities for fledgling businesses to grow 
into self-sustaining entities.

Section 26.151  What Monitoring and Compliance Procedures Must Sponsors 
Follow?

    This section is not changed substantively from the May 1997 
version. The principles established under the DBE contracting program 
for monitoring prime contractors' compliance may also be useful in the 
concession program. A primary purpose of the procedures is to verify 
that the work committed to DBEs as a condition of contract award is 
actually performed by the DBEs. Sponsors would generally rely on local 
law to enforce contractual provisions in the event of noncompliance. 
The grant legislation does not specify contract sanctions.

Section 26.153  Does a Sponsor Have To Change Existing Concession 
Agreements?

    This SNRM rule would retain the May 1997 provision that sponsors 
are not required to modify or abrogate existing concession agreements, 
defined as ones executed prior to the effective date of this part. 
Under the rule, it is the sponsor that establishes and levies 
individual contract goals. One commenter wanted to know whether bidders 
and proposers will be responsible for establishing these levels. As 
discussed above, however, sponsors must provide for public 
participation in goal-setting process, and overall goals depend, in 
part, on the percentage levels of individual contract goals.

Section 26.155  What Requirements Apply to Privately-Owned Terminal 
Buildings?

    This provision is identical to the version in the May 1997 SNPRM. 
We did not receive any comments on it.

Section 26.157  Can Sponsors Enter Into Long-Term, Exclusive Agreements 
With Concessionaires?

    This provision proposes that long-term, exclusive leases are 
prohibited, except where the sponsor obtains FAA approval. The section 
proposes a procedure for obtaining such approval, including a list of 
information FAA needs before it can grant this approval. DBE 
participation would be a key part of this information. Comments on the 
May 1997 version of this section generally favored requiring 
opportunities for DBE participation as part of a long-term, exclusive 
lease arrangement.

Section 26.159  Does This Subpart Preempt Local Requirements?

    This proposed section restates the statutory provision that the 
regulation does not preempt local requirements. Sponsors may, however, 
have to take steps to avoid situations where a local requirement 
conflicts with a Federal requirement. It should be noted also that this 
provision refers to substantive DBE and similar requirements of local 
entities, not to Federal requirements for confidentiality (e.g., with 
respect to information submitted in response to PNW requirements).

Section 26.161  Does This Subpart Permit Sponsors To Use Local 
Geographic Preferences?

    This SNPRM proposes to allow a geographical preference in 
concessions in limited situations. Several comments on the May 1997 
SNPRM addressed this subject. One asked if a sponsor could deny a DBE 
an opportunity to compete for a contract solely because it resides 
outside a given geographic area. Another said that lack of guidance on 
the matter further frustrates reasonable means of compliance because 
sponsors do not consider the limitations in availability and 
competitive pricing in the sponsor's geographic area. Another comment 
also opposed local geographic preferences, saying that if the 
Department has concluded that Congress made a nationwide determination 
of discrimination in the airport concession industry, then any remedial 
action it takes, such as the DBE concession program, must be nationwide 
in scope. The comment urged the Department to correct this 
contradiction and prohibit local

[[Page 54463]]

preferences in the DBE airport concession program unless a local 
governmental entity has made an independent determination of racial 
discrimination in the airport concession industry in the local 
geographic area. The comment states further:

    Sponsors must not be permitted to rely on an alleged 
congressional determination of nationwide discrimination to adopt 
local racial preferences. The Supreme Court declared in Croson: ``We 
have never approved extrapolation of discrimination in one 
jurisdiction from the experience of another * * *'' (S)everal firms 
in the (car rental) industry feature the vehicles of specific 
automobile manufacturers in their rental fleets. The industry's 
experience in the past has been that new car dealers selling these 
featured makes of vehicles are not available in all areas, or that 
local preferences encourage those dealers that are available to 
quote vehicle prices that are substantially higher than those 
dealers outside of the local geographic area.

    The Department recognizes that sponsors have a special stake in 
facilitating participation by firms doing business in their local 
areas, and it is not the purpose of the DBE program to intrude upon 
that mission. As noted, the prohibition on local geographical 
preferences in 49 CFR part 18 applies only to DOT-assisted contracts 
and not to concessions. Further, under part 18, geographical location 
can be a selection criterion, subject to certain limitations, when a 
recipient contracts for architectural and engineering services (49 CFR 
18.36(c)(2)). At the same time, the Department recognizes that local 
geographic preferences have disadvantages, such as the elimination of 
the benefits of wider competition for business opportunities and the 
possible loss of opportunities for DBEs who are not located in the 
locality served by an airport.
    Based on these considerations, the Department has decided to 
propose allowing local geographical preferences, but only under limited 
circumstances. A sponsor would have to submit a program waiver request 
under Sec. 26.15 in order to secure approval for a geographic 
preference. The FAA Administrator would decide whether to grant the 
request.
    The requested waiver would have to conform to several requirements. 
The preference would have to be described in detail as to area and 
operation. When the procedure is used, the contract solicitation would 
have to fully inform competitors of the operation of the preference. 
The preference would have to be designed and implemented on a race-
neutral basis, applying equally to DBEs and non-DBEs. Thus, if a 
sponsor restricted the geographical area of firms eligible to compete 
for a given contract, all DBEs and non-DBEs within the area to which 
the preference pertains must be allowed to compete. A preference would 
be unacceptable if it conflicted with any provision of the rule or has 
the effect of defeating or substantially impairing accomplishment of 
the program's objectives. Any goals set on contracts subject to the 
preference would have to be based on the relative availability of DBEs 
within the area covered by the preference and could not have the effect 
of limiting DBE participation. The preference would not have to be 
applied to every covered contract, however.
    Because of the potential problems that could arise with the use of 
local preferences, the Department seeks comment on whether, even with 
these safeguards, the final rule should permit preferences.

Appendix F--Size Standards for the Airport Concession Program

    All five comments on the proposed size standard for car dealerships 
concurred, and the proposal is retained as part of the SNPRM. One 
comment concurred with the proposed inflationary adjustment to the size 
standards for concessionaires. The adjustment in the final rule has 
been updated to reflect more recent statistical information. The 
Department of Commerce, Bureau of Economic Analysis, prepares estimates 
of personal consumption expenditures of goods and services, many of 
which are sold to the public by airport concessionaires. The implicit 
price deflator for personal consumption expenditures was 11.3 from June 
1992 to March 1998. (In the interim between this time and the 
publication of our final rule based on this SNPRM, FAA will update this 
information and make adjustments as needed.) Since size standards for 
concessionaires were originally established and became effective June 
1, 1992, the second quarter of 1992 is used as the base period. 11.3 
percent represents the rate of increase since that time. By multiplying 
the appropriate size standard by 1.113, we are able to adjust dollar 
figures for inflation. Thus, $40,000,000 multiplied by 1.113 yields 
$44,520,000 as the new size standard for auto rental concessions. 
$30,000,000, when multiplied by 1.113, yields $33,390,000 as the new 
size standard for many other categories of concessionaires.
    One comment concurred with the proposed size standard of $5.0 
million for operators of parking lots. A second comment said that the 
standard appeared low when compared to ones for concessionaires. We 
point out, however, that a management contractor does not normally 
incur the substantial capital costs generally associated with a 
concession. The proposed standard of $5 million is taken from the SBA's 
regulations at 13 CFR part 121. Further, it applies only if a parking 
lot is operated under a management contract. If it is operated as a 
concession, the applicable size standard would be $33,390,000.
    Under the SNPRM, other activities operated under management 
contracts need to meet the appropriate size standard in 13 CFR part 
121. Although the legislation delegates authority to the Secretary to 
set size standards for the concession program, we have chosen to use 
SBA's in this case.
    One commenter (a sponsor) on the 1997 SNPRM said that the size 
standards for concessionaires cannot withstand strict scrutiny in 
determining that a firm is owned and controlled by socially and 
economically disadvantaged. The comment said that the public may 
question how a barbershop or shoe shine with gross sales of over $33 
million could be considered either socially or economically 
disadvantaged. It believes that these standards may raise a question of 
fairness with the public and challenge the program's credibility.
    It should be noted that the size standards for concessionaires were 
initially adopted by the Department when subpart F was added to 49 CFR 
part 23. The particular standards were selected only after the 
Department gave full consideration to all comments. A discussion of the 
comments and various alternatives considered can be found in the 
preamble to the April 1, 1992 Federal Register (57 FR 18400). This 
notice amended 49 CFR part 23 to add subpart F. It should be noted that 
size standards employed in the DBE program apply to firms. Owners of 
DBE firms, by contrast, must be ``socially and economically 
disadvantaged.'' As such, this standard applies to individuals. We 
believe that the current size standards conform to the legislative 
provisions.

Regulatory Analyses and Notices

Executive Order 12866

    This rule is a not a significant rule under Executive Order 12866. 
It is significant under the Department's Rulemaking Policies and 
Procedures, because of the substantial public interest concerning and 
policy importance of programs to ensure nondiscrimination in Federally-
assisted contracting. Moreover, we do not believe that the rule will 
have

[[Page 54464]]

significant economic impacts. In evaluating the potential economic 
impact of this rule, we begin by noting that it does not create a new 
program. It simply revises the rule governing an existing program. The 
economic impacts of the DBE program are created by the existing 
regulation and the statutes that mandate it, not by these revisions. 
Some changes that we propose in this program may have some positive 
economic impacts. For example, if car rental companies set goals on a 
national basis, there will be some reductions in administrative burdens 
and costs for both recipients and the companies.
    The rule's ``narrow tailoring'' changes are likely to be neutral in 
terms of their overall economic impact. These could have some 
distributive impacts (e.g., if the proposed goal-setting mechanism 
results in changes in DBE goals, a different mix of firms may work on 
recipients' contracts), but there would probably not be net gains or 
losses to the economy. There could be some short-term costs to 
recipients owing to changes in program administration resulting from 
``narrow tailoring,'' however.
    In any event, the economic impacts are quite speculative and appear 
nearly impossible to quantify. Comments did not provide, and the 
Department does not have, any significant information that would allow 
the Department to estimate any such impacts. To the extent that we 
receive additional information about economic impacts from commenters, 
we will incorporate it at the final rule stage.

Regulatory Flexibility Act Analysis

    This part of DBE program is aimed at improving contracting 
opportunities for small businesses owned and controlled by socially and 
economically disadvantaged individuals in airport concessions. 
Virtually all the businesses it affects are small entities. There is no 
doubt that a DBE rule always affects a substantial number of small 
entities.
    This proposed rule, while improving program administration and 
facilitating DBE participation and responding to legal developments, 
appears essentially cost-neutral with respect to small entities in 
general. It does not impose new burdens or costs on small entities, 
compared to the existing rule. It does not affect the total funds or 
business opportunities available to small businesses that seek to work 
in airport concessions. To the extent that the proposals in this rule 
(e.g., with respect to changes in the methods used to set overall 
goals) lead to different goals than the existing rule, some small firms 
may gain, and others lose, business.
    There is no data of which the Department is aware that would permit 
us, at this time, to measure the distributive effects of the revisions 
on various types of small entities. It is likely that any attempt to 
gauge these effects would be highly speculative. For this reason, we 
are not able to make a quantitative, or even a precise qualitative, 
estimate of these effects.

Paperwork Reduction Act

    A number of provisions of this SNPRM involve information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA). 
These requirements continue existing part 23 requirements, major 
elements of the DBE program that recipients and contractors have been 
implementing since the inception of the concessions part of the 
program. While the SNPRM would modify these requirements in some ways, 
the Department believes the overall burden of these requirements will 
remain the same or shrink. These requirements are the following:
     Firms applying for DBE certification must provide 
information to recipients to allow them to make eligibility decisions. 
Currently certified firms must provide information to recipients to 
allow them to review the firms' continuing eligibility. (After the UCP 
requirements of the rule are implemented, the burdens of the 
certification provisions should be substantially reduced.)
     Recipients must maintain a directory of certified DBE 
firms. (Once UCPs are implemented, there will be 52 consolidated 
directories rather than the hundreds now required, reducing burdens 
substantially.)
     Recipients must calculate concessions goals and transmit 
them to the FAA for approval. (The process of setting overall goals is 
more flexible, but may also be more complex, than under part 23. As 
they make their transition to the final rule's goal-setting process 
during the first years of implementation, recipients may temporarily 
expend more hours than in the past on information-related tasks.)
     Recipients must have a concessions plan approved by the 
FAA. (The SNPRM includes a one-time requirement to submit a revised 
program document making changes to conform to the new regulation.)
    The Department is in the process of estimating the burden hours 
resulting from these requirements.
    Both as the result of comments and what the Department learns as it 
implements the DBE program under part 26, it is possible for the 
Department's information needs and the way we meet them to change. 
Sometimes the way we collect information can be changed informally 
(e.g., by guidance telling recipients they need not repeat information 
that does not change significantly from year to year). In other 
circumstances, a technical amendment to the regulation may be needed. 
In any case, the Department will remain sensitive to situations in 
which modifying information collection requirements becomes 
appropriate.
    As required by the PRA, the Department will submit an information 
collection approval request to OMB. Organizations and individuals 
desiring to submit comments on information collection requirements 
should direct them to the Department's docket for this rulemaking. You 
may also submit copies of your comments to the Office of Information 
and Regulatory Affairs (OIRA), OMB, Room 10235, New Executive Office 
Building, Washington, DC, 20503; Attention: Desk Officer for U.S. 
Department of Transportation.
    The Department considers comments by the public on information 
collections for several purposes:
     Evaluating the necessity of information collections for 
the proper performance of the Department's functions, including whether 
the information has practical utility.
     Evaluating the accuracy of the Department's estimate of 
the burden of the information collections, including the validity of 
the methods and assumptions used.
     Enhancing the quality, usefulness, and clarity of the 
information to be collected.
     Minimizing the burden of the collection of information on 
respondents, including through the use of electronic and other methods.
    The Department points out that all the information collection 
elements discussed in this section of the preamble have not only been 
part of the Department's DBE program for many years, but have also been 
the subject of extensive public comment following the 1992 NPRM and 
1997 SNPRM. Among the over 900 comments received in response to these 
notices were a number addressing administrative burden issues 
surrounding these program elements. In the February 1998 final rule for 
the rest of part 26, and in this SNPRM, the Department has responded to 
these comments.

Federalism

    The rule does not have sufficient Federalism impacts to warrant the 
preparation of a Federalism assessment. While the rule concerns the 
activities of state and local governments in DOT

[[Page 54465]]

financial assistance programs, the rule does not significantly alter 
the role of state and local governments vis-a-vis DOT from the present 
part 23. The availability of program waivers could allow greater 
flexibility for state and local participants, however.

List of Subjects in 49 CFR Part 26

    Administrative practice and procedure, Airports, Civil rights, 
Concessions, Government Contracts, Grant programs -transportation, 
Highways and roads, Mass transportation, Minority business, Reporting 
and recordkeeping requirements.

    Issued This 31st day of July, 2000, at Washington, D.C.
Rodney E. Slater,
Secretary of Transportation.
    For the reasons stated in the preamble, the Department proposes to 
take the following actions:

PART 23--[REMOVED]

    1. Remove part 23 of Title 49, Code of Federal Regulations.
    2. Revise the authority citation for 49 CFR part 26 to read as 
follows:

    Authority: 23 U.S.C. 324; 42 U.S.C. 2000d, et seq.); 49 U.S.C 
1615, 47107, 47113, 47123; 49 U.S.C. 47107 and 47123; Executive 
Order 12138, 3 CFR, 1979 Comp., p. 393, Sec. 1101(b), Pub. L. 105-
178, 112 Stat. 107,113.
    3. Add a new subpart G of 49 CFR part 26, to read as follows:

Subpart G--DBE Participation in Airport Concessions

Sec.
26.111   Do the provisions of subparts A-F of this Part apply to 
this subpart?
26.113   What do the terms used in this subpart mean?
26.115   To whom does this subpart apply?
26.117   What are the nondiscrimination and assurance requirements 
of this subpart for sponsors?
26.119   What information do sponsors have to retain and report 
about the DBE concession program?
26.121   Who must implement a DBE concessions plan?
26.123   What is the basic DBE goal requirement for sponsors?
26.125   What is the base for a sponsor's goal for concessions and 
covered activities other than car rentals?
26.127   What is the base for a sponsor's goal car rentals?
26.129   How are a sponsor's goals expressed and calculated?
26.131   What are public participation requirements concerning a 
sponsor's goals?
26.133   What are the contents of a sponsor's goal submissions to 
FAA?
26.135   What does FAA do with your goal submission?
26.137   What are the sponsor's obligations concerning the use of 
race-neutral and race-conscious measures?
26.139   What are the steps a sponsor takes to meet its DBE goals?
26.141   How do concessionaires and covered activities other than 
car rentals meet concession-specific DBE goals?
26.143   How do car rental companies meet concession-specific DBE 
goals?
26.145   How do sponsors count DBE participation toward goals for 
items other than car rentals?
26.147   How do sponsors count DBE participation toward car rental 
goals?
26.149   What certification standards and procedures do recipients 
use to certify DBE concessionaires?
26.151   What monitoring and compliance procedures must sponsors 
follow?
26.153   Does a sponsor have to change existing concession 
agreements?
26.155   What requirements apply to privately-owned terminal 
buildings?
26.157   Can sponsors enter into long-term, exclusive agreements 
with concessionaires?
26.159   Does this subpart preempt local requirements?
26.161   Does this subpart permit sponsors to use local geographic 
preferences?
Appendix F to Part 26--Size Standards for Airport Concessionaires


Sec. 26.111  Do the provisions of subparts A-F of this part apply to 
this subpart?

    Except where provisions of this subpart differ from or add to those 
of subparts A-F of this part, the provisions of subparts A-F apply to 
the DBE program for airport concessions of this subpart G.


Sec. 26.113  What do the terms used in this subpart mean?

    Affiliation has the same meaning as in Sec. 26.5, except that the 
provisions of SBA regulations concerning affiliation in the context of 
joint ventures (13 CFR 121.103(f)) do not apply to this subpart.
    Car dealership means an establishment primarily engaged in the 
retail sale of new automobiles or new and used automobiles. Car 
dealerships frequently maintain repair departments and carry stocks of 
replacement parts, tires, batteries, and automotive accessories. Such 
establishments also frequently sell pickups and vans at retail. In the 
standard industrial classification system, car dealerships are 
categorized in SIC 5511, ``Motor Vehicle Dealers (New and Used).''
    Concession means a for-profit business enterprise, located on an 
airport subject to this subpart, that is engaged in the sale of 
consumer goods or services to the public under an agreement with the 
sponsor, another concessionaire, or the owner of a terminal, if other 
than the sponsor.
    (1) For purposes of this subpart, a business is not considered to 
be ``located on the airport'' solely because it picks up and/or 
delivers customers under a permit, license, or other agreement. For 
example, providers of taxi, limousine, car rental, or hotel services 
are not considered to be located on the airport just because they send 
shuttles onto airport grounds to pick up passengers or drop them off. A 
business is considered to be ``located on the airport,'' however, if it 
has an on-airport facility. Such facilities include in the case of a 
taxi operator, a dispatcher; in the case of a limousine service, a 
booth selling tickets to the public; in the case of a car rental, a 
counter at which its services are sold to the public or a ready return 
facility; and in the case of a hotel operator, a hotel located anywhere 
on airport property.
    (3) Any business meeting the definition of concession is covered by 
this subpart, regardless of the name given to the agreement with the 
sponsor, concessionaire, or airport terminal owner. A concession may be 
operated under various types of agreements, including:
    (i) Leases.
    (ii) Subleases.
    (iii) Permits.
    (iv) Contracts or subcontracts.
    (v) Other instruments or arrangements.
    (4) A company in the business of placing advertising in airport 
terminals or on airport grounds on behalf of others is considered to be 
a concession, even though its offices are not located on the airport 
and it does not sell its services directly to the public.
    (5) The conduct of an aeronautical activity is not considered a 
concession for purposes of this subpart. Aeronautical activities 
include scheduled and non-scheduled air carriers, air taxis, air 
charters, and air couriers, in their normal passenger or freight 
carrying capacities; fixed base operators; flight schools; recreational 
service providers (e.g., sky-diving, parachute-jumping, flying guides); 
and air tour services.
    (6) Other examples of entities that do not meet the definition of a 
concession include flight kitchens and in-flight caterers servicing air 
carriers, government agencies, industrial plants, farm leases, 
individuals leasing hangar space, custodial and security contracts, 
telephone and electric service, and skycap services under contract with 
an air carrier.
    (7) Appendix F to this part contains a listing of the types of 
businesses that are frequently operated as concessions.
    Concessionaire means a firm that owns and controls a concession or 
a portion of a concession.

[[Page 54466]]

    Covered activities means concessions, management contracts and 
subcontracts, and the provision of goods and services to 
concessionaires.
    Direct ownership arrangement means a joint venture, partnership, 
sublease, licensee, franchise, or other arrangement in which a firm 
owns and controls a concession.
    Management contract or subcontract means an agreement with a 
sponsor or another management contractor (but not with a 
concessionaire) under which a firm directs or operates one or more 
business activities, the assets of which are owned, leased, or 
otherwise controlled by the sponsor. The managing agent generally 
receives, as compensation, a flat fee or a percentage of the gross 
receipts or profit from the business activity. For purposes of this 
subpart, the business activity operated or directed by the managing 
agent must be other than an aeronautical activity, be located at an 
airport subject to this subpart, and be engaged in the sale of consumer 
goods or services to the public.
    Material amendment means a substantial change to the basic rights 
or obligations of the parties to a concession agreement. Examples of 
material amendments include an extension to the term not provided for 
in the original agreement or a substantial increase in the scope of the 
concession privilege. Examples of nonmaterial amendments include a 
change in the name of the concessionaire or a change to the payment due 
dates.
    Primary airport means a commercial service airport that the 
Secretary determines to have more than 10,000 passengers enplaned 
annually.
    Small business concern means an existing for-profit business that 
does not exceed the size standards of appendix F to this part. With 
respect to concessionaires and other businesses involved in other 
covered activities under this subpart, the annual gross receipts cap of 
Sec. 26.65(b) does not apply.
    (1) A concessionaire qualifying under this definition that exceeds 
the size standard after entering a concession agreement, but which 
otherwise remains eligible, may continue to be counted as DBE 
participation toward the overall goals and any contract goals set under 
this subpart, until the current agreement, including the exercise of 
options, expires.
    (2) If a concessionaire or business involved in another covered 
activity under this subpart was certified as a minority/woman/or 
disadvantaged business enterprise (MBE/WBE/DBE) prior to [insert 
effective date of this subpart], pursuant to a requirement in former 
Sec. 23.43(d) or former subpart F of 49 CFR part 23, and the firm has 
exceeded the size standard, it may be counted as DBE participation 
until the current agreement, including the exercise of options, 
expires, provided that the firm remains otherwise eligible.
    (3) Any firm falling under ``Standard Industrial Classification 
(SIC)'' code 5511 (which applies to car dealerships) shall be 
considered a small business concern for purposes of this subpart, if it 
has no more than 500 employees.
    (4) The Secretary may periodically adjust the size standards in 
appendix F to this part for inflation.
    Socially and economically disadvantaged individuals has the same 
meaning as provided in Sec. 26.5, Sec. 26.67 and appendix E to this 
part, except that for purposes of this subpart, the presumption of 
economic disadvantage shall be deemed to be rebutted when the 
individual's personal net worth exceeds $2 million.
    Sponsor means the recipient of an FAA grant.


Sec. 26.115  To whom does this subpart apply?

    If you are a sponsor that has received a grant for airport 
development after January 1988 that was authorized under Title 49 of 
the United States Code, this subpart applies to you. The threshold of 
Sec. 26.21(a)(3) does not apply to requirements of this subpart.


Sec. 26.117  What are the nondiscrimination and assurance requirements 
of this subpart for sponsors?

    (a) As a sponsor, you must abide by the non-discrimination 
requirements of Sec. 26.7 with respect to the award and performance of 
any concession agreement, management contract or subcontract, purchase 
or lease agreement, or other agreement covered by this subpart.
    (b) You must also take all necessary and reasonable steps to ensure 
nondiscrimination in the award and administration of contracts and 
agreements covered by this subpart.
    (c) You must include the following assurances in all concession 
agreements and management contracts you execute with any firm after 
[insert effective date of this subpart]:
    (1) This agreement is subject to the requirements of the U.S. 
Department of Transportation's regulations, 49 CFR part 26, subpart G. 
The concessionaire or contractor agrees that it will not discriminate 
against any business owner because of the owner's race, color, national 
origin, or sex in connection with the award or performance of any 
concession agreement, management contract, or subcontract, purchase or 
lease agreement, or other agreement covered by 49 CFR part 26, subpart 
G.
    (2) The concessionaire or contractor agrees to include the above 
statements in any subsequent concession agreement or contract covered 
by 49 CFR part 26, subpart G, that it enters and cause those businesses 
to similarly include the statements in further agreements.


Sec. 26.119  What information do sponsors have to retain and report 
about the DBE concession program?

    (a) As a sponsor, you must retain sufficient basic information 
about your program implementation, your certification of DBEs, and the 
award and performance of agreements and contracts to enable the FAA to 
determine your compliance with this subpart. You must retain this data 
for a minimum of three years following the end of the concession 
agreement or other covered contract.
    (b) You must submit to FAA an annual analysis of the 
accomplishments you have made toward achieving your goals. This 
analysis must show the effect of those results on the overall level of 
DBE participation in the your concessions program.
    (c) You must report data to the appropriate FAA Regional Office. 
You must comply with this requirement in a format, and with a 
frequency, determined by the FAA Administrator.


Sec. 26.121  Who must implement a DBE concessions plan?

    (a) If you are the owner of a primary airport, you must implement a 
DBE concessions plan implementing the requirements of this subpart. If 
you are the owner of more than one primary airport, you may implement 
one plan for all your locations. If you do so, you must establish 
separate overall goals for each location that has received FAA airport 
development assistance.
    (b) You must submit your plan to the appropriate FAA regional 
office for approval by [insert date nine months from the effective date 
of this subpart].
    (c) If you make any significant changes in this plan, you must 
provide them to the FAA as soon as you make them.
    (d) If you are a sponsor of a non-commercial service airport, a 
general aviation airport, or a reliever airport, you are not required 
to implement a DBE concession plan. However, you must take appropriate 
outreach steps to encourage available DBEs to participate as 
concessionaires whenever there is a concession opportunity.

[[Page 54467]]

Sec. 26.123  What is the basic DBE goal requirement for sponsors?

    (a) If you are a sponsor who must implement a DBE concessions plan, 
you must establish two different DBE goals. The first is for all 
concessions and covered activities other than car rentals. The second 
is for car rentals. Follow the provisions of this section and 
Secs. 26.125--26.139 of this subpart with respect to both these goals.
    (b) Your goal submission must cover a three to five-year period, as 
agreed upon between you and the FAA. The submission must include goals 
for each year in the period covered by the submission.

    Example to Paragraph (b): You make a goal submission for the 
period 2001-2005. The submission would include an annual goal for 
car rentals and an annual goal for other concessions and covered 
activities for 2001, 2002, 2003, 2004, and 2005. You would calculate 
each of these goals in the same way, using the same data and 
reasoning (i.e., for Step 1 and Step 2 of the goal-setting process). 
However, the amount of the goal and the estimate of race conscious/
race neutral participation may differ from year to year within the 
period depending on the types of opportunities for concessions and 
other covered activities you anticipate during each year of the 
period.

    (c) You must review your goals annually to make sure they continue 
to fit your circumstances appropriately. You must report any 
significant adjustments to your goals to FAA.
    (d) You must submit your goals to the appropriate FAA regional 
office for review. Your first concessions goal is due [insert a date 
nine months from the effective date of this subpart]. You then submit 
new goals by August 1 of each year in which you establish new goals 
(e.g., for a recipient who will submit a new set of goals every three 
years, August 1, 2004).


Sec. 26.125  What is the base for a sponsor's goal for concessions and 
covered activities other than car rentals?

    (a) If you are a sponsor, the base for this goal includes the total 
gross receipts of concessions and other covered activities at your 
airport.
    (b) This figure includes the gross contract amount of management 
contracts but does not include the gross receipts of car rental 
operations.
    (c) This figure includes the estimated dollar value of goods and 
services that a concessionaire (except a car rental) will purchase from 
DBEs and use in operating the concession.
    (d) This figure includes the net payments to the airport for banks 
and banking services, including automated teller machines (ATM) and 
foreign currency exchanges.
    (e) This figure does not include any portion of a firm's estimated 
gross receipts that will not be generated from a concession or other 
covered activity.

    Example to Paragraph (e): A firm operates a restaurant in the 
airport terminal which serves the traveling public and, under the 
same lease agreement, provides in-flight catering service to air 
carriers. The projected gross receipts from the restaurant are 
included in the overall goal calculation, while the gross receipts 
to be earned by the in-flight catering services are not.

    (f) If you have any concession agreements that do not provide for 
you to know the value of the gross receipts earned by the concession, 
you must use the net payment from the concession to the airport and 
combine these figures with the estimated gross receipts from other 
agreements for purposes of calculating overall goals. You must identify 
any such concession agreements in your goal submission.


Sec. 26.127  What is the base for a sponsor's goal car rentals?

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


Sec. 26.129  How are a sponsor's goals expressed and calculated?

    (a) If you are a sponsor, you must express your goals as a 
percentage of the base calculated under Sec. 26.125 or Sec. 26.127. 
This percentage represents your estimate of the DBE participation you 
would obtain in the absence of discrimination and its effects (i.e., 
the DBE participation you would expect if there were a ``level playing 
field'').
    (b) You must use a two-step method for calculating the goal.
    (1) In Step 1, you determine the relative availability of DBE 
concessionaires and other covered entities. You use the best available 
data. Depending on how the markets for different types of business are 
structured, this relative availability may be determined on a local, 
regional, or national basis for particular types of businesses. For 
example, using this data, you would establish a percentage of gross 
receipts of available DBE concessionsiares/gross receipts of all 
available concessionaires.
    (2) In Step 2, you adjust this availability figure to reflect such 
factors as the past participation of DBEs in your concessions and other 
covered opportunities, information from disparity studies, and barriers 
to DBEs' ability to participate in these concessions opportunities.
    (3) Use Sec. 26.45 for guidance in performing Step 1 and Step 2.
    (c) If, as an alternative to establishing a goal meeting the 
requirements of this section, you wish to submit a goal based on a 
percentage of concession and other covered activity contracts, you must 
meet the following requirements:
    (1) You must submit a program waiver request meeting the 
requirements of Sec. 26.15(b). In the case of such a request, the 
Secretary's authority to review and approve the request is delegated to 
the FAA Administrator.
    (2) Your request must include the following additional showings:
    (i) More than half of the concession agreements do not provide for 
the sponsor to know the value of the gross receipts earned; or
    (ii) Other circumstances at the airport exist that make it 
impracticable to use gross receipts as the basis for calculating the 
goals.
    (d) Your goals established under this subpart must provide for 
participation by all certified DBEs and may not be subdivided into 
group-specific goals.
    (e) If you fail to establish and implement goals as provided in 
this section, you are not in compliance with this subpart. If you fail 
to comply with this requirement, you are not eligible to receive FAA 
financial assistance.


Sec. 26.131  What are public participation requirements concerning a 
sponsor's goals?

    (a) As a sponsor, you must provide for public participation by 
taking at least the steps listed in this paragraphs (b) and (c) of this 
section before submitting your overall goals to FAA (i.e., every three 
to five years when you submit new concessions goals).
    (b) You must consult with minority and women's business groups, 
community organizations, trade associations representing 
concessionaires currently located at the airport, as well as existing 
concessionaires themselves, and other officials or organizations which 
could be expected to have information concerning the availability of 
disadvantaged businesses, the effects of discrimination on 
opportunities for DBEs, and the sponsor's efforts to increase 
participation of DBEs.
    (c) You must publish a notice announcing your proposed goals and a 
description of how they were selected. You must make information on 
your goal selection method, process, and data available for inspection 
during normal business hours at your main office for 30 days following 
the date of the notice. You must accept comments on the goals for 45 
days from the date of the notice. Your notice must include addresses 
(including electronic addresses, where available) to which comments may 
be sent and must be published in general

[[Page 54468]]

circulation media and available minority-focus media and trade 
association publications.


Sec. 26.133  What are the contents of a sponsor's goal submissions to 
FAA?

    (a) You submission must include your goals, a description of the 
method used to calculate them, and the data you relied on. You must 
``show your work'' to enable the FAA to understand how you concluded 
your goals are appropriate. This means that you must provide to the FAA 
the data, calculations, assumptions, and reasoning used in establishing 
your goals.
    (b) You must estimate the portion of your goal you can meet using 
race-neutral measures (see Sec. 26.137). You then use race-conscious 
measures to meet the remainder of your goal. You must include your 
projection of the portions of your goal you expect to be able to meet 
through race-neutral and race-conscious measures, and the data and 
analysis on which it is based, in your goal submission to FAA. You must 
provide data and analysis to FAA supporting your projection.
    (c) You must also include information on the concessions that will 
operate at the airport during the period covered by the submission. For 
each concession agreement, you must provide the following information, 
together with any additional information requested by the FAA Regional 
Civil Rights Officer:
    (1) Name of firm (if known).
    (2) Type of business (e.g. bookstore, car rental, baggage carts).
    (3) Beginning and expiration dates of agreement, including options 
to renew.
    (4) For new agreements, method of solicitation proposed by sponsor 
(e.g. request for proposals, invitation for bids).
    (5) Dates that material amendments will be made to the agreement 
(if known).
    (6) The estimated gross receipts for each goal period established 
in the plan.
    (7) Identification of those concessionaires that have been 
certified under this subpart as DBEs.


Sec. 26.135  What does FAA do with your goal submission?

    (a) FAA will approve or disapprove the way you calculated your 
goals as part of its review of your plan or goal submission. Except as 
provided in paragraph (b) of this section, the FAA does not approve or 
disapprove the goal itself (i.e., the number).
    (b) If the FAA determines that way you calculated your goals is 
inadequate, the FAA may, after consulting with you, establish an 
adjusted goal. The adjusted goal represents the FAA's determination of 
an appropriate overall goal for DBE participation in the sponsor's 
concession program, based on relevant data and analysis. The adjusted 
goal is binding on you.
    (c) The provisions of Sec. 26.47 apply in the event you fail to 
meet your goals.


Sec. 26.137  What are the sponsor's obligations concerning the use of 
race-neutral and race-conscious measures?

    (a) As a sponsor, you must give priority to implementing race-
neutral measures. This means that you must meet as much of your goal 
through race-neutral efforts as you can. This does not mean that you 
must use race-neutral measures chronologically before you begin using 
race conscious-measures.
    (b) You must provide your projection of the portion of each of your 
goals you expect to meet through race-neutral and race-conscious means, 
respectively, and the basis for this projection, to the FAA as part of 
your goal submission (see Sec. 26.133(b)).
    (c) If your actual participation does not reflect this projection, 
you must make appropriate adjustments in your use of race-conscious and 
race-neutral efforts. For example, if you projected meeting a 12 
percent overall goal with 2 percent race-conscious participation and 10 
percent race-neutral participation, and midway through the period 
covered by the goal you have only obtained 3 percent race-neutral 
participation, you would need to consider increasing your use of race-
conscious good faith measures.
    (d) In any year in which you project meeting part of your goal 
through race-neutral measures and the remainder through race-conscious 
measures, you must maintain data separately on DBE achievements 
obtained through these respective means. You must report this data to 
the FAA Regional Civil Rights office with the other data you submit 
under Sec. 26.119 .


Sec. 26.139  What are the steps a sponsor takes to meet its DBE goals?

    (a) You must, to the extent practicable, seek to obtain DBE 
participation in all types of concessions and other covered activities 
and not concentrate participation in one category or a few categories 
to the exclusion of others.
    (b) You must include in your concessions plan a narrative 
description of the types of measures you intend to make to achieve your 
goals.
    (c) The following are examples of race-neutral measures you can 
implement:
    (1) Locating and identifying DBEs who may be interested in 
participating as concessionaires under this subpart;
    (2) Notifying DBEs and other organizations of concession 
opportunities and encouraging them to compete, when appropriate;
    (3) When practical, structuring concession activities so as to 
encourage and facilitate the participation of DBEs;
    (4) Providing technical assistance to DBEs in overcoming 
limitations, such as inability to obtain bonding or financing;
    (5) Ensuring that competitors for concession opportunities are 
informed of DBE requirements during pre-solicitation meetings;
    (6) Providing information concerning the availability of DBE firms 
to competitors to assist them in meeting DBE requirements;
    (7) Establishing a business development program (see Sec. 26.35); 
and
    (8) Taking other appropriate steps to foster DBE participation.
    (f) The following are examples of race-conscious measures you can 
implement:
    (1) Establishing concession-specific goals for particular 
opportunities for concessions and other covered activities.
    (i) If the goal is to attain a direct ownership arrangement with a 
DBE, calculate the goal as a percentage of the total estimated annual 
gross receipts from the concession.
    (ii) If the goal applies to purchases and/or leases of goods and 
services, calculate the goal by dividing the estimated dollar value of 
such purchases and/or leases from DBEs by the total estimated dollar 
value of all purchases to be made by the concessionaire.
    (iii) To be eligible to be awarded the concession, competitors 
would have to meet this goal or document that they made sufficient good 
faith efforts to do so.
    (iv) The administrative procedures applicable to contract goals in 
Sec. 26.51-53 apply with respect to concession-specific goals.
    (2) Evaluation credits or other methods that take a competitor's 
ability to provide DBE participation into account in awarding a 
concession.
    (3) Negotiation with a potential concessionaire to include DBE 
participation, through direct ownership arrangements or otherwise, in 
the operation of the concession.
    (4) Set-asides, only to the extent permitted in Sec. 26.43(b) .


Sec. 26.141  How do concessionaires and covered activities other than 
car rentals meet concession-specific DBE goals?

    (a) This section applies to you if you are a concession or covered 
activity,

[[Page 54469]]

other than a car rental company, and the sponsor has set a concession-
specific goal concerning your activity.
    (b) You must either meet the goal the sponsor has set or 
demonstrate sufficient good faith efforts to the sponsor. These two 
ways of meeting your goal are equally acceptable under this subpart.
    (c) For purposes of this subpart, making sufficient good faith 
efforts means taking steps which, by their scope, intensity, and 
appropriateness to the objective, can reasonably be expected to achieve 
your goal.
    (d) Appendix A to this part 26 provides guidance concerning the 
kinds of good faith efforts that you are expected to make.


Sec. 26.143  How do car rental companies meet concession-specific DBE 
goals?

    (a) This section applies to you if you are a car rental company and 
the sponsor has set a concession-specific goal concerning your 
activity.
    (b) You must either meet the goal the sponsor has set or 
demonstrate sufficient good faith efforts to the sponsor. These two 
ways of meeting your goal are equally acceptable under this subpart.
    (c) The following are examples of good faith efforts you can use:
    (1) The methods outlined in Sec. 26.139.
    (2) Your efforts to obtain DBE participation through direct 
ownership arrangements. While this subpart does not require you to seek 
direct participation by DBEs in car rental operations, the sponsor will 
consider any efforts you make to do so in evaluating your good faith 
efforts.
    (3) The following additional steps:
    (i) Conducting a comprehensive survey of vendors to determine which 
qualify as DBEs for purposes of the airport concessions program and 
encouraging other vendors who may be eligible to apply for 
certification.
    (ii) Identifying opportunities for DBE's to provide goods and 
services, and engage in proactive outreach efforts to inform such firms 
of the opportunities.
    (iii) Joining and supporting local and national minority, women, 
and small business organizations.
    (iv) Advertising in local and national DBE-focused publications for 
vendors that can provide needed goods and services.
    (v) Making DBEs aware of solicitations in a timely manner and 
meeting with firms to determine whether they fulfill requirements as 
car rental operators, or suppliers of goods and services.
    (vi) Documenting outreach efforts, including those that are 
unsuccessful.
    (vii) Whenever a new opportunity arises, using a combination of 
sources and outreach efforts (such as those cited above) to identify 
DBEs that fulfill the need.
    (c) You are not required to change your corporate structure in 
order to meet your goal.


Sec. 26.145  How do sponsors count DBE participation toward goals for 
items other than car rentals?

    (a) As a sponsor, you must apply the counting provisions of this 
section to your goal for concessions and covered activities other than 
car rentals. See Sec. 26.147 for information on how to count DBE 
participation for car rentals.
    (b) You count only DBE participation that results from a 
commercially useful function. For purposes of this subpart, the term 
commercially useful function has the same meaning as in Sec. 26.55(c), 
except that the requirements of Sec. 26.55(c)(3) shall not apply to a 
concession agreement or management contract or subcontract.
    (c) Count the total dollar value of a management contract or 
subcontract with a DBE. However, if the DBE enters into a subcontract 
with a non-DBE, do not count the portion of the value of the 
subcontract performed by the non-DBE.
    (d) Count the total dollar value of gross receipts a DBE earns 
under a concession agreement toward the goals. However, if the DBE 
enters into a subconcession agreement with a non-DBE, do not count any 
of the gross receipts earned by the non-DBE.
    (e) When a DBE performs as a subconcessionaire to a non-DBE, count 
only the portion of the gross receipts earned by the DBE under its 
subagreement.
    (f) When a concession is performed by a joint venture involving a 
DBE and a non-DBE, count a portion of the gross receipts equal to the 
percentage of the ownership and control by the DBE partner in the joint 
venture. To perform a commercially useful function as part of a joint 
venture, the DBE must be independently responsible for an identifiable 
portion of the work of the joint venture.
    (g) Count costs incurred in connection with the renovation, repair, 
or construction of a concession facility (sometimes referred to as the 
``build-out'').
    (h) Count the entire amount of fees or commissions charged by a DBE 
firm for a bona fide service, provided that, as the sponsor, you 
determine this amount to be reasonable and not excessive as compared 
with fees customarily allowed for similar services. Such services may 
include, but are not limited to, professional, technical, consultant, 
legal, security systems, advertising, building cleaning and 
maintenance, computer programming, or managerial.
    (i) Count 100 percent of the cost of goods obtained from a DBE 
manufacturer. For purposes of this subpart, the term manufacturer has 
the same meaning as in Sec. 26.55(e)(1)(ii) .
    (j) Count 100 percent of the cost of goods purchased or leased from 
a DBE regular dealer.
    (k) If you obtain goods purchased from a DBE which is neither a 
manufacturer nor a regular dealer, count credit toward DBE goals as 
follows:
    (1) Count the entire amount of fees or commissions charged for 
assistance in the procurement of the goods, provided that this amount 
is reasonable and not excessive as compared with fees customarily 
allowed for similar services. Do not count any portion of the cost of 
the goods themselves.
    (2) Count the entire amount of fees or transportation charges for 
the delivery of goods required for a concession, provided that this 
amount is reasonable and not excessive as compared with fees 
customarily allowed for similar services. Do not count any portion of 
the cost of goods themselves.
    (l) If a firm has not been certified as a DBE in accordance with 
the standards in this part, the firm's participation may not count 
toward DBE goals.
    (m) Except in the case of a concessionaire that exceeds the small 
business size standard during the term of a contract, as referenced 
under the definition of a ``small business concern,'' the work 
performed or gross receipts earned by a firm after its eligibility has 
been removed may not be counted toward DBE goals.


Sec. 26.147  How do sponsors count DBE participation toward car rental 
goals?

    (a) As a sponsor, you must apply the counting provisions of this 
section to your goal for car rentals. See Sec. 26.145 for information 
on how to count DBE participation for concessions and covered 
activities other than car rentals.
    (b) Count the full value of vehicles purchased through DBE car 
dealers toward your goal. Provided, that neither you nor a car rental 
company may meet more than 70 percent of a car rental goal through this 
means.
    (c) Count the entire amount of the cost charged by a DBE for 
repairing vehicles, provided that it is reasonable and not excessive as 
compared with fees customarily allowed for similar services.
    (d) Count the entire amount of the fee or commission charged by a 
DBE to manage a car rental concession under an agreement with the 
concessionaire

[[Page 54470]]

toward DBE goals, provided that it is reasonable and not excessive as 
compared with fees customarily allowed for similar services.
    (e) Do not count any portion of a fee paid by a manufacturer to a 
car dealership for reimbursement of work performed under the 
manufacturer's warranty.
    (f) For other goods and services, count participation toward DBE 
goals as provided in Secs. 26.55 and 26.145. In the event of any 
conflict between these two sections, Sec. 26.145 will control.
    (g) If a car rental company has a national or regional contract for 
the purchases of vehicles, other goods, or services, count a pro-rated 
share of the amount of that contract toward the goals for your airport. 
Use the proportion of the company's applicable gross receipts as the 
basis for making this pro-rated assignment of DBE participation.

    Example to Paragraph (g): Car Rental Company X signs a regional 
contract with a DBE car dealer to supply cars to all five airports 
in a state. The five airports each account for 20 percent of X's 
gross receipts in that state. Twenty percent of the value of the 
cars purchased through the DBE car dealer would count toward the 
goal of each airport.

    (h) While this subpart does not require you to obtain DBE 
participation through direct ownership arrangements, you count 
participation through such an arrangement toward your DBE goal.


Sec. 26.149  What certification standards and procedures do recipients 
use to certify DBE concessionaires?

    (a) If you are a sponsor, you must, except as provided in this 
section, use the procedures and standards of Secs. 26.61-91 to certify 
DBEs for participation in your concessions program.
    (b) The personal net worth threshold used in rebutting the 
presumption of disadvantage, referenced in Sec. 26.67(b) and in 
appendix E to this part, is $2 million for purposes of this subpart;
    (c) The provisions of Sec. 26.71(n), concerning affiliation, do not 
apply to this subpart.
    (d) Section 26.83 (c)(1) through (c)(6) do not apply to 
certifications for airport concessions purposes. Instead, in 
determining whether a firm is an eligible DBE, you must take the 
following steps:
    (1) Obtain the resumes or work histories of the principal owners of 
the firm and personally interview these individuals;
    (2) Analyze the ownership of stock of the firm, if it is a 
corporation;
    (3) Analyze the bonding and financial capacity of the firm;
    (4) Determine the work history of the firm, including any 
concession contracts or other contracts it may have received;
    (5) Obtain or compile a list of the licenses of the firm and its 
key personnel to perform the concession contracts or other contracts it 
wishes to receive;
    (6) Obtain a statement from the firm of the type(s) of 
concession(s) it prefers to operate or the type(s) of other contract(s) 
it prefers to perform.
    (7) If you determine it is necessary to validate the certification 
information submitted by the firm, perform an on-site visit to the 
offices of the firm and to any facilities within the sponsor's 
jurisdiction or local area before making an eligibility determination.
    (e) In reviewing the affidavit required by Sec. 26.83(h), you must 
ensure that the DBE firm meets the appropriate size standard in 
appendix F to this part.
    (f) For purposes of this subpart, the term ``prime contractor'' in 
Sec. 26.87(i) includes a firm holding a prime contract with an airport 
concessionaire to provide goods or services to the concessionaire or a 
firm holding a prime concession agreement with a sponsor.
    (g) The procedures of Sec. 26.87(i)(2) apply to this subpart, 
except when you remove a concessionaire's eligibility because the firm 
exceeded the size standard after entering a concession agreement. In 
such instances, the procedures set forth under the definition of a 
``small business concern'' in Sec. 26.113 shall apply.
    (h) When UCPs are established in a state (see Sec. 26.81), the UCP, 
rather than individual sponsors, will certify firms for the DBE 
concessions program.
    (i) Car rental companies and private terminal owners are not 
authorized to certify firms as DBEs. As a car rental company or private 
terminal owner, you must obtain DBE participation from firms that a 
sponsor or a UCP has certified as DBEs.
    (j) When you certify firms as airport concessionaires, identify 
them in your directory in a way that makes it easy for readers to find 
them. For example, you could use a special symbol next to a firm's name 
in the directory to identify it as a concessionaire or place certified 
concessionaires in a separate section of the directory.


Sec. 26.151  What monitoring and compliance procedures must sponsors 
follow?

    (a) If you are a sponsor, you must implement appropriate mechanisms 
to ensure compliance with the requirements of this subpart by all 
participants in the program. You must include in your concessions plan 
the specific provisions to be inserted into concession agreements and 
management contracts, the enforcement mechanisms, and other means you 
use to ensure compliance. These provisions shall include a monitoring 
and enforcement mechanism to verify that the work committed to DBEs is 
actually performed by the DBEs.
    (b) This subpart does not authorize or preclude you from imposing 
additional requirements on firms engaged, or seeking to be engaged, in 
contracting or concessions activities at your airport. However, you 
must include in your concessions plan a description, together with a 
citation of state or local law, regulation, or policy, to support such 
additional requirements.


Sec. 26.153  Does a sponsor have to change existing concession 
agreements?

    No. Nothing in this subpart requires you to modify or abrogate an 
existing concession agreement (one executed prior to the date the 
sponsor became subject to this subpart) during its term. When an option 
to renew such an agreement is exercised or when a material amendment is 
made, you must assess potential for DBE participation and may, if 
permitted by the agreement, use any means authorized by this subpart to 
obtain DBE participation in the renewed or amended agreement.


Sec. 26.155  What requirements apply to privately-owned terminal 
buildings?

    (a) If you are a sponsor on whose airport there is a privately-
owned terminal building that has concessions, this section applies to 
you.
    (b) You must pass through the applicable requirements of this 
subpart to the private terminal owner by an agreement with the owner or 
by other means. You must ensure that the terminal owner complies with 
the requirements of this subpart.
    (c) If your airport is a primary airport, you must obtain from the 
terminal owner the goals and other elements of the DBE concession plan 
required under this subpart. You must incorporate this information into 
your concession plan and submit it to the FAA in accordance with this 
subpart.
    (d) If the terminal building is at a non-primary commercial service 
airport general aviation airport, or reliever airport, the sponsor 
shall ensure that the owner complies with the requirements in 
Sec. 26.121(d).


Sec. 26.157  Can sponsors enter into long-term, exclusive agreements 
with concessionaires?

    (a) Except as provided in paragraph (b) of this section, you must 
not enter into long-term, exclusive agreements for the operation of 
concessions. For

[[Page 54471]]

purposes of this section, a long-term agreement is one having a term in 
excess of five years. The FAA has issued guidelines for determining 
whether an agreement is exclusive, as used in this section. You can 
obtain them from any FAA Regional Civil Rights Officer or from the FAA 
Office of Civil Rights, 800 Independence Avenue, SW., Washington, DC 
20591, Attention, ACR-4.
    (b) You may enter into a long-term, exclusive concession agreement 
only under the following conditions:
    (1) Special local circumstances exist that make it important to 
enter such agreement, and
    (2) The responsible FAA regional civil rights officer approves of a 
plan for meeting the standards of paragraph (c) of this section.
    (c) In order to obtain FAA approval of a long-term-exclusive 
concession agreement, you must submit the following information to the 
FAA regional civil rights officer:
    (1) A description of the special local circumstances that warrant a 
long-term, exclusive agreement.
    (2) A copy of the draft and final leasing and subleasing or other 
agreements. This long-term, exclusive agreement must provide that:
    (i) A number of DBEs that roughly reflects their availability in 
the absence of discrimination to do the types of work required will 
participate as concessionaires throughout the term of the agreement and 
account for at a percentage of the estimated annual gross receipts 
equivalent to a level set in accordance with Secs. 26.125-127 of this 
subpart.
    (ii) You will review the extent of DBE participation before the 
exercise of each renewal option to consider whether an increase or 
decrease in DBE participation may be warranted.
    (iii) A DBE concessionaire that is unable to perform successfully 
will be replaced by another DBE concessionaire, if the remaining term 
of the agreement makes this feasible. In the event that such action is 
not feasible, you will require the concessionaire to make good faith 
efforts during the remaining term of the agreement encourage DBEs to 
compete for the purchases and/or leases of goods and services to be 
made by the concessionaire.
    (3) Assurances that any DBE participant will be in an acceptable 
form, such as a sublease, joint venture, or partnership.
    (4) Documentation that DBE participants are properly certified.
    (5) A description of the type of business or businesses to be 
operated (e.g., location, storage and delivery space, ``back-of-the-
house facilities'' such as kitchens, window display space, advertising 
space, and other amenities that will increase the DBE's chance to 
succeed).
    (6) Information on the investment required on the part of the DBE 
and any unusual management or financial arrangements between the prime 
concessionaire and DBE.
    (7) Information on the estimated gross receipts and net profit to 
be earned by the DBE.


Sec. 26.159  Does this subpart preempt local requirements?

    Nothing in this subpart preempts any State or local law, 
regulation, or policy enacted by the governing body of a sponsor, or 
the authority of any State or local government or sponsor to adopt or 
enforce any law, regulation, or policy relating to DBEs. In the event 
that a State or local law, regulation, or policy conflicts with the 
requirements of this subpart, the sponsor shall, as a condition of 
remaining eligible to receive Federal financial assistance from the 
DOT, take such steps as may be necessary to comply with the 
requirements of this subpart.


Sec. 26.161  Does this subpart permit sponsors to use local geographic 
preferences?

    (a) As a sponsor you are permitted to use a local geographic 
preference only as provided in this section. By a local geographic 
preference, we mean any requirement that you impose that gives a DBE 
located near you an advantage over DBEs from other places in obtaining 
business as or with a concession or other covered activity at your 
airport.
    (b) You must submit a program waiver request meeting the 
requirements of Sec. 26.15(b). In the case of such a request, the 
Secretary's authority to review and approve the request is delegated to 
the FAA Administrator.
    (c) In order for your request to be granted, you must make the 
following additional showings:
    (1) The preference does not conflict with any provision of this 
part or have the effect of defeating or substantially impairing 
accomplishment of the objectives of the program;
    (2) The preference does not have the effect of limiting or 
foreclosing DBE participation in your concessions and other covered 
activities;
    (3) The preference will make it possible for you to diversify the 
DBE firms participating in your concession and other covered activities 
(e.g., by permitting smaller DBEs to participate that otherwise would 
be unable to compete in certain fields with larger, better-established 
DBEs from other areas);
    (4) The preference applies on a race-neutral basis, to DBEs and 
non-DBEs alike;
    (5) The preference is consistent with Federal law; and
    (6) The preference meets any additional conditions established by 
the Administrator.

   Appendix F to Part 26.--Size Standards for Airport Concessionaires
       Maximum Average Annual Gross Receipts in Preceding 3 Years
                        [In millions of dollars]
------------------------------------------------------------------------
                          Concession                             Amount
------------------------------------------------------------------------
Auto Rentals..................................................    44,520
Toy stores....................................................    33,390
Beauty shops..................................................    33,390
Vending machines..............................................    33,390
Coin-operated lockers.........................................    33,390
Florists......................................................    33,390
Advertising...................................................    33,390
Taxicabs......................................................    33,390
Limousines....................................................    33,390
Duty free shops...............................................    33,390
Local pay telephone service...................................  \1\ 1500
Gambling machines.............................................    33,390
Other concessions not shown above.............................    33,390
 
                      OTHER PARTICIPANTS
Management contractors:
    Parking lots..............................................       5.0
    Other.....................................................     (\2\)
Motor vehicle dealers (new and used)..........................   \1\ 500
Other providers of goods or services..........................    (\2\)
------------------------------------------------------------------------
\1\ For these types of businesses, the standard is expressed in terms of
  number of employees, rather than dollars.
\2\ As defined in 13 CFR Part 121.

[FR Doc. 00-22839 Filed 9-7-00; 8:45 am]
BILLING CODE 4910-62-P