[Federal Register Volume 70, Number 54 (Tuesday, March 22, 2005)]
[Proposed Rules]
[Pages 14520-14522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5529]

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

[[Page 14520]]



Office of the Secretary

49 CFR Part 23

[Docket No. OST-97-2550]
RIN 2105-AD51

Participation by Disadvantaged Business Enterprises in Airport 

AGENCY: Office of the Secretary, DOT.

ACTION: Supplemental notice of proposed rulemaking (SNPRM).


SUMMARY: This SNPRM seeks further comment on the issue of business size 
standards for the Department of Transportation's airport concession 
disadvantaged business enterprise (ACDBE) program. It also requests 
comment on issues such as additional measures to combat fraud and abuse 
in the program and to provide additional flexibility for airports in 
implementing the program.

DATES: Comment Closing Date: Comments should be submitted to the docket 
by June 20, 2005. Late-filed comments will be considered to the extent 

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 (TTY), [email protected] (e-mail).

SUPPLEMENTARY INFORMATION: In today's Federal Register, the Department 
of Transportation published a final rule revising 49 CFR Part 23, the 
regulation governing the airport concessions disadvantaged business 
enterprise (ACDBE) program. This SNPRM seeks comment on the issue of 
business size standards to be used in Part 23 and also asks for comment 
on two other matters concerning implementation of the program on which 
we have not previously sought comment.

Business Size Standards

    Size standards in this ACDBE regulation are important for a number 
of reasons. They implement the statutory requirement that participants 
be small businesses. They provide a means to ensure that participation 
in DBE programs is not necessarily of indefinite duration: if a firm 
grows to exceed size standards, it ceases to be eligible for the 
program. They are calibrated to help meet the objectives of the 
program, including permitting ACDBE firms to compete in the airport 
concessions market.
    In Part 26, businesses seeking DBE certification must, by statute, 
meet SBA size standards and an additional statutory $17.42 million 
dollar cap on average annual gross receipts. These requirements do not 
apply to Part 23, since the ACDBE statute gives the Secretary 
discretion to set size standards for concessions. For most airport 
concessions, the size standard under current Part 23 is $30 million 
average annual gross receipts.
    In the 2000 SNPRM proposing revisions to Part 23, the Department 
suggested adjusting the size standards for inflation (e.g., from $30 
million to approximately $33 million) and to create new size standards 
for management contractors ($5 million) and car dealers (500 
employees). Many airport comments supported a size standard higher than 
$33 million, especially for advertising, but did not suggest an 
alternative. One ACDBE suggested using a higher figure or an employee 
number. One airport suggested trying to match size standards more 
precisely to the types of businesses involved, while another thought it 
was confusing not to apply the Part 26 $17.42 million dollar cap to 
concessions. A consultant asked for more detail, especially with 
respect to the affiliation rule.
    For parking management, one airport suggested $12 million rather 
than $5 million, while another said there was confusion between how 
these two figures were meant to be applied. Three airports and a car 
rental trade association supported the 500-employee standard for car 
dealers, while another large airport said it was too high.
    In December 2002, the Department responded to a petition from an 
airport advertising firm to alter the size standards further (67 FR 
76327; December 2, 2002). The petitioner argued that because some types 
of concessionaires pay higher concession or lease fees to airports than 
others, size standards should be adjusted to equalize the situation of 
these different businesses. The NPRM proposed two options for 
equalizing the size standards to take differing concession fees into 
accounts, one of which would have increased the size standard 
significantly for most categories of businesses and the other of which 
would have meant smaller increases for some types of businesses and 
modest decreases for others.
    The Department seeks additional comment on certain size standard 
issues. One of these is the ``equity'' issue raised in the December 
2002 NPRM. The Department received 50 comments on this NPRM. Most were 
from airport operators. A sizeable majority of the airport comments 
supported the proposal, particularly the option that would have raised 
the size standards significantly. Four ACDBE firms and associations 
also commented in favor of the proposal. Supporters generally believed 
that the proposed change would create a ``level playing field'' among 
types of ACDBEs. Some airports, including most of the large airports 
that responded, opposed the proposal or thought further study would be 
necessary. A state DOT and an individual commenter also took this 
position. These commenters' reservations about the proposal centered on 
concerns that the proposal would make some size standards unreasonably 
high, lead to other inequities among types of businesses, or were based 
on inadequate or incomplete data.
    After reviewing the comments and thinking further about the 
proposal, we have concluded that we should not adopt either of the 
specific options we proposed. One could raise the basic size standard 
too high, and the other could result in excluding some presently 
certified firms by lowering some current size standards. Both are based 
on data that pertains to several categories of firms at large airports, 
but we have no data about other categories of firms or practices at 
smaller airports. We are also concerned that facially very different 
size standards for different categories of business could lead to 
perceptions of unfairness and difficult administrative

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or legal decisions about the category in which a particular firm 
    However, the evident differences in concession or lease fees among 
types of businesses do raise a fairness issue. One way of addressing 
this issue would be to keep the existing size standards but to subtract 
from a firm's gross receipts the concession or lease fees it pays to 
the airport for the privilege of doing business. For example, suppose a 
concessionaire has annual gross receipts of $30 million. It pays 20 
percent of its gross receipts ($6 million) to the airport in concession 
fees. Consequently, for purposes of calculating whether the firm meets 
the size standard, the firm's receipts for that year would be valued at 
$24 million. The Department seeks comment on this approach.
    We also seek further comment on adjusting the dollar size 
standard--which has remained in place since 1992--for inflation. In the 
2000 SNPRM, as noted above, we proposed an inflationary adjustment to 
$33 million for most ACDBEs, a proposal to which commenters did not 
object. However, we now seek comment on a different calculation, using 
a method similar to the one we use for inflationary adjustments to Part 
26 size standards. Using this method, we calculate that the adjusted 
standards would be $40.57 million (in place of the former $30 million 
standard for most businesses) and $54.1 million (in place of the former 
$40 million standard) for car rental companies.
    In arriving at these numbers, the DOT used a Department of Commerce 
price index to make a current inflation adjustment. The Department of 
Commerce's Bureau of Economic Analysis prepares constant dollar 
estimates of state and local government purchases of goods and services 
by deflating current dollar estimates by suitable price indicies. These 
indicies include purchases of durable and non-durable goods, and other 
services. Using these price deflators enables the Department to adjust 
dollar figures for past years' inflation. Given the nature of DOT's 
ACDBE Program, adjusting the gross receipts cap in the same manner in 
which inflation adjustments are made to the costs of state and local 
government purchases of goods and services is simple, accurate and 
    The inflation rate on purchases by state and local governments for 
the current year is calculated by dividing the price deflator for the 
fourth quarter of 2003 (109.546) by 1992's third quarter price deflator 
(80.997). The third quarter of 1992 is used because that is when the 
Department established the current size limitations. The result of the 
calculation is 1.35247, which represents an inflation rate of 35.25% 
from the third quarter of 1992 through the fourth quarter of 2003. 
Multiplying the $30,000,000 figure by 1.35247 equals $40,574,100, which 
will be rounded off to the nearest $10,000, or $40,570,000. Multiplying 
the $40,000,000 figure by 1.35247 equals $54,098,800, which will be 
rounded off to the nearest $10,000, or $54,100,000.
    We also seek comment on the alternative of making the size standard 
of Part 23 equivalent to that of Part 26, for the reasons of enhancing 
the narrow tailoring of Part 23 and to avoid potential confusion from 
having two different size standards for different parts of the 
Department's overall DBE program. This alternative would rely on SBA 
size standards, and might or might not include the gross receipts cap 
that Congress imposed in the highway/transit program DBE provision 
(currently calculated as $17.42 million, and subject to periodic 
inflationary adjustments).
    One additional idea on which the Department believes is that of 
creating an employee number-based size standard, in place of the 
current dollar-based standards. Such an approach could make ACDBE size 
standards simpler and fairer. For example, using an employee number-
based standard would apparently moot the issue raised in the 2002 NPRM 
concerning concession fees paid to airports. Likewise, using an 
employee number-based standard would eliminate questions about the 
relationship between the income of businesses located on airports and 
similar businesses located elsewhere.
    There is a relatively limited number of types of businesses that 
perform as ACDBEs, offering the possibility of creating a set of 
employee number standards specific to these types of businesses 
relatively readily. In any case, the task would have a narrower scope 
than the Small Business Administration's recent efforts to establish 
employee number standards for the full range of small businesses. We 
seek comment on whether pursuing such an approach is desirable and, if 
so, what reasonable employee number standards might be for ACDBEs. Is 
it likely that employee numbers of concession businesses differ from 
those in other contexts? For example, is it likely that a restaurant or 
specialty retail store on an airport concourse will have a different 
number of employees from the same type of restaurant or store in a 
shopping mall?
    If an employee number-based standard were proposed for Part 23, 
would it make more sense to apply the standard on an airport-by-airport 
basis or to the total employee numbers of a company that served 
multiple airports? For example, suppose a chain of retail stores 
seeking ACDBE certification has locations at six airports, and each 
location employees 10 people. If the size standard for the business 
were 50 employees, should the certifying office look at this business 
as one company with 60 employees, exceeding the size standard, or six 
stores with 10 workers per store, each of which individually meets the 

Additional Provisions To Combat Fraud and Abuse

    As noted in the preamble to the final Part 23 rule issued today, 
the Department's Office of Inspector General has focused considerable 
effort and attention on the need to prevent fraud and abuse in the 
ACDBE program. Parts 23 and 26 already contain a number of provisions 
designed to prevent fraud and abuse. For example, the ownership and 
control certification standards (Sec. Sec.  26.69-26.71) include 
detailed instructions to UCPs and recipients on how to address 
eligibility issues. Are there additional specific provisions the 
Department should add to address particular issues affecting the 
ownership and control of types of businesses or business arrangements 
common in the ACDBE program?
    Likewise, the certification process contains various safeguards 
against fraud and abuse. Applicants must attest, under penalty of 
perjury, to the accuracy and truthfulness of information on their 
applications (Sec.  26.83(c)(7)(ii)). Certified DBEs must inform the 
recipient within 30 days of material changes in their circumstances 
that may affect their continued eligibility (Sec.  26.83(i)). Certified 
DBEs must also provide the recipient an annual ``affidavit of no 
change'' affirming that there have not been changes in their 
circumstances that would call into question their continued eligibility 
(Sec.  26.83(j)). This affidavit specifically covers matters of 
business size and PNW. All these provisions apply to ACDBEs under Part 
23 as well as other DBEs under Part 26.
    The Department seeks comment on whether there is other information 
that ACDBEs should report that would enable airports and the Department 
to better monitor the eligibility of ACDBEs as well as the ongoing 
performance of ACDBEs in the concession business. For example, are 
there additional reports that airports should receive concerning the 
actual performance by ACDBEs of the work for which credit toward

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ACDBE goals is being claimed? Should there be additional reporting 
responsibilities for ``prime'' concessionaires as well as ACDBEs 
themselves? Should ACDBEs be required to report on the specific 
commercially useful functions they are performing on a given contract? 
Should they report, on an annual basis, their number of employees, 
revenue dollars, and PNW to the airport, UCP, or the FAA?

Additional Flexibility

    The exemption and program waiver processes of Sec.  26.15 also 
apply to Part 23 and the ACDBE program. These provisions are designed 
to permit airports and other recipients to depart from the specific 
requirements of DBE regulations when circumstances warrant. The 
Department seeks comment on whether there should be any additional 
provisions, either applying generally to Part 23 or applying to 
specific portions of Part 23, to give greater flexibility to airports 
and other participants in meeting ACDBE requirements. For example, are 
there categories of airports that should be excepted from one or more 
requirements of the rule? Should the $200,000 concessions revenue 
threshold for submitting overall goals be raised? If airports 
consistently meet overall goals over a given period of years, should 
they be excused from future goal setting submissions, at least as long 
as DBE participation continued at the level of their recent goals? We 
will consider suggestions for such provisions.
    With respect to flexibility in goal setting, the Department wishes 
to raise for further comment the idea of establishing car rental goals 
on a national basis for car rental companies that have a nationwide 
presence. Under this concept, modeled on the handling of goals for 
transit vehicle manufacturers under Part 26, a national-scope car 
rental company would establish a national goal for ACDBE participation 
in its airport business, using the goal setting provisions of Part 23 
and obtaining FAA approval for the nationwide goal. Then the car rental 
company would submit to each airport a certification that it had such 
an FAA-approved nationwide goal. This approach would reduce 
administrative burdens both on airports--who would not have to 
calculate car rental goals at all for national-scope car rental 
companies--and on the car rental companies themselves. It would also 
recognize that the car rental market is, in large measure, a national 
market. Local airports would not be able to set locally-derived goals 
for national-scope car rental companies under this concept, however. We 
also seek comment on whether, if the Department adopts this concept, 
there are other types of business to which it might reasonably apply 
(e.g., hotels).

Regulatory Analyses and Notices

    This SNPRM is nonsignificant for purposes of Executive Order 12866 
and the Department of Transportation's Regulatory Policies and 
Procedures. The SNPRM continues the discussion of size standards, one 
issue from today's broader, but also nonsignificant, final rule to 
implement the ACDBE program. While the resolution of size standards 
issue may help certain individual businesses and harm others, we do not 
anticipate any across-the-board significant economic impacts from the 
clarification and further development of size standards. The other 
issues raised in the SNPRM are administrative in nature and should not 
have significant impacts on any regulated parties. The rule does not 
have Federalism impacts sufficient to warrant the preparation of a 
Federalism Assessment.
    The Department certifies that this rule will not have a significant 
economic effect on a substantial number of small entities. The rule 
clearly affects small entities: ACDBEs are, by definition, small 
businesses. However, as mentioned above, the economic effect of the 
matters discussed in the SNPRM on these small entities is not likely to 
be significant. In other respects, compared to the existing rule, the 
matters discussed in the SNPRM should not have noticeable incremental 
economic effects on small businesses.
    There are a number of other statutes and Executive Orders that 
apply to the rulemaking process that the Department considers in all 
rulemakings. However, none of them are relevant to this SNPRM. These 
include the Unfunded Mandates Reform Act (which does not apply to 
nondiscrimination/civil rights requirements), the National 
Environmental Policy Act, E.O. 12630 (concerning property rights), E.O. 
12988 (concerning civil justice reform), and E.O. 13045 (protection of 
children from environmental risks).

    Issued this 8th Day of March, 2005, at Washington, DC.
Norman Y. Mineta,
Secretary of Transportation.
[FR Doc. 05-5529 Filed 3-16-05; 3:20 pm]