[Federal Register Volume 72, Number 62 (Monday, April 2, 2007)]
[Rules and Regulations]
[Pages 15614-15617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6054]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Parts 23 and 26
[Docket OST-97-2550]
RIN 2105-AD51
Disadvantaged Business Enterprise Program
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document adjusts the dollar limits and size limits used
to define small businesses for the Department of Transportation's
Airport Concessions Disadvantaged Business Enterprise (ACDBE) program.
The Department of Transportation amends these size limits in order to
ensure that the opportunity of small businesses to participate in the
ACDBE program remains unchanged after taking inflation into account.
This document, as required by statute, also adjusts the dollar limits
used to define small businesses for the Department of Transportation's
Disadvantaged Business Enterprise (DBE) program, which applies to State
and local highway, transit, and airport recipients of DOT financial
assistance. This document also corrects a reference error in a previous
final rule. Finally, this document makes minor changes to the language
of a previous rule in order to accurately explain the role of
administrative guidance material.
DATES: This rule is effective May 2, 2007.
FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant
General Counsel for Regulation and Enforcement, Department of
Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590,
phone numbers (202) 366-9310 (voice), (202) 3669313 (fax), (202) 755-
7687 (TTY), [email protected] (e-mail).
SUPPLEMENTARY INFORMATION:
Background
On March 22, 2005, the Department published a final rule revising
49 CFR Part 23--the regulation governing the airport concessions
disadvantaged business enterprise (ACDBE) program. On the same day, the
Department published a supplemental notice of proposed rulemaking
(SNPRM) on the business size standards for eligibility in the ACDBE
program as well as on two other matters concerning implementation of
the program. This final rule addresses the issues raised in the SNPRM
and the comments made in response to the SNPRM.
The DBE Airport Concessions and Contracting Programs
The DOT-assisted contracts DBE rule and airport concessions DBE
rule are based on different statutes. Each statute applies to a
distinct type of business that may seek DOT financial assistance. The
ACDBE program is designed to give business opportunities to certain
small business concerns that operate at airports and that are owned and
controlled by socially and economically disadvantaged individuals. The
ACDBE program is mandated by 49 U.S.C. 47107(e), originally enacted in
1987 and amended in 1992.
The DBE program for DOT-assisted contracts is a statutory program
intended to ensure nondiscriminatory contracting opportunities for
small business concerns owned and controlled by socially and
economically disadvantaged individuals in the Department's highway,
mass transit and airport financial assistance programs. The statutory
provision governing the DBE program in the highway and mass transit
financial assistance programs is 1101(b) of the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU), Public Law 109-59, August 10, 2005. The statutory
provision governing the DBE program as it relates to the airport
planning and airport development financial assistance programs is 49
U.S.C. 47113.
ACDBE Gross Receipts Size Standards
The ACDBE program is designed to help small business concerns,
owned and controlled by socially and economically disadvantaged
individuals, become self-sufficient and able to compete with non-
disadvantaged firms. Under the current DOT rule, if the airport
concessions firm's annual gross receipts averaged over the preceding
three fiscal years exceed $30 million, then it is not considered a
small business eligible to be certified as an ACDBE. The Department
notes that the existing size standards have not been adjusted for
inflation since June 1, 1992. This final rule adjusts the size
standards for eligibility as an ACDBE.
A number of comments submitted to the Department supported
adjusting the gross receipts size limit for inflation. One comment
suggested that the Department consider distinct size standards for each
type of concession. A number of comments also suggested that an
employee based size standard is inappropriate because businesses may
operate using different business model configurations with different
numbers of employees. These comments also point out that verifying the
number of employees is more complex than verifying gross receipts,
which are recorded in tax returns.
This final rule adjusts the general ACDBE gross receipts cap for
inflation. This rule only applies an employee based size standard if
the business operates pay telephones or if the business is an
automobile dealer. The Department views a general gross receipts size
limit that is adjusted for inflation as the most efficient and fair way
to establish size limits for the ACDBE program. The adjustment
compensates for the rise in the general level of prices over time from
the second quarter of 1992 to the third quarter of 2006. In order to
ensure that this adjustment is made on a more timely basis in the
future, the rule provides for a similar adjustment every two years,
using the same methods. At two year intervals, the Department will
publish a final rule to update the size standard numbers.
It should be emphasized that this action does not increase the size
standard for ACDBEs in real dollar terms. It simply maintains the
status quo, adjusting to 2006 dollars. A number of comments opposed the
idea of making Part 23 and Part 26 size standards identical because the
capitalization requirements for airport concessions are much higher.
The Department agrees and will not harmonize the standards.
In order to make an inflation adjustment to the gross receipts
figures, the Department of Transportation uses a Department of Commerce
price index. The Department of Commerce's Bureau of Economic Analysis
prepares constant dollar estimates of state and local government
purchases of goods and services by deflating current dollar estimates
by suitable price indexes. These indices include purchases of durable
and non-durable goods, and other services. Using these price deflators
enables the Department to adjust dollar figures for past years'
inflation. Given the nature of the Department's DBE Program and ACDBE
Program, adjusting the gross receipts cap in the same manner in which
inflation adjustments are made to the costs of state and local
government
[[Page 15615]]
purchases of goods and services is simple, accurate, and fair.
The inflation rate on purchases by State and local governments for
the current year is calculated by dividing the price deflator for the
third quarter of 2006 (128.352) by 1992's second quarter price deflator
(80.583). The result of the calculation is 1.5928, which represents an
inflation rate of 59.28% from the second quarter of 1992. Multiplying
the $30,000,000 figure for small business enterprises by 1.5928 equals
$47,784,000, which will be rounded off to the nearest $10,000, or
$47,780,000.
Therefore, under the new rule, if a firm's gross receipts, averaged
over the firm's previous three fiscal years, exceeds $47,780,000, then
it exceeds the airport concessions small business size limit contained
in Part 23.
ACDBE Car Rental Company Size Standards
Under the existing rule, car rental companies are not eligible to
participate in the ACDBE program if their average gross receipts over
the three previous fiscal years exceed $40 million. This final rule
adjusts the size standard for car rental companies to reflect the
effects of inflation on the real dollar value.
The inflation rate on purchases by State and local governments for
the current year is calculated by dividing the price deflator for the
third quarter of 2006 (128.352) by 1992's second quarter price deflator
(80.583). The result of the calculation is 1.5928, which represents an
inflation rate of 59.28% from the second quarter of 1992. Multiplying
the $40,000,000 figure for car rental companies by 1.5928 equals
$63,712,000, which will be rounded off to the nearest $10,000, or
$63,710,000.
Therefore, under the new rule, if a car rental company's gross
receipts, averaged over the company's previous three fiscal years,
exceeds $63,710,000, then it exceeds the airport concessions car rental
company size limit contained in Part 23.
A number of comments also supported establishing car rental goals
on a nationwide basis for car rental agencies with a nationwide
presence. The Department recognizes that a number of issues need to be
considered before such a rule can be published. The Department will
continue to consider developing a future rulemaking on nationwide car
rental company goals. The Department will also continue to look for
input from stakeholders when drafting any future rule on this subject.
ACDBE Banks and Financial Institutions Size Standards
A number of comments said that financial industry regulators (e.g.,
the Federal Reserve Board of Governors, the Federal Deposit Insurance
Corporation, the Office of the Comptroller of Currency, and the Office
of Thrift Supervision) and the banking industry itself consider banks
with less than $1 billion in assets to be ``small'' institutions. These
comments went on to point out that the assets needed to operate any
financial institution are high, even for the smallest banks, because of
compliance burdens and technology expenses. In its comments, the
American Bankers Association discussed the difference in efficiency
between banks with less than $1 billion in assets and banks with over
$1 billion in assets. A December 5, 2006 report from the American
Bankers Association stated that the largest minority bank has assets of
$638 million. The report also states that 61% of all black owned banks
have assets under $100 million.
The existing rule imposes a $275 million asset limit for banks and
financial institutions. This final rule increases the dollar amount of
assets that a bank or financial institution may have while still
remaining eligible to participate in the ACDBE program; the new limit
is $750 million. The new size standard will more closely approach the
``small'' bank and financial institution standards referenced in the
comments while accommodating the size of actual minority financial
institutions. The new standard will also reflect the size differences
between most minority banks and the banking industry generally.
ACDBE Automobile Dealer Size Standards
Finally, the current rule has no unique size standard for
automobile dealers. Some comments suggested that the size standard for
automobile dealers selling vehicles to car rental concessionaires at
airports should be based on the number of employees working for a
dealer. The comments recommend an employee based size standard because
automobile dealers who process sales of fleets of cars to car rental
companies (``fleet dealers'') generate high gross sales, with the
result that few, if any, fleet dealers would qualify as small
businesses, under the existing standard. A number of commenters
recommended that a 500-employee size standard be created for car
dealers, which, in their view, would ensure that all potential DBE car
dealers would qualify as small businesses.
The Department believes that commenters made a persuasive case for
replacing the current gross receipts standard with an employee-based
standard. However, we are concerned that using the suggested 500
employee standard would go too far in the other direction, encompassing
all but a few of all car dealers in the industry (2005 statistics from
the National Association of Automobile Dealers, for example, state that
the average number of employees of a dealer was 53). We believe that a
small business standard should not be so inclusive that the distinction
between smaller and larger businesses is erased. At the same time, we
realize that ``fleet dealers,'' who sell large numbers of cars to car
rental companies and other fleet purchasers, are likely to have more
employees than the typical retail dealer. Consequently, we are
establishing a 200 employee standard for purposes of this rule.
Fraud, Abuse, and Administrative Burdens in the ACDBE Program
In the NPRM, the Department asked for comment on ways to better
monitor the eligibility of ACDBEs as well as the ongoing performance of
ACDBEs in the concession business. A number of comments responded to
this inquiry. These comments suggested creating additional reporting
requirements, detailed annual reviews, and more detailed initial review
of certification applications. Some comments voiced concern with the
administrative burdens from the monitoring and goal setting that is
already required by the ACDBE program, pointing out that this burden is
especially significant for small hub airports. The Department has
reviewed the current administrative requirements of the rule and will
not change the process in this final rule. The ACDBE program carefully
balances the benefits of administrative requirements that are designed
to eliminate fraud and abuse with the burdens associated with those
requirements, and we do not believe that further regulatory provisions
are needed at this time.
Business Size Standards for the DBE DOT Financial Assistance Programs
This rule also adjusts the gross receipts cap for the Department's
financial assistance programs in 49 CFR Part 26. The existing DBE
business size limits became effective on August 10, 2005 with the
passage of SAFETEA-LU. Under the existing rule, if a firm's average
annual gross receipts over the preceding three fiscal years exceed
$19,570,000, then it cannot qualify as an eligible DBE firm. SAFETEA-LU
[[Page 15616]]
Section 1101 (b) (1) (a) instructs the Secretary of Transportation to
adjust this amount annually for inflation. The rule will provide for
annual calculations to make this adjustment, with future adjustments
made by final rule.
The inflation rate on purchases by State and local governments for
the current year is calculated by dividing the price deflator for the
third quarter of 2006 (128.352) by 2005's third quarter price deflator
(123.079). The result of the calculation is 1.0428, which represents an
inflation rate of 4.28% from the third quarter of 2005. Multiplying the
$19,570,000 figure for disadvantaged business enterprises in Department
of Transportation financial assistance programs by 1.0428 equals
$20,407,596, which will be rounded off to the nearest $10,000, or
$20,410,000.
Therefore, if a firm's gross receipts, averaged over the firm's
previous three fiscal years, exceeds $20,410,000, then it exceeds the
small business size limit for participation by disadvantaged business
enterprises in Department of Transportation financial assistance
programs contained in the statutes and in Part 26.
Corrections
This rule corrects an error in the definition section of the
original ACDBE rule. In the first publication of the rule, the
definition of ``small business concern'' incorrectly referred to Sec.
23.23 for the applicable size standards. The definition of a ``small
business concern'' now refers readers to Sec. 23.33 for additional
information on the size standards necessary to qualify as a ``small
business concern.'' In addition, we are amending sec. 23.11 to add an
omitted reference to sec. 26.109, concerning confidentiality of DBE
information.
Guidance Documents Issued by the Department of Transportation
The changes to Sec. 26.9 of 49 CFR Part 26 are intended to clarify
the role of guidance documents in the Department's Disadvantaged
Business Enterprise (DBE) programs. Guidance documents do not have the
same binding authority as a final ``legislative'' rule; however,
guidance documents do express the Department's official view of the
meaning and application of our rules. Consequently, we are deleting the
word ``binding.''
The change also clarifies that this provision applies to guidance
issued by individual operating administrations as well as by the Office
of the Secretary of Transportation (OST) or DOT as a whole. For
example, guidance could not purport to express the official views of
FHWA, FTA, or FAA if it did not comply with this provision. This
provision also applies to any guidance or instructional material
prepared by an outside party (e.g., a trade association) that is
endorsed in any way or used in training sessions sponsored by DOT or
any of its modal administrations. Section 26.9, as originally drafted,
was intended to have this effect. However, because some questions have
been raised about whether the language of the section effectively
covers modal-specific, as distinct from Department-wide, guidance we
are making the language of this section even more specific.
For the same reasons, this rule makes a parallel change to Sec.
23.13 of 49 CFR Part 23. We also note that the review mechanism
specified in these sections would be the method through which the
Department would comply with provisions of the recently-issued
Executive Order 13422 and OMB Bulletin on Good Guidance Practices for
any guidance issued by the Department that would be considered to be
significant guidance.
Regulatory Analyses and Notices
This rule is non-significant for purposes of Executive Order 12866
and the Department of Transportation's Regulatory Policies and
Procedures. The rule is an essentially ministerial adjustment for
inflation of a statutory small business size standard that does not
change the standard in real dollar terms. It will not impose burdens on
any regulated parties. This rule does not have Federalism impacts
sufficient to warrant consultation with state and local officials. The
rule does not impose information collection requirements subject to the
Paperwork Reduction Act.
The only effect of the rule on small entities is to allow some
small businesses to continue to participate in the ACDBE and the DBE
programs by adjusting for inflation and modifying the size standards as
measured by average annual gross receipts, total asset amounts, and
total number of employees. Therefore, I certify that the rule will not
have a significant economic impact on a substantial number of small
entities. Since this rule pertains to a nondiscrimination requirement
and affects only Federal financial assistance programs, the Unfunded
Mandates Act does not apply.
List of Subjects
49 CFR Part 23
Administrative practice and procedure, Airports, Civil rights,
Concessions, Government contracts, Grant programs--transportation,
Minority businesses, Reporting and recordkeeping requirements.
49 CFR Part 26
Administrative practice and procedure, Airports, Civil rights,
Concessions, Government contracts, Grant programs--transportation,
Highways and roads, Mass transportation, Minority business, Reporting
and recordkeeping requirements.
0
For the reasons stated in the preamble, the Department of
Transportation amends 49 CFR Parts 23 and 26 as follows:
PART 23--PARTICIPATION OF DISADVANTAGED BUSINESS ENTERPRISE IN
AIRPORT CONCESSIONS
0
1. The authority citation for part 23 continues to read as follows:
Authority: 42 U.S.C. 200d et seq.; 49 U.S.C. 47107 and 47123;
Executive Order 12138, 3 CFR, 1979 Comp., p. 393.
0
2. Amend Sec. 23.3 by revising the definition of ``Small business
concern'' to read as follows:
Sec. 23.3 What do the terms in this part mean?
* * *
Small business concern means a for profit business that does not
exceed the size standards of Sec. 23.33 of this part.
* * * * *
Sec. 23.11 [Amended]
0
3. Amend Sec. 23.11 by removing ``26.107'' and adding in its place
``sec. 26.109''.
0
4. Amend Sec. 23.13 by revising paragraphs (a) and (b) to read as
follows:
Sec. 23.13 How does the Department issue guidance, interpretations,
exemptions, and waivers pertaining to this part?
(a) Only guidance and interpretations (including interpretations
set forth in certification appeal decisions) consistent with this part
23 and issued after April 21, 2005, express the official positions and
views of the Department of Transportation or the Federal Aviation
Administration.
(b) The Secretary of Transportation, Office of the Secretary of
Transportation, and the FAA may issue written interpretations of or
written guidance concerning this part. Written interpretations and
guidance are valid, and express the official positions and views of the
Department of Transportation or the FAA, only if they are issued over
the signature of the
[[Page 15617]]
Secretary of Transportation or if they contain the following statement:
The General Counsel of the Department of Transportation has
reviewed this document and approved it as consistent with the
language and intent of 49 CFR part 23.
0
5. Revise Sec. 23.33 to read as follows:
Sec. 23.33 What size standards do recipients use to determine the
eligibility of ACDBEs?
(a) As a recipient, you must, except as provided in paragraph (b)
of this section, treat a firm as a small business eligible to be
certified as an ACDBE if its gross receipts, averaged over the firm's
previous three fiscal years, do not exceed $47.78 million.
(b) The following types of businesses have size standards that
differ from the standard set forth in paragraph (a) of this section:
(1) Banks and financial institutions: $750 million in assets;
(2) Car rental companies: $63.71 million average annual gross
receipts over the firm's three previous fiscal years;
(3) Companies providing pay telephones: 1,500 employees;
(4) Automobile dealers: 200 employees.
(c) The Department adjusts the numbers in paragraphs (a) and (b)(2)
of this section using the Department of Commerce price deflators for
purchases by state and local governments as the basis for this
adjustment. These adjustments are made every two years from May 2,
2007. The Department publishes a final rule informing the public of
each adjustment.
PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS
0
1. The authority citation for part 26 continues to read as follows:
Authority: 23 U.S.C. 324; 42 U.S.C. 2000d et seq.; 49 U.S.C
1615, 47107, 47113, 47123; Sec. 1101(b), Pub. L. 105-178, 112 Stat.
107, 113.
0
2. Revise Sec. 26.9 to read as follows:
Sec. 26.9 How does the Department issue guidance and interpretations
under this part?
(a) Only guidance and interpretations (including interpretations
set forth in certification appeal decisions) consistent with this part
26 and issued after March 4, 1999 express the official positions and
views of the Department of Transportation or any of its operating
administrations.
(b) The Secretary of Transportation, Office of the Secretary of
Transportation, FHWA, FTA, and FAA may issue written interpretations of
or written guidance concerning this part. Written interpretations and
guidance are valid, and express the official positions and views of the
Department of Transportation or any of its operating administrations,
only if they are issued over the signature of the Secretary of
Transportation or if they contain the following statement:
The General Counsel of the Department of Transportation has
reviewed this document and approved it as consistent with the
language and intent of 49 CFR part 26.
0
3. Revise Sec. 26.65 to read as follows:
Sec. 26.65 What rules govern business size determinations?
(a) To be an eligible DBE, a firm (including its affiliates) must
be an existing small business, as defined by Small Business
Administration (SBA) standards. As a recipient, you must apply current
SBA business size standard(s) found in 13 CFR part 121 appropriate to
the type(s) of work the firm seeks to perform in DOT-assisted
contracts.
(b) Even if it meets the requirements of paragraph (a) of this
section, a firm is not an eligible DBE in any Federal fiscal year if
the firm (including its affiliates) has had average annual gross
receipts, as defined by SBA regulations (see 13 CFR 121.402), over the
firm's previous three fiscal years, in excess of $20.41 million.
(c) The Department adjusts the number in paragraph (b) of this
section using the Department of Commerce price deflators for purchases
by State and local governments as the basis for this adjustment. The
Department issues a final rule by August 10 of each year making this
adjustment.
Issued this 20 day of March 2007, at Washington DC.
Mary E. Peters,
Secretary of Transportation.
[FR Doc. E7-6054 Filed 3-30-07; 8:45 am]
BILLING CODE 4910-9X-P