ABC S of DBE & ACDBE Programs
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1 ABC S of DBE & ACDBE Programs Project Take Off: Community Partnerships and Economic Growth Conference Presented to: By: Broward County Aviation Department Anthony W. Brown, FAA Date:
2 Presentation Overview Airport Funding Sources DBE In General Program Participation Contracting Certifications Goals Participation Reports Joint Ventures Program Pitfalls, Compliance & Enforcement Legislative & Regulatory Update 2
3 Airport Funding Sources Airport Improvement Program (AIP) Airport & Airway Improvement Act of 1982 April 1982 Aviation Investment & Reform Act for 21 st Century ( AIR 21 ) 2 Funding Methods Entitlement Funds Tied to Enplanements (passengers) Discretionary Funding Awarded by FAA Discretion Airport Planning Airport Development Airport Capacity Airport Noise Program 3
4 Airport Funding Sources Passenger Facility Charges (PFCs) Created by the Aviation Safety & Capacity Act of 1990 cont d Airport Use of PFCs require Application to and Approval of the FAA Charge is added to individual ticket cost for each segment flown through the airport State Department of Transportation Grants Tax Exempt Bond Issues Airport Generated Revenues Landing Fees, Rents, Concession, Advertising & Parking Revenue 4
5 DBE in General Program Participation Who Must Have a DBE Program? Section FAA recipients receiving grants for airport planning or development who will award prime contracts exceeding $250,000 in FAA funds in a Federal fiscal year. 5
6 DBE in General (cont d) Title VI concept Recipients prohibited from race, color, or national origin discrimination Adarand Constructors v. Pena, 515 U.S. 200, 235, (1995) requires strict scrutiny Compelling governmental interest Narrow tailoring (i.e. goal-setting) 6
7 DBE In General Program Participation cont d 49 CFR Part 26: DOT (i.e. FHWA, FTA, & FAA) DBE program for recipient contracting 49 CFR Part 23: FAA DBE program for airport concessions 7
8 DBE in General Cont d Contracting (49 CFR Part 26) FAA distributes about $3.4 billion annually in AIP grants to help finance airport construction projects. 3,300 airports are eligible for AIP grants for airport planning & development. FAA has a policy of ensuring that socially and economically disadvantaged businesses are able to participate in contracting opportunities created by AIP grants. 8
9 DBE in General cont d Certification Applicants must show that they meet size, group membership, ownership, and control standards by a preponderance of the evidence. Firms are not considered small businesses concerns and are therefore ineligible as DBEs once their average annual receipts over the preceding three fiscal years reach $20.41 M (DBEs) or $47.78 M (most ACDBEs). 9
10 DBE in General cont d Certification Firms must also meet separate SBA small business size standards for their type of business. Certain groups are rebuttably presumed to be socially and economically disadvantaged. These include Native Americans, Blacks, Hispanics, Asian-Pacific Americans, Subcontinent Asian Americans, & Women. Each disadvantaged individual seeking certification for his or her firm must submit a notarized certification of disadvantage and a statement of personal net worth. 10
11 DBE in General cont d Certification Eligibility is based on social and economic disadvantage. To ensure that only genuinely disadvantaged individuals participate, there is a $750,000 personal net worth (PNW) cap. If an individual s PNW (excluding principal residence and interest in the applicant firm) exceeds $750,000, the person is not an eligible DBE owner. 11
12 DBE in General cont d Certification Ownership and control requirements provide detailed, specific, clarified standards for determining whether to certify firms. Each state has a Unified Certification Program (UCP) that certifies DBEs for all DOT recipients in their state. (One-Stop-Shopping) 12
13 DBE in General Goals The intent of DOT s DBE program is to remedy past and current discrimination against DBEs and ensure a "level playing field" -- the amount of DBE participation that could realistically be expected in the absence of discrimination. The goal must be based on demonstrable evidence of the percentage of DBEs that are ready, willing, and able to perform the types of contracts the airport intends to let. 13
14 DBE in General cont d Goals Contract goals are not required on every contract. Recipients must meet as much as possible of their overall goals by using raceneutral measures, like outreach and technical assistance. [49 CFR 26.51] They should use race-conscious measures, like contract goals, only to make up the difference. 14
15 DBE in General cont d Goals The FAA Civil Rights Offices must review the Part 26 DBE goal-setting methodology submitted by approximately 850 airports each year to ensure compliance with DOT s DBE regulations. We must also review the Part 23 goal-setting methodology submitted by approximately 350 primary airports every 3 years, on a staggered 3 year basis. 15
16 DBE in General cont d Participation Reports FAA Civil Rights Staff must compile reports of actual DBE participation in contracting and by airport concessions. DBE Office Online Reporting System DOORS program Airports must submit DBE participation reports to FAA: Part 26 reports are due December 1 Part 23 reports are due March 1 16
17 DBE Accomplishments General rule [49 CFR 26.55] DBE credit is awarded only for work performed by DBE firms with their own forces DBE participation under Part 23 is counted in the same way as it is under Part 26 17
18 DBE in General cont d DBE Compliance Reviews Background - FAA has a responsibility to ensure that recipients comply with Part 23 & 26. Civil Rights staff have always conducted compliance reviews. OIG has indicated need for more oversight. Current Program To supplement staff reviews, FAA from time to time hires contractors to assist with additional reviews, selected based on a variety of factors. 18
19 DBE in General cont d Certification PNW Cap $750,000 cap, with three exclusions: Equity in owner s primary residence (Also in Part 26) Assets invested in the business (Also in Part 26) Assets encumbered or to be encumbered to obtain financing to enter or expand a concessions business (New in Part 23 only) Capped at $3 million 19
20 DBE in General cont d Revised Part 23 - Certification - Other Except for size and PNW standards, the eligibility criteria of Part 23 for ACDBEs are almost identical to those of Part 26 Certification of ACDBEs and all other DBEs will be handled by the UCPs UCPs/Airports had up to three years to review certifications of ACDBEs to ensure that they met Part 23 criteria 20
21 DBE in General cont d Part 23 - Certification Other If a current ACDBE loses eligibility because it cannot meet PNW or business size standards, the business can continue to be counted as an ACDBE with respect to an existing concession contract, but not for extensions or a new contract [49 CFR 23.55] If plan to enter into a new contract with an ACDBE before the deadline to review their certification, should first review their eligibility 21
22 DBE in General cont d Part 23 - ACDBE Goals Types of Goals - Primary Airports must set 2 separate goals under Part 23 so car rental participation does not skew the picture for others [49 CFR 23.41(a)] Car rentals All other concession activities 22
23 DBE in General cont d Revised Part 23 - ACDBE Goals Goal Submission Threshold - Many smaller airports have little concession activity Airports with less than $200K in revenues from car rentals or other concessions, respectively, would not have to do an overall goal for that area [49 CFR 23.41(b)] Will reduce administrative burdens for small airports 23
24 DBE in General cont d Revised Part 23 - DBE Goals Goal Submission Period [49 CFR 23.41(c)] Overall goals cover 3 years, rather than 1 year as in Part 26 Recognizing longer timeframes involved in concession relationships between business and airports The goal submission dates are staggered over three years [49 CFR 23.45] 24
25 DBE in General cont d New Part 23 - DBE Goals Goal-Setting Mechanism Parallel to Part 26, which has withstood a number of legal challenges and courts have found to help in making the program narrowly tailored Must consult with stakeholders before setting goal, but public comment period is not required [49 CFR 23.43] 25
26 Part 23 Joint Venture Guidance Main Issue: how to credit the participation of DBE joint venture partners. Stakeholder listening session (completed), FAA draft (complete), Conference input, another Stakeholder (held yesterday) meeting, Final Guidance 26
27 Joint Venture Definition 49 CFR 23.3 Association of an ACDBE firm and one or more other firms Carry out a single for-profit business enterprise Combine property, capital, efforts, skills and knowledge ACDBE responsible for clearly defined portion of the work and whose share in the capital contribution, control, management, risks, and profits commensurate with its ownership interest. 27
28 JV Certification Joint venture entities themselves are not certified as ACDBEs it is the socially and economically disadvantaged joint venture participant that needs to seek certification. 28
29 Common ACDBE Pitfalls Joint Ventures Some concession joint ventures do not involve an ACDBE performing an independent part of the work, and have been the focus of fraud investigations by DOT s Inspector General and other law enforcement organizations. Avoid prime concessionaire seeking to have an ACDBE silent partner on its payroll. 29
30 Common ACDBE Pitfalls -- Fronts Fronts refer to ACDBE firm which does not perform work to fulfill ACDBE participation requirements under prime contracts Prime or Subcontractor pays ACDBE a relatively small amount for the use of ACDBE status to falsely represent that ACDBE is performing the work. Prime or another non-acdbe contractor actually performs the work and receives the bulk of the payments. Payments may be funneled through ACDBE to make it appear that ACDBE performed the work. 30
31 ACDBE Program Compliance Airport Monitoring and Enforcement Airport ACDBE programs must include the monitoring and compliance measures the airport will use, including levels of effort and resources devoted to this task. Describe the frequency of reviews or records, onsite reviews of concession workplaces, etc., to determine whether ACDBEs are actually performing the work for which credit is being claimed. This type of oversight is crucial to combating ACDBE fraud, and FAA will closely scrutinize this aspect of ACDBE programs. 31
32 Enforcement Airport Sponsor subject to compliance reviews by Office of Civil Rights 14 CFR Part 16 Airport Enforcement Proceeding Withhold grant funds Terminate grant eligibility DOJ referral for DBE/ACDBE Program Fraud Jail Fines Suspension and Debarment Listed on the Federal Government s Excluded Parties List System; not eligible to participate in Federal contracts DOT directive to UCP to initiate proceeding to remove DBE/ACDBE certification 32
33 JV Counting (d) Credit may be counted only for the distinct, clearly defined portion of the work performed by the ACDBE with its own forces. 33
34 DBE Legislative & Regulatory Update FAA Reauthorization H.R. 915 & S Requires DOT, by regulation to adjust the current $750,000 PNW cap upward to adjust for inflation occurring since 1989, and to perform future inflationary adjustments Requires DOT to exclude the value of a business owner s qualified retirement accounts from any calculation of PNW 34
35 DBE Legislative & Regulatory Update FAA Reauthorization H.R. 915 & S cont d HR 915 passed by U.S. House of Representatives requires DOT/FAA establish mandatory uniform certification training program for those performing certifications Permits DOT/FAA to utilize private third parties to implement the uniform certification training program Prohibits excessive or discriminatory bonding requirements for all firms Directs DOT, by regulation to establish a program to eliminate barriers to bonding 35
36 DBE Legislative & Regulatory Update FAA Reauthorization H.R. 915 & S cont d H.R. 915 applies DBE participation goals to airport projects financed solely by PFC s If enacted, this federal requirement would preempt those states with laws banning race-conscious contracting goals in procurement or contracting (e.g., California, Michigan, etc.) S Does not include provisions for DBE participation in PFCs. Conference to Reconcile Differences in H.R. 915 & S in
37 DBE Legislative & Regulatory Update USDOT Advanced Notice of Proposed Rulemaking Allows DOT to use private third party trainers to implement requirement that all performers of certifications receive uniform training in certification Counting of DBE Credit Regarding items obtained by DBE subcontractors from other sources (i.e., prime contractors) Unbundling of Contracts Improvement of DBE application and PNW forms Improvement of oversight processes 37
38 DBE Legislative & Regulatory Update USDOT Advanced Notice of Proposed Rulemaking cont d Lessens administrative burden on recipients and the FAA by limiting DBE goal submissions to once every three years Reciprocity Establishes procedures encouraging greater reciprocity between states in regard to acceptance of a fellow state s DBE certification. Current rule provides for yearly submission of goals by recipients Comment period closed Consideration ongoing at DOT 38
39 FAA s External Civil Rights Website FAA s Office of Civil Rights is has updated it s external civil rights website at: arters_offices/acr/ There are two external civil rights sections: Airport Disadvantaged Business Enterprise Program Airport Civil Rights Programs 39
40 The End Thank You!! 40
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