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Resource Manual for Airport In-Terminal Concessions (2011)

Chapter:Chapter 7 - The ACDBE Program

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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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Suggested Citation:"Chapter 7 - The ACDBE Program." National Academies of Sciences, Engineering, and Medicine. 2011. Resource Manual for Airport In-Terminal Concessions. Washington, DC: The National Academies Press. doi: 10.17226/13326.
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This chapter presents an overview of the U.S. Department of Transportation (U.S. DOT) Air- port Concession Disadvantaged Business Enterprise (ACDBE) Program and how an airport operator’s policies and plans for ACDBE participation can be successfully incorporated into its concession program. The discussion of the ACDBE Program includes the following topics: • Federal requirements • Determining concessionaire market area(s) • Determining availability of ready, willing, and able participants • Establishing race-neutral and race-conscious participation goals • Outreach activities • Methods for achieving ACDBE participation through contractual arrangements • Evaluating joint venture and subtenant agreements • Compliance monitoring and enforcement • Attributes of successful ACDBE programs • Measuring performance • Reporting achievements • Historical development and business trends • Barriers to ACDBE participation • Program audits • Mentoring In this chapter, references to the appropriate section under Title 49 of the Code of Federal Reg- ulations (CFR) or other legal authority are included so that the reader may easily find additional information or clarification. 7.1 Federal Requirements The ACDBE Program regulations are set forth in 49 CFR Part 23. These regulations are man- dated by 49 United States Code (U.S.C.) 47107(e), enacted in 1987 and amended in 1992, and they incorporate certain provisions of the U.S. DOT Disadvantaged Business Enterprise (DBE) Program regulations (49 CFR Part 26). The purpose of 49 CFR Part 23 is to prevent discrimina- tion on the basis of race, color, national origin, or sex in connection with the award or perfor- mance of any “concession agreement, management contract, or subcontract, purchase or lease agreement, or other agreement covered by [49 CFR Part 23]” (49 CFR Part 23, §23.9 [2005]). 49 CFR Part 23 applies to the operators of airports that have received a federal grant for air- port development any time after January 1988 that was authorized under Title 49 of the United States Code. Recipients of these federal funds have agreed to grant assurances that require them 104 C H A P T E R 7 The ACDBE Program

to administer an ACDBE program in compliance with 49 CFR Part 23 and all other applicable federal laws, regulations, executive orders, policies, guidelines, and requirements as they relate to the acceptance and use of federal funds (49 CFR Part 23, §23.5). References: 49 CFR Part 23, Section 23.5 and FAA Airport Sponsor Assurances, 3/2011 The ACDBE Program regulations require the operators of primary airports to develop and implement an FAA-approved ACDBE program participation plan with the following objectives: (1) ensure nondiscrimination in the award and administration of concession opportunities, (2) create a level playing field to enable ACDBEs to compete fairly for concession opportuni- ties, (3) ensure that their ACDBE program is narrowly tailored in accordance with applicable laws, (4) ensure that only firms that fully meet 49 CFR Part 23 eligibility standards are permit- ted to participate as ACDBEs, and (5) help remove barriers to ACDBE participation in conces- sions. 49 CFR Part 23 also provides airport operators flexibility in establishing and providing opportunities for ACDBEs. 49 CFR Part 23 defines a primary airport as a commercial airport that the Secretary of Transportation or his/her designee determines to have more than 10,000 enplaned passengers annually (49 CFR Part 23, §23.1). Verbatim assurances set forth in 49 CFR Part 23, §23.9, must be included in all concession agreements (including management contracts subject to 49 CFR Part 23 requirements) executed with any firm after April 21, 2005, as follows (49 CFR Part 23, §23.9): This agreement is subject to the requirements of the U.S. Department of Transportation’s regulations, 49 CFR Part 23. The concessionaire or contractor agrees that it will not dis- criminate 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, man- agement contract, or subcontract, purchase or lease agreement, or other agreement covered by 49 CFR Part 23. The concessionaire or contractor agrees to include the above statements in any subsequent concession agreement or contract covered by 49 CFR Part 23, that it enters and cause those businesses to similarly include the statements in further agreements. If an airport operator fails to comply with any requirement of 49 CFR Part 23, it may be sub- ject to formal enforcement action under 49 CFR Part 26, §26.103, or 49 CFR 26, §26.105, or to appropriate program sanctions, such as the suspension or termination of federal funds or refusal to approve projects, grants, or contracts until deficiencies are remedied. Program sanc- tions may include actions consistent with 49 U.S.C. 47106(d), 47111(d), and 47122 (49 CFR Part 23, §23.101). An airport operator’s ACDBE program must incorporate the procedures and standards of 49 CFR Part 26, §§26.61–26.91 for certification of ACDBE participants in its concessions program. The program must also provide that certification decisions for ACDBEs will be made by the Uni- fied Certification Program (UCP) in the state where the airport is located. UCP entities may be airports, state departments of transportation, and/or other entities acceptable to the recipients of federal funds, subject to approval by the Secretary of Transportation (49 CFR Part 23, §23.31; 49 CFR Part 26, §26.81). Applicants for ACDBE certification must meet eligibility requirements. To participate as an ACDBE in an airport concession, a business owner must demonstrate social and economic disadvantage. The business owner must also apply to and receive ACDBE certification from a state’s UCP. To be eligible, an owner’s personal net worth cannot exceed the dollar amount established in 49 CFR Part 23, §23.35, excluding the individual’s ownership interest in an ACDBE or a firm that The ACDBE Program 105

is applying for ACDBE certification, the individual’s equity in his or her primary place of residence, and other assets that the individual can document are necessary to obtain financing or a franchise agreement for the initiation or expansion of his or her ACDBE (or have, in fact, been encumbered to support existing financing for the individual’s ACDBE), to a maximum of $3 million. An indi- vidual’s personal net worth includes only his or her own share of assets held jointly or as com- munity property with the individual’s spouse. A copy of the Uniform Certification Application can be downloaded from the DOT website at: http://www.osdbu.dot.gov/Documents/pdf/dbe/ Final%20Application_9-30-09.pdf (49 CFR Part 23, Subpart C). References: 49 CFR Part 23, Subpart C and U.S. DOT Office of Small and Disadvantaged Business Utilization n.d. In addition, the gross receipts of the owner’s business, averaged over the firm’s previous 3 fis- cal years, currently cannot exceed $52.47 million. Standards for numbers of employees apply to certain in-terminal concessionaires, such as pay telephone providers, for which a standard of 1,500 employees applies. Concession size standards are the following (49 CFR Part 23, §23.33): • A small business eligible for ACDBE certification—gross receipts, averaged over the firm’s previous 3 fiscal years, not to exceed $52.47 million • Banks and financial institutions—$1 billion in assets • Rental car companies—$69.97 million average annual gross receipts over the company’s 3 previous fiscal years, as adjusted for inflation by the U.S. DOT every 2 years from April 3, 2009 • Pay telephone providers—1,500 employees • Automobile dealers—350 employees A concession business is eligible for ACDBE certification if it is a for-profit, small business at least 51% owned by one or more individuals who are all socially and economically disadvantaged or a corporation in which 51% of the stock is owned by one or more such individuals. The man- agement and daily operations of the business must also be controlled by one or more of its socially and economically disadvantaged owners (49 CFR Part 23, §23.3). Concessionaires and airport operators must make good faith efforts to achieve ACDBE par- ticipation. Good faith efforts are defined as efforts to achieve an ACDBE goal or other require- ment of 49 CFR Part 23 that, by their scope, intensity, and appropriateness to the objective, can reasonably be expected to result in achievement of the ACDBE Program requirement. Good faith efforts are the following (49 CFR Part 26.53[f][2]; 49 CFR Part 23, §23.3): • Exploring all available options to meet an airport’s ACDBE goals, to the maximum extent practicable, through direct ownership arrangements with ACDBEs. • Soliciting, through all reasonable and available means, the interest of all certified ACDBEs who have the capability to perform the work of the contract. • Soliciting, through all reasonable and available means, the interest of potential ACDBEs that have been granted DBE status with a state’s Unified Certification Program but are not currently engaged in airport concession activities. • Effectively using the services of available minority/women community organizations; minority/ women contractors’ groups; local, state, and federal minority/women business assistance offices; and other organizations as allowed on a case-by-case basis to provide assistance in the recruitment and placement of ACDBEs. • Attending pre-proposal and/or networking meetings related to concession contract oppor- tunities. • Documenting proof of any advertisements in general circulation, trade association, and minority- or woman-focused media. • Documenting the follow-up to the initial solicitation with ACDBE. 106 Resource Manual for Airport In-Terminal Concessions

• Selecting portions of the work to be performed by ACDBEs in order to increase the likelihood that the ACDBE goals will be achieved. This includes, where appropriate, breaking out contract work items into economically feasible units to facilitate ACDBE participation, even when a prime concessionaire might otherwise prefer to perform these work items with its own forces. • Documenting how direct contracting portions of the concession contract or partnering or joint venture opportunities were selected to solicit ACDBE participation and how the selec- tion was made in order to increase the likelihood of meeting an airport’s ACDBE goals. • Providing information to ACDBEs to solicit their bids in a timely manner, such as adequate information about the concession concept, space allocation being considered for ACDBE agreements, and general requirements of the contract to enable the ACDBE to supply a com- plete and competitive bid. • Negotiating in good faith with interested ACDBEs. Evidence of such negotiation includes the names, addresses, and telephone numbers of ACDBEs that were considered; a description of the information provided regarding the plans and specifications for the work selected for ACDBE participation; and evidence as to why additional agreements could not be reached for ACDBEs to perform the work. • Making efforts to assist interested ACDBEs in obtaining necessary equipment, supplies, materials, or related assistance or services. • Making efforts to assist ACDBEs in obtaining independent lines of credit, financing, bonding, or other assistance that would make them a viable candidate for participation in a concession opportunity. • Not rejecting ACDBEs as being unqualified without sound reasons based on a thorough inves- tigation of their capabilities. • Replacing an ACDBE that is terminated or has otherwise failed to complete its concession agreement, lease, or subcontract with another certified ACDBE. 7.2 Determining Concessionaire Market Area(s) One element of the ACDBE goal setting process is determining the geographic area where all ready, willing, and able businesses seeking an airport’s concession privileges and receiving most of the airport’s concession revenue are located. 49 CFR Part 23 §23.45 defines the concession market area as . . . the geographical area in which the substantial majority of firms which seek to do concessions business with the airport are located and the geographical area in which the firms which receive the substantial majority of concessions-related revenues are located. Market areas may be different for different types of concessions, as illustrated in Table 7-1. 7.3 Determining Availability of Ready, Willing, and Able Participants Establishing and maintaining records of companies interested and/or participating in conces- sion opportunities at the airport is necessary in order to identify ready, willing, and able partic- ipants in the jurisdiction’s market area(s). These records are often created from pre-proposal meeting attendance lists, public inquiries, outreach attendee lists, utilization reports, active par- ticipants’ lists (i.e., current concessionaires), and the annual ACDBE participation achievement reports to the FAA. A list of former concessionaires and unsuccessful proposers for concession opportunities will also be useful in determining availability, as well as information from other airports on compa- The ACDBE Program 107

nies seeking or participating in their concession opportunities. At a minimum, the following information should be collected, maintained, and kept current for use when determining avail- ability of ready, willing, and able participants: • Company name • Owner(s) name • Owner(s) gender and ethnicity • Complete address of the company’s principal place of business • Company telephone and facsimile numbers • Owner(s) email address • Type of concession the company is interested in • Date of inquiry 7.4 Establishing Race-Neutral and Race-Conscious Participation Goals The U.S. DOT allows airport operators to use several methodologies to determine 3-year ACDBE participation goals, including, but not limited to, data from disparity studies, active par- ticipants’ lists, and U.S. Department of Commerce Census Bureau data. An airport’s ACDBE Pro- gram must include a goal aimed at achieving the nondiscrimination objectives of 49 CFR Part 23. Airport operators must project the portions of their overall ACDBE participation goal that they propose to meet by using race-neutral and/or race-conscious measures. The use of numerical goals is the primary race-conscious measure for achieving ACDBE participation. Others include any measure the airport operator implements solely for ACDBEs, such as a bid conference or training where other businesses are not invited, and awarding additional points during the evaluation process for a firm’s good faith efforts to utilize ACDBEs. 108 Resource Manual for Airport In-Terminal Concessions Concession Local Regional National Food and beverage X X X News and gifts X Specialty retail X X Duty free X Advertising X ATMs X Foreign exchange X Hair salon/barber shop X Shoe shine X X Nail care X Spa/massage X X Business centers X Baggage carts/lockers X *Representative list Source: ExStare Federal Services LLC based on studies done for several airports. Table 7-1. Potential geographic market areas for in-terminal concessions.*

ACDBE participation needed to meet overall goals must be achieved as much as possible through the use of race-neutral measures, which include, but are not limited to, the following: • Carrying out information and communications programs on contracting procedures and spe- cific contract opportunities (e.g., ensuring the inclusion of DBEs and other small businesses on recipient mailing lists for bidders, ensuring the dissemination of lists of potential subcontractors to bidders on prime contracts, and provision of information in languages other than English, where appropriate) • Unbundling large contracts to make them more accessible to disadvantaged and other small businesses. • Arranging solicitations in ways to facilitate disadvantaged business and other small business participation • Providing assistance to help disadvantaged businesses and other small businesses to obtain bonding and financing • Providing technical assistance to all small businesses • Implementing a supportive services program to develop and improve immediate and long- term business management, record keeping, and financial and accounting capability for DBEs and other small businesses • Providing services to help ACDBEs and other small businesses improve long-term develop- ment, increase opportunities to participate in a variety of types of work, handle increasingly significant projects, and achieve eventual self-sufficiency • Ensuring distribution of your DBE directory, through print and electronic means, to all small businesses and the widest feasible universe of potential prime contractors • Assisting DBEs and other small businesses in developing their capability to use emerging tech- nology and conduct business through electronic media Airport operators must consult with stakeholders before submitting their overall goals to the FAA. Stakeholders include, but are not limited to, minority and women’s business groups; com- munity organizations; trade associations representing concessionaires currently located at the airport, as well as existing concessionaires themselves; and other officials or organizations that could be expected to have information concerning the availability of disadvantaged businesses, the effects of discrimination on opportunities for ACDBEs, and the recipients’ efforts to increase participation of ACDBEs. 7.5 Outreach Activities Outreach is one of the primary tools for identifying ACDBEs; communicating the availability of airport concession opportunities; and gathering information to assist the airport operator in devel- oping and refining policies, procedures, and practices so that they reflect the airport operator’s business objectives and the legitimate interests and concerns of prospective airport concessionaires. One of the questions most often asked by airport staff when seeking small, disadvantaged, minority-owned, and woman-owned businesses to invite to outreach meetings is “how do I find them?” If the DBE liaison officer is not keeping a directory of interested ACDBEs, he/she should begin one immediately. Keeping a list of all businesses that reach out to the airport operator to inquire about concession opportunities and that the airport operator’s staff responsible for the concessions program and ACDBE program identify through outreach activities is very important for identifying interested firms, where they are located, and the types of goods and services they offer. At a minimum, the name of the business, the name of the owner of the business, the full address and telephone num- ber of the business, and an owner’s email address should be obtained. Keeping track of the date(s) The ACDBE Program 109

of an interested business’s inquiry and the type of opportunity being sought is also useful in an air- port operator’s efforts to identify interested parties for specific types of concession opportunities. In addition to maintaining and updating a list of companies that inquire about business opportu- nities at the airport, numerous other sources are available for identifying businesses to invite to outreach activities, including disparity studies and availability studies. Businesses that are listed in certification directories, those that have sought assistance through local economic development agencies, those that have proposed on previous concession oppor- tunities, and those that have attended preproposal meetings are also prospects to be added to the list of contacts for outreach activities. Other sources of business prospects include concession operators at sports arenas, convention centers, malls, and similar locations. Community-based organizations, chambers of commerce, and other organizations represent- ing small, minority-owned, and woman-owned businesses are good points of contact for getting the word out. Other ways of reaching out are through advertising in general and business pub- lications, local press, ethnic media outlets, and on the Internet. Each community should have sources of information about businesses that could be interested in airport concession opportu- nities. Getting and staying connected to the community is priceless to the airport operator and interested businesses—not just when new opportunities are available. Strong ties to local, regional, and national business organizations also provide airport opera- tors a wealth of information and access to companies with the breadth and depth of ability and experience required to operate in the airport environment. National airport industry organiza- tions, such as the Airport Minority Advisory Council (AMAC), ACI-NA, AAAE, and the Airport Consultants Council (ACC), and national business organizations, such as the Women’s Business Enterprise National Council (WBENC) and the National Minority Supplier Development Council (NMSDC), and other such organizations can also be sources of businesses interested in airport concession opportunities. Timing is a critical factor in reaping the full benefit of conducting outreach activities. Out- reach activities should be planned and conducted well in advance of seeking proposals for upcoming concession opportunities. When a new concession program is still in its development phase, the sooner the local and broader community is informed about the upcoming business opportunities, the better. Outreach activities may be conducted a full year before receiving pro- posals and repeated periodically. The objectives are to provide interested parties the time to plan how they will respond to the objectives of the airport terminal program and to allow sufficient time for securing financing and for developing teaming relationships. Some airport operators conduct regularly scheduled outreach meetings to inform the community regarding current and future planning for the airport. Outreach meetings are held both on the airport property and off airport at a hotel or other meeting location. It is not unusual for multiple meetings to be held in different locations at dif- ferent times of the day to reach the widest audience. Figure 7-1 shows a typical announcement for an outreach meeting. In addition to introducing airport staff and informing participants of upcoming concession opportunities, outreach activities should also include an education component. Providing sessions that focus on how to conduct business with the airport allows interested parties to understand whether and how they can take advantage of opportunities. An invitation to and/or attendance at an outreach meeting does not guarantee an opportunity. It is important to educate airport boards, committees, politicians, chambers of commerce, and other airport stakeholders to minimize overly ambitious demands and expectations. Interactions at these meetings also provide an avenue for acquiring information from interested parties and are useful in establishing business participation goals and assistance in identifying pos- sible barriers to and opportunities for improving the process. Often general information about the 110 Resource Manual for Airport In-Terminal Concessions

different certification programs and instructions for applying for ACDBE and other certifications are also provided at outreach meetings. Some basic sources and methods for successful outreach are the following: • Interested parties list created by airport operator or concession manager • Certification directories • Local community and business organizations • National industry organizations • Chambers of commerce • Notices in local media and ethnic media outlets • Internet • Outreach meetings and networking events 7.6 Methods for Achieving ACDBE Participation through Contractual Arrangements A thoughtfully developed ACDBE plan can guide the airport operator in determining when and how to achieve ACDBE participation. The plan begins with a commitment to the purpose of the ACDBE Program. A commitment to the purpose of the ACDBE Program means a commitment at all organizational levels, starting at the top. An assessment of airport policies, procedures, and practices that affect the solicitation process is also important, as it presents an opportunity to ensure that no barriers are constructed that might eliminate qualified and interested parties. The ACDBE Program 111 CITY OF PHOENIX AVIATIO N DEPARTMENT Termi na l 4 Food and Beverage Concession Opportuniti es Outreach fo r Request for Propos al s (R FP) The City of Phoenix Aviation Departme nt is cond uc ti ng a series of infor ma ti onal meet in gs fo r pr ime operators and other interested part ies including ACDBE operators , i n prepar at ion fo r the release of a Request for Proposals (RFP) for the Te rminal 4 Food and Beverage concession opport unities. This RFP will of fer tw o prim e op er ator food and beverage contract opportunities. Each contra ct opport unity will represent approxim at ely half of th e food and beverage sales in the terminal. No individual contra ct opportunit ies will be available. No reta il concession opportunities ar e available at this time. The scheduled outreach meeting s are: Date Time Focus A ugust 20 1 pm Prim e Operator A ugust 20 2:30 pm General Outreac h A ugust 30 10 am- 5 pm Business to Business Ne tw orking Eve nt Septem be r 21 1 pm Prim e Operator Septem be r 21 2:30 pm General Outreac h Oct obe r 19 1 pm Prim e Operator Oct obe r 19 2:30 pm General Outreac h Novembe r 18 8:30 am Preproposal Meeting Novembe r 18 10 am G eneral Outreac h A ll meet in gs will be held at Phoenix Airport Marriot t, 1101 N. 44 th St ., Ph oeni x, AZ. To RSVP please call 602-683- xx xx or em ail xxxx.xxxx@phoenix. gov Figure 7-1. Example of an outreach meeting notice.

A well thought out and transparent contracting process, including selection criteria and con- tract award, are also important elements in achieving ACDBE participation. A transparent con- tracting process is one that is documented, open to public scrutiny, and applied consistently for each contract opportunity. The contracting process should be audited on a regular basis to ensure consistent application at each stage of the process. Along with assessing the process, it is imperative that contracting staff receive continuous training to ensure competency. Transparency does not ensure that the contracting process is free of barriers. A transparent process allows for process review by stakeholders who may have different perspectives or who may offer alternatives to the existing process and raise questions that evoke fresh thinking about ways to level the playing field for businesses interested in airport concession opportunities. While the ACDBE plan may or may not be adjusted, awareness and informed flexibility ensure that the commitment to the objectives of the ACDBE Program and a competitive process is more likely. ACDBE participation in airport concession programs is usually accomplished through direct leases, subleases, and joint ventures. ACDBE participation can also be accomplished through procurement and/or leasing of goods and contracting for services that concessionaires use in their operations and in management contracts and subcontracts subject to 49 CFR Part 23 requirements. Some examples are the following: • Direct leases. Some airport concession programs use a model that includes smaller sized con- cession packages. ACDBEs and other ready, willing, and able firms pursue these opportuni- ties as prime concessionaires and/or joint venture partners. If successful, airport operators enter into direct leases with these firms. • Subleases. A prime concessionaire or developer subleases one or more concession locations to ACDBEs. • Joint ventures. These frequently used arrangements in airport concession programs are defined in 49 CFR Part 23 as an association of an ACDBE firm and one or more other firms to carry out a single, for- profit business enterprise, for which the parties combine their property, capital, efforts, skills, and knowledge, and in which the ACDBE is responsible for a distinct, clearly defined portion of the work of the contract and whose shares in the capital contribu- tion, control, management, risks, and profits of the joint venture are commensurate with its ownership interest. Joint venture entities are not certified as ACDBEs. • Purchase of goods and services. While 49 CFR Part 23 requires airport operators and conces- sionaires to make good faith efforts to explore all available options to achieve compliance with ACDBE goals through direct ownership arrangements, the purchase of goods and services by the airport operator or concessionaires and management contractors from certified ACDBEs can count toward participation goals. • Management contracts/subcontracts. These are agreements with the airport operator or with another management contractor under which a firm directs or operates one or more business activities, the assets of which are owned, leased, or otherwise controlled by the airport opera- tor. The managing agent generally receives, as compensation, a flat fee or a percentage of the gross receipts or profits from the business activity (other than an aeronautical activity), which must be located at an airport (which is subject to 49 CFR Part 23) and engaged in the sale of consumer goods or provision of services to the public. Success in designing, establishing, and administering a best-in-class airport concession pro- gram requires approaches that clearly identify the goals of the concession program, including its goal for ACDBE participation. Airport operators that begin with the end in mind tend to be the most successful in developing programs that meet the test of a dynamic airport environment. 112 Resource Manual for Airport In-Terminal Concessions

7.7 Evaluating Joint Venture and Subtenant Agreements 7.7.1 Joint Venture Agreements In July 2008, the FAA issued guidance to assist airport operators in understanding how to credit ACDBE participation in concession joint ventures. The guidance also assists ACDBEs and non-ACDBE partners in developing joint ventures that comply with U.S. DOT regulations. Before an agreement is approved by the airport operator as an acceptable business arrange- ment between the ACDBE and the airport, a master or prime concessionaire, or a developer or leasing manager, it is important that the airport operator evaluate the joint venture agreement to ensure that it is in compliance with the federal regulations and FAA guidance. Some aspects of the joint venture agreement that the airport operator must review include organization of the venture, roles and responsibilities of the partners in the venture, as well as the ACDBE’s capital investment, ownership, operation, and managerial control. Even though joint ventures are often complex, and determining how to credit the ACDBE’s participation can be challenging, it is imperative that the airport operator determine how the participation of the ACDBE is counted toward its established ACDBE goals, consistent with the regulations and cri- teria set forth in FAA guidance. In evaluating a joint venture, the following questions should be answered: • Is the ACDBE certified? • Have the joint venture agreement and other documentation been reviewed by the commer- cial/property management, legal, and ACDBE Program departments? • What is the claimed ACDBE ownership? • What are the amounts and sources of capital contributions? • Are capital contributions commensurate with ACDBE ownership? • How does the ACDBE participate in control of the joint venture business? • How does the ACDBE participate in the management (overall and day-to-day) of the business? • How does the ACDBE participate in risks and profits of the joint venture? • Is management by the ACDBE commensurate with ownership? • What portion of the work will the ACDBE perform? Please describe. • Does the work assigned to the ACDBE represent a distinct and clearly defined portion of the work? Once it is determined that the joint venture agreement is compliant and the ACDBE partici- pation is approved for counting toward the goal, the amount of ACDBE participation is assigned. The count is determined based on the portion of gross receipts equal to the distinct, clearly defined portion of the concession work that the ACDBE performs with its own workforce. 7.7.2 Subtenant Agreements Subtenant agreements (i.e., subleases) are easier to understand and usually do not require the same level of scrutiny as a joint venture agreement. Subtenants are usually responsible for all aspects of their operations. Subtenants may be franchisees or licensees or they may operate brands and concepts that they developed. Counting concession gross receipts generated by subtenants toward ACDBE goals is, for the most part, straightforward when subtenants use their own capi- tal and workforce and manage the overall and day-to-day operations of their business. Some aspects of the sublease arrangements that the airport operator may want to review are whether the subtenant has the same requirements as the lessor; whether administrative fees are being charged for managing the sublease; and whether provisions forbidding the subtenant from interacting with the airport’s concession management team are included. The ACDBE Program 113

ACDBE subleases are usually with prime concessionaires that have a lease for a varying amount of real estate at the airport. These subleases may have provisions for the prime conces- sionaire to provide services for the ACDBE, such as management training, product placement consultation, or mystery shopping programs. Services provided by a prime for a fee should be reviewed to determine whether the fee for the services does not significantly exceed the amount for which the subtenant could secure such services on the open market. Some general tips on evaluating joint venture and sublease agreements are the following: • Do not be afraid to ask questions. You have to understand the proposed arrangement to evaluate it. • Review the agreement and require changes if necessary. • Develop a plan for monitoring the agreement. • Involve concessions and property staff throughout the process. • Develop good working relationships and communications with participants. While subleases and joint ventures are the primary types of arrangements with and between non-ACDBEs and ACDBEs, instruments such as leases, permits, contracts, and other arrange- ments are also used (e.g., management contracts and goods and services contracts). When the ACDBE’s gross receipts generated by these instruments and arrangements are to be counted toward ACDBE goals, they must be evaluated to ensure that the ownership, ACDBE roles and responsibilities, and other provisions of the agreement are consistent with the requirements of the solicitation and 49 CFR Part 23. 7.8 Compliance Monitoring and Enforcement Internal policies and processes for contract compliance monitoring and enforcement, includ- ing responsible parties and the scope of monitoring, should be documented and included in the airport’s ACDBE plan. Primary aspects of compliance monitoring include, but are not limited to, tracking ACDBE revenue, conducting onsite reviews, and ensuring that ACDBEs are performing the roles and responsibilities specified in concession, sublease, and joint venture agreements. Some questions that should be considered in this regard are the following: • What are the provisions of the contract that have to be monitored for contract and ACDBE Program compliance? • What does the airport’s approved ACDBE plan say? • Is the ACDBE doing what it said it would do? 7.9 Attributes of Successful ACDBE Programs Successful ACDBE Programs ensure that small businesses owned by socially and economically disadvantaged individuals (i.e., ACDBEs) have equal access to concession opportunities in accor- dance with federal law mandating the U.S. DOT ACDBE Program. A critical ingredient of a successful ACDBE Program is achieving the commitment of the orga- nization’s leadership to the objectives of the program, which commitment spans across the entire organization. In addition, the objectives of the ACDBE Program should be incorporated into every function that affects the concession program, including the following: • Outreach • Management structure • Concession planning and design • Selection of concession mix • Solicitation of bids and proposals 114 Resource Manual for Airport In-Terminal Concessions

• Structure of agreements • Compliance and monitoring Additional attributes of a successful ACDBE program are transparency in the solicitation process, flexibility in making real time adjustments to the operating environment, adherence to clearly defined operating standards, and a well-trained staff that communicates openly with all airport tenants. These attributes create a positive environment for developing and implementing a successful ACDBE program. Although successful programs may or may not exhibit every attribute mentioned above, they share some common characteristics such as a fully developed ACDBE plan; a well-defined con- cessions program operated in concert with the ACDBE plan; and an adequate number of staff who have the knowledge, training, and resources needed to accomplish their responsibilities. 7.10 Measuring Performance Measuring the performance of an airport’s ACDBE plan requires a clear set of expectations and goals for each component of the program, consistent with the expectations and goals of the concessions program. Development of the request for proposals (RFP), request for qualifications (RFQ) or request for bids (RFB) and the solicitation process are areas that can create or elimi- nate barriers to achieving the airport’s ACDBE participation objectives. Outreach, monitoring, and compliance are other critical aspects of the ACDBE program where measuring performance will be necessary to determine whether these activities are being implemented successfully and in compliance with 49 CFR Part 23. The purpose of outreach and how to conduct it has been described in Section 7.5. Measuring the performance of this aspect of the airport’s ACDBE plan would include an assessment of whether outreach initiatives have achieved the desired objective of inclusion of ACDBEs in the concession program, and, if not, what should be changed and how. Measuring the performance of the monitoring and compliance component of the airport’s ACDBE plan requires adequate numbers and training of the staff assigned to handle the various aspects of these functions, which can include on-site reviews, monitoring timely payments to ACDBEs, reporting achievements to the FAA, and monitoring contract performance and com- pliance against contract provisions. Monitoring and performance measures need to be clearly stated in the agreement and include expectations related to the goals of the airport’s ACDBE plan. Making adjustments to bid requirements so that they are relevant for the specific concession opportunity is a measure of an airport’s performance on eliminating barriers to ACDBE partici- pation. The assumption that one set of requirements fits all can create a barrier that is easy to elim- inate. An assessment of the bid requirements for each specific concession opportunity does not mean that the bid requirements (e.g., bonding, insurance, experience, and qualifications) will be changed for each concession opportunity. A thoughtful and thorough analysis of the require- ments, using criteria reflective of the objectives to be met by the contract and the ACDBE Pro- gram, is necessary. The airport operator should document and periodically review the solicitation process. A check- list is useful to be sure that administration of the process is consistent. Debriefing participants after each solicitation process is completed and asking questions similar to those listed below will pro- vide information that will allow for continuous evaluation. Changes and improvements can be made when deemed necessary. • Have we achieved our goals for outreach, monitoring, compliance, and ACDBE participation? • Are we achieving the objectives of our ACDBE plan? The ACDBE Program 115

• Are we performing our responsibilities consistent with 49 CFR Part 23? • Have there been any complaints about ACDBE policies and administration of the ACDBE plan? • What do the bidders or proposers say about their experience with the process? • What do interested parties that did not bid or propose on the opportunity say about their impression of the process? • Are there any barriers? • What have we learned? • What needs to be changed? • What actions need to be taken based on our findings? Measuring performance not only is a mechanism for airport staff to be responsive to stake- holders, it helps the airport execute a successful, compliant ACDBE Program. 7.11 Reporting Achievements The purpose and objectives of the airport operator’s ACDBE plan and the intended achieve- ments should be communicated during the airport operator’s outreach efforts, in solicitation documents, and in contract documents to achieve the levels of ACDBE participation that the air- port operator expects. • What are achievements? – Achievements are expressed by the dollar value of the participation in concession contracts generated by ACDBEs, which are reported to the FAA annually. Attaining or exceeding ACDBE participation goals is an achievement. • How are achievements tracked? – Achievements are tracked routinely (e.g., monthly, quarterly) by collecting and verifying ACDBE sales reports from concessionaires, as well as collecting and verifying the amounts that concessionaires pay to ACDBEs under contract with them to provide goods and/or services to the airport concession operation. • Send achievement reports to the FAA – The sales generated from the commercially useful functions performed by ACDBEs on a fiscal year basis, as included in concession contracts, are reported to the FAA by March 1 each year via its web-based DBE Office Online Reporting System (DOORS). If the airport operator errs in reporting achievements, DOORS permits the airport operator to edit its report. If the report is late, the FAA will contact the airport operator. If achievements are not reported at all, the FAA may find that the airport operator failed to administer its ACDBE program in good faith. • Tell stakeholders – Inform internal and external stakeholders of the airport’s ACDBE achievements and suc- cesses via annual reports, on the airport’s website, and through other means. Figure 7-2 shows the FAA’s Uniform Report of ACDBE Participation form. 7.12 Barriers to ACDBE Participation Airport in-terminal concession programs have evolved from generic offerings in the early days to today’s national and regional brands and business and personal services that rival those in some of the most upscale malls. Since the 1970s, as airport concession programs have evolved and become more sophisticated, the number, size, and types of ACDBE Program participants (e.g. concession operators, goods and services providers, and management contractors and sub- contractors) have increased. 116 Resource Manual for Airport In-Terminal Concessions

The ACDBE Program 117 Figure 7-2. Uniform report of ACDBE participation.

ACDBEs have been quite successful in creating food and retail concepts that they began as single units and that they are now operating at multiple airports. From concession program dif- ferentiation and creation of a sense of place at the local airport, to operating national brands at airports across the country, ACDBEs have contributed substantially to airports as we experience them today. While that trend is fully expected to continue into the future, there are still internal and external barriers that affect ACDBE participation in airport concessions. For example, insufficient planning for ACDBE participation, limited outreach, and excessive contractual requirements (e.g., bonding, insurance, and experience) are some of the internal bar- riers to ACDBE participation in airport concession opportunities. These are barriers that airport operators have an opportunity and an obligation to address in developing and administering their ACDBE program and concession program. Internal policies, procedures, and practices can also create challenges for ACDBEs, small businesses, and operators new to the airport environment. Concession managers that are open to new ideas and new operators for the concession pro- gram can create an operating environment and culture that encourage others to think more expansively about the program and about the opportunities. This open and thoughtful approach requires educating stakeholders and analyzing the effects of important requirements, processes, and procedures. Some actions that can be taken to reduce and eliminate internal barriers to ACDBE participation are the following: • Evaluate the basis for certain policies, practices, and procedures to determine if they continue to be relevant and appropriate. This evaluation would apply to requirements such as years of experience and the amounts and types of bonds and insurance. • Educate the community about the economic benefits of the airport and the opportunities that it provides to the community. • Include the community in assessing and re-evaluating the concession program. • Conduct sessions for potential participants, such as “How to do Business at the Airport” and “Concessions 101.” • Inform the community of plans for updating or reinventing the airport concession program. • Conduct outreach consistent with the market area(s) (i.e., national, regional, or local) estab- lished for each particular concession opportunity. External barriers tend to be outside the control or influence of the airport operator, such as barriers that limit access to education, management experience, and leadership opportunities. Obtaining financial assistance for starting or expanding a business or securing franchises is a pri- mary external barrier to ACDBE participation. First instituting and then establishing a cap on the personal net worth of ACDBE owners also created a new hurdle for ACDBEs seeking financing to win or extend concession contracts. ACDBE business owners may begin as operators of one or more units at the local airport. If they achieve success with a concept and seek to offer the concept at other airports, access to the finances required to pay the costs associated with doing business at the second airport could be restricted, especially with a limit on the operator’s personal net worth. This restriction could hin- der the operator’s ability to acquire the financing needed to expand the business. For this rea- son, the growth in numbers of ACDBEs has far exceeded the growth in the size of ACDBE concessionaires. Very few ACDBEs have graduated from the ACDBE Program. Others have sold their businesses to larger operators eager to gain both the real estate and the concepts that were created and developed into successful and sought-after brands. Another challenge to growth has been the lack of uniformity in how certification eligibility is determined. ACDBE operators certified in one state may experience difficulties being certified in other states and jurisdictions. Some of these situations are being addressed through uniform certification applications and reciprocity between states, although there is room for improve- 118 Resource Manual for Airport In-Terminal Concessions

ment and training in both areas. The U.S. DOT regulation that became effective February 28, 2011, establishes further requirements and provides guidance to help eliminate some of the bar- riers to ACDBE certification eligibility and interstate certification reciprocity. 7.13 Program Audits All airport operators that establish and implement ACDBE programs are subject to program audits. The audits are conducted by the FAA Office of Civil Rights, which has become more sys- tematic in conducting ACDBE program audits, with a greater number of such audits conducted in recent years. The audit entails several days of meetings with airport staff and concessionaires and site visits to concessionaires’ on-airport operations, as well as reviews of the airport opera- tor’s contract files and compliance areas. Benefits of the audit include providing assurance to airport operators that they are in compli- ance with 49 CFR Part 23 and offering guidance to airport operators that are not in compliance so that they can make required adjustments to their ACDBE Programs. Airport operators that do not implement their FAA-approved ACDBE Program plan could be found in noncompliance with 49 CFR Part 23 and become ineligible to receive FAA financial assistance. 7.14 Mentoring Mentor/protégé relationships have achieved some level of success in the concession arena— for example, the mentor/protégé model in a program at Dallas/Fort Worth International Air- port, overseen by the Marketing Department, and the mentor/protégé relationship operating in the concession environment at Portland International Airport. But mentor/protégé relationships have not achieved the same level of success in the airport concessions environment as they have in construction and professional services. One of the first and most successful mentor/protégé programs was initiated by the Port of Port- land in 1995 and is credited to the Port’s Contract Manager, Ron Stempel. Based on the findings of a 1994 assessment of why small minority- and woman-owned businesses were not participating in Port projects, the Port developed a Mentor/Protégé Program. What has come to be known as The Stempel Plan has since become a national model for various agencies and organizations. It is noteworthy that the program is promoted by Associated General Contractors of America (AGC) chapters nationwide. The five barriers identified as a result of the assessment conducted in 1994 by the Port of Portland are similar to those frequently identified by ACDBEs today. These barriers include the following: • Ineffective relationships between prime contractors and small businesses and minority-owned and woman-owned businesses • Poor access to job notification • Inability to accommodate size of work • Inability to secure adequate financing • Inability to secure adequate bonding Businesses that have established relationships with franchisors and/or major suppliers and that have gained the ability to purchase products and services at premium rates through mentor/ protégé relationships gain an excellent opportunity for capacity building. It is important to remember that capacity building will have the most effect on the economic growth and development of the communities where the ACDBEs reside. While few analyses of The ACDBE Program 119

the economic contribution of minority-owned and woman-owned businesses have been con- ducted, a study commissioned by the Dallas/Fort Worth International Airport Board found that 51% of retail sales at the airport from September 2002 through September 2005 occurred at minority-owned and woman-owned businesses. Those firms recorded $287 million in sales, cre- ating $431 million in economic activity, adding $157 million to regional labor income. One difficulty that has been experienced in mentor/protégé relationships is creating a way for an ACDBE protégé to maintain independence that does not deter its ability to maintain its DBE/ACDBE certification eligibility. Another challenge that often arises is how to count the participation by the ACDBE protégé towards ACDBE goals. There continues to be an opportunity to address these issues so that capac- ity building of ACDBEs, maintaining ACDBE certification, and counting participation of ACDBEs in mentor/protégé relationships can be achieved. Airport operators seeking to implement business development programs or mentor/protégé programs in their ACDBE programs must use the U.S. DOT’s business development program guidelines (Appendix C of 49 CFR Part 26) and/or its mentor/protégé program guidelines (Appendix D of 49 CFR Part 26). Both sets of guidelines offer a full discussion of the requirements, objectives, and roles and responsibilities of participants in these programs. 120 Resource Manual for Airport In-Terminal Concessions

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TRB's Airport Cooperative Research Program (ACRP) Report 54: Resource Manual for Airport In-Terminal Concessions provides guidance on the development and implementation of airport concession programs.

The report includes information on the airport concession process; concession goals; potential customers; developing a concession space plan and concession mix; the Airport Concessions Disadvantaged Business Enterprise (ACDBE) program; and concession procurement, contracting, and management practices.

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