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									FAA Small Business        Federal Aviation
                          Administration
Conference


Year in Review



Presented to: DBE Panel
By: Michael Freilich
Date: July 18, 2007
Overview


• Part 26



• Part 23




Year in Review   Federal Aviation   2
July 18, 2007    Administration
Part 26 – Western States Paving

• 9th Circuit panel held that DOT’s DBE contracting
  regulations (49 CFR Part 26) were constitutional,
  but found that the Washington State DOT DBE
  program was unconstitutional as applied.

• The court concluded that Washington State DOT’s
  DBE program was not narrowly tailored because
  the evidence of discrimination supporting its
  application was inadequate, including that
  Washington State DOT had not conducted
  statistical studies to establish the existence of
  discrimination in the highway contracting industry
  that were completed or valid.


Year in Review                          Federal Aviation   3
July 18, 2007                           Administration
Part 26 – Western States


• Guidance applicable only to recipients in
  the 9th Circuit for Part 26 DBE Programs
      – Have evidence to support Race-Conscious Goal or
      – Submit Race-Neutral Program and
            • Gather necessary evidence, may include disparity or
              availability study and
            • Develop action plan for a disparity/availability study




Year in Review                                           Federal Aviation   4
July 18, 2007                                            Administration
Part 26 – Study Reimbursement

      – DOT’s Western States guidance explains that the costs of
        conducting disparity studies are reimbursable from Federal
        program funds, subject to the availability of those funds.

      – For FAA recipients, disparity studies are generally funded as a
        planning study, and have the same eligibility and performance
        requirements of other planning studies, although their priority
        for reimbursement is relatively low.

      – However, for recipients in 9th Circuit, if a disparity study is
        required in order to complete allowable AIP project work, then
        the study is considered an allowable cost of the project and has
        the same priority for reimbursement as the project.

Year in Review                                        Federal Aviation     5
July 18, 2007                                         Administration
Part 26 – Study Reimbursement

      – Nevertheless, USDOT, including FAA, anticipates that each
        State DOT would conduct a state-wide study, which should be
        coordinated with Airport and Transit recipients to account for
        their particular DBE participants.

      – For large and medium primary hub airports, the grant covers 75
        percent of eligible costs (or 80 percent for noise program
        implementation). For small primary, reliever, and general
        aviation airports, the grant covers 95 percent of eligible costs.

      – For further information, contact your FAA Airports District Office
        (see
        http://www.faa.gov/about/office_org/headquarters_offices/arp/r
        egional_offices/media/contact_info_regional_airports_offices.p
        df).


Year in Review                                         Federal Aviation      6
July 18, 2007                                          Administration
Part 26 – Northern Contracting


• Northern Contracting, Inc. v. State of Illinois, et al.,
  January 8, 2007

• Northern Contracting challenged IDOT’s DBE
  Program in Federal District Court & sued USDOT

      – claiming it was unconstitutional




Year in Review                              Federal Aviation   7
July 18, 2007                               Administration
Part 26 – Northern Contracting

• USDOT granted summary judgment in
  District Court
      – Federal government demonstrated compelling
        interest – ending effects of discrimination
      – 49 CFR Part 26 narrowly tailored
• After trial, IDOT’s program was found to be
  narrowly tailored to the compelling interest
• Northern Contracting appealed to the 7th
  Circuit

Year in Review                             Federal Aviation   8
July 18, 2007                              Administration
Part 26 – Northern Contracting

• 7th Circuit held that IDOT’s DBE program
  was narrowly tailored

• What does this mean?
      – In all cases, Adarand, Western States Paving,
        Sherbrook and Northern Contracting, USDOT’s
        DBE Program has been upheld and found
        constitutional



Year in Review                            Federal Aviation   9
July 18, 2007                             Administration
Part 23 - Overview

• Guidance
      –   Overview Memo
      –   Overview Pamphlet
      –   Sample Program
      –   Joint Venture
      –   E-training
      –   PNW Q & A
• SNPRM
• Business Size

Year in Review                Federal Aviation   10
July 18, 2007                 Administration
Part 23 – Sample Program


• FAA/DOT has prepared this sample program
  to help sponsors comply with 49 CFR Part
  23, the DOT Airport Concession
  Disadvantaged Business Enterprise
  (ACDBE) rule.




Year in Review                 Federal Aviation   11
July 18, 2007                  Administration
Part 23 – Sample Program


• This sample program supersedes guidance
  issued by the Office of Civil Rights under
  the former Part 23
• Generally follows Part 26
• Use of the sample program is not required
• Sponsors may customize the sample
  program to meet their needs


Year in Review                   Federal Aviation   12
July 18, 2007                    Administration
Part 23 – Joint Venture Guidance


      – Issue of how to credit the participation of DBE joint
        venture partners.

      – Stakeholder listening session (completed), FAA draft
        (nearly complete), Conference input, Another
        Stakeholder meeting, Final Guidance




Year in Review                                  Federal Aviation   13
July 18, 2007                                   Administration
Part 23 – E-Training

      – The product will likely be in a DVD format, including
        video interviews, a powerpoint presentation, and
        reference materials.

      – Topics will include a welcome statement, program
        overview, legal overview, and comments from an
        airport, ACDBE prime, ACDBE sub, and car rental
        representative.




Year in Review                                 Federal Aviation   14
July 18, 2007                                  Administration
Part 23 – 3rd Exclusion - PNW Q & A

• Only assets supporting obligations for which the individual is
  currently liable, which are properly documented, and for
  which his or her personal assets are encumbered, should be
  counted toward this exclusion.
• The initiation or expansion of a concession concerning which
  an owner seeks this exclusion should be real and present
  rather than a possibility that is speculative or well into the
  future.
• For example, assets supporting a loan or line of credit
  obtained today for a projected expansion of a concession
  three years from now would not be a reasonable basis for
  excluding the assets from today’s PNW calculation.
• Assets eligible for this exclusion from the PNW calculation
  are properly excluded from an owner’s PNW calculation
  regardless of the location of concession for which the
  financing in question was arranged.


Year in Review                                  Federal Aviation   15
July 18, 2007                                   Administration
Part 23 – 3rd Exclusion - PNW Q & A

• Since an ACDBE applicant bears the burden of demonstrating
  its eligibility, it is reasonable for recipients to request all
  supporting documentation for each financial obligation
  claimed by the applicant, including loan agreements,
  supporting lien and/or letter of credit documents, and
  specification of the assets used to secure a loan or line of
  credit.
• Recipients should pay particular attention to the terms of a
  financial obligation, determine the extent to which the
  individual owner, as distinct from a corporation or other party,
  is obligated to repay, or is repaying, the obligation.
• The recipient should make appropriate inquiries into whether
  there are any additional borrowers or other factors that may
  affect the size or duration of the individual owner’s debt.


Year in Review                                   Federal Aviation    16
July 18, 2007                                    Administration
Part 23 – SNPRM - Topics

• National Car Rental Goal

• Anti-Fraud

• Business Size

• Etc.



Year in Review               Federal Aviation   17
July 18, 2007                Administration
Part 23 – SNPRM – Car Rental Goal

      – Proposed revision to the Part 23 regulations, to
        allow national car rental companies to set DBE goals
        rather than each individual airport. This is a concept
        borrowed from Part 26 with regard to transit vehicle
        manufacturers.

      – 1st Stakeholder Meeting, Industry Meeting, Concept
        Paper, Bullet Points, 2nd Stakeholder Meeting,
        Possible Rulemaking



Year in Review                                 Federal Aviation   18
July 18, 2007                                  Administration
Business Size

• The DBE program is intended to level the
  playing field for socially and economically
  disadvantaged firms so that they can
  compete fairly for federal contracting
  (highway, transit, and airport) and
  concessions (airport only) opportunities at
  a level that would be expected in the
  absence of the effects of discrimination.



Year in Review                    Federal Aviation   19
July 18, 2007                     Administration
Business Size

• To meet constitutional standards, race and
  gender based programs must be narrowly
  tailored to meet a compelling governmental
  interest.
• One element of a narrowly tailored DBE
  program is that a DBE business must be
  small, as measured by gross receipts or
  number of employees.



Year in Review                   Federal Aviation   20
July 18, 2007                    Administration
Business Size

• Existing business size standards have not
  been adjusted for inflation since 1992.

• In March 2005 DOT issued a revised ACDBE
  rule to incorporate statutory changes and
  constitutional standards.

• At the same time DOT issued a notice
  asking for comments on business size
  standards and some other issues.

Year in Review                   Federal Aviation   21
July 18, 2007                    Administration
Business Size

• In response, FAA worked with DOT to make
  inflationary adjustments to the business
  size for DBEs and ACDBEs.

• The purpose of these changes is to ensure
  that the opportunities for small businesses
  to participate in the DBE and ACDBE
  program remains unchanged after taking
  inflation into account.

Year in Review                    Federal Aviation   22
July 18, 2007                     Administration
Business Size

• A final rule, issued by DOT on April 2, 2007
  (effective May 2, 2007), makes inflationary
  adjustments for ACDBE and DBE size
  standards, and provides for similar
  adjustments to the ACDBE size standard
  every two years, and to the DBE size
  standard every year.
• The rule also makes other minor changes
  and corrections regarding guidance and
  definitions.

Year in Review                     Federal Aviation   23
July 18, 2007                      Administration
Business Size – Part 23 Changes

• Most ACDBE businesses - $47.78 million gross
  receipts averaged over previous 3 fiscal years
  (previously $30 million)
• ACDBE Banks and Financial Institutions - $750
  million in assets (previously $275 million)
• Car rental ACDBE businesses - $63.71 million gross
  receipts averaged over previous 3 fiscal years
  (previously $40 million)
• Pay Telephone ACDBE businesses - 1,500
  employees (no change from previous standard)
• ACDBE Automobile Dealers - 200 employees (no
  previous standard)

Year in Review                        Federal Aviation   24
July 18, 2007                         Administration
Business Size – Part 26 Change

• DBE businesses:

      – $20.41 million gross receipts averaged over
        previous 3 fiscal years

            • (previously $19.57 million)




Year in Review                               Federal Aviation   25
July 18, 2007                                Administration
Questions




Year in Review   Federal Aviation   26
July 18, 2007    Administration
                 The End – Thank You!!




Year in Review                     Federal Aviation   27
July 18, 2007                      Administration

								
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