Attachment 1A

1. Background.

Department of Transportation regulations require that overall concession goals be calculated consistent with the process in Section 26.45 for setting goals under DOT-assisted projects (49 CFR Section 23.95(a)). The FAA offers the following approach as one way to apply Section 26.45 to setting the airport's overall FY-02 concession goal. Other methods can be used, subject to approval of the FAA.

2. One approach to setting goals.

a. This guidance considers a recipient who expresses its overall goal as a percentage of gross receipts to be earned by all concessionaires (Section 23.95(a)(2)(i)), rather than as a percentage of the total number of concession agreements operating at the airport during the goal period (Section 23.95(a)(2)(ii)).

b. Except for those concession agreements referenced in Paragraph c, include in the numerator and denominator, as appropriate, gross receipts to be earned by existing DBEs and/or non-DBEs that will participate in the concession agreements.

c. Consistent with the two-step process outlined in 49 CFR Section 26.45, determine the relative availability of DBEs ready, willing, and able to perform work for each "concession opportunity" that will occur during the goal period. A "concession opportunity" includes any of the following actions by a recipient--

(1) awarding a new concession agreement;

(2) exercising an option to renew an existing agreement; or

(3) making a material amendment to an existing agreement.

d. Under "Step 1" of the two-step process (Section 26.45(c)), use available sources of data or information to determine the base figure. (See Paragraph e.) A combination of sources can also be used. Recipients are not restricted to the methods listed in Section 26.45(c). Moreover, the FAA's own review indicates that the industrial classifications in the Census Bureau's County Business Pattern data base, referenced in 26.45(c)(1), in some instances do not correspond to the types of businesses operated as concessions and thus, may not provide adequate data. A recipient can also employ a different method for each "concession opportunity" if the method best suits a given procurement. Any methodology chosen must be based on demonstrable evidence of market conditions and be designed to ultimately attain a goal that is rationally related to the relative availability of DBEs in the recipient's market.

e. Sources of data that the recipient may consider using in determining a base figure include, but are not limited to the following--

(1) DBE directories.

(2) Lists of bidders, proposers, or other firms who previously competed for a concession contract.

(3) Firms who previously expressed interest in operating a concession, e.g., attendees at pre-solicitation conferences, firms who purchased Request for Proposal documents, etc.

(4) Information on DBEs and non-DBEs currently performing the same or a similar type of concession at the recipient's airport or other airports in the recipient's market area.

(5) Any pertinent data maintained by FAA regional offices.

(6) Data derived from a valid, applicable disparity study.

f. Make appropriate adjustments to the base figure using an approach consistent with "Step 2" as outlined in 49 CFR Section 26.45(d).

g. After determining the relative availability of DBEs for a concession opportunity, multiply the percentage figure by the total projected gross receipts from the concession. The resulting figure represents estimated DBE participation and is added to the numerator, while the total estimated gross receipts from the concession is added to the denominator.

3. Example applying the approach.

a. Figure 1 lists concession agreements to be operated at a hypothetical primary airport during FY-02. The first seven agreements shown will carry over from previous years, and none will be materially amended or renewed during FY-02. As such, none represents a "concesssion opportunity." The projected gross receipts for the DBE and non-DBE participants are included in the numerator and denominator, as applicable, as shown in Figure 2.

b. Each of the last four agreements listed in Figure 1 offers a concession opportunity--three new ones will be awarded, while the term of the lease with "The News Shop" (a non-DBE) will be extended 5 years. Consistent with the two-step process outlined in 49 CFR Section 26.45(b) through (d), the recipient determines the relative availability of DBEs for each of these opportunities.

(1) The recipient determines that the relative availability of DBEs to operate the new bookstore is 14%. Thus, $50,700 (14% of $362,000) represents projected DBE gross receipts and is included in the numerator, while the total receipts ($362,000) are added to the denominator (Figure 2).

(2) As a condition of extending The News Shop's lease for 5 additional years, the airport imposes a requirement on this firm to make good faith efforts to sublease one of its locations in the midfield terminal to a DBE. The sublease is expected to generate approximately $90,000 in revenues. The recipient determines that the relative availability of DBEs to perform the work of the concession is 16.2%. Projected DBE participation in this instance is 16.2% x $90,000 or $14,600. Thus, $14,600 is added to the numerator, while total estimated gross receipts ($882,000) is included in the denominator (Figure 2).

(3) The recipient determines that the relative availability of DBE firms in its market area (in this case, the entire country) that provide baggage cart services is zero. Following a review of information consistent with the two-step process, the recipient determines that the only firm that provides such services is a non-DBE. Consequently, none of the projected gross receipts from this concession are added to the numerator, while the total ($119,000) is included in the denominator (Figure 2).

(4) A food court consisting of 4 businesses begins operation during FY-01. The relative availability of DBE food/beverage operators is determined by the recipient to be 18 percent. Projected DBE gross receipts is calculated to be $264,800 (18% x $1,471,000 total), and the appropriate figures are added to the numerator and denominator (Figure 2).

4. Setting Contract goals.

a. Contract goals are authorized by 49 CFR Section 23.103(a), but the rule does not require that one be set for each concession.

b. The relative availability percentage for each concession opportunity, as described above, is the appropriate figure to use as the contract goal. For example, a contract goal for the Bookstore would be 14%.

c. DOT/FAA recommends that recipients implement race-neutral mechanisms, whenever possible, if doing so will result in achieving the overall goal.

d. Imposing a contract goal on a car rental is subject to the provisions of 49 U.S.C. Section 47107(e)(4)(C), which states:

"This subsection does not require a car rental firm to change its corporate structure to provide for a direct ownership arrangement to meet the requirements of this subsection."

Direct ownership arrangements include joint ventures, franchises, and subleases. The FAA has advised recipients that the above provision is in effect.