Commercial Ground Transportation at Airports: Best Practices (2015)

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41 Role of Small and Disadvantaged Business Enterprises Airports have limited policy levers to promote small busi- ness participation, since commercial ground transportation companies are providing a service to the traveling public (i.e., an airport’s customers) rather than to the airport sponsor. This section of the guidebook discusses the regulatory framework of small business participation in commercial ground trans- portation at airports, followed by a description of the strategies applicable to each mode of commercial ground transportation. This section also discusses other opportunities that apply across all commercial ground transportation modes at airports. Description of the Regulatory Framework Airport contracting, procurement, and concessions agree- ments are regulated by the federal government through the FAA. Airports are required to have DBE goals and programs on construction and Airport Concessions Disadvantaged Business Enterprise (ACDBE) goals and programs for airport concessions. The federal regulation governing the ACDBE program is 49 CFR 23, known as “Part 23.” As described in the next paragraph, the definition of an airport concession used in Part 23 differs from the concession business arrangement used elsewhere in this guidebook. Generally, federal policies only pertain to ground trans- portation when it is a management contract or a concession. Part 23 defines commercial ground transportation to be a concession when it has a counter, kiosk, or dispatcher at the airport. Therefore, some commercial ground transportation services, such as shared-ride vans, are considered a conces- sion when there is a counter. Likewise if taxicabs, limousines, or scheduled buses/vans have a dispatcher at the airport, they are considered a concession. Generally it is the decision of the airport, rather than the transportation company or service, to require a counter or dispatcher, thus defining the com- mercial ground transportation service as a concession. Other contracts, such as ground transportation coordination or on-airport parking shuttles, are management contracts and also fall within the Part 23 ACDBE program but are not con- sidered commercial ground transportation. Related to airport construction, the FAA, like other USDOT entities, requires grantees to have race-neutral Small Business Enterprise (SBE) programs alongside the DBE program. The airport DBE construction program is governed by 49 CFR 26, known as “Part 26.” But Part 23, which governs concessions and ground transportation, does not require a SBE program alongside the ACDBE program. Some airports operate within a city or county where there is a SBE or Minority and Women Business Enterprise (MWBE) contracting program. If the commercial ground transportation service is considered a concession, the airports operate under the federal ACDBE program and cannot administer a SBE or MWBE program local requirement. If the commercial ground transportation service is not considered a concession, the air- port might apply a local SBE or MWBE program. Some airports also adopt a Disabled Veteran Business Enterprise (DVBE) Pro- gram with goals for inclusion in the 3-5% range. Many of these programs are part of a state’s small business program. Virtually all city and county SBE programs have a local preference or headquarter requirement—either city, county, or metropolitan region. Part 23 suggests that airports meld the federal ACDBE program with the local-jurisdiction pol- icy, but where there are conflicts, the ACDBE policy takes precedence. Specifically, Part 23 prohibits a local ACDBE firm from having a preference over a non-local ACDBE firm (49 CFR 23.79). The FAA interprets Part 23 to mean that a local SBE or local MWBE program cannot be operated alongside the ACDBE program. For this reason, most air- ports avoid applying any local SBE or MWBE program to airport commercial ground transportation. In effect, most small business contracting in commercial ground transpor- tation happens through the ACDBE program or indirectly in commercial ground transportation services that are not considered a concession. C H A P T E R 7

42 Small Business Definitions Many small businesses participating in airport commercial ground transportation programs will participate in the ACDBE program. The size definition of an ACDBE small commercial ground transportation business is one having up to $30 million in annual sales, averaged over three years, with an additional personal net worth limit. The ACDBE size standard is higher than most, if not all, local SBE and MWBE programs, and higher than the federal Small Business Administration (SBA) standards. Table 7-1 shows the limits the SBA has established for small businesses operating in the arena of airport ground transportation. Some airports, especially larger ones, treat taxicabs, limou- sines, and/or shared-ride vans as concessions, subject to the ACDBE program. Charter or scheduled buses/vans generally are not concessions. Concessionary transportation providers may form a joint venture with an ACDBE through a prime contractor–sub-contractor relationship where the ACDBE is fulfilling a core function, or through a supplier relation- ship where the ACDBE is not in a core function. There are a number of industries that provide a supplier role to ground transportation businesses, including vehicle parts and sup- plies, fuel, insurance, training, and uniforms. Small business size standards for each of these industries can be found online on the SBA website. When the various commercial ground transportation ser- vices are not treated as a concession and are open to partici- pation by any qualified business (i.e., an open access model), various small businesses may be among the transportation providers. In a few cases, airports apply a local SBE or MWBE program to non-concessionary ground transportation; how- ever, many airports do not track SBE, MWBE, or DBE participa- tion in non-concessionary commercial ground transportation businesses. Taxicabs A few airports, especially larger ones, treat taxicabs as con- cessions under the Part 23 definition. The federal regulations make a distinction of whether the taxicabs have a dispatch at the airport, in which case they are a concession. Hartsfield- Jackson Atlanta International Airport is an example of an airport where any city taxicab is allowed to operate at the air- port (an open taxicab system), but taxicabs are considered a concession as defined by the SBA. In these cases the taxicab companies (concessionaires) are typically required to make a good faith effort to include ACDBE participation. This par- ticipation could be through an allotment of vehicles to oper- ate under the prime contractor’s concession. It could also be through goods and services contracts, such as maintenance and repair, fuel, insurance, or other services. When taxicabs are not a concession, the options to increase SBE or ACDBE participation among taxicabs are limited. However, there usually is some small business participation naturally among taxicabs, especially in areas where taxicabs tend to be provided by owner-operators. A few locations have taxicab cooperatives or associations. At these locations an air- port small business or equal opportunity office may wish to discuss ways to increase small business participation with the cooperatives or associations. Examples of this are the Small Business Association of DC Taxicab Drivers in the District of Columbia, the Yellow Cab Coop in Milwaukee, and the Yellow Cab Cooperative in San Francisco. One other way to promote participation by small business taxicab companies is to list all taxicab services on an airport website. An example of this is Denver International Airport, whose online list includes the Union Taxicab Cooperative. Limousines Limousine service is treated in a similar fashion to taxicabs— it is generally not seen as a concession, since at most airports the limousine services do not have a counter or dispatcher. Perhaps even more than taxicabs, many limousine companies are small businesses—earning less than $14 million in annual sales and receipts by the SBA definition. Thus, there will often be small business participation in this mode of airport commercial ground transportation. Shared-Ride Vans Some airports treat shared-ride vans as concessions. The federal regulations indicate that if the shared-ride van Small Business Type Annual sales limit Taxicab and limousine service $14 million On-airport shuttles $14 million Shared-ride vans $14 million Charter or Airporter buses (i.e., scheduled buses) $14 million Ground transportation coordination $7 million Source: U.S. Small Business Administration, 2014. Table 7-1. SBA small business limits.

43 participation regarding charter buses other than encouraging these companies to utilize small businesses for good and ser- vices and to voluntarily report small business spending. One of the few airports that places local goals on charter/ scheduled bus companies, as well as shared-ride vans, is the Port Authority of New York and New Jersey. These transpor- tation services are not considered concessions by the Port Authority. However, because they are permitted to operate at the Port Authority operated airports, the Port Author- ity places MWBE goals on all the bus and van companies. Depending on how the domain of local policy is interpreted, other airports could also place MWBE or SBE goals on non- concessionary commercial ground transportation services [except where prohibited by law as in California (Proposi- tion 209) or Washington State (I-200)]. Ground Transportation Management Contractor Several airports use third-party contractors to coordinate and manage commercial ground transportation services at the curbside, including coordinating taxicabs and/or shared- ride vans on behalf of the airport. At times, these manage- ment services serve as a liaison between the customers at the curbside and the commercial ground transportation pro- viders. Airports that retain third-party commercial ground transportation coordinators often do so using a management agreement rather than a concession contract, which means that ACDBE goals also apply. The airport curbside coordination provider at San Francisco International Airport, mentioned in the shared-ride section, is an example of this. They coordinate the van departures of the ten shared-ride companies. This service is a joint venture between a large parking management company and a small, local ACDBE, therefore meeting the airport’s ACDBE goal. Other Options for Increasing SBE and ACDBE Participation Aside from the formal ACDBE program, there are other ways that airports can influence opportunities for small busi- nesses in airport commercial ground transportation. These include policies on brokering and small business development services. Brokering Policies Brokering is defined as when a contractor or concession- aire has a contract and sells the contract or a majority of the contract to another entity to represent them. Legitimate bro- kering services are allowed to be counted for ACDBE credit, including fees or commissions charged for assistance in the company(ies) has a counter or dispatch service at the airport then it should be considered a concession and fall within the ACDBE program. An example of a concession approach to shared-ride vans is Orlando International Airport. It offers a concession for one master or prime ground transportation contract, with the prime contractor required to sub-contract with ACDBE firms. These sub-contracts can be for service contracts, such as maintenance and repair, not only van service. Denver International Airport treats shared-ride vans in a similar way to Orlando. During 2012–2013 it placed ACDBE goals on concessions awarded to shared-ride van companies for the first time. The companies were not able to determine revenue generated by airport business to come up with a basis for a goal. Instead the shared-ride van companies determine all their expenses and the portion of their business that came from airport pickups and drop-offs, and these airport-related expenses become the basis for the ACDBE goal. The airport’s anti-brokering law does not allow sub-contracting in the core operations of the shared-ride van company, so other areas of goods and services are utilized to meet the ACDBE goal. Some of the shared-ride van companies were able to meet the 10 percent goal. Another way of operating shared-ride vans at an airport is to use an open access model rather than treating it as a con- cession. With an open model, any company meeting mini- mum criteria can operate as a shared-ride company, but none of the companies are allowed to have a counter in the airport. This typically results in allowing multiple companies to oper- ate shared-ride vans, some of which may be qualified as small businesses. An example of this approach is San Francisco International Airport, which allowed ten shared-ride van companies to oper- ate during the 1990s, with additional companies able to begin operations at the airport until 1997 when the airport placed a moratorium on new shared-ride companies. Airport staff esti- mate that up to eight of the ten shared-ride companies might be considered small businesses. The airport does not allow any of the shared-ride companies to have a counter at the airport. Instead, a third-party airport curbside coordinator directs pas- sengers to the vans and instructs drivers to exit the hold lot and proceed to a specific terminal. Charter and Scheduled Buses/Vans Scheduled buses/vans frequently have a counter, which would qualify them as a concession and fall within the ACDBE program. Charter buses/van, however, generally do not have a counter so they are not considered a concession. They are less likely than shared-ride vans to be a small business, given the amount of vehicle investment required. At first glance, there would seem to be few leverage points for small business

44 would be in coordination with the city or county in which the airport is located, so that the city’s small business develop- ment services are extended to an airport setting. The small business development services could include start-up assistance, mentor-protégé programs, technical assis- tance on the specific operations of commercial ground trans- portation, and information on how to become certified, how to bid on airport projects, how to partner with a prime concessionaire, and how to form a joint venture. Other services often include bonding guarantees, assistance on obtaining bonding or insurance, loan guarantees, or low-interest small business loans. Resources for SBE/DBE development and utilization include the following: • National Minority Supplier Development Council; • Taxicab, Limousine, and Paratransit Association; • Airport Minority Advisory Council; • National Association for Minority Contractors (for any con- struction or construction supply/vendor opportunities); • Small business support organizations such as: – Local ethnic and industry chambers – Law school and business school clinical programs (e.g., Green Collar Communities Clinic of the East Bay Com- munity Law Center at UC, Berkeley or the Community & Economic Development Clinic at CUNY School of Law); • Women’s Action to Gain Economic Security (WAGES); • California Center for Cooperative Development; • Insight Center for Economic Development; and • Local Bar Association Programs. procurement of goods and transportation costs for the deliv- ery of goods. Unless the broker is also the manufacturer, the cost of the goods or services cannot be counted towards DBE credit. In an attempt to prevent fraud, some jurisdictions strictly interpret DBE policies so that some joint venture and sub-contracting arrangements cannot be counted for DBE credit. Best practice is to interpret the ACDBE policies (Code of Federal Regulations Part 23) to ensure against fraud but to maximize DBE utilization in a way that the DBE is providing a commercially useful function that helps the airport achieve its goals. For example, a brokering prohibition could be applied to prohibit a joint venture, as well as some sub-contracting rela- tionships. In a joint venture or sub-contracting relationship in a shared-ride van setting, the ACDBE firm might be providing vans and/or drivers, where the vans would have the branding of the prime firm. This could be prohibited by a brokering prohi- bition. As a result, ACDBE firms would only be able to partici- pate in non-core activities, such as providing fuel, uniforms, or repair services. It is advisable that, if there are anti-brokering policies, they allow for a second firm to participate in core activities as part of an ACDBE program, where the ACDBE firm has a secondary role in the operations of the venture. Small Business Development Services and Financing Another way that airports can increase small business par- ticipation in airport commercial ground transportation is by providing small business development services at or through the airport to small businesses bidding on or participating in airport contracts or concessions. In many cases these services