A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities (2015)

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16 C H A P T E R 3 This chapter provides illustrations of policies and practices frequently used to promote busi- ness diversity in airport contracts outside of the Part 23 and Part 26 Programs. It also discusses the U.S. DOT’s mandatory requirement that airport operators have a small business element of their DBE programs. Goods, services, and professional services contracts are examples of airport contracts included among the non-federal business enterprise programs commonly called local busi- ness enterprise (LBE) programs, small business enterprise (SBE) programs, and minority or women’s business enterprise (MBE/WBE) programs. These programs also can include Passenger Facility Charge (PFC)–funded contracts, which have grown extensively over the years due in large part to the reduction of AIP grants and to the increased usage, primarily by large airports, of local PFC funding for gates, terminals, runways, taxiways, and other airport improvements. General aviation airports usually do not have stand-alone, non-federal business enterprise programs. Their programs normally come under the purview of larger airports that also operate general aviation facilities. Most LBE, SBE and MBE/WBE programs have eligibility criteria, such as personal net worth standards and business size limits. Airport contracts included in these programs often are set aside for smaller businesses. The research for ACRP Project 01-25 identified several practices and policies that airports have adopted in their LBE, SBE, and MBE/WBE programs to increase diverse business participa- tion. These practices and policies include: • Establishing eligibility requirements, such as business size and personal net worth limits. • Opening SBE program eligibility to small businesses regardless of where they are located. • Dividing larger contracts into smaller-sized contracts. • Encouraging MBE and/or WBE participation even if a firm does not meet eligibility criteria under a particular business diversity program. • Establishing race-neutral participation goals. • Including LBE, SBE, or MBE/WBE participation goals in solicitations. • Limiting competition to firms under a certain business size. • Limiting competition to firms within a designated locale. • Limiting competition to MBE and WBE firms. • Requiring firms of a certain business size to have an affirmative action plan and procurement policies. Non-Federal Business Enterprise Programs

Non-Federal Business Enterprise Programs 17 • Making advance payments to smaller businesses in recognition that they may have limited access to working capital. • Relaxing bonding and insurance requirements for contracts under a certain dollar level. • Providing website access to lists of companies obtaining solicitations. • Providing website access to directories of LBE, SBE, MBE, and WBE firms. • Utilizing similar (or the same) types of eligibility and other requirements as those found in the Part 26 and Part 23 programs. • Awarding bid preference points to local businesses competing for a contract. 3.1 Local Business Enterprise Programs Local Business Enterprise (LBE) programs promote economic development and equal oppor- tunity for all segments of the contracting community in jurisdictions where an airport is located. Airports across the country have implemented these programs to help level the playing field for diverse businesses to participate in airport contracts as prime contractors or subcontractors. Most firms participating in LBE programs are required to have an established office or place of business within a designated locality and to meet other eligibility criteria. Some airports’ LBE programs do not have qualification requirements, such as personal net worth standards and/or business size limits. The Columbia Metropolitan Airport (CAE), for example, does not require certification for participation in its local program. Other LBE programs are reserved for MBE, WBE, and/or SBE firms. Several other airport operators that have instituted LBE programs include: • Metropolitan Washington Airports Authority (MWAA). • Greater Orlando Aviation Authority (GOAA, also called the Authority). • Miami-Dade Aviation Department. • Jacksonville Aviation Authority (JAA). • Metropolitan Nashville Airport Authority (Airport Authority). MWAA has operated its race-neutral, Local Disadvantaged Business Enterprise (LDBE) program for Ronald Reagan Washington National Airport (DCA) and Washington Dulles International Airport (IAD) for more than 2 decades. The LDBE program applies to local small businesses without regard to the race or gender of the owner(s). For LDBE program purposes, MWAA defines a “small business” as a firm that is not dominant in its field and that meets MWAA’s small business size standards for the goods it will be supplying or the services it will be performing in a specific solicitation. To be considered a local business, the firm has to be organized for profit and have an established office or place of business within a city, county, or town located within a 100-mile radius of Washington, D.C.’s Zero Milestone (zero mile marker). Business entities located within counties that fall partially within this boundary also are eligible to participate in the LDBE program. Firms have to apply to and receive LDBE certification from MWAA. LDBE-certified firms are eligible for any MWAA contract requiring LDBE participation. Under the LDBE program, MWAA may set aside an airport contract, such as a contract for floor repair in the terminals at DCA and IAD, or printing and copying services, for 100 percent LDBE participation. In other instances, LDBE participation is required for a certain percentage of an MWAA contract, such as task-order–based architectural and engineering services. Other features of the LDBE program are relaxed bonding and insurance requirements for contracts valued at $100,000 or below.

18 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities GOAA operates a Local Developing Business (LDB) program at Orlando International Air- port (MCO) and Orlando Executive Airport (ORL), its general aviation/reliever airport. Accord- ing to GOAA’s policy statement, The Local Developing Business (LDB) Program (Program) of the Authority is designed to promote the development of local businesses and to ensure the availability of firms to compete for work at its facili- ties. The Program is also designed to promote the economic vitality and employment opportunities in the Orlando SMSA [standard metropolitan statistical area] in order to sustain the continued growth at MCO and ORL. The Program will seek to provide full and equal business opportunities to all local developing businesses in the Authority’s construction contracting, procurement, and professional ser- vices activities (175). GOAA’s LDB program has eligibility and certification requirements similar to MWAA’s LDBE program. GOAA’s LDB program, however, has a personal net worth limit of $1.5 mil- lion for construction management and construction-at-risk management contracts. Certain retainers and/or designated mobilization payments are also made available to LDB profes- sional services, construction and procurement firms. These advance-payment features of GOAA’s LDB program recognize that participating businesses may have limited access to working capital. The Miami-Dade Aviation Department, an agency of the Miami-Dade County govern- ment, provides opportunities for small business participation on architectural and engi- neering projects at Miami International Airport (MIA) through the county’s Community Business Enterprise (CBE) program. The CBE program utilizes gender- and race-neutral measures designed to provide contracting opportunities to small- and medium-sized archi- tectural and engineering (A/E) firms. Under the CBE program, owners can have only one CBE-certified firm, and firms have to be located and performing a commercially useful func- tion in Miami-Dade County. Architectural services firms cannot have average gross revenue for the last 3 years exceeding $4.5 million. Engineering, surveying and mapping services, and landscape architecture services firms must have 3-year average gross receipts not exceeding $6 million. Miami-Dade County Ordinance No. 98-30 requires all firms with annual gross revenues in excess of $5,000,000, to have an affirmative action plan and procurement policies filed and approved by the county’s Office of Capital Improvements as a condition of contract award. All A/E firms must also provide information in their proposal as to their furtherance and compli- ance with their approved affirmative action plan when responding to the county’s solicitations for A/E services. JAA manages and operates the Jacksonville International Airport (JAX) and three gen- eral aviation airports. It has adopted a Local Preference Policy applicable to JAA’s race- and gender-neutral SBE program. Any business that is located in the Florida counties of Duval, Clay, St. Johns, Nassau, Flagler, Putnam, and Baker, and that has had an office of three or more people for at least 1 year prior to the release of a JAA solicitation for bids qualifies as a local business. JAA’s SBE program provides opportunities for local small businesses to compete for business in the total procurement of JAA-sponsored projects, goods, and services. Among other crite- ria, a qualifying business must be for-profit as defined by the U.S. Small Business Administra- tion (SBA) Regulations (13 CFR Part 121), be independently owned and operated, and its gross receipts averaged over a 3-year period cannot exceed 25 percent of the size standards set forth in 13 CFR Part 121. For projects that are awarded by a bid process, local firms receive 5 percent preference. For example, if a non-local firm bids a cost of $96,000 on a project and a qualified local firm bids $100,000, the local firm would win the business after factoring in the 5 percent

Non-Federal Business Enterprise Programs 19 preference on its bid, which makes the local firm’s bid equivalent to $95,000. The local firm would still be paid the full amount of its $100,000 bid. The Nashville Airport Authority has a small, minority or woman-owned business enterprise (SMWBE) program designed to promote, encourage, and stimulate the participation of local SBEs, MBEs, and WBEs in contracts at Nashville International Airport (BNA). Through the SMWBE program, the Airport Authority is charged with promoting, encouraging, and stimu- lating participation of local SMWBEs within the organization and the economic community served; providing maximum opportunities to participate in contracts, programs, and all related business activities of the Airport Authority; and implementing goals, policies, and operational procedures to ensure the objectives of the program. An SMWBE firm must be a for-profit business, as defined in Part 26. Firms seeking SMWBE certification also must be located in a designated Tennessee county (i.e., Bedford, Cannon, Cheatham, Davidson, Dickson, Hickman, Mason, Maury, Montgomery, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson or Wilson). 3.2 Small Business Enterprise Programs Many airport operators implement both a federally required program and their own small business enterprise (SBE) program to increase contracting opportunities for diverse businesses. Eligibility to participate in non-federal SBE programs varies depending on an airport operator’s policies. In most instances, business size limits and personal net worth limits are among the eligibility criteria. In its rulemaking of February 28, 2011, U.S. DOT amended Part 26 to require that airports implement a small business element in their DBE programs to facilitate competition by small businesses (49 CFR § 26.39). U.S. DOT believes that “a program element that pulls together the various ways that a recipient reaches out to small businesses and makes it easier for them to compete for DOT-assisted contracts will foster the objectives of the DBE program.” In response to comments on this element, U.S. DOT explained that “DBEs are small businesses. Program provisions that help small businesses can help DBEs. By facilitating participation for small busi- nesses, recipients can make possible more DBE participation and participation by additional DBE firms” (76 Fed. Reg. 5094 (Jan. 28, 2011)). Practice Tip: Airports must actively promote small business participation as a requirement of good faith implementation of DBE programs (49 CFR § 26.39(c)). U.S. DOT offers several race-neutral strategies to facilitate small business competition that air- port operators are utilizing in their federal and non-federal business diversity programs. These strategies include: • Establishing a race-neutral small business set-aside for prime contracts under a stated amount (e.g., $1 million). • Requiring bidders on the prime contract for multi-year design-build contracts or other large contracts (e.g., for megaprojects) to specify contract elements or specific subcontracts that are of a size that small businesses, including DBEs, can perform. • Requiring the prime contractor on prime contracts without DBE contract goals to provide subcontracting opportunities of a size that small businesses, including DBEs, can reasonably perform, rather than self-performing all the work involved.

20 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities • Identifying alternative acquisition strategies and structuring procurements to facilitate the ability of consortia or joint ventures consisting of small businesses, including DBEs, to com- pete for and perform prime contracts. • Ensuring that a reasonable number of prime contracts are of a size that small businesses, including DBEs, can reasonably perform. 3.3 Minority and Women’s Business Enterprise Programs As a result of disparity studies, some airport operators have implemented MBE/WBE pro- grams applicable to non-federally funded contracts for construction, goods and services, and professional services. Airport operators that have instituted MBE/WBE programs or MBE/WBE policies include: • Raleigh-Durham Airport Authority • GOAA • City of St. Louis • MWAA The Raleigh-Durham Airport Authority operates the Minority and Women-Owned Small Business (MWSB) program for Raleigh-Durham International Airport (RDU). As the name implies, minority-owned and woman-owned small businesses compete as contractors, sub- contractors, suppliers, and service providers in the MWSB program. Firms participating in the MWSB program have to be certified, either as DBEs (certified by the North Carolina Department of Transportation), as 8(a) firms (certified by the SBA), or as Small Women Business Enterprises (certified by the Women’s Business Enterprise National Council). GOAA’s MBE/WBE participation program applies to any of its non-federal contract agree- ments at MCO and OEA for construction, for the purchase, lease, or disposal of supplies or other goods; or for maintenance, installation, or other services, including professional services. Certifications for this program are accepted from the City of Orlando and Orange County and, in the case of suppliers, from the National Minority Supplier Development Council. GOAA sets percentage goals for the dollar value of work to be awarded to certain MBEs and WBEs. In addi- tion to its annual overall MBE/WBE participation goals, contract goals may be set for individual projects, for which there are known available MBEs and WBEs with capabilities consistent with the requirements of a specific contract. The City of Saint Louis’s MBE/WBE program applies to Lambert-St. Louis International Airport (STL) under the direction of the Mayor of St. Louis’s Executive Order #47 to ensure that minority and women businesses have the maximum opportunity to participate in City of St. Louis locally funded contracts. An eligible firm must be a local, for-profit, independent MBE/ WBE business located in the St. Louis Metropolitan Statistical Area (MSA), and be pursuing work as a subcontractor or prime contractor. Firms participating in the MBE/WBE program also must meet 51 percent ownership and control requirements, and one or more of the socially and economically disadvantaged individuals who own the firm must manage and control the firm’s daily operations. MWAA has adopted policies to encourage MBE and WBE participation in its federally funded and non-federally funded contracts at DCA and IAD. Firms are eligible even if they do not qualify for DBE or LDBE certification or do not wish to go through the certification process for MWAA’s DBE and/or LDBE programs. MWAA may establish voluntary MBE/WBE goals, in addition to LDBE participation requirements, for certain contracts. Achievement of these goals is strictly voluntary.

Non-Federal Business Enterprise Programs 21 3.4 Creating LBE or SBE Programs Local and state governments possess the legal authority and duty to provide for the general welfare of their citizens and residents, and thus have the discretion to enact laws fostering eco- nomic development. These government agencies, as well as airport entities that are not part of a municipality or state government organization, also are vested with the proprietary power or ability to enter into contracts for the operation of their facilities or enterprises. An agency’s general welfare or proprietary authority is the legal foundation for the creation of local or SBE programs in contracting. Typically, the LBE or SBE program or policy is initiated by the chief executive of the public agency (e.g., a mayor of a city, a governor of a state, or an airport director of an airport author- ity), or by a policymaking member of a policy or legislative body (e.g., a city councilmember or state legislative member). The proposed policy or legislation is vetted through a public notice with a hearing and consultation process and/or a stakeholder engagement process. The particu- lar provisions of the LBE or SBE program will be crafted by the policy’s initiator, commonly in collaboration with the small, local, and disadvantaged business community, and with the assistance of legal counsel to ensure that the LBE or SBE policy comports with applicable law.