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

Chapter: Chapter 6 - Addressing Impediments to the Success of Diverse Businesses

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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
×
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
×
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Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
×
Page 45
Page 46
Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
×
Page 46
Page 47
Suggested Citation:"Chapter 6 - Addressing Impediments to the Success of Diverse Businesses." National Academies of Sciences, Engineering, and Medicine. 2015. A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities. Washington, DC: The National Academies Press. doi: 10.17226/22220.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

38 This chapter discusses certification, proposal requirements, sizes of contracts, politics, and other issues that impede the success of diverse businesses. The chapter also illustrates ways to alleviate these impediments. Often, contracts for some services (e.g., legal services; financial services; airport insurance bonding, investment and auditing services; goods under a certain dollar amount) are not handled through a competitive process and, as a result, may have less emphasis on maximizing diverse business participation. These business practices are lawful but may nonetheless pose unintentional impediments to small business success. Practice Tip: It is everyone’s responsibility to work toward alleviating impediments to diverse business success. 6.1 Certification Requirements The certification process continues to be among the most challenging components of DBE and ACDBE programs for applicants and certifying agencies. Among the greatest challenges are the current personal net worth cap, fully understanding how to apply net worth exclusions, and what constitutes acceptable joint venture arrangements. DBE and ACDBE certification requirements were the number one impediment to participa- tion in the DBE and ACDBE Programs identified in this research, though ACDBEs and DBEs find certification beneficial because they do not believe they would get airport contracts without it. Numerous airport industry stakeholders view ACDBE and DBE certification requirements and related issues as major barriers preventing otherwise eligible firms from seeking certification. It appears that certification requirements hinder the success of diverse businesses and limit the pool of certified firms. Not only have the businesses participating in airport DBE and ACDBE programs become more complex in their structure, certification eligibility requirements have also become more complex. The most significant impediments stakeholders cite include: • The requirement to apply for certification in every state in which a firm wants to do business. • The length of time it takes to obtain certification. • Certifying officials’ limited understanding of financial and tax documents. • Inconsistent interpretation and application of certification requirements. • The volume and type of paperwork required to become certified. • The cost of applying for certification. C H A P T E R 6 Addressing Impediments to the Success of Diverse Businesses

Addressing Impediments to the Success of Diverse Businesses 39 An airport CEO explained that “the DBE Program is somewhat cumbersome in terms of certification,” and “it’s hard convincing small firms that probably qualify for DBE certification to get certified because it takes forever and they don’t want to tell their whole life story to get a certification that may not get them a business opportunity.” Practice Tip: Requirements for obtaining MBE, SBE, LBE, and WBE certification that differ from the requirements for DBE certification are sometimes confusing to majority-owned firms and diverse businesses. Airports, trade associations, and businesses can do more through outreach, training sessions, and providing a direct contact for diverse businesses that want to discuss certification requirements. Unified Certification Program (UCP) entities can do more to explain the certification process and what it takes to obtain DBE and ACDBE certification, and to enhance certification reciprocity by streamlining the certification process for firms already certified in their home state that are seeking certification in another state. Certification reciprocity is permissible under the Part 26 regulations, but it is not being used in a manner that reduces the burden and cost to businesses seeking certifica- tion under the Programs. The U.S. DOT’s mandatory certification training for UCP personnel and DBELOs, which is now offered to others, will hopefully address these impediments. 6.2 Proposal Requirements Factors such as the standard term of an airport concession agreement (10 years) can limit the numbers of ACDBE firms participating in concessions, and standard RFP specifications for professional services and construction agreements may include eligibility criteria that limit the pool of DBEs and other diverse businesses. More often than not, solicitation provisions contain requirements that affect diverse busi- nesses’ eligibility to compete for an airport contract, such as insurance- or fee-related condi- tions, and numerous years of prior experience at certain size airports. For example, in 2009, one city required a proposer to have a minimum of 3 years of experience (within the past 5 years) in the ownership or management of a sit-down restaurant for an airport restaurant concession opportunity. In 2011, another city required the same minimum years of experience, but added that the proposer must have said experience with not less than five food and beverage locations in a shopping center, airport transportation center, mall, or other prominent setting generating a minimum of $10,000,000 in gross revenues. These requirements oftentimes exclude a new or recently established firm, as well as seasoned firms. Practice Tip: Work to ensure that proposal requirements do not serve as an impedi- ment, discouraging participation by diverse businesses in airport contracts. Questions to consider concerning proposal requirements to determine whether there are impediments to diverse business participation: • Is the RFP process documented, periodically reviewed, and updated? • Are the goals and objectives of the RFP process clearly stated?

40 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities • Do the provisions of contractual agreements vary by the solicitation, or are there standard provisions? • Are contract provisions reviewed for relevancy? Who does the review, and how frequently is it done? • What contracting elements may vary by contract? What determines the ability to be flexible? • What is the process for contract extensions? Is the process transparent? • Is there an opportunity for questions/responses? • Are the proposal requirements relevant to the opportunity? • Are there bid requirements (e.g., bid bonds, performance bonds, insurance, experience and qualifications) that may adversely impact diverse business participation? There also appears to be considerable variation in how airports procure professional services such as outside counsel, including bond counsel; underwriters; lobbyists; and aviation man- agement companies. Some airports issue RFPs or RFQs and create a pool consisting of several proposers for use on a multi-year, as-needed basis. Other airports seek professional services on a project-by-project basis with or without an RFP or RFQ process. For the most part, procure- ment of professional services is governed by the relevant state and local law. Notably, professional services such as legal services are rarely advertised widely. Title 49 (49 CFR § 18.36) specifies the policy, procedures, and regulations applicable to grant recipients that are to be used for procure- ments of professional services. Part 18.36 provides, in part, that an airport (a) use the same policies and procedures it uses for procurements from its non-federal funds; (b) maintain a contract administration system; (c) maintain a written code of standards of conduct for employees engaged in award and admin- istration of contracts; and (d) award contracts only to responsible contractors. Part 18.36 also specifies that an airport utilize the following procurement methods: 1. For small purchases ($100,000 or less), price and rate quotes must be obtained from an ade- quate number of qualified sources. 2. Sealed bid procurements must be advertised, publicly opened, and awarded to the responsible bidder whose bid conforms with all material terms and is the lowest price. 3. For competitive procurement, RFPs must be publicized and awarded to the most responsible firm whose proposal is most advantageous to the program and can be used for A/E profes- sional services process alone when price is not used as a selector. 4. Non-competitive proposal solicitation is permitted when an item is available only from a single source or the airport authorizes a non-competitive process or if, after solicitation of a number of sources, competition is determined inadequate (116). Part 18.36 also requires that airports take all necessary affirmative steps to assure that MBE and WBE firms are used when possible. Practice Tip: Unbundling contract opportunities (such as dividing a total require- ment into smaller tasks), prequalifying small firms, or utilizing SBA and other outreach programs can help to create a level playing field. The stated objectives of the DBE and ACDBE Programs encourage award of federally funded and concession opportunities by a competitive process. Although neither Part 23 nor Part 26 directly mandate competitive bidding for airport opportunities, most procurement made pursuant

Addressing Impediments to the Success of Diverse Businesses 41 to the AIP and many state, city, county, and/or airport authorities have enacted legislation requir- ing the award of airport opportunities on a competitive basis. For example, the City and County of San Francisco has adopted an ordinance that requires its Airport Commission to conduct a competitive process and award its contracts to the best responsible proposer. Practice Tip: To ensure non-discriminatory participation and create a level playing field, solicitations, specifications, and other contract requirements can and should be arranged in ways that facilitate participation by diverse businesses, both as primes and as subcontractors. To achieve participation by diverse businesses, an airport operator needs to ensure that its minimum qualifications in solicitations are not so onerous that participation by these entities, which are primarily smaller firms, is nonexistent from the start. This can be accomplished by unbundling contract opportunities and requiring prime contractors to reach out to DBE and ACDBE subcontractors. Requiring a small business to have the same level of ownership, manage- ment, and financial ability and experience as does a prime defeats the goal of diverse business participation. Likewise, setting minimum gross sales too high for an opportunity also will effectively limit participation by small and diverse businesses. An RFP that requires multi-year experience or $10,000,000 minimum in revenue eliminates many small businesses from the start. RFP lan- guage can level the playing field for small and diverse businesses by (1) allowing the formation of entities wherein only the controlling principal needs to meet any minimum qualifications, or (2) encouraging and allowing participation by sublessees while mandating their participation in all interactions with the airport. Between 2008 and 2009, Hartsfield–Jackson Atlanta International Airport (ATL) issued a series of RFPs for retail concession opportunities encompassing five large packages and six indi- vidual stores. An overwhelming 82 proposals were received for the 11 RFPs, with an appreciable number of responses received from smaller businesses. In the end, all five large packages and five of the six individual stores were awarded to joint venture partnerships between large and small businesses or businesses with a smaller U.S. presence. One reason for the higher solo participa- tion by small businesses was that ATL capped the minimum annual guarantee (MAG). By doing so, small, independent concessionaires were able to compete directly against primes. When it comes to DBE and ACDBE participation, considerable variation exists in how the competitive proposal process is applied and how service providers are determined. Compliance with DBE requirements is generally considered a condition of responsiveness (i.e., a proposal will be rejected for failure to meet the DBE requirements). Increasingly, it is also being used as an evaluation criterion. Thus, a certain percentage of evaluation points may be awarded based on the strength of DBE participation in the proposal and the extent to which it creates new and bet- ter opportunities for small businesses to participate and succeed. Airport operators that place a high priority on local participation may use this criterion to reward those proposers that include a strong local component in their proposals (27). The Port of Portland assigns evaluation criteria points on all professional service contracts over $100,000. The port assigns points to RFPs to evaluate a proposer’s efforts to include small business on a particular project (409).

42 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities 6.3 Size of Contracts When the Programs first started decades ago, one of the first questions posed to contract administration managers was whether the business opportunity could be “unbundled” or assem- bled in smaller contract scopes for multiple contract opportunities which could be undertaken by small and disadvantaged firms. Airport operators recognize that most diverse businesses do not have the comparable capacity or credit as larger, well-established firms to compete for larger contract opportunities. Numerous diverse businesses state that airports can provide more access to contract opportunities by break- ing down contract components and identifying specific components that small businesses can perform as primes. Policies and practices to divide airport contracts into smaller work packages have been implemented as a means to increase diverse business participation and to level the playing field for diverse businesses to participate in smaller-sized contracts that are within their financial resources and capacity. Practice Tip: When a large contract is broken down into smaller sized compo- nents, diverse businesses are better able to compete and win opportunities and thus build capacity to perform larger contracts, both as prime contractors and subcontractors. Determination of whether and which contracting opportunities can be divided into smaller work elements should happen during the planning stages of a contract. Practices that promote diverse business participation include identifying and listing in solicitations as many North American Industry Classification System (NAICS) codes and work elements as prudently pos- sible for diverse business participation, and requiring minimum levels of participation in those work elements. Each airport contract presents a unique opportunity to focus on individual needs of the airport and the businesses that seek and participate in those contracts. Practice Tip: Look at every type of airport contract to determine what opportunities can be carved out for smaller businesses. When SFO underwent a $22 million redevelopment to create its San Francisco Marketplace about 20 minority-owned or women-owned firms participated in the project. When the Marketplace opened, 80 percent of the 45 new concessions were locally owned, and a majority of the DBEs in the Marketplace were under direct leases as owners/operators. 6.4 Bonding and Insurance Requirements Small business enterprises are significantly challenged by the high cost of doing business in the airport environment. Access to bonding and insurance were among the most frequently mentioned impediments, being mentioned by almost all interviewees for ACRP Project 01-25. Bonding and insurance are forms of financial credit which are inherently less available to small businesses because of their limited access to capital. The cost of bonds varies greatly depending

Addressing Impediments to the Success of Diverse Businesses 43 on how the bond companies predict the risk that a small business represents. The premium can be anywhere from 1 percent to 15 percent of the bond amount, and a small business, with limited opportunities given its size, generally will be assessed a higher premium. The vast majority of airport concession and construction opportunities require concession- aires and contractors to obtain surety bonds and insurance. For example, one city currently requires food and beverage concessionaires to provide workers’ compensation, employer’s liabil- ity, commercial general liability, automobile liability, and property insurance at set minimum amounts. Performance bonds must also be obtained in an amount equal to 12 months of the MAG, and before commencement of construction the concessionaires must also obtain a per- formance and payment bond in an amount equal to the cost of construction. The cost to a small business to comply with these types of minimum insurance and bonding requirements can impede its ability to compete for opportunities. Practice Tip: Relaxing bonding and insurance requirements can help eliminate barriers to diverse business participation in airport contracts. At the Airport Minority Advisory Council (AMAC) 2013 Airport Business Diversity Confer- ence, Merriwether & Williams Insurance Services reported that “[t]he ability and extent to which Local Small Businesses have access to insurance/bonding credit, impacts their ability, to [access] local public business opportunity and participation.” One way of providing access is to move from the conventional risk management philosophy of protecting financial assets from the cost of risk using risk transfer, risk avoidance, risk mitigation, and risk financing methodologies. Moreover, access, opportunity, and inclusion will be enhanced by shifting to an aligned risk man- agement philosophy in which risk management practice is aligned with organizational goals. Practice Tip: An aligned risk management strategy removes barriers such as insurance and bonding requirements and enables innovation. Airport operators are using a variety of tools such as “wrap-up” insurance policies and bonding assistance programs to ease the bonding and insurance barriers to small businesses. A bonding assistance program addresses the credit, character, and capacity needs of small businesses that seek to become bond-ready, increase capacity, and compete for projects. Wrap-up insurance policies serve as all-encompassing insurance that protects all contractors and subcontractors working on a project. MWAA operates an Owner Controlled Insurance Program (Aviation OCIP) for prime contractors, subcontractors, and sub-subcontractors of any tier. For enrolled participants on qualifying projects, the coverage includes workers’ compensation, employer liability, general liability, automobile liability, builders’ risk, excess liability, and contractor’s pollution legal liability. Practice Tip: An OCIP levels the playing field for subcontracting opportunities by removing the cost of insurance as a competitive factor, which in turn may give small businesses more opportunities to compete as primes.

44 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities Examples of bonding assistance programs include: • The U.S. DOT Bonding Education Program (BEP) partners with The Surety and Fidelity Association of America (SFAA) to help small businesses become bond-ready. The BEP is designed to address what businesses need to do to become bond-ready. Components of this program include stakeholder meetings, educational workshops, a bond-readiness component, and follow-up and assistance. The program also offers one-on-one sessions with surety bond- ing professionals to help in assembling the materials necessary for a complete bond applica- tion. The BEP is tailored to businesses competing for transportation-related contracts. • New York State’s Surety Bond Assistance Program provides technical and financial assistance to help contractors secure surety bonding. Contractors may be eligible to receive a guarantee of up to 30 percent to secure a surety bond line, bid bond, or a performance and payment bond on state and city projects. • Alameda County, California operates a contractor bonding assistance program designed to help small local contractors obtain bid, payment, and performance bonds and/or increase their bonding capacity for work on Alameda County contracts. The program is sponsored by the county administrator’s Office Risk Management Unit and administered by Merriwether & Williams Insurance Services. Alameda’s program assembles a team of professionals to assist small local contractors in preparing for the bonding process, helps them grow their busi- nesses, and guides contractors through the bonding process with one-on-one consultations and contactor-focused group workshops and seminars. It guarantees up to 40 percent of the bond amount or $750,000, whichever is less, to qualified contractors. • San Diego International Airport’s (SAN’s) Bonding and Contract Financing Assistance Pro- gram has helped some contractors get bonding, sometimes more than once. Some partici- pants in this program are now able to bond on their own, having established a track record. • The City of Philadelphia, Pennsylvania, has launched a multi-billion-dollar, multi-year Capacity Enhancement Program (CEP), a comprehensive construction program to expand and modernize PHL. The CEP will require the expertise of numerous construction firms who will be subject to the city’s bonding requirements. To assist small firms in the construction industry, PHL sponsored a free bonding education program in 2013 that consisted of six 3-hour workshops and included one-on-one assistance from bonding professionals. Through the CEP, PHL is committed to ensuring workforce inclusion for minority and women workers and business owners. Key performance measures for the CEP are established federal and local participation goals for minorities and women, particularly in construction and professional services. Practice Tip: When addressing bonding and insurance barriers, seek answers from the business community and from other airports that have faced similar questions. Several useful questions were posed in ACI–NA’s 2008 DBE/Small/Minority Business Survey (5): • What insurance coverage is the most difficult to comply with by small business or DBE firms. ([E]xamples: auto insurance, commercial general liability insurance.) • Have the limits of the insurance required in an airport contract frequently been identified by small busi- ness entities as a barrier to bidding on work at the airport? • Have bonding requirements for contracts been identified as a hurdle for small businesses that are trying to secure a contract for work at your airport? • Has your organization addressed any bonding requirement concerns with small business entities by implementing creative programs to allow bonding to be less of a hurdle for small businesses when competing for airport work?

Addressing Impediments to the Success of Diverse Businesses 45 • Has your organization’s Risk Management Department actively tried to directly engage a small busi- ness, etc. to work on its own internal insurance program and insurance related services, in whole or in part? • Has your Risk Management Department met at least once with the airport’s small business representa- tive to discuss opportunities for qualified small businesses in the area of insurance placement, safety, loss prevention, broker services or other related services? • If allowed in your state, does your organization have general contracting goals to account for small, DBE, and minority business participation, for non-federal dollar contracts? • If allowed under state contracting statutes, have you asked your main insurance provider or broker to utilize or seek a partnership with qualified small businesses to work on placement and/or servicing your organization’s insurance in any capacity? • What is the number of current active and direct contracts your organization has with small qualified businesses for insurance, broker, third party claims administration, safety, loss prevention, or other related services? 6.5 Financial Resources Practice Tip: To alleviate financing hurdles, some airports set aside loan money at low interest rates for small businesses. Examples of airport financial assistance initiatives include: • DIA, in partnership with the Denver Office of Economic Development, developed the Airport Concession Loan Program for first-time concessionaires to enhance their ability to do busi- ness by obtaining gap financing. Minority and women small business owners who are looking to bring their shopping or dining concept to DIA can apply for financial assistance through this $1 million revolving loan fund. • The City of Austin’s Small Business Development Program fosters the growth of new and existing businesses by hosting free, stand-alone events targeted at specific needs of diverse businesses. One such event, “Meet the Lender,” featured the city’s Family Business Loan Pro- gram, which is designed to offer low-interest loans to qualified, existing small businesses that are ready to expand and create jobs. This event connected business owners to lenders and bankers to learn about the loan process and what documentation they need, and enabled firms to make personal connections with valuable sources of capital. Representatives from area credit unions and community development organizations also participated. • The Raleigh-Durham Airport Authority was the first airport to adopt a “Small and Emerging Business Assistance (SEB)” program to help small businesses participating in its Terminal 2 concessions program obtain loans. The airport authority partnered with a bank to seed $1.5 million for this 80 percent loan guarantee program to qualified concessionaires. 6.6 Prompt Payment Payment delays can and do create cash flow problems for all types of small and diverse busi- nesses. Notwithstanding applicable local, state, and federal laws to the contrary, it is not uncom- mon for some public agencies to process payments 60-plus days after receipt for professional services contracts and 45-plus days for construction contracts. Delays in payment create hard- ships for small and diverse businesses and often impact their success. The untimely receipt of payment can limit the ability of a small business to pay its employees and keep current with its

46 A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities bills. Many small and diverse businesses lack the resources of larger companies to supplement needed cash from savings or lines of credit. Practice Tip: Include and enforce prompt payment clauses in all prime contracts and subcontracts. 49 CFR §26.29(d) requires airports to take an active role in disputes between contractors regarding payment. Airports also must add a prompt payment clause to all federally funded con- tracts, requiring payment to subcontractors within 30 days of receipt of payment to primes from the airport (see also Chapters 4, 5, and 6). DFW’s Expedited Payment Program provides incentives to prime contractors that pay their subcontractors within 7 days of the subcontractor’s invoice. This voluntary program allows prime contractors that have been awarded a multi-year contract for construction and/or main- tenance services of at least $10,000,000 to participate. When prime contractors adhere to the program requirements, DFW pays interest and provides other incentives. Many states require timely payments for private contracts as well as public contracts. For example, in New York, parties to a private construction contract cannot change by contract the statutory-proscribed periods to pay an invoice. An owner must tender payment of an invoice, including final payment, within 30 days of the approval of the invoice. A contractor or sub- contractor must also tender payment to its subcontractor of the proportionate amount paid by the owner for the subcontractor’s work within 7 days of having received payment for it. Further, it is against public policy in New York to utilize “pay when paid” clauses (making a general con- tractor’s obligation to pay its subcontractor contingent on the general contractor’s own receipt of payment from the owner), because—in contravention of New York law—such clauses remove a subcontractor’s right to enforce a mechanic’s lien against an owner. New York also has prompt payment laws governing public improvement contracts. A person performing labor for or fur- nishing materials to a contractor or its subcontractor for the construction of a public improve- ment with the state or a public corporation can place a lien for the principal and interest of the value or agreed price of such labor due and unpaid. Airport managers can support the viability of small disadvantaged firms performing services on airport contracts by monitoring prime contractors to ensure that the contractors are pay- ing subcontractors within contractual timeframes and, if they are not in compliance, immedi- ately initiating enforcement actions, including, if necessary, withholding payment to the prime contractor. 6.7 Politics Airports are active and significant market participants and purchasers of professional, contrac- tual, and general services and goods. As commercial property owners, airports offer interested tenants and concessionaires multi-year leaseholds that can generate lucrative profit margins. Although most airports are government entities, not all contracts and leases awarded are subject to competitive solicitation processes, even though many businesses may be interested in a given opportunity. This combination of factors may provide an incentive for airport industry busi- nesses, both small and large, to engage a lobbyist or consultant to influence airport policymakers and decisionmakers.

Addressing Impediments to the Success of Diverse Businesses 47 Airport managers, DBELOs, and other personnel need to proceed with caution when approached by lobbyists representing a business with an interest in obtaining airport contracts and concessions. Public officials are bound by ethical rules when conducting official business and are required to avoid conflicts of interest when conducting the public’s business. The appropriate time for firms to approach managers is before the request for bids, proposals, or qualifications has been publically noticed and disseminated. Once the solicitation for a contract or lease opportunity “hits the street,” the competitive bidding/proposal process has commenced and lobbying and/or attempts to discuss qualifications or related topics are generally barred in the solicitation documents. Firms that do not comply with the “no contact” and “no conflict of interest” rules in competitive contract award processes risk being rejected as eligible proposers or bidders. Such rules, however, do not necessarily deter prohibited conduct. Practice Tip: The research for ACRP Project 01-25 shows that airports that facilitate fair competition and a level playing field obtain the best business diversity results in their procurement processes Some consultants explained that politics “play a role” and “influence who is selected.” Others commented that some airports require a business to have a local presence in order to participate in their contracts. DBELOs were very candid about difficulty in executing their responsibilities because of politics in the contracting process. Airport operators can and should ensure that the procurement process is transparent and handled ethically and with integrity, by taking several key actions: • Before commencement of a solicitation process for a contract or concession opportunity, specify mandatory contact/inquiry protocols in the solicitation documents that competitors and their representatives must observe during the pending competitive process. • After commencement of a solicitation process for a contract or concession opportunity, com- municate with all interested parties and their representatives in writing and in a way that is consistent with the communication protocols identified in the solicitation document. • Identify evaluation and selection criteria in the solicitation document and observe the estab- lished criteria. Through these measures even the appearance of internal and external conflicts of interest can be avoided, leading to stakeholder trust that a fair process has been implemented.

Next: Chapter 7 - Strategies and Partnerships to Enhance Diverse Business Participation »
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TRB’s Airport Cooperative Research Program (ACRP) Report 126: A Guidebook for Increasing Diverse and Small Business Participation in Airport Business Opportunities is a compilation of industry best practices and other measures airports can use to attract and enhance participation in their contract opportunities.

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