Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery (2019)

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56 Airport Funding Sources Airports have several sources of funding for their capital projects. The source of funding may dictate the type of project delivery or procurement method used for a construction project. Major airport funding comes from • Federal assistance (Federal Aviation Administration [FAA] and Transportation Security Administration [TSA]), • Passenger facility charges (PFC), • State assistance, • Bond sales, and • Airport cash and revenue funding (Airports Council International–North America 2012). Airport Improvement Program The Airport and Airway Revenue Act of 1970 established the Airport and Airway Trust Fund that is used to fund the Airport Improvement Program (AIP). AIP provides grants to airports for the planning and development of public-use airports that are included in the National Plan of Integrated Airport Systems. Only those projects considered by the FAA Administrator to be necessary to provide for a safe and efficient airport system and to meet the current and projected growth of civil aeronautics will be considered for selection. Eligible projects include improvements related to airport safety, security, capacity, and environmental concerns (FAA 2014). Although AIP can fund multi- year projects, the funds are released yearly and based on an agreed-upon payment schedule. Because of this, cash flow and compliance with an AIP-approved fund schedule have important roles. Using this fund carries conditions such as competitive pricing of construction services, compliance with the Davis–Bacon Act (Public Law 107-217), and good-faith efforts to include Disadvantaged Business Enterprise (DBE) firms (Airports Council International–North America 2012; Touran et al. 2009b). Total federal funds under AIP according to the AIP webpage amounted to approximately $3.3 billion per year for 2015, 2016, and 2017. Otherwise, for all federal aid that comes from TSA, they need to follow FAR procedures for accounting (Airports Council International–North America 2012). Passenger Facility Charges Another source of funds comes from PFCs. These are user fees charged on each ticket, collected by the airlines, and given to the airport. The airport must follow FAA guidelines (such as for airfield-related or terminal-related projects) in order to use these funds. A P P E N D I X B Overview of Airport Funding The major constraints faced by airports regarding the implementation of QBS of contractors are associated with federal AIP grants and state funding that mandate price be included in the award decision.

Overview of Airport Funding 57 State Funds State funding is another source of financing for airport projects. Many states assist capital improvement projects by grants through various programs. Like federal assistance, acceptance of this funding imposes restrictions and compliance requirements. The requirements include type of contract and disbursement of the state’s fund, competitive pricing of construction services, auditing and monitoring rules, required project record retention, involvement by the state in the airports’ selection process of professional consultant services, compliance with equal employment opportunities, Davis–Bacon laws, Civil Rights acts, American with Disabilities Act, and good-faith efforts to include DBEs (Airports Council International– North America 2012). Bond Funding In bond-funded financing, factors such as project definition, cost analysis, budget commit- ment, and delivery schedule are critical since the airport authority wants to buy only the required number and amount of bonds at the right time. Note that highly complex projects without a clear scope are not suitable for bond funding because of inherent risk involved (Airports Council International–North America 2012) and because in this approach the investor’s confi- dence is of paramount importance. Airport Cash and Revenue Airport cash and revenue funding gives the airports that have consistent revenue streams the freedom to choose any delivery method without regard to outside restriction impacts like those in other types of financing. Multiyear projects, which need to have significant funding in place as the project commences, cannot rely on this funding (Touran et al. 2009c).