\[Federal Register: April 2, 2007 (Volume 72, Number 62)\]

\[Rules and Regulations\]

\[Page 15614-15617\]

From the Federal Register Online via GPO Access \[wais.access.gpo.gov\]

\[DOCID:fr02ap07-6\]

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Parts 23 and 26

\[Docket OST-97-2550\]

RIN 2105-AD51

**Disadvantaged** **Business** **Enterprise** Program

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: This document adjusts the dollar limits and size limits used

to define small businesses for the Department of Transportation\'s

Airport Concessions **Disadvantaged** **Business** **Enterprise**
(ACDBE) program.

The Department of Transportation amends these size limits in order to

ensure that the opportunity of small businesses to participate in the

ACDBE program remains unchanged after taking inflation into account.

This document, as required by statute, also adjusts the dollar limits

used to define small businesses for the Department of Transportation\'s

**Disadvantaged** **Business** **Enterprise** (DBE) program, which
applies to State

and local highway, transit, and airport recipients of DOT financial

assistance. This document also corrects a reference error in a previous

final rule. Finally, this document makes minor changes to the language

of a previous rule in order to accurately explain the role of

administrative guidance material.

DATES: This rule is effective May 2, 2007.

FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant

General Counsel for Regulation and Enforcement, Department of

Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590,

phone numbers (202) 366-9310 (voice), (202) 3669313 (fax), (202) 755-

7687 (TTY), <bob.ashby@dot.gov> (e-mail).

SUPPLEMENTARY INFORMATION:

Background

On March 22, 2005, the Department published a final rule revising

49 CFR Part 23\--the regulation governing the airport concessions

**disadvantaged** **business** **enterprise** (ACDBE) program. On the
same day, the

Department published a supplemental notice of proposed rulemaking

(SNPRM) on the **business** size standards for eligibility in the ACDBE

program as well as on two other matters concerning implementation of

the program. This final rule addresses the issues raised in the SNPRM

and the comments made in response to the SNPRM.

The DBE Airport Concessions and Contracting Programs

The DOT-assisted contracts DBE rule and airport concessions DBE

rule are based on different statutes. Each statute applies to a

distinct type of **business** that may seek DOT financial assistance.
The

ACDBE program is designed to give **business** opportunities to certain

small **business** concerns that operate at airports and that are owned
and

controlled by socially and economically **disadvantaged** individuals.
The

ACDBE program is mandated by 49 U.S.C. 47107(e), originally enacted in

1987 and amended in 1992.

The DBE program for DOT-assisted contracts is a statutory program

intended to ensure nondiscriminatory contracting opportunities for

small **business** concerns owned and controlled by socially and

economically **disadvantaged** individuals in the Department\'s highway,

mass transit and airport financial assistance programs. The statutory

provision governing the DBE program in the highway and mass transit

financial assistance programs is 1101(b) of the Safe, Accountable,

Flexible, Efficient Transportation Equity Act: A Legacy for Users

(SAFETEA-LU), Public Law 109-59, August 10, 2005. The statutory

provision governing the DBE program as it relates to the airport

planning and airport development financial assistance programs is 49

U.S.C. 47113.

ACDBE Gross Receipts Size Standards

The ACDBE program is designed to help small **business** concerns,

owned and controlled by socially and economically **disadvantaged**

individuals, become self-sufficient and able to compete with non-

**disadvantaged** firms. Under the current DOT rule, if the airport

concessions firm\'s annual gross receipts averaged over the preceding

three fiscal years exceed \$30 million, then it is not considered a

small **business** eligible to be certified as an ACDBE. The Department

notes that the existing size standards have not been adjusted for

inflation since June 1, 1992. This final rule adjusts the size

standards for eligibility as an ACDBE.

A number of comments submitted to the Department supported

adjusting the gross receipts size limit for inflation. One comment

suggested that the Department consider distinct size standards for each

type of concession. A number of comments also suggested that an

employee based size standard is inappropriate because businesses may

operate using different **business** model configurations with different

numbers of employees. These comments also point out that verifying the

number of employees is more complex than verifying gross receipts,

which are recorded in tax returns.

This final rule adjusts the general ACDBE gross receipts cap for

inflation. This rule only applies an employee based size standard if

the **business** operates pay telephones or if the **business** is an

automobile dealer. The Department views a general gross receipts size

limit that is adjusted for inflation as the most efficient and fair way

to establish size limits for the ACDBE program. The adjustment

compensates for the rise in the general level of prices over time from

the second quarter of 1992 to the third quarter of 2006. In order to

ensure that this adjustment is made on a more timely basis in the

future, the rule provides for a similar adjustment every two years,

using the same methods. At two year intervals, the Department will

publish a final rule to update the size standard numbers.

It should be emphasized that this action does not increase the size

standard for ACDBEs in real dollar terms. It simply maintains the

status quo, adjusting to 2006 dollars. A number of comments opposed the

idea of making Part 23 and Part 26 size standards identical because the

capitalization requirements for airport concessions are much higher.

The Department agrees and will not harmonize the standards.

In order to make an inflation adjustment to the gross receipts

figures, the Department of Transportation uses a Department of Commerce

price index. The Department of Commerce\'s Bureau of Economic Analysis

prepares constant dollar estimates of state and local government

purchases of goods and services by deflating current dollar estimates

by suitable price indexes. These indices include purchases of durable

and non-durable goods, and other services. Using these price deflators

enables the Department to adjust dollar figures for past years\'

inflation. Given the nature of the Department\'s DBE Program and ACDBE

Program, adjusting the gross receipts cap in the same manner in which

inflation adjustments are made to the costs of state and local

government

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purchases of goods and services is simple, accurate, and fair.

The inflation rate on purchases by State and local governments for

the current year is calculated by dividing the price deflator for the

third quarter of 2006 (128.352) by 1992\'s second quarter price deflator

(80.583). The result of the calculation is 1.5928, which represents an

inflation rate of 59.28% from the second quarter of 1992. Multiplying

the \$30,000,000 figure for small **business** enterprises by 1.5928
equals

\$47,784,000, which will be rounded off to the nearest \$10,000, or

\$47,780,000.

Therefore, under the new rule, if a firm\'s gross receipts, averaged

over the firm\'s previous three fiscal years, exceeds \$47,780,000, then

it exceeds the airport concessions small **business** size limit
contained

in Part 23.

ACDBE Car Rental Company Size Standards

Under the existing rule, car rental companies are not eligible to

participate in the ACDBE program if their average gross receipts over

the three previous fiscal years exceed \$40 million. This final rule

adjusts the size standard for car rental companies to reflect the

effects of inflation on the real dollar value.

The inflation rate on purchases by State and local governments for

the current year is calculated by dividing the price deflator for the

third quarter of 2006 (128.352) by 1992\'s second quarter price deflator

(80.583). The result of the calculation is 1.5928, which represents an

inflation rate of 59.28% from the second quarter of 1992. Multiplying

the \$40,000,000 figure for car rental companies by 1.5928 equals

\$63,712,000, which will be rounded off to the nearest \$10,000, or

\$63,710,000.

Therefore, under the new rule, if a car rental company\'s gross

receipts, averaged over the company\'s previous three fiscal years,

exceeds \$63,710,000, then it exceeds the airport concessions car rental

company size limit contained in Part 23.

A number of comments also supported establishing car rental goals

on a nationwide basis for car rental agencies with a nationwide

presence. The Department recognizes that a number of issues need to be

considered before such a rule can be published. The Department will

continue to consider developing a future rulemaking on nationwide car

rental company goals. The Department will also continue to look for

input from stakeholders when drafting any future rule on this subject.

ACDBE Banks and Financial Institutions Size Standards

A number of comments said that financial industry regulators (e.g.,

the Federal Reserve Board of Governors, the Federal Deposit Insurance

Corporation, the Office of the Comptroller of Currency, and the Office

of Thrift Supervision) and the banking industry itself consider banks

with less than \$1 billion in assets to be \`\`small\'\' institutions.
These

comments went on to point out that the assets needed to operate any

financial institution are high, even for the smallest banks, because of

compliance burdens and technology expenses. In its comments, the

American Bankers Association discussed the difference in efficiency

between banks with less than \$1 billion in assets and banks with over

\$1 billion in assets. A December 5, 2006 report from the American

Bankers Association stated that the largest minority bank has assets of

\$638 million. The report also states that 61% of all black owned banks

have assets under \$100 million.

The existing rule imposes a \$275 million asset limit for banks and

financial institutions. This final rule increases the dollar amount of

assets that a bank or financial institution may have while still

remaining eligible to participate in the ACDBE program; the new limit

is \$750 million. The new size standard will more closely approach the

\`\`small\'\' bank and financial institution standards referenced in the

comments while accommodating the size of actual minority financial

institutions. The new standard will also reflect the size differences

between most minority banks and the banking industry generally.

ACDBE Automobile Dealer Size Standards

Finally, the current rule has no unique size standard for

automobile dealers. Some comments suggested that the size standard for

automobile dealers selling vehicles to car rental concessionaires at

airports should be based on the number of employees working for a

dealer. The comments recommend an employee based size standard because

automobile dealers who process sales of fleets of cars to car rental

companies (\`\`fleet dealers\'\') generate high gross sales, with the

result that few, if any, fleet dealers would qualify as small

businesses, under the existing standard. A number of commenters

recommended that a 500-employee size standard be created for car

dealers, which, in their view, would ensure that all potential DBE car

dealers would qualify as small businesses.

The Department believes that commenters made a persuasive case for

replacing the current gross receipts standard with an employee-based

standard. However, we are concerned that using the suggested 500

employee standard would go too far in the other direction, encompassing

all but a few of all car dealers in the industry (2005 statistics from

the National Association of Automobile Dealers, for example, state that

the average number of employees of a dealer was 53). We believe that a

small **business** standard should not be so inclusive that the
distinction

between smaller and larger businesses is erased. At the same time, we

realize that \`\`fleet dealers,\'\' who sell large numbers of cars to
car

rental companies and other fleet purchasers, are likely to have more

employees than the typical retail dealer. Consequently, we are

establishing a 200 employee standard for purposes of this rule.

Fraud, Abuse, and Administrative Burdens in the ACDBE Program

In the NPRM, the Department asked for comment on ways to better

monitor the eligibility of ACDBEs as well as the ongoing performance of

ACDBEs in the concession **business**. A number of comments responded to

this inquiry. These comments suggested creating additional reporting

requirements, detailed annual reviews, and more detailed initial review

of certification applications. Some comments voiced concern with the

administrative burdens from the monitoring and goal setting that is

already required by the ACDBE program, pointing out that this burden is

especially significant for small hub airports. The Department has

reviewed the current administrative requirements of the rule and will

not change the process in this final rule. The ACDBE program carefully

balances the benefits of administrative requirements that are designed

to eliminate fraud and abuse with the burdens associated with those

requirements, and we do not believe that further regulatory provisions

are needed at this time.

**Business** Size Standards for the DBE DOT Financial Assistance
Programs

This rule also adjusts the gross receipts cap for the Department\'s

financial assistance programs in 49 CFR Part 26. The existing DBE

**business** size limits became effective on August 10, 2005 with the

passage of SAFETEA-LU. Under the existing rule, if a firm\'s average

annual gross receipts over the preceding three fiscal years exceed

\$19,570,000, then it cannot qualify as an eligible DBE firm. SAFETEA-LU

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Section 1101 (b) (1) (a) instructs the Secretary of Transportation to

adjust this amount annually for inflation. The rule will provide for

annual calculations to make this adjustment, with future adjustments

made by final rule.

The inflation rate on purchases by State and local governments for

the current year is calculated by dividing the price deflator for the

third quarter of 2006 (128.352) by 2005\'s third quarter price deflator

(123.079). The result of the calculation is 1.0428, which represents an

inflation rate of 4.28% from the third quarter of 2005. Multiplying the

\$19,570,000 figure for **disadvantaged** **business** enterprises in
Department

of Transportation financial assistance programs by 1.0428 equals

\$20,407,596, which will be rounded off to the nearest \$10,000, or

\$20,410,000.

Therefore, if a firm\'s gross receipts, averaged over the firm\'s

previous three fiscal years, exceeds \$20,410,000, then it exceeds the

small **business** size limit for participation by **disadvantaged**
**business**

enterprises in Department of Transportation financial assistance

programs contained in the statutes and in Part 26.

Corrections

This rule corrects an error in the definition section of the

original ACDBE rule. In the first publication of the rule, the

definition of \`\`small **business** concern\'\' incorrectly referred to
Sec.

23.23 for the applicable size standards. The definition of a \`\`small

**business** concern\'\' now refers readers to Sec. 23.33 for additional

information on the size standards necessary to qualify as a \`\`small

**business** concern.\'\' In addition, we are amending sec. 23.11 to add
an

omitted reference to sec. 26.109, concerning confidentiality of DBE

information.

Guidance Documents Issued by the Department of Transportation

The changes to Sec. 26.9 of 49 CFR Part 26 are intended to clarify

the role of guidance documents in the Department\'s **Disadvantaged**

**Business** **Enterprise** (DBE) programs. Guidance documents do not
have the

same binding authority as a final \`\`legislative\'\' rule; however,

guidance documents do express the Department\'s official view of the

meaning and application of our rules. Consequently, we are deleting the

word \`\`binding.\'\'

The change also clarifies that this provision applies to guidance

issued by individual operating administrations as well as by the Office

of the Secretary of Transportation (OST) or DOT as a whole. For

example, guidance could not purport to express the official views of

FHWA, FTA, or FAA if it did not comply with this provision. This

provision also applies to any guidance or instructional material

prepared by an outside party (e.g., a trade association) that is

endorsed in any way or used in training sessions sponsored by DOT or

any of its modal administrations. Section 26.9, as originally drafted,

was intended to have this effect. However, because some questions have

been raised about whether the language of the section effectively

covers modal-specific, as distinct from Department-wide, guidance we

are making the language of this section even more specific.

For the same reasons, this rule makes a parallel change to Sec.

23.13 of 49 CFR Part 23. We also note that the review mechanism

specified in these sections would be the method through which the

Department would comply with provisions of the recently-issued

Executive Order 13422 and OMB Bulletin on Good Guidance Practices for

any guidance issued by the Department that would be considered to be

significant guidance.

Regulatory Analyses and Notices

This rule is non-significant for purposes of Executive Order 12866

and the Department of Transportation\'s Regulatory Policies and

Procedures. The rule is an essentially ministerial adjustment for

inflation of a statutory small **business** size standard that does not

change the standard in real dollar terms. It will not impose burdens on

any regulated parties. This rule does not have Federalism impacts

sufficient to warrant consultation with state and local officials. The

rule does not impose information collection requirements subject to the

Paperwork Reduction Act.

The only effect of the rule on small entities is to allow some

small businesses to continue to participate in the ACDBE and the DBE

programs by adjusting for inflation and modifying the size standards as

measured by average annual gross receipts, total asset amounts, and

total number of employees. Therefore, I certify that the rule will not

have a significant economic impact on a substantial number of small

entities. Since this rule pertains to a nondiscrimination requirement

and affects only Federal financial assistance programs, the Unfunded

Mandates Act does not apply.

List of Subjects

49 CFR Part 23

Administrative practice and procedure, Airports, Civil rights,

Concessions, Government contracts, Grant programs\--transportation,

Minority businesses, Reporting and recordkeeping requirements.

49 CFR Part 26

Administrative practice and procedure, Airports, Civil rights,

Concessions, Government contracts, Grant programs\--transportation,

Highways and roads, Mass transportation, Minority **business**,
Reporting

and recordkeeping requirements.

0

For the reasons stated in the preamble, the Department of

Transportation amends 49 CFR Parts 23 and 26 as follows:

PART 23\--PARTICIPATION OF **DISADVANTAGED** **BUSINESS** **ENTERPRISE**
IN

AIRPORT CONCESSIONS

0

1\. The authority citation for part 23 continues to read as follows:

Authority: 42 U.S.C. 200d et seq.; 49 U.S.C. 47107 and 47123;

Executive Order 12138, 3 CFR, 1979 Comp., p. 393.

0

2\. Amend Sec. 23.3 by revising the definition of \`\`Small **business**

concern\'\' to read as follows:

Sec. 23.3 What do the terms in this part mean?

\* \* \*

Small **business** concern means a for profit **business** that does not

exceed the size standards of Sec. 23.33 of this part.

\* \* \* \* \*

Sec. 23.11 \[Amended\]

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3\. Amend Sec. 23.11 by removing \`\`26.107\'\' and adding in its place

\`\`sec. 26.109\'\'.

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4\. Amend Sec. 23.13 by revising paragraphs (a) and (b) to read as

follows:

Sec. 23.13 How does the Department issue guidance, interpretations,

exemptions, and waivers pertaining to this part?

\(a\) Only guidance and interpretations (including interpretations

set forth in certification appeal decisions) consistent with this part

23 and issued after April 21, 2005, express the official positions and

views of the Department of Transportation or the Federal Aviation

Administration.

\(b\) The Secretary of Transportation, Office of the Secretary of

Transportation, and the FAA may issue written interpretations of or

written guidance concerning this part. Written interpretations and

guidance are valid, and express the official positions and views of the

Department of Transportation or the FAA, only if they are issued over

the signature of the

\[\[Page 15617\]\]

Secretary of Transportation or if they contain the following statement:

The General Counsel of the Department of Transportation has

reviewed this document and approved it as consistent with the

language and intent of 49 CFR part 23.

0

5\. Revise Sec. 23.33 to read as follows:

Sec. 23.33 What size standards do recipients use to determine the

eligibility of ACDBEs?

\(a\) As a recipient, you must, except as provided in paragraph (b)

of this section, treat a firm as a small **business** eligible to be

certified as an ACDBE if its gross receipts, averaged over the firm\'s

previous three fiscal years, do not exceed \$47.78 million.

\(b\) The following types of businesses have size standards that

differ from the standard set forth in paragraph (a) of this section:

\(1\) Banks and financial institutions: \$750 million in assets;

\(2\) Car rental companies: \$63.71 million average annual gross

receipts over the firm\'s three previous fiscal years;

\(3\) Companies providing pay telephones: 1,500 employees;

\(4\) Automobile dealers: 200 employees.

\(c\) The Department adjusts the numbers in paragraphs (a) and (b)(2)

of this section using the Department of Commerce price deflators for

purchases by state and local governments as the basis for this

adjustment. These adjustments are made every two years from May 2,

2007\. The Department publishes a final rule informing the public of

each adjustment.

PART 26\--PARTICIPATION BY **DISADVANTAGED** **BUSINESS** ENTERPRISES IN

DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS

0

1\. The authority citation for part 26 continues to read as follows:

Authority: 23 U.S.C. 324; 42 U.S.C. 2000d et seq.; 49 U.S.C

1615, 47107, 47113, 47123; Sec. 1101(b), Pub. L. 105-178, 112 Stat.

107, 113.

0

2\. Revise Sec. 26.9 to read as follows:

Sec. 26.9 How does the Department issue guidance and interpretations

under this part?

\(a\) Only guidance and interpretations (including interpretations

set forth in certification appeal decisions) consistent with this part

26 and issued after March 4, 1999 express the official positions and

views of the Department of Transportation or any of its operating

administrations.

\(b\) The Secretary of Transportation, Office of the Secretary of

Transportation, FHWA, FTA, and FAA may issue written interpretations of

or written guidance concerning this part. Written interpretations and

guidance are valid, and express the official positions and views of the

Department of Transportation or any of its operating administrations,

only if they are issued over the signature of the Secretary of

Transportation or if they contain the following statement:

The General Counsel of the Department of Transportation has

reviewed this document and approved it as consistent with the

language and intent of 49 CFR part 26.

0

3\. Revise Sec. 26.65 to read as follows:

Sec. 26.65 What rules govern **business** size determinations?

\(a\) To be an eligible DBE, a firm (including its affiliates) must

be an existing small **business**, as defined by Small **Business**

Administration (SBA) standards. As a recipient, you must apply current

SBA **business** size standard(s) found in 13 CFR part 121 appropriate
to

the type(s) of work the firm seeks to perform in DOT-assisted

contracts.

\(b\) Even if it meets the requirements of paragraph (a) of this

section, a firm is not an eligible DBE in any Federal fiscal year if

the firm (including its affiliates) has had average annual gross

receipts, as defined by SBA regulations (see 13 CFR 121.402), over the

firm\'s previous three fiscal years, in excess of \$20.41 million.

\(c\) The Department adjusts the number in paragraph (b) of this

section using the Department of Commerce price deflators for purchases

by State and local governments as the basis for this adjustment. The

Department issues a final rule by August 10 of each year making this

adjustment.

Issued this 20 day of March 2007, at Washington DC.

Mary E. Peters,

Secretary of Transportation.

\[FR Doc. E7-6054 Filed 3-30-07; 8:45 am\]

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