Regulatory Alert: DOT Releases Final Rule to Update DBE and ACDBE Programs
On April 9, the U.S. Department of Transportation (DOT) released a final rule that makes a wide range of changes and updates to the regulations governing the Disadvantaged Business Enterprise (DBE) Program and the Airport Concession Disadvantaged Business Enterprise (ACDBE) Program. As part of the rollout, DOT hosted an event this morning at its headquarters in Washington, D.C., where Secretary Pete Buttigieg and other senior administration officials gave remarks about the new rule and highlighted the importance of the programs. AAAE Chair Perry Miller, Ph.D., A.A.E., I.A.P., and AAAE staff attended the event at the invitation of the department.
In terms of implications for airports, the DBE/ACDBE rule includes changes that will increase and promote firm participation, such as raising the personal net worth (PNW) cap (from $1.32 to $2.047 million) to account for inflation and rising costs and establishing a reasonable mechanism to allow for interstate certification and reciprocity. However, the rule also contains a series of new requirements, such as expanded data collection and reporting responsibilities and the promotion of small business participation in ACDBE programs. A complete overview of key provisions and changes is provided below. DOT indicated that airport DBE/ACDBE program plans will have to be updated to bring them into conformity with the new rule.
You can read DOT’s final rule, which was published in the Federal Register, here. The rule goes into effect on Thursday, May 9. Along with the rule, DOT released new guidance and resources on their DBE/ACDBE website to help airports comply with the new provisions. The department is also planning a series of virtual training sessions on the new rule beginning April 23. Individuals who are responsible for ensuring their airport’s compliance with program requirements are encouraged to review the final rule and the resources. AAAE is planning to host a virtual meeting where FAA can brief members, share updates, and help airports navigate the new rule.
Background. As part of their federal grant obligations, airports are required to administer DBE and ACDBE programs in accordance with the regulations outlined in 49 C.F.R. Parts 23 and 26. Since the 1980s, DOT has made occasional updates to the regulations governing the DBE and ACDBE programs, with the last notable revision coming in 2014. In July 2022, DOT released its proposed rule, which proposed a wide range of changes to both programs. This initiative is part of the Biden Administration’s broader effort to advance equity and expand opportunities for DBE firms in government funding programs.
In October 2022, AAAE submitted extensive comments in response to the proposal, emphasizing the importance of the DBE/ACDBE programs and supporting efforts to increase and promote firm participation. However, we shared concerns from many of our members regarding a series of new requirements that would be imposed on airports in the areas of reporting, monitoring, and small business participation. You can view our comments here. DOT received over 440 comments from airports, state transportation agencies, firms, and the public.
Key Takeaways from Final Rule. DOT has published a summary of the changes that airports are encouraged to review. To elaborate on the summary, AAAE developed the following key takeaways from the rule based on our initial review:
• Personal Net Worth (PNW) Cap: The rule increases the PNW cap, which applies to owners that are the basis for a firm’s eligibility in the program, from $1.32 to $2.047 million to account for rising inflation and costs. The rule allows DOT to adjust the cap every three years based on data from the Federal Reserve and without a rulemaking process. AAAE supported the cap increase because we believe it will promote firm participation in these programs.
• Calculation of PNW: The rule allows owners to exclude all retirement assets when calculating their PNW for purposes of firm eligibility in these programs. DOT believed that saving for retirement should not preclude a firm from remaining eligible. Many AAAE members supported this change.
• Interstate Certification Process: The rule establishes a process for allowing interstate certification of prospective DBE firms through automatic reciprocity. Under the current regulations, a state has discretion as to whether to accept another state’s certification of a firm. The rule requires states to recognize the certification of the firm from another state, although it allows for decertification if the state has reasonable cause that the firm is ineligible for DBE certification.
• Flexible Certification Procedures: The rule updates various certification provisions with less prescriptive rules to give certifiers more flexibility when determining firm eligibility, such as allowing virtual on-site visits to certify that a firm qualifies as a DBE and allowing the use of unsworn declarations under penalty of perjury over sworn affidavits and notarization.
• DBE Performance Plan (DPP): The rule requires prime contractors, which respond to a request for proposal on a design-build procurement, to submit an open-ended DPP with the proposal. The DPP must detail the types of work the contractor will solicit DBEs to perform and a projected timeframe in which actual subcontracts will come to fruition. Airports will be responsible for monitoring the contractor’s adherence to the plan throughout the contract to ensure good faith efforts. This new requirement will apply to any proposal submitted after May 9, the effective date of the rule.
• Counting DBE Participation: The rule requires airports to establish a system to determine, prior to a grant award, whether a DBE supplier—submitted by the bidder as a “regular dealer” or “distributor”—qualifies for that designation. DOT indicated that this ensures preliminary counting determinations and contract goal attainment decisions are based on the DBE’s ability and intent to comply with the rule’s commercially useful function (CUF) requirements. DOT has developed a new “tool” to help airports evaluate whether a firm is considered a “regular dealer” or “distributor,” which will be available here. As of April 9, however, it has not been posted yet.
• Running Tally Requirement: The rule expands the “running tally” provisions by requiring that airports maintain an accounting of each contractor’s progress in attaining a contract goal through progressive payments to the committed DBEs. DOT believes this is necessary to ensure that airports can intervene quickly if they observe a contractor falling short of a contract goal.
• Prompt Payment Requirements: The rule requires airports’ DBE programs to outline the mechanisms that the airport will use to “proactively” monitor and conduct oversight for the purpose of ensuring that prime contractors are promptly paying subcontractors. DOT also specifies that the prompt payment requirements apply to all lower-tier subcontractors as well.
• ACDBE Small Business Participation: The rule requires airports to implement a new “small business element” to promote and foster small business participation as part of its ACDBE program and submit annual reports to DOT regarding the success of the new “element.” This will include taking reasonable steps to eliminate obstacles to their participation, such as unnecessary or unjustified bundling of concession opportunities that may preclude small businesses from participating in solicitations.
• Expanded Reporting Requirements: The rule expands the amount of data that airports have to collect and report to DOT through the “Uniform Report of DBE Awards or Commitments and Payments,” such as the names of the DBEs with contracts, the work categories/trades performed, and dollar value of contracts, among other things.
• DBE Bidders List: The rule requires airports to provide all data from its bidders list—which airports currently create based on DBE and non-DBE firms that seek work on federally assisted contracts—to DOT through a centralized database. According to implementation guidance released today, DOT has not yet created this database, and reporting will not be required until it is operational.
• ACDBE Active Participant List: The rule requires airports to create and maintain an “active participants list” that contains information about ACDBE and non-ACDBE firms that have participated or attempted to participate in airport concessions programs in previous years. This information must be provided to FAA through a designated system (after it becomes operational). No similar requirement existed prior to this rule.
• Definition of Long-Term Exclusive (LTE) Agreements: In the ACDBE Program, airports are prohibited from entering into LTE agreements for concessions without prior FAA approval. An LTE agreement is currently considered one with a term longer than five years. AAAE strongly urged DOT to extend the duration of the term from five to ten years. DOT agreed. This will be especially helpful for small hub airports that have fewer concession opportunities and can use the longer leases to attract potential bidders.
DOT/FAA Implementation of New DBE/ACDBE Rule. Given the significant changes made by the final rule, DOT prepared implementation guidance for the DBE and ACDBE programs to help airports, firms, and others navigate the transition to the new set of regulations, which will take effect on May 9. You can view the DBE guidance here and the ACDBE guidance here. We would note question 19, which provides that airports will be expected to update their DBE program plans, as necessary, to bring them into conformity with the new rule. FAA plans to release sample DBE and ACDBE program plans that airports can use. When available, they will be posted to FAA’s website here.
What’s Next? DOT’s final rule on the DBE/ACDBE programs goes into effect on Thursday, May 9. DOT will be hosting training sessions beginning April 23 to help airports and others navigate the new requirements. You can sign up for those sessions here. AAAE is also planning to have FAA brief members and answer questions that airports may have in advance of the implementation date. In the meantime, please reach out to Justin Barkowski if you have any questions or feedback regarding the new rule.
Resources on DOT’s DBE/ACDBE Final Rule
• DOT’s April 9 Press Release on Final Rule
• DOT’s Final Rule to Update DBE/ACDBE Programs
• DOT’s Summary of Changes to DBE/ACDBE Programs
• DOT’s Website on DBE/ACDBE Final Rule
• DOT’s Implementation Guidance for DBE and ACDBE Program Changes
• DOT’s Sign-Up Form for Virtual Training on Final Rule
• AAAE’s October 31, 2022 Response to Proposed Rule
• DOT’s July 21 Proposed Rule on DBE/ACDBE Program Updates
• Regulatory Docket for DOT’s DBE/ACDBE Rule
