Official FAQs on DBE Program Regulations (49 CFR 23)
The General Counsel of the Department of Transportation has reviewed these questions and answers and approved them as consistent with the language and intent of 49 CFR Part 23. These questions and answers therefore represent the institutional position of the Department of Transportation.
These questions and answers provide guidance and information for compliance with the provisions under 49 CFR part 23, pertaining to the implementation of the Department's disadvantaged business enterprise program. Like all guidance material, these questions and answers are not, in themselves, legally binding or mandatory, and do not constitute regulations. They are issued to provide an acceptable means, but not the only means, of compliance with Part 23. While these questions and answers are not mandatory, they are derived from extensive DOT, recipient, and contractor experience and input concerning the determination of compliance with Part 23.
Section 23.75 - Can recipients enter into long-term, exclusive agreements with concessionaires?
The purpose of this guidance on Long-Term, Exclusive (LTE) agreements for concessions is to provide information and direction to airport sponsors, ACDBE program staff, stakeholders, and all other interested parties on how to determine whether an agreement is considered a LTE agreement subject to the prohibition against such agreements in the ACDBE program rules.
Long-Term, Exclusive (LTE) Guidance
Section 23.31; 27.67(b)(2) - Personal Net Worth
Question: If the owner of a DBE or ACDBE certified firm or applicant firm has a personal net worth of less than $1.32 million, does that necessarily mean that the recipient must regard the owner as being economically disadvantaged?
Answer: No. A person cannot be regarded as economically disadvantaged if he or she exceeds the $1.32 million personal net worth (PNW) cap. However, there may be some cases in which an individual whose PNW is less than $1.32 million may properly be regarded as not being economically disadvantaged.
- The legal and policy rationale behind the PNW provision of the rule is that a program designed to assist socially and economically disadvantaged individuals should not include people who can reasonably be regarded as having accumulated wealth too substantial to need the program’s assistance.
- Consequently, in determining whether an individual is economically disadvantaged, a recipient is entitled to look not only at the individual’s PNW but also at his or her overall economic situation to make a reasonable determination of whether the individual is fairly regarded as being economically disadvantaged.
- Consistent with Small Business Administration practice in the 8(a) program, it is appropriate for recipients to review the total fair market value of the individual’s assets and determine if that level appears to be substantial and indicates an ability to accumulate substantial wealth.
- For example, an individual with very high assets and significant liabilities may, in accounting terms, have a PNW of less than $750,000. However, the person’s assets (e.g., a very expensive house, a yacht, extensive real or personal property holdings) may lead to a conclusion that he or she is not economically disadvantaged. The recipient can rebut the individual’s presumption of economic disadvantage under these circumstances, as provided in sec. 26.67(b)(2).
- This guidance applies to determinations of economic disadvantage under both 49 CFR Part 23 and 49 CFR Part 26.
Section 23.37 12/9/2011
Question: May a recipient or UCP require a firm certified as a DBE under Part 26 to complete an entire new application to be certified as an ACDBE under part 23?
Answer: No. Section 23.37 provides that as a recipient or UCP, you are required to presume that a firm certified in your State as a DBE under Part 26 meets size, disadvantage, ownership, and control requirements for certification as an ACDBE under Part 23.
- A recipient or UCP must check to make sure a Part 23 applicant meets the Part 23 PNW cap.
- There is only one additional determination that you need to make in order to certify such a firm as an ACDBE: whether the disadvantaged owners of the Part 26-certified firm can control the activities of the firm with respect to its participation in the ACDBE program.
- You are not required to certify a DBE firm as an ACDBE if the firm does not do work relevant to the airport concessions program (e.g., operating a concession or providing goods and services to concessions).
- In summary, when you receive an ACDBE application that has a current Part 26 DBE certification in your State, you should only seek information on two subjects: the firm owner’s PNW and the disadvantaged owner’s ability to control the firm with respect to airport concession activities. You may not require the firm to file a complete new application.
Section 23.55 06/12/2015
Question: How do recipients count ACDBE participation that involves the sale of advertising displays or messages to the public on the airport?
Answer: The primary function of an advertising concession is selling advertising displays or messages at an airport pursuant to a written agreement with the airport owner, with another concessionaire, or with the owner or lessor of a terminal (if other than the recipient).
- An ACDBE engaged in providing advertising services may have an agreement with the recipient as a prime concessionaire (i.e., the owner of the concession) working with or without a joint venture partner. An ACDBE also may provide services as a contractor to the concessionaire.
- To determine how to count ACDBE participation in a transaction involving advertising goods or services, a recipient must determine in what capacity the ACDBE is performing (e.g., prime concessionaire, joint venture partner, sub-concessionaire, lessee, supplier or contractor) and the manner in which the ACDBE is compensated (e.g., gross receipts earned versus fees or commission for services provided).
- If the ACDBE is a prime concessionaire, the ACDBE’s participation is counted based on the gross receipts earned by the ACDBE as provided at 49 C.F.R. §23.55(b).
- If the ACDBE is a subcontractor or sub-concessionaire to a non-ACDBE and the ACDBE’s compensation under the agreement is based on gross receipts earned by the ACDBE, those earnings should be counted pursuant to 49 C.F.R. §23.55(c).
- If the ACDBE’s compensation is solely based on fees and commissions, the ACDBE’s participation for a bona fide service is counted based on the fees and commissions paid as provided at 49 C.F.R. § 23.55(e).
- EXAMPLE 1: Firm A (a certified ACDBE) is awarded the airport’s advertising concession. Firm A sells $2,000,000 in advertising to various clients. The entire $2,000,000 of the sales generated by Firm A should be counted as ACDBE participation, assuming the work is actually performed by the ACDBE with its own forces. In this example, the ACDBE participation on the contract would be counted as race-neutral participation since Firm A obtained the contract through customary competitive procurement procedures.
- In the case of a joint venture, recipients must first determine that the ACDBE joint venture partner is in fact functioning in a manner consistent with the ACDBE Joint Venture Guidance. By definition the ACDBE in a joint venture must be responsible for a distinct, clearly defined portion of the work of the contact and must share in the capital contribution, control, management, risks, and profits of the joint venture commensurate with the ACDBE’s ownership interest. See 49 C.F.R. §23.3.
- If the ACDBE firm is participating as a direct owner of the advertising concession through a joint venture arrangement, partnership, sublease, licensee, franchise, or other arrangement in which the ACDBE owns or controls all or some part of the concession and consequently shares in the profits and risks of the concession, the recipient counts the total value of gross receipts the ACDBE earns pursuant to the concession agreement as provided at 49 C.F.R. §23.55(b) – (d).
- EXAMPLE 2: Firm B is not a certified ACDBE. Firm B enters into a joint venture with Firm A (a certified ACDBE) and the ownership percentage of the ACDBE in the joint venture is 10%. The joint venture is awarded the advertising concession for the airport. The joint venture is expected to generate $100,000,000 in sales over a five year term of the concession agreement. The airport confirms that the ACDBE capital contribution, control, management, risks, and profits are commensurate with its ownership interest of 10% in accordance with the Joint Venture Guidance. In this example, 10% of the gross receipts generated by the joint venture should be counted as ACDBE participation.
- EXAMPLE 3: Firm C, not a certified ACDBE, enters into a sublicense agreement with Firm A, the certified ACDBE. The agreement grants a specific number of locations to Firm A on an exclusive basis for the sale of advertising. Firm A makes a significant investment for the specified locations and is responsible for the entire administration of the locations. The entire sales generated by Firm A should be counted as ACDBE participation.
- If the ACDBE firm is a service contractor to the concessionaire and is compensated based on fees or a commission, the recipient counts the fees or commissions charged by the ACDBE that are reasonable and not excessive as compared with fees customarily allowed for similar services.
- EXAMPLE 4: Firm C in example 3 enters into a sublicense agreement with Firm A, the ACDBE. The agreement grants a specific number of locations to Firm A on an exclusive basis for the sale of advertising. Firm A does not make an investment for the specified locations and is not responsible for the overall administration of the locations. Firm C pays Firm A a commission based on its sales. Firm A’s sole function is to sell ads and has little to no other responsibility. Count only the fees or commission paid to Firm A for the services it provides.
- EXAMPLE 5: Firm C in example 3 enters into a contract with Firm A, the ACDBE. Firm A’s sole function is to sell ads, for which it is compensated based on commission and fees earned. Count only the fees or commissions paid by Firm C for the service it received.
- If the ACDBE provides a bona fide service other than selling advertising, count the entire amount of fees charged by the ACDBE as provided at 49 C.F.R. §23.55(e). In the case where the ACDBE is a supplier of goods count the cost of goods supplied by the ACDBE firm as provided at 49 C.F.R. §23.55(g) – ((h). This should not be confused with costs or goods incurred in connection with renovation, repairs, or a construction concession commonly referred to as “build-out” costs. See 49 C.F.R. §23.55 (k).
- EXAMPLE 6: Firm C, in example 3, enters into a service contract with Firm A, the ACDBE. Firm A agrees to provide services such as maintenance, electrical work, and other service associated with the contract. Firm C pays Firm A a fee for the services rendered. Count only the fees paid to Firm A for the service it provides.
- EXAMPLE 7: Firm C, in example 3, purchased a good (i.e. advertising displays) from Firm A, the ACDBE. In order to calculate the ACDBE participation amount you will need to determine if Firm A is a manufacturer, a regular dealer, or neither of the two and count the participation according to 23.55 (f)-(h).