BACKGROUND AND OVERVIEW

Airport Concessions Disparity Study Overview

The City of Phoenix (City) operates Phoenix Sky Harbor International Airport, a primary airport that has received federal funds for airport development after January 1988 (authorized under title 49 of the United States Code). As a recipient of federal funds, the City has signed airport grant assurances that it will administer an Airport Concessions Disadvantaged Business Enterprise (ACDBE) program that is compliant with 49 Code of Federal Regulations (CFR) Part 23, the Equal Protection Clause of the United States Constitution and relevant case law. The City’s policy is to ensure that ACDBEs as defined in Part 23, have an equal opportunity to receive and participate in concession opportunities.

The City of Phoenix is and has been committed to small, minority and woman-owned businesses for many years. The City has sought to identify and to eradicate race and gender based discrimination in construction-related contracts and in the procurement of goods and services. Acting on the findings of availability and disparity studies conducted over a 14 year period, ordinances creating a M/WBE price preference program, a race and gender neutral small business program and MBE/WBE/SBE goals have been approved. The City is equally committed to ensuring equal opportunity for ACDBEs to participate in airport concessions contracts.

The City has retained Exstare Federal Services, Group LLC and its team, Meyers Nave and HNTB to conduct an Airport Concessions Disparity Study to determine if Airport Concession Disadvantaged Business Enterprises (ACDBEs) have an equal opportunity to compete for and participate in the concessions opportunities at Phoenix Sky Harbor International Airport (Airport). The Study will focus on data for the period beginning January 1, 2002 to the present, and is expected to be completed by May, 2008.

The primary objective of the Study is to determine if disparity exists in the Airport’s concessions market(s) and, if so, to what degree and why. Among other key areas, the Study will: (1) determine ACDBE availability and utilization for all types of concessions, including management contracts; (2) examine the City’s contracting policies and procedures; (3) consider anecdotal evidence obtained from the community; (4) decide the concessions market area(s) for the Airport; and; (5) determine what combination of race and gender conscious and race and gender neutral measures will be used in the City’s ACDBE program.

The goal-setting process was one of the issues the United States Department of Transportation (USDOT) identified when developing 49 CFR Part 23. Under certain circumstances, goal-setting can be utilized by the City if there is evidence of the presence of discrimination in its relevant market area(s).

49 CFR Part 23 is the USDOT regulation to ensure nondiscrimination in the provision of opportunities for disadvantaged business enterprises in airport concessions. The regulation is mandated by 49 U.S.C. 47107(e), originally enacted in 1987 and amended in 1992.

Airport Concession Disadvantaged Business Enterprise (ACDBE) is defined in 49 CFR Part 23 as a concession that is a for-profit, small business concern (1) that is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged or, in the case of a corporation, in which 51 percent of the stock is owned by one or more such individuals; and (2) whose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it.

Legal Standard for ACDBE Programs

Two U.S. Supreme Court cases set forth the standard by which the federal courts will review race based public contracting programs. Those cases are City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989) and Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995). In those decisions, the Court held that affirmative action programs that employ racial classifications are subject to “strict scrutiny.” For federally funded/mandated programs, the Adarand strict scrutiny test requires that such racial classifications be narrowly tailored to serve a compelling governmental interest.

For race based federally mandated affirmative action programs implemented by a local government agency grant recipient, the federal courts agree that under Adarand:

Congress/federal government must identify a compelling governmental interest which is narrowly tailored in remedying the effects of racial discrimination. (See Northern Contracting, Inc. v. Illinois Dept. of Transportation, 473 F.3d 715 (7th Cir. 2007); Western States Paving Co. v. Washington State Dept. of Transportation, 407 F.3d 983 (9th Cir. 2005); and Sherbrooke Turf, Inc. v. Minnesota Dept. of Transportation, 345 F.3d 964 (8th Cir. 2003)).
The state or local recipient of the federal funds may rely upon the federal government's demonstration of a compelling state interest. However, the local grant recipient must independently demonstrate that its ACDBE Part 23 program employing racial classifications is narrowly tailored. In order to meet the “narrowly tailored” requirement, the state/local grant recipient must demonstrate evidence of the presence or absence of discrimination in its relevant market areas for each of its contracting industries for each ethnic group the state/local entity includes in its DBE program. In addition, the state/local grant recipient must assess the availability and capacity of each such ethnic group included in the DBE program for each contracting industry. Moreover, state/local grant recipients cannot resort to race based remedial measures without first considering and implementing feasible and effective race neutral measures.

Study Approach and Methodology

Relevant data and evidence will be collected, consistent with evidence gathering efforts previously approved by the federal courts, in order to determine availability of ACDBE companies and to conduct a disparity analysis. This evidence and data will be evaluated to determine if there is discrimination based on barriers such as access to capital and on disparities in business formations, earnings, or other business requirements.

The Study process will also establish the market area(s) for airport concessions such as car rental, food and beverage, news and gifts, specialty retail, baggage carts, advertising, parking management and shuttle bus management.

A market area is the geographical area in which the substantial majority of firms which seek to do concessions business with the Airport are located and the geographical area in which the firms which receive the substantial majority of concessions related revenues are located.

Through the Study process:

the availability and utilization of ACDBEs in the relevant market area(s) will be determined;
the effects of factors other than discrimination that may account for statistical disparities between ACDBE availability and participation will be considered;
evidence of any active or passive discrimination against any group presumed by 49 CFR Part 23 to be disadvantaged will be sought;
evidence of discrimination and its effects will be analyzed separately for each group presumed by 49 CFR Part 23 to be disadvantaged;
evidence of the extent of any ongoing discrimination or the lingering effects of past discrimination that may exist in airport concessions contracting will be collected;
the City’s/Airport’s contracting system and processes will be examined;
anecdotal evidence will be gathered and evaluated.

Several methods for gathering anecdotal data that will be relied upon and evaluated for evidence of discrimination will include survey responses, telephone interviews, face-to-face interviews, and a public hearing process.

We Need Your Participation in the Study

A good deal of the information utilized in the Study process will be sought from members of the community between now and the end of October 2007, including, but not limited to, minority and woman's business groups, community organizations, trade associations representing concessionaires currently located at the Airport, as well as previous and current concessionaires and other businesses, officials or organizations which could be expected to have information concerning:

the availability of disadvantaged businesses
the effects of discrimination on opportunities for ACDBEs
the City’s efforts to provide equal opportunity for participation of ACDBEs in airport concession contracts

The opportunity to be an integral part of the Airport Concessions Disparity Study process is yours. We need your cooperation and participation in the Study when and if you are asked to provide information and to encourage others in the community to do the same. Information sharing and gathering is an important component of the Study process. The quality and quantity of the information provided by the community will have a strong correlation with the value of the Study results. Also look for updates so that you can remain informed about the progress of the Airport Concessions Disparity Study.

Please get involved and stay informed!

How Study Results Will Be Used

The results of the Study will be used by the City to administer an ACDBE program that ensures opportunities, meets regulatory requirements, and that is constitutional and legally defensible. It is important to remember that the intent of the federal ACDBE program and the City is to ensure equal opportunity for ACDBEs to participate in airport concessions opportunities.

Setting goals for ACDBE participation is a major component of the ACDBE program and the results of the disparity Study will assist the City in determining what combination of race and gender conscious and race and gender neutral measures will be used in its ACDBE program.

Additionally, the findings of this Study will provide the City with information that will enable it to assist ACDBE companies interested in increasing the capacity of their businesses and their ability to participate in future Airport concession and management agreement opportunities.

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