Institute of Concessions

ACDBE Program
Office of Business Diversity and Accessibility
City of Philadelphia, Department of Aviation
Overview
Introductions
Regulations and Benefits of the ACDBE Program
Common Terms
Goals
PA NYNJ and JFK Goals
Certification
Points of entry – ACDBE options
Joint ventures
Reporting
Monitoring
Introductions
Introductions
Denise Bailey,
Deputy Director of Aviation, Business Diversity and Accessibility
Philadelphia International Airport | Northeast Philadelphia Airport

38 years in aviation industry

Joined PHL in December 2022 and leads the Airports’
responsibilities for:
• Disadvantaged Business Enterprise (DBE)
• Airport Concessions DBE (ACDBE)
• Small Business
• Americans with Disabilities Act
• Title VI
Introductions Continued
Denise Bailey,
Deputy Director of Aviation, Business Diversity and Accessibility
Philadelphia International Airport | Northeast Philadelphia Airport

Principal at a minority-owned firm providing consulting services in

Diversity, Transportation Grant Compliance, and Economic
Development for 30 years.
Construction Manager at regional engineering firm.
Memberships include Airport Minority Advisory Council (AMAC),
Conference of Minority Transportation Officials (COMTO), and
Women’s Transportation Seminar. Serves on the airport’s
Department of Aviation’s Racial Equity Advisory Council (REAC).
Participant Name
Introductions
Business name

Specialty/Concept
Introduction
Location

Years in business

Are you certified diverse business or in the

process? - if yes with what agency?
ACDBE Regulations
and Benefits
What is the ACDBE
Program?
Airport concessions disadvantaged business
enterprise (ACDBE) program.

When an airport accepts Federal Aviation

Administration (FAA) funds, one requirement is
to level the playing field for socially and
economically disadvantaged businesses
(49 CFR Part 23).

ACDBE participation the food and shops

program is part of the requirement.
What does the ACDBE Program Cover?
Setting of overall goals (every three years) for ACDBEs
Setting of individual contract/lease goals for ACDBEs
Certification
Monitoring and enforcement
Reporting
Technical assistance
Benefit of Being an ACDBE
Program is meant to be an on-ramp to opportunities at the airport
• Bring local/regional flavor iconic business to airport environment
• Expand existing street-side operation to airport location

Participation can be a platform for expansion at the airport

• Growth within the airport environment
• Expand diversity of offerings
• Flexible points of entry - joint venture to 100% location or vice versa

Success can lead to expansions to other airport or commercial locations

• Growth potential to other transportation venues
• Application to other traditional commercial locations
Common Terms
Common Terms for Diverse Businesses
in Concessions
Race-conscious
Race-neutral
Diverse business
MBE/WBE – minority/woman-owned business
SBE – small business enterprise
DBE – disadvantaged business enterprise
ACDBE – airport concessions disadvantaged business enterprise
Level playing field
Good faith efforts
Non-car rental
ACDBE Goals
ACDBE Goal Setting
Goal-setting is a two-step process:
1) Establish a base figure based on the relative availability of ACDBEs to participate in the
Airport’s concessions programs.
2) Make any necessary adjustments to the base figure based on local market conditions.
Establishing Overall Goals
Airports are required to set two overall 3-year ACDBE goals:
• Car rental concessions
• Non-car rental concessions
Overall goals must be based on demonstrable evidence of the availability of ready, willing,
and able ACDBEs relative to all businesses ready, willing and able to participate in the
concessions opportunities.

STEP 1: Ready, Willing, and Able ACDBEs

Establishing the
Base Goal All Ready, Willing, and Able Firms
Adjusting the Base Figure – Non-Car Rental
After Step 1, determine what adjustment, if any, is needed to the base figure. Consider:
• Past ACDBE participation
• Evidence from disparity studies
• Any available evidence from related fields that affect the opportunities for ACDBEs to form,
grow and compete
PA NYNJ and JFK Goals for FFY 2021-2023

Airport ACDBE Non-car Rental Goal

Newark Liberty International Airport 25.2% (race-conscious)

John F. Kennedy International Airport 21.8% (race-conscious)

LaGuardia Airport 22.6% (race-conscious)

Stewart International Airport 0.5% (race-conscious)

Contract ACDBE Goal
New Food/Beverage Terminal 1 27.6%
New Food/Beverage Terminal 8 25.0%
New Retail
30.3%
New Retail Terminal 8 only
PA NYNJ and
27.1%
Duty Free Retail Terminal 1
JFK Goals for
17.0%
Duty Free Retail Terminal 4 FFY 2021-2023
20.0%
Duty Free Retail Terminals 5, 7, & 8
John F. Kennedy International
23.0%
Advertising Airport Concession Leasing
11.4% Goals FFY 2021-2023
Luggage Carts 0.0%
CNN Network Goal Period: from
0.0%
Foreign Currency Exchange 10/01/20-09/30/23
27.3%
Hotel
17.0%
Baggage Storage/Wrap 100.0%
Total
21.8%
ACDBE Certification
Overview
DBE/ACBDE certification follows USDOT
regulation - 49 CFR Parts 26 and 23
Designed for small firms owned and
controlled by socially and economically
disadvantaged individual(s)
Differs from local
Minority/Woman/Disabled-Owned/Small/Local
Business Enterprise certifications
Primarily for firms that work on projects
funded by USDOT
Must be certified in business’ ‘home state’ first
Overview Continued
All states use the same
• Certification application form
https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/uniform-certificatio
n-application-english
• Personal net worth form
https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/new-dbe-personal-
net-worth-statement
 Certification
Application Overview
Highlights of Eligibility
Ownership and control by socially and economically disadvantaged individual(s)
• Economic disadvantage = personal net worth less than $1.32 million
For-profit firm
For DBE, business gross receipts thresholds:
• SBA NAICS Code size standards (averaged over 5 years) – depends on what type of
business you operate
• Additionally (if you want to work on transit and highway projects) - $30.40 million
averaged over 3 years
For Airport Concessions DBE, business gross receipts threshold of $56.42 million
(averaged over 3 years)
Why Get Certified?
There are DBE and ACDBE goals on many
USDOT-Funded contracts
• Airports
• Transit agencies
• State highway departments
One-stop certification for all USDOT-funded
agencies within a state
Great advertising and access to opportunities
and technical assistance
Where Do You Get Certified?
For firms headquartered in the state of New York
Four Certification Partners
Where Do You Get Certified?
For firms headquartered in the state of New Jersey
Three Certification Partners
 NAICS Code​ Description​

NAICS Codes 722310​

722330​
Food Services​
Mobile Food Services​
451212​ Magazines/News Stands​
North American Industrial Classification System
(NAICS) Codes 812199​ Spa Services​

• Fancy name for a 6-digit number that defines 722513 ​ Limited Service
Restaurants​
what type of business you own
• Necessary to define your NAICS code(s) NAICS Code​ Description​
for certification 722511​ Full-Service Restaurant ​
• Don't oversell or undersell yourself with 443142​ Electronics Stores​
the NAICS you include on your 448120​ Clothing and Accessories​
certification application
451211​ Book Stores​
Common ACDBE NAICS Codes
453220 ​ Misc. Store Retailers​
What Are Other Benefits
of Certifications?
Once certified in your ‘home’ state, it is a
streamlined process to get certified in additional
states
• This is called ‘interstate certification’
• Philadelphia International Airport (PHL) counts
Pennsylvania UCP-certified firms in its attainment
• Once certified in your home state, visit the PAUCP
to get on our state’s list
https://paucp.dbesystem.com/
• Check out PHL’s Annual report at
https://simplebooklet.com/onahigherplane2022an
nualreport#page=1
Points of Entry
Business Models
100% ACDBE Joint Venture
• Owned and operated by ACDBE • ACDBE partners with larger operator
• Licensing agreement • Partners negotiate ownership percentage
• Franchise agreement • Roles defined in Joint Venture agreement
• Licensing agreement
• Franchise agreement

ACDBE Operator can be both 100% operator and Joint Venture partner at the same time
Joints Ventures and
Subleases
Joint Ventures (JV) Definition
An association of an ACDBE firm and one or more other firms
They combine their property, capital, efforts, skills and knowledge.
The ACDBE is responsible for a distinct, clearly defined portion of the work of the contract.
The ACDBE shares in the capital contribution, control, management, risks, and profits of the
joint venture commensurate with its ownership interest.
A JV is a separate legal entity with a separate Tax ID
Details of the JV are contained in a Joint Venture Agreement
Joint Ventures Agreements (JVA)
It is a legal document, forming a new company
• Have your own lawyer (and the right kind)
• Have your own account (and the right kind)
JVAs should be reviewed for
• Compliance with DBE/ACDBE regulations
• Minimization of legal exposure
• Calculation of when/if you will see profit
Airport JVA reviews historically have benefited the ACDBE
• They should not and cannot determine ‘good’ business decisions for ACDBEs
Joint Ventures Agreements (JVA) Continued
Agreements are made for when parties do not agree
• ACDBEs should read each term as if doomsday is happening
• ACDBEs should beware of “this never happens” or “we’ve never implemented that” statements
Many of these same principles should be applied if you are reviewing a sublease
Important Components of Joint Venture
Agreements (JVA)
Identification of the participants in the JV
Identification of the single, for-profit business enterprise to be undertaken by the JV
Term of the agreement and factors effecting the term
Capital to be contributed by each
Accounting methods and distribution of profits/losses.
Management of the joint venture’s business
Administrative matters
Dissolution
JV Capital Contribution
Each party in a JV should bring real and substantial value to the joint venture enterprise.
The parties should each contribute both tangible and intangible assets.
The agreement should specify the initial capital contributions to be made by each party and how
future capital contributions will be allocated.
The ACDBE’s portion of the initial and future capital contributions should be equal to its
ownership percentage.
Capital Contributions
Initial capital contributions vary in JVAs
• Initial ‘open the bank account’ amount
• Full projected amount for construction and initial expenses
• Graduated amount for all initial projected expenses
Future capital contributions can include
• Unanticipated capital calls
• Underestimation of initial fit-out costs
• Repairs/required upgrades
• Anticipated mid-term refurbishment
Capital Contributions
Important considerations for future capital contributions
• Who decides when and how much (see JV management decisions)?
• May require additional loans
• Should be anticipated and factored into cash flow projections
Capital Contributions
The parties should contribute capital commensurate with their ownership interest,
knowledge and skills relative to the portion of the JV’s business for which they are
responsible, and efforts to the success of the venture.
The skill set (a combination of experience, core competencies, unique talent, etc.)
provided by each party should add value to the JV relationship that is objectively apparent.
This skill set should be specifically addressed in the JV agreement, and verified by the
airport during its initial review and periodically thereafter.
JV Control
The ACDBE in the JV should have control in proportion to their ownership interest and
proportionate control of the governance of the JV.
Each JV partner should assume full responsibility for executing each element of the work
assigned to it.
There is a higher burden of proof that the ACDBE controls the employees performing its
designated portion of the work in instances when the employees are employees of the
joint venture and an even higher burden of proof when the employees are employees
of the non-ACDBE.
JV Control
Usually, JVs will have a management committee or Board that controls the overall business.
The JV agreement should provide for control by the ACDBE of the activities for which
it is responsible.
Some major decisions should require a unanimous vote to substantiate some level of control
attributable to the ACDBE (e.g., items related to expansion, borrowing, lending money, etc.).
JV Management
The agreement should address the issue of the overall management, or governance, of the
business of the joint venture and the day-to-day management of the joint venture’s operation.
ACDBE participant should participate in the overall management, decision making, and
day-to-day operations, including decisions on the hiring and firing of management
personnel (and if appropriate non-management personnel) for the joint venture to be
eligible for ACDBE credit.
The agreement should specify the frequency of the management committee meetings, and
formal agendas and meeting minutes should be prepared.
JV Profits
Each JV partner must share in the profits in proportion to their ownership interest.
Accounting methods and the timing of distribution should be included in the agreement and
reviewed for reasonableness by the airport.
There should be no provisions in the agreement which have the effect of creating separate profit
centers to siphon profits before each participant’s share is calculated.
Airports are to carefully examine all accounting mechanisms to ensure that the distribution
process is reasonable.
The joint venture agreement should specify the timing of the distributions.
Profits – Amounts of Distributions
Definitions such as ‘net profit’ or ‘distributable income’ come into play – read the definition
sections of agreements
Potential ‘siphons’
• Administrative/management/service fees
• Franchise fees/royalties/license fees/branding fees
• Administrative employees of non-ACDBE directly charged to JV
• Consultants to JV
• Reserves
• Loan paybacks
• Etc., etc., etc.
Who determines if there is ‘enough’ cash to make disbursement?
Loans Between JV Partners
If ACDBE cannot obtain independent financing, the non-ACDBE may provide financing with the
following conditions:
• Terms and conditions comparable to prevailing market conditions in terms of such factors as
duration, rate, fees, etc.
• Must have promissory note or loan agreement clearly stating due date and payment method,
interest rate, prepayment, defaults, and collateral.
• Full recourse note personally guaranteed by the ACDBE and/or secured by assets outside of the
ownership interest or future profits of the joint venture.
• Should not be for 100% of the capital requirement (max. 90%)
Loans Between JV Partners
Should not be longer than the term of the contract under which the joint venture operates
(excluding options or extensions).
No provisions in the loan agreement which have the effect of limiting the ACDBEs ability to
control its business or independently perform its designated role in the joint venture’s business.
Loans Between JV Partners
Does the non-ACDBE have authority to:
• Loan money to the JV in lieu of making an additional capital call
• Automatically convert an ACDBE capital call liability as a loan to the JV
• Typically at a much higher rate than an anticipated loan to the ACDBE
• Automatically allow the non-defaulting member to pay a defaulting member’s capital and
assess a loan
Can non-repayment of loan or non-contribution of capital dilute ACDBE’s interest in the JV?
• This triggers an immediate ACDBE counting issue for the JV, along with a
reduction in distribution
Terminations and Defaults
Carefully read any term that discusses
• Change in control event
• Redemption event
• Default
Carefully review the sliding scale of how the ACDBE shares will be bought back in the event of
any termination or default
Restrictive Conditions
Exclusivity and non-competes
• Not only an impact on growth, but can also impact the ‘independence’ of an ACDBE
Actions for which sanctions only apply to the ACDBE:
• Unlawful acts
• Tax issues
• Financial issues outside of the JV
• Transfer of ownership
Monitoring
Monitoring Concessions
It is the responsibility of the airport to:
• Monitor that ACDBEs are operating as agreed to in their lease or joint venture agreement
• Confirm that all ACDBE participation is real and meaningful
• Monitor the operation of joint ventures to ensure that the joint venture is operating as
intended and approved,
If the ACDBE is found to have relinquished an element of control in the joint venture or its
location, the airport should immediately review the firm’s certification eligibility or refer the
matter to the certifying authority, and where appropriate, initiate decertification of the firm
in accordance with § 26.87
Monitoring Concessions
Most airports have a formal monitoring program that includes, at a minimum, the
following elements:
• Annual verification of the status of the ACDBEs certification eligibility
• On-site visits to the operation
• Review of new and revised JV agreements
• Periodic (not less than annual) review of the managing entity’s meeting minutes and reports
• Periodic interviews with ACDBE operators and joint venture participants, managers,
and employees
• Review of any documentation, including financial reports and agreements, necessary to
ensure compliance with the agreement
Reporting
Reporting
Annual reports from Airports to the FAA
• ACDBE reports due March 1
• Covers previous Federal fiscal year (Oct 1 – Sept 30)
• Reported in FAA Civil Rights Connect System
Sales information must be provided to the Airport in order for this reporting to be completed
In addition to the form, information on each ACDBE is provided to the FAA
FAA
Required
Reporting
Form
Questions?