Amount of Goal
The City of Phoenix (the “City”) overall goal for ACDBE participation in non-car rental concessions at Phoenix Sky Harbor International Airport (“PHX”) during the period beginning October 1, 2023, and ending September 30, 2026, is 29.3% of the total gross receipts for concessions at PHX. If conditions change, for example gross revenues increase for specific contracts at a rate disproportionate to the other contracts or a new contract goal is established as provided in the City’s approved ACDBE Program, the City will adjust the goal accordingly. The goal methodology is detailed below. The following are not included in the total gross receipts for concessions: (a) the gross receipts of car rental operations, (b) the dollar amount of a management contract or subcontract with a non-ACDBE, (c) the gross receipts of business activities to which a management contract or subcontract with a non-ACDBE pertains, and (d) any portion of a firm’s estimated gross receipts that will not be generated from a concession. The calculation for determining the overall goal for the three-year period is as follows.
Methodology used to Calculate Overall Goal
Overall goals for PHX have been determined by consolidating the total estimated gross revenues and estimated ACDBE gross revenues for continuing and new or anticipated concession agreements that will become effective during the goal period. Goals for each new concession are determined through an analysis of the opportunity, potential for ACDBE participation and the relative availability of ACDBE firms ready, willing, and able to perform under the agreement.
Step 1 – Development of a Base Goal
Continuing Contracts
The following is a summary of PHX concession contracts that will not be re-solicited during this three-year reporting period. Goals for these contracts are as previously established in the approved methodology developed during the last goal cycle and weighted by current and projected gross revenue performance in each concession category. Federal Fiscal Year 2022 gross revenues are shown on the charts below. Projections for FFY 2024 – 2026 are as described in the section of this report that discusses weighting.
Table 1 – Continuing Concession Contracts
Expiring or New Contracts
There are relatively few new concession contracts anticipated during this goal period as many contracts were resolicited during the previous three-year goal cycle in accordance with the previous triennial ACDBE goal. New concession contracts anticipated for FFY 2024 – 2026 are as described in Table 2 below.
Geographic Region
There are currently thirty-six (36) firms participating in non-car rental concessions at PHX. Nineteen (19) firms are headquartered in Arizona. The remaining seventeen (17) firms are from ten (10) different states. Thirteen (13) of these seventeen (17) firms are large firms that operate nationally or internationally and are located in numerous airports across the country. The remaining four (4) firms are from three (3) different states. It seems over-inclusive to include all firms located in a single state simply because one of the major national firms is headquartered in that state or because one small participant is from the state. Therefore, for the purposes of determining the geographic region to be used, we are including national and international firms that currently have a presence at PHX as being located in Arizona. Given this reclassification, thirty-two (32) of the thirty-six (36) participating firms (88.9%) are located in Arizona. We will therefore use the state of Arizona as the relevant geographic region for purposes of determining the ACDBE goal.
Availability
The base figure for the relative availability of ACDBEs for the above listed new concession opportunities has been determined using a number of data sources as follows:
1) Data from the Census Bureau County Business Patterns and the Arizona Unified Certification Program (AZUCP) DBE/ACDBE directory.
Using the Census Bureau County Business Patterns Data for the State of Arizona for applicable trades as listed below for 2021 (the most recent year available) and the AZ UCP Directory yields the following:
This data is flawed as the firms listed in the census have not expressed that they are ready, willing, and able to perform a concession contract at PHX. In comparison, those in the directory have made an effort to become certified, indicating that those firms are at least interested in operating at the airport.
2) Data from the Economic Census
Using the 2017 Economic Census (the most recent data available) for the State of Arizona provides information on the number of minority and women-owned firms for the listed trades. Note: The Census Bureau publishes an economic census every 5 years. Data for 2022 has not yet been published.
3) Active Participants List
There are currently thirteen (13) active participants in the PHX Food/Beverage concession program and fifteen (15) in the Retail concession program. ACDBEs represent 76.9% of the active participants in terms of number of Food/Beverage firms and 46.7% in terms of the Retail program. It should be noted that the proportion of gross revenues operated by ACDBE participants is significantly less than their representation in terms of the number of firms; these firms tend to operate smaller concessions or participate as owners of a minority share of a joint venture (Table 5).
Summary – Availability Data Sources
Given the above, the City has determined that each of the data sets contains issues and drawbacks. Therefore, the City has elected to use the average of all of the available data sets (using gross revenues of active participants rather than number) as the most reliable data sources for determining availability, recognizing that all sources have issues and limitations. Averaging the four results in the following:
Food/Beverage – 0.2% + 45.1% + 33.5% = 78.8%
78.8% ÷ 3 = 26.3%
Retail – 0.1% + 30.3% + 38.0% = 68.4%
68.4% ÷ 3 = 22.8%
Foreign Currency – Given the fact that there are no ACDBE Foreign Currency firms in the AZ UCP directory, we have elected not to set an ACDBE Goal for the Foreign Currency concession.
The base goal for availability for any upcoming food/beverage concession opportunities is 26.3%. (Note: None are planned at this time, however this is provided in the event that food/beverage opportunities are added).
The base goal for availability for the upcoming retail concession opportunities is 22.8%.
Foreign Currency – There are numerous challenges with implementing ACDBE participation in foreign currency concessions as there are no ACDBEs certified in this trade in the relevant geographic region and while there are seven certified firms in the FAA DBE-System, only one of the seven operates independently. These concessions most likely lend themselves to achieving ACDBE participation through the purchase of goods/services, however we have no data to support a goal for purchases. We will implement a reporting requirement in this concession opportunity when awarded to enable the setting of a purchasing goal in the future. The City will encourage ACDBE firms to submit bids and non-ACDBE firms to include ACDBE participants to the greatest extent possible.
Weighting of Base Goal for Continuing/Upcoming Opportunities
Passenger traffic at PHX has rebounded from the severe declines experienced during the COVID-19 pandemic. Calendar year 2022 enplanements were 3.9% below 2019 enplanements. For calendar year 2023 through May, enplanements are 5.4% greater than the same period in 2019. The City has weighted the base goal using 6% growth against the base year of 2019 and calculated availability by contract type for an average year. Assuming the rate of growth will be even amongst all categories, the goal would remain the same from year to year although the dollar amounts will increase significantly from year to year. The result is shown in Table 7 below:
Step 2 – Adjustments
The ACDBE regulation provides for a Step 2 adjustment of the developed base goal for a variety of factors, including the current capacity of ACDBEs to perform work in a concession program, as measured by the volume of work ACDBEs have performed in recent years. We have reviewed the ACDBE achievement for the most recent five-year period for direct participation only (excluding purchases) to provide for an adjustment of the base goal as follows:
RACE-NEUTRAL/RACE-CONSCIOUS GOAL
The goals set forth in this document have been set as race-neutral as the City has had success in meeting its race-neutral goal over the past 5 years.
The City may use the following race-neutral measures to facilitate ACDBE participation:
1. Locating and identifying ACDBEs and other small businesses that may be interested in participating as concessionaires under 49 CFR Part 23.
2. Notifying ACDBEs of concession opportunities and encouraging them to compete, when appropriate.
3. When practical, structuring concession activities to encourage and facilitate the participation of ACDBEs.
4. Providing technical assistance to ACDBEs in overcoming limitations, such as inability to obtain bonding or financing.
5. Ensuring that competitors for concession opportunities are informed during pre-solicitation meetings about how the sponsor’s ACDBE program will affect the procurement process.
6. Providing information concerning the availability of ACDBE firms to competitors to assist them in obtaining ACDBE participation; and
7. Establishing a business development program (see 49 CFR Part 26.35) or technical assistance program or taking other steps to foster ACDBE participation in concessions.
If during the term of these overall goals, the City projects that race-neutral measures, standing alone, are not sufficient to meet the overall goal, the City will use the following race-conscious measures to meet the goal.
1. Establish race-conscious concession-specific goals for particular concession opportunities.
2. Negotiate with potential concessionaires to include ACDBE participation through direct ownership arrangements or measures, in the operation of the concession.
3. With prior FAA approval, other methods that take a competitor’s ability to provide ACDBE participation into account in awarding a concession.
To ensure the City’s ACDBE program will be narrowly tailored to overcome the effects of discrimination, the City will adjust the estimated breakout of race-neutral and race-conscious participation as needed to reflect actual experience with ACDBE participation. The City will also track and report race-neutral and race-conscious participation separately if the City uses concession-specific goals. For reporting purposes, race-neutral ACDBE participation includes, but is not necessarily limited to, the following: ACDBE participation through a prime contract that an ACDBE obtains through customary competitive procurement procedures; ACDBE participation through a subcontract on a prime contract that does not carry an ACDBE goal; ACDBE participation on a prime contract exceeding a concession-specific goal; and ACDBE participation through a subcontract from a prime contractor that did not consider a firm’s ACDBE status in making the award.
The City will maintain data separately on ACDBE achievements in those contracts with and without concession-specific goals, respectively.
New Opportunities
If a new concession opportunity arises prior to the end of this goal period and the estimated average of annual gross revenues are anticipated to be $200,000 or greater, the City will submit an appropriate adjustment to the overall goal. This will be submitted to the FAA for approval prior to executing the new concession agreement (23.45(i)).
The City determines the market area for each concession opportunity separately since the market area may vary depending upon the size and nature of the specific opportunity. For example, the geographical area in which the substantial majority of firms that seek to do concessions business with the airport are located and the geographical area in which the firms receive a substantial majority of concessions related revenues are located may be national for large contracts and local or regional for smaller contracts. The market area is defined for each concession opportunity as it arises and as the City undertakes the goal-setting process.
Goods and Services
The City can meet the percentage goal by including purchases from ACDBEs of goods and services used in business conducted at PHX. The City, and the businesses at PHX, shall make good faith efforts to explore all available options to achieve, to the maximum extent practicable, compliance with the goal through direct ownership arrangements, including joint ventures and franchises. The dollar value from purchases of goods and services from ACDBEs may be added to the numerator, and the dollar value from purchases of goods and services from all firms (ACDBEs and non-ACDBEs) may be added to the denominator.
Management Contract or Subcontract
The City can meet the percentage goal by including any business operated through a management contract or subcontract with an ACDBE. The City, and the businesses at PHX, will add the dollar amount of a management contract or subcontract with an ACDBE to the total participation by ACDBEs in airport concessions (both the numerator AND the denominator) and to the base from which the airport’s percentage goal is calculated. However, the dollar amount of a management contract or subcontract with a non-ACDBE and the gross revenue of business activities to which the management contract or subcontract pertains will not be added to this base in either the numerator or denominator. While the City realizes that this appears to go against the normal rules and rationale for goal setting, the City understands that this method is nevertheless required by statute.
Consultation with Stakeholders
The City held a virtual stakeholder meeting on August 28, 2023. Invitees included all seven-hundred, eighty-seven (787) certified City of Phoenix Vendors, with separate invites sent to all one-hundred, fifty-six (156) current City of Phoenix Concessionaires, Vendors and Suppliers. Additionally, the stakeholders meeting was publicized to minority and women’s business groups, community and trade organizations identified in Table 9.
The City’s published announcement (in English and Spanish) regarding the stakeholder meeting and availability of the proposed goal and methodology for public review is included as Attachment A.
ACDBE GOAL and METHODOLOGY
Car Rental Concessions
Overall Goal Calculation for Car Rentals Concessions (49 CFR Part 23.53)
Phoenix Sky Harbor International Airport
FFY 2024 - 2026
Background
Phoenix Sky Harbor International Airport currently has six (6) car rental firms, operating a total of twelve (12) brands, based in its consolidated car rental facility at the airport. The current agreements will not expire during this goal period. FFY 2022 car rental concession revenues were approximately $570 million (a 2.0% decrease from 2019). Annual purchases of goods/services by car rental firms were approximately $59 million in FFY 2022.
In accordance with the regulation regarding ACDBE participation in Airport Concessions, we have conducted research to determine an appropriate ACDBE goal for car rental concessions at the airport. The methodology for setting the goals is included in this report.
49 CFR Part 23 provides the following guidance for establishing concession goals:
§ 23.51(a) Your objective in setting a goal is to estimate the percentage of the base calculated under §§23.47–23.49 that would be performed by ACDBEs in the absence of discrimination and its effects.
(1) This percentage is the estimated ACDBE participation that would occur if there were a “level playing field” for firms to work as concessionaires for your airport.
(2) In conducting this goal setting process, you are determining the extent, if any, to which the firms in your market area have suffered discrimination or its effects in connection with concession opportunities or related business opportunities.
(3) You must complete the goal-setting process separately for each of the two overall goals identified in §23.41 of this part.
(b) (1) Each overall concessions goal 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 your ACDBE program (hereafter, the “relative availability of ACDBEs”).
(2) You cannot simply rely on the 10 percent national aspirational goal, your previous overall goal, or past ACDBE participation rates in your program without reference to the relative availability of ACDBEs in your market.
(3) Your market area is defined by 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. Your market area may be different for different types of concessions.
Counting Participation in Car Rentals
Given the fact that there are no ACDBE car rental companies currently operating at the airport and few ACDBE car rental concession operators, none based in Arizona, we have elected to base the Car Rental ACDBE goal on the purchase of goods and services from ACDBE or potential/ACDBE firms. The regulation provides for counting ACDBE participation for car rentals as follows:
§ 23.53 How do car rental companies count ACDBE participation toward their goals?
(a) As a car rental company, you may, in meeting the goal the airport has set for you, include purchases or leases of vehicles from any vendor that is a certified ACDBE.
(b) As a car rental company, if you choose to meet the goal the airport has set for you by including purchases or leases of vehicles from an ACDBE vendor, you must also submit to the recipient documentation of the good faith efforts you have made to obtain ACDBE participation from other ACDBE providers of goods and services.
(c) While this part does not require you to obtain ACDBE participation through direct ownership arrangements, you may count such participation toward the goal the airport has set for you.
(d) The following special rules apply to counting participation related to car rental operations:
(1) Count the entire amount of the cost charged by an ACDBE for repairing vehicles, provided that it is reasonable and not excessive as compared with fees customarily allowed for similar services.
(2) Count the entire amount of the fee or commission charged by an ACDBE to manage a car rental concession under an agreement with the concessionaire toward ACDBE goals, provided that it is reasonable and not excessive as compared with fees customarily allowed for similar services.
(3) Do not count any portion of a fee paid by a manufacturer to a car dealership for reimbursement of work performed under the manufacturer's warranty.
(e) For other goods and services, count participation toward ACDBE goals as provided in part 26, §26.55 and §23.55 of this part. In the event of any conflict between these two sections, §23.55 controls.
(f) If you have a national or regional contract, count a pro-rated share of the amount of that contract toward the goals of each airport covered by the contract. Use the proportion of your applicable gross receipts as the basis for making this pro-rated assignment of ACDBE participation.
Example to paragraph (f): Car Rental Company X signs a regional contract with an ACDBE car dealer to supply cars to all five airports in a state. The five airports each account for 20 percent of X's gross receipts in the state. Twenty percent of the value of the cars purchased through the ACDBE car dealer would count toward the goal of each airport.
Market Area
Based on the types of goods/services purchased by the firms (e.g., auto repair, insurance, fuel, etc.), we have determined that the market area for the purchase of goods and services, with the exception of vehicle purchases, is the State of Arizona. The geographic region for the purchase of vehicles varies depending on the operator with some purchasing from dealerships within the state and others from various areas of the country, including from manufacturers. Therefore, we will use a national geographic region for vehicle purchases.
Goal-Setting Step I
The regulation provides the following examples of potential approaches for accomplishing Step 1, determining the base figure, as follows:
§23.51(c) Step 1. You must begin your goal setting process by determining a base figure for the relative availability of ACDBEs. The following are examples of approaches that you may take toward determining a base figure. These examples are provided as a starting point for your goal setting process. Any percentage figure derived from one of these examples should be considered a basis from which you begin when examining the evidence available to you.
These examples are not intended as an exhaustive list. Other methods or combinations of methods to determine a base figure may be used, subject to approval by the FAA.
(1) Use DBE Directories and Census Bureau Data. Determine the number of ready, willing and able ACDBEs in your market area from your ACDBE directory. Using the Census Bureau's County Business Pattern (CBP) data base, determine the number of all ready, willing and able businesses available in your market area that perform work in the same NAICS codes. Divide the number of ACDBEs by the number of all businesses to derive a base figure for the relative availability of ACDBEs in your market area.
2) Use an Active Participants List. Determine the number of ACDBEs that have participated or attempted to participate in your airport concessions program in previous years. Determine the number of all businesses that have participated or attempted to participate in your airport concession program in previous years. Divide the number of ACDBEs who have participated or attempted to participate by the number for all businesses to derive a base figure for the relative availability of ACDBEs in your market area.
(3) Use data from a disparity study. Use a percentage figure derived from data in a valid, applicable disparity study.
(4) Use the goal of another recipient. If another airport or other DOT recipient in the same, or substantially similar, market has set an overall goal in compliance with this rule, you may use that goal as a base figure for your goal.
(5) Alternative methods. (i) You may use other methods to determine a base figure for your overall goal. Any methodology you choose must be based on demonstrable evidence of local market conditions and be designed to ultimately attain a goal that is rationally related to the relative availability of ACDBEs in your market area.
We have decided to use the DBE Directories and Census Bureau Data method for determining availability as follows:
The most recent available census bureau data is for 2021. The NAICS codes for the various trades typically utilized by car rental concessions was determined through a previous survey of car rental concessionaires and research and are shown on the chart below.
