BUSINESS DEVELOPMENT - OPINION
Cracks in the ACDBE Bridge By Kevin Holt, Chief Financial Officer, H&H Hospitality
I
n 1980, when minority-owned businesses were awarded less than 1 percent of government contracts, the Airport Concession Disadvantaged Business Enterprises (ACDBE) Program was established to extend opportunities to these historically, socially and economically disadvantaged businesses. Since that time, the program has served as an economic bridge, resulting in over $500 billion in government contracts creating significant wealth for many business owners that historically never had access to such opportunity. More specifically, many operators of ACDBE-designated companies reached these unprecedented levels of success by offering goods and services within one of the country’s most coveted areas of commercial real estate–U.S. airports. But, as the program has aged, many current and potential ACDBE participants are finding that the program has weakened. It’s no longer as effective providing broad opportunities as it once was. As a 2014 Office of Inspector General (OIG) report acknowledged, the existence of “significant barriers for new DBE/ACDBE entrants… such as limited opportunities, infrequent turnover of existing DBE/ACDBE firms, lack of access to capital, high entry costs, and inexperience with the airport bidding process” has shown that
this bridge of creating historical wealth opportunities may have some cracks. We should keep in mind that the ACDBE bridge of opportunity—that many of us are now standing on—wasn't built by any one individual. There’s not a person, family or business who owns the rights, the franchise license or the exclusivity agreements qualifying as the only business able to prosper from this bridge. It is hypocrisy for us, the entire ACDBE community that has benefited from the program to make economic gains, to not genuinely support and assist others looking to gain in the same manner. We all must work together to ease the path of certification, lower the hurdles to participate and operate successfully, and lastly create a clear path to graduate from the ACDBE program. The process alone for becoming a new ACDBE-certified company is complicated at best. Once certified, the exorbitant costs to bid combined with the difficulties of securing the largely uncollateralized financing has proven to be a major roadblock for most small business owners; and therefore limits access to new entrants. According to U.S. Department of Transportation OIG reports, the program pool growth rate is less than 3 percent annually, and the annual graduation rate is closer
to 0 percent. Consequently, the vast majority of new opportunities are being awarded to only a select few historically successful operators and their affiliated and/or successor companies. Although this is partially due to industry traits, it also seems to be in the interest of beneficiaries. There’s no denying that the program has been successful in creating significant wealth opportunities. Unfortunately, the majority of opportunities have served a small number of operators. Let’s face it, there has been no genuine effort from within the industry to encourage firms to ever graduate from the program to allow opportunities to flow down to newer operators. It is also widely known that any seasoned attorney or accountant can easily navigate the loopholes to ensure that their firm indefinitely avoids graduation. As an industry, we’ve prioritized and fought to keep legacy operators in the program as long as possible, at the peril of new and potential participants. When the industry’s inside adage for survival is “Buy a larger house,” using the primary residence exclusion to reduce one’s personal net worth below $1.32 million, we should all recognize we have a problem.
// SUMMER 2017
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