The head of the state's largest airport recently notified the Federal Aviation Administration of "potentially noncompliant activity" related to the disadvantaged business enterprise certification of The Design Group, a Little Rock public relations and marketing firm that previously served as an airport subcontractor.
Over approximately 10 years, hundreds of thousands of dollars were paid to The Design Group by an airport advertising concessionaire.
But the public relations firm lacked certification as a disadvantaged firm when two initial contracts undergirding the deal were executed, records show.
The letter from Bryan Malinowski, the executive director of Little Rock's Bill and Hillary Clinton National Airport/Adams Field, was addressed to Kirk Brouwer, an official within the FAA's Office of Civil Rights who handles compliance for the federally regulated Disadvantaged Business Enterprise (DBE) and Airport Concession Disadvantaged Business Enterprise (ACDBE) programs.
Malinowski's letter was dated March 9. It was emailed to Brouwer the next day along with a packet of attachments illustrating the compliance issues, airport records show.
The letter concerned approximately $656,812 in payments to The Design Group from Clear Channel Airports, the airport-advertising arm of Clear Channel Outdoor, in its capacity as the Little Rock airport's advertising concessionaire over a period from 2012 to 2022.
The Design Group as well as another firm, Doyne Construction Company, were the designated local DBE partners on the Clear Channel advertising concession to achieve the airport's goal of 15% DBE participation.
The U.S. Department of Transportation's DBE and ACDBE programs are meant to encourage the participation of small businesses principally owned and controlled by individuals from socially and economically disadvantaged backgrounds with regard to federally funded highway, transit or airport projects.
Although the goals of the two programs are the same, the ACDBE program specifically applies to airport concessions and is governed by a different part of the Code of Federal Regulations. (Pursuant to federal regulations, the airport must presume a firm certified as a DBE is eligible to participate as an ACDBE, according to Malinowski.)
In his letter, Malinowski laid out a timeline of the events involving The Design Group's certification for the FAA's review.
The Design Group was already registered as a DBE on Jan. 17, 2012, the date when the Little Rock Municipal Airport Commission voted to award Clear Channel the advertising concession, but was decertified shortly thereafter, on March 28, 2012, according to the Arkansas Department of Transportation.
Even though The Design Group's certification at this point had lapsed, the airport's agreement with Clear Channel was executed on April 18, 2012 and, in turn, Clear Channel's agreement with The Design Group was executed May 1, 2012.
The Design Group later regained DBE certification in September 2015 and maintained the status until April 1, 2019, when the firm was decertified again. The period included a 2017 renewal of the advertising contract between the airport and Clear Channel.
In the letter, Malinowski wrote that portions of the approximately $656,812 Clear Channel paid to The Design Group "may have been incorrectly counted toward the airport's concession goal calculations. Given the potential noncompliance, the Airport is reviewing its 2022-2024 approved ACDBE goal and will submit a revised goal, if necessary."
Additionally, Malinowski made the FAA aware of changes to the airport's procedures regarding the certification of disadvantaged firms.
"In an attempt to improve our oversight, the Airport is changing our internal processes to include a quarterly review of ACDBE firms that do work as contractors and subcontractors on our behalf," he wrote. "Moreover, we are working on a system integration with [the Arkansas Department of Transportation] to periodically capture and validate ACDBE certifications."
The letter noted that neither Clear Channel nor The Design Group were under contract with the airport at the moment.
In July 2022, the Airport Commission voted to authorize a contract with a different advertising concessionaire, Departure Media, after Clear Channel declined to submit a proposal. The arrangement included no designated role for The Design Group.
Malinowski's letter to the FAA comes after Arkansas Democrat-Gazette reporting on The Design Group and its president and chief executive officer, Myron Jackson, who applied unsuccessfully for a seat on the seven-member Airport Commission earlier this year.
A March 5 article described Jackson's behind-the-scenes efforts in 2022 to secure a role for The Design Group while Departure Media was under consideration as the prospective advertising concessionaire.
Jackson had reached out to Departure Media and intimated that his involvement could bolster the deal as some members of the Airport Commission appeared to be reluctant to authorize an agreement with the new firm based in Charleston, S.C.
The Design Group has close ties to Little Rock Mayor Frank Scott Jr.
Jackson's wife, Stephanie, has served as a spokeswoman for Scott in government and on the campaign trail, and Scott's campaign reported paying The Design Group over $200,000 in expenses during the mayor's 2022 reelection bid.
Responding to questions in writing from the Democrat-Gazette, Malinowski said he learned of the potential noncompliance through the newspaper's reporting.
"Subsequently, I am obligated to report concerns in my role as executive director or the airport could face sanctions," Malinowski said in a set of responses provided by airport spokesman Shane Carter. "As a recipient of federal funds, we have signed grant assurances requiring the airport comply with regulations."
He had yet to receive a response from Brouwer, the FAA or other federal officials regarding the disclosures contained in the letter, according to Malinowski.
When asked how the payments from Clear Channel to The Design Group affected the airport's current 2022-2024 ACDBE goal, Malinowski said the airport had received no directive from the FAA regarding The Design Group.
However, the FAA had notified the airport that payments made to Doyne -- the other DBE partner in the Clear Channel advertising concession -- cannot be counted toward the goal.
"While Doyne Construction is a certified DBE, the FAA is advising the construction work that Doyne performed on advertising displays in conjunction to the Clear Channel contract does not qualify as work that an ACDBE is allowed to perform," Malinowski said.
A preliminary recalculation of the goal that subtracted payments to The Design Group during the final three-year period in which the firm was not certified as well as all payments to Doyne "resulted in only a 0.3 percent reduction in the goal due to substantially higher food, beverage and retail gross revenue that was included in the calculation," according to Malinowski. "For example in 2019, food, beverage and retail gross revenue equaled $9.38 million, compared to Clear Channel's gross revenue of $410,000."
ACDBE achievement reports for 2019, 2020 and 2021 had been revised to remove payments to the two firms and an updated goal calculation will be provided to the FAA for review, he said.
The airport also was seeking clarification from the FAA in light of a statement from an Arkansas Department of Transportation official contained in the March 5 article, Malinowski said.
"The DBE just has to be certified at the time of the contract award," department official Joanna P. McFadden wrote in response to questions at the time. "The prime contractor is not penalized if the certification is lost during the life of the project."
Malinowski said the airport's reading of the federal regulations required a company's certification to be current at the time of the contract's execution.
He cited the regulations' general instruction not to count a firm's participation toward any DBE goals if it is not certified "at the time of the execution of the contract."
Additionally, Malinowski pushed back on Jackson's contention in the March article that "a DBE certification is at the desire of the business submitting for one. It is unrelated and not needed to do business as an airport vendor. Our firm did not 'lose' the status, we elected to not submit for renewal for business reasons."
"Generally, a company does not have to be certified as a DBE to do business with the airport. However, our agreement with Clear Channel contained a 15% DBE goal, which required Clear Channel to maintain 15% DBE participation," Malinowski said. "Clear Channel reported to us it was meeting this goal by using The Design Group and Doyne Construction."
Both of the designated DBE firms "were required to maintain their certifications throughout the term of the agreement to fulfill the contractual obligation and to allow the airport to count their participation in our annual accomplishment report with the FAA," Malinowski added.
The airport's internal changes meant to strengthen monitoring and compliance were planned for several months before the situation involving The Design Group came to Malinowski's attention, he said.
Language in the 2012 contract between Clear Channel and The Design Group underscored the importance of the public relations firm maintaining ACDBE certification.
The contract said The Design Group's status as an ACDBE "is of great importance and a material concern of this Agreement. Contractor shall immediately notify [Clear Channel Airports], in the event it loses its certification or status as an ACDBE."
Should The Design Group no longer be certified as an ACDBE, Clear Channel had the right to cancel the agreement upon written notice of two weeks, the contract said.
FAA spokeswoman Elizabeth Isham Cory provided written responses to questions from the Democrat-Gazette in light of Malinowski's letter.
When asked about penalties associated with noncompliant activity under the DBE/ACDBE programs, the agency said, "The FAA works with the airport sponsor to achieve voluntary compliance when possible and would take additional, progressive actions as needed to secure compliance."
Regarding contractors or subcontractors, the FAA's response said, "Noncompliance by a contractor/subcontractor (concessionaire in this instance) would be dependent on the terms of the contract between the airport sponsor and concessionaire."
The FAA has not communicated with The Design Group on this matter, the agency said.
Clear Channel officials did not respond to questions via email. Jackson did not respond by press time to a request for comment via email that included a copy of the letter and attachments the airport provided to the FAA.