The U.S. Department of Transportation has filed an interim ruling dismantling a Reagan-era program that allocated federal funds to disadvantaged firms.
The interim final rule issued October 3 states the USDOT’s Disadvantaged Business Enterprise and Airport Concession Disadvantaged Business Enterprise programs will now be operated “in a nondiscriminatory fashion – in line with law and the U.S. Constitution.” The ruling specifically removes “race- and sex-based presumptions of social and economic disadvantage” and decrees the program must both help small businesses and serve the public.
USDOT enacted its first DBE program in 1983 and has since required a minimum 10% of authorized highway and transit federal financial assistance programs go to DBEs. The program was reauthorized by Congress in 1987 and amended to define women as a group presumed to be disadvantaged.
The current program requires that recipients of DOT funds establish goals for working with disadvantaged businesses and certify those firms are eligible to be considered DBEs.
Eligible firms – small, independent companies that are majority owned and controlled by a socially and economically disadvantaged individual – must apply for and receive a DBE certificate before qualifying for the program.
By redefining key aspects of the program, including changing terms such as “race-neutral” to “DBE-neutral,” the program will no longer include “presumption eligibility based on race and sex” and will now require small businesses to submit evidence to prove their qualifying social disadvantage, in addition to their economic disadvantage.
The interim ruling acknowledges these changes could increase the complexity, cost and time required for small businesses to qualify as DBEs but states many will continue to apply “because of the benefits to being certified and the potential opportunity it brings outweighs the added burden of the application process.”
The full interim final rule can be found here.
This new interim ruling, in laying out its case for the rule changes, references a case from September 2024 when two companies that sued the U.S. Department of Transportation over an affirmative action-style contracting program were awarded a preliminary injunction. In that instance, the judge wrote in his opinion that, “…remedying those [discriminatory] wrongs must still pass constitutional muster. The federal government cannot classify people in such a manner that violates the principles of equal protection.”
The plaintiffs in that September 2024 case were Mid-America Milling, based in Jeffersonville, Indiana, and hauling company Bagshaw Trucking, based in Memphis, Indiana.
