DOT agrees to remove race, gender-based criteria from DBE program

Dive Brief:

• The DOT has agreed to settle a case challenging the constitutionality of its Disadvantaged Business Enterprise program, effectively barring women- and minority-owned companies from automatic inclusion in the initiative.
• In a joint motion filed May 28 in U.S. District Court for the Eastern District of Kentucky that still needs a judge’s approval, DOT agreed to no longer defend gender and race as presupposed qualifications for inclusion in the program. “USDOT has determined that the race- and sex-based presumptions in its DBE program can no longer pass constitutional scrutiny,” the agency wrote in court documents. 
• The move essentially abandons the fight taken on by former President Joe Biden’s administration to defend the program’s constitutionality after a U.S. Supreme Court ruling banned affirmative action in higher education admissions in 2023. 

Dive Insight:

Although the proposed settlement casts uncertainty around the future of the DBE program, which was started in 1983 under President Ronald Reagan, it isn’t an absolute death knell. 

For instance, the DOT could change the criteria for inclusion in the DBE program to look at specific circumstances, much as the Small Business Administration did for its similar 8(a) Business Development Program after a separate challenge was successful against that initiative. 

“What this means is that, if the consent order is entered, companies who qualified as DBEs due to race or gender alone will likely need to be recertified as disadvantaged based on a unique narrative of what they’ve actually experienced over the course of doing business,” said Christopher Slottee, an attorney at law firm Schwabe in Anchorage, Alaska, who specializes in federal contracting. “They’ll need to show they’ve actually been harmed due to their race or gender.” 

The settlement also still needs to be granted by the judge in the case. Beyond that, Democracy Forward, a liberal advocacy group that has been a vocal legal challenger to President Donald Trump’s policies during both of his terms, recently won a minor victory in gaining approval to intervene in the case, which is still ongoing. 

“The participation in this case is essential to allowing minority- and women-owned businesses to fight for themselves and their communities, and we are pleased that the court will allow their voices to be heard, said Sarah von der Lippe, counsel for the Minority Business Enterprise Legal Defense and Education Fund in a May 21 Democracy Forward news release praising that decision. 

Whatever the ultimate outcome of the case, the DBE’s future administration will likely be dramatically curtailed and increasingly complex, according to Slottee. He said based on the settlement in its current form, state DOTs would need to re-certify all existing DBE contractors without using an assumption of disadvantage based on gender or race alone to award any contracts under the initiative. 

In effect, the “DOT may not approve any federal, state or local DOT-funded projects with DBE contract goals where any DBE in that jurisdiction was determined to be eligible based on a race- or sex-based rebuttable presumption,” Slottee said in an email to Construction Dive. 

That means just a single participant certified under DBE’s old rules could now effectively block the program from making new awards going forward. 

“For example, if a single, individually owned company in the State of Alaska was certified as a DBE due to the rebuttable presumption, the DOT would be barred by the proposed consent order from approving any projects in Alaska that had DBE goals,” Slottee said. 

Affirmative action ruling

Shortly following the Supreme Court’s 2023 ruling on affirmative action in higher education, the Wisconsin Institute for Law & Liberty, a conservative advocacy group, filed suit against DOT on behalf of two White-owned businesses, Jeffersonville, Indiana-based Mid-America Milling Co. and Memphis, Indiana-based Bagshaw Trucking. 

It claimed that the DBE program, which aims to award 10% of federal contracts to disadvantaged businesses, was a legalized form of reverse discrimination, since women- and other non-majority-owned firms received automatic — or “presumed” — certification to participate based on race or gender alone. 

“All we want is a level playing field,” Kramer Koetter, president of Mid-America Milling, said in a news release. “If my team can put forth the best product or service at a reasonable cost, then we should be rewarded for that. The DBE’s removal returns common-sense back to contracting.