Original Notice- November 3rd, 2023
We wanted to share what we’ve been tracking at the federal level about legal challenges to Disadvantaged Business Enterprise (DBE) contracting programs. This topic was discussed at the recent NAECE meeting, and we have been getting questions from member firms about the status and outlook.
In the wake of the Supreme Court decision in the Harvard admissions case earlier this year, in which the Court found that race-conscious affirmative action policies violated the Equal Protection clause of the 14th Amendment, many experts predicted that similar challenges will be made to race-based and gender-based government contracting preferences.
One such lawsuit was filed in federal court in Kentucky just a few days ago, challenging the U.S. DOT DBE program. I’ve attached the complaint, where you can see the legal arguments citing the Harvard decision. (H/T to Van Collins, who was notified by Washington DOT about it, even though it wasn’t in their jurisdiction.)
In August, another court in Tennessee ruled against the SBA 8(a) program, which is designed to improve contracting opportunities for socially and economically disadvantaged individuals. Citing the Harvard case, the court forced SBA to make changes to the automatic presumption of economic disadvantage:
As a result of the court’s ruling, the SBA has temporarily suspended new applications into the 8(a) program. They recently offered guidance, which can be found here, as well as instructions on how to write a compelling narrative for a successful application, which can read here. It’s our understanding that there are not many A/E firms that participate in this program, but it’s important to understand these developments because of the similarities to other DBE programs.
The ACEC Federal Agencies & Procurement Advocacy Committee has been monitoring the issue and circulating updates to members. The Army Corps included information on the changes to the SBA 8(a) program and related federal acquisition changes in a recent briefing – see slides 19-21 on the Industry Day presentation from August 31.
The ACEC Transportation Committee also discussed this issue at our meeting in Austin to get members to think ahead on how to position ACEC and the industry as DBE programs are challenged.
Update provided- September 24th, 2024
Yesterday, a federal judge in Kentucky ruled in favor of the construction contractors that filed a lawsuit challenging the constitutionality of U.S. DOT DBE contracting preferences. The judge granted a temporary injunction against the implementation of the program, but only for the two plaintiff companies and in the two states where they conduct business, Indiana and Kentucky. It was not a nationwide injunction.
The court’s ruling was that race-based and gender-based government contracting preferences violate the Equal Protection Clause of the Constitution and are not narrowly tailored enough to pass constitutional muster. The judge’s decision closely tracks the Supreme Court’s ruling in the Harvard affirmative action case from last year.
According to the judge’s decision, the Supreme Court has said that the government may remedy past discrimination only through a policy that targets a specific episode of past discrimination, where the discrimination was intentional, and the government had a hand in the discrimination to be remedied. “The Court in no way doubts that racial barriers still persist when it comes to the success of minority-owned businesses. But the Government’s evidence here is too broad. It points to societal discrimination against minority-owned businesses generally, but does not offer much evidence of past discrimination against the many groups to whom it grants a preference via the DOT’s DBE program.” In other words, the statistical disparity studies are not enough, and the program is not narrowly tailored to specific individuals or groups or with any outcome-based resolution or end point.
U.S. DOT has said they will comply with the judge’s decision for these two specific companies in those two states while they continue to defend the program in the courts. The final disposition of this particular case and the subsequent appeals process, including the implications for a nationwide ban or restriction on DBE programs, will take quite some time to play out. As we noted earlier, the judge’s ruling in this case is consistent with outcomes we’ve seen in other cases challenging other government procurement and contracting programs, including the SBA 8(a) program and the Minority Business Development Agency.
We will continue to engage U.S. DOT on this issue, particularly in how the agency may restructure existing programs going forward to comply with the parameters set out by the Supreme Court in the Harvard case. We’ll provide more information and analysis as it becomes available.
Update- November 1, 2024
I want to make you aware of a development in the federal lawsuit challenging the constitutionality of DBE programs. Yesterday the judge in the case granted the plaintiff’s motion to clarify/expand the preliminary junction to include any state where the two contractors (Mid-America Milling and Bagshaw Trucking) bid on work, not just Indiana and Kentucky.
Specifically, the court order says that the U.S. DOT and FHWA are “enjoined from mandating the use of race- and gender-based rebuttable presumptions for United States Department of Transportation contracts impacted by DBE goals upon which the Plaintiffs bid, to be effective in any state in which Plaintiffs operate or bid on such contracts.”
The plaintiff’s motion cited the intent to bid on work in Arkansas, Illinois, Iowa, Mississippi, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.
I expect that the U.S DOT will be working with the potentially impacted states on how to respond and comply. You may see notices from your DOTs on that soon. Other challenges may be filed by other contractors in other states.
Yesterday I talked with the senior advisor in the DOT Office of Civil Rights and asked her to keep us in the loop as this situation develops. She clarified that at this point the lawsuit still does not directly impact A/E services because it is limited to the contractors in the case, at least for now.
Matt Reiffer
Vice President, Infrastructure Programs
American Council of Engineering Companies
1400 L St. NW, Suite 400
Washington, DC 20005
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