Update on DBE Legal Challenges
- administration478
- May 29
- 4 min read
Updated: Oct 14
ACEC continues to closely monitor the pending legal challenges to the federal Disadvantaged Business Enterprise (DBE) program and potential regulatory changes. There were significant developments in the case (Mid-America Milling) this week.
Yesterday, the U.S. DOT and the plaintiff contractors filed a joint motion for a consent order to settle the case:
The draft ruling that they want the judge to sign is here:
Essentially, it says the U.S. DOT agrees that the presumption of economic disadvantage based on race or gender is unconstitutional.
If granted, the court ruling would hold that U.S. DOT and FHWA “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 presumption.” If granted, the court’s ruling would essentially impose a nationwide injunction on implementing the DBE program.
However, at this point, this is only a motion from the two parties. Last week, the court allowed several groups of minority contractors to directly intervene in the case and defend the constitutionality of the DBE program. The DOT and plaintiff contractor motion for a final order does not take their position into account. I don’t know whether or how that would change the timing or substantive outcome of the court’s decision on the motion, or any likely appeal of the ruling. I have reached out to a few attorneys who are closely tracking this case for their views.
Regardless, I think this development is significant because it clearly indicates the Administration’s position on the unconstitutionality of the DBE program.
We will continue to provide updates on this and related activity, including any guidance or directives from U.S. DOT.
As of 10/3/25
Please see below for information from my colleague Matt Reiffer, ACEC Vice President and Advocacy Counsel, regarding the interim final rule just released by the Department of Transportation making significant changes to the disadvantaged business enterprise (DBE) program.
The U.S. Department of Transportation has announced significant changes to the Disadvantaged Business Enterprise (DBE) program. Please circulate this information to your members.
U.S. DOT has issued an Interim Final Rule (IFR) that removes the race- and gender-based presumptions of social and economic disadvantage in the DBE program. The DOT cites the constitutional arguments and the judge's preliminary ruling in the federal case in Kentucky, among other legal precedents. While acknowledging that the proposed consent decree in the court case is still pending and a final ruling not made, DOT states that they have concluded that the rebuttable presumption is unconstitutional and a change to the program is required. That said, this action by U.S. DOT creates the possibility of a legal challenge to the rules change for failure to comply with the Administrative Procedure Act, especially since the underlying lawsuit challenging the constitutionality of the DBE program is not yet settled.
The Interim Final Rule states that it will go into effect immediately upon publication in the Federal Register. There is a 30-day comment period, but DOT cites the unconstitutionality of the current law as justification for moving straight to a final rule to take immediate effect.
Going forward, all applicants will have to provide a narrative and evidence of individualized social and economic disadvantage. This is similar to the changes made to the Small Business Administration (SBA) 8(a) program in response to constitutional challenges.
Key components of the rule:
Re-certification: Every currently certified DBE will lose certification and must undergo reevaluation. Firms will be required to submit new documentation and personal narratives to establish eligibility.
Note that as far as I can tell, existing contracts would not be impacted. Firms will need to go through recertification and agencies will need to redo their goals, but nothing compels agencies to recompete exiting contracts. We are working to confirm this understanding.
Burden of proof: The burden of proof is on the applicant firm.
Suspension of goals: Until reevaluation is complete by the certifying agency, federal funding recipients may not set DBE contract goals or count DBE participation toward existing goals.
Retention of Personal Net Worth cap: The rule retains compliance with the PNW cap in the current program.
There are also other changes to record-keeping and recording, goal setting, and how disparity studies are conducted.
The IFR is here.
DOT guidance on the changes is here.
It is not clear when the Interim Final Rule will be published and go into effect. During the lapse in appropriations and government shutdown, the Office of the Federal Register only publishes documents "directly related to the performance of governmental functions necessary to address imminent threats to the safety of human life or protection of property and may publish documents related to funded programs if delaying publication until the end of the appropriations lapse would prevent or significantly damage the execution of funded functions at the agency… unless the document was received and scheduled for publication before the appropriations lapse began." It's not clear whether the IFR meets those standards.
It is also unclear whether and when FHWA might update their regulations and guidance for the intersection of the DBE program and QBS procurements under 23 C.F.R. 172.
We are in touch with AASHTO and other stakeholders and will circulate additional information and analysis as it becomes available.