U.S. DOT Proposes Ending Key Provisions of DBE Program

What happened: In a federal court filing May 28, the U.S. Department of Transportation (U.S. DOT) moved to terminate key requirements of the Disadvantaged Business Enterprise (DBE) program.

Congress established the program more than four decades ago, citing the need to remedy past discrimination in transportation construction contracting. Recent litigation has challenged its constitutionality, contending that objective is inconsistent with subsequent regulations which have presumed women and people of certain races or nationalities to be “disadvantaged,” a major basis of eligibility for the DBE program. In this week’s proposed settlement to that case, the Department has “reevaluated [its] position” and now agrees the DBE program’s structure is unconstitutional. Thus, U.S. DOT has further agreed to prohibit federal-aid funding of projects incorporating DBE contract goals based on those presumptions.

Why it matters: The proposed consent order represents a major change in federal policy, intended to conclude or drastically alter the DBE program, which has long required at least 10 percent participation on federal-aid projects by DBE contractors and suppliers. Voluminous – and often burdensome – regulations for implementing the program have long been a policy focus for ARTBA, its chapters and members, including DBE firms themselves.

In October 2023, two non-DBE industry companies, Mid-American Milling Co. and Bagshaw Trucking, filed suit in a Kentucky federal district court, claiming damages for work lost to DBE firms in procurement for federal-aid projects. Defendants in the suit included U.S. DOT officials and the Federal Highway Administration (FHWA). In a series of preliminary orders issued last fall, Judge Gregory Van Tatenhove signaled his intention to declare the program unconstitutional.

Under President Biden, U.S. DOT and the Department of Justice defended the DBE program in court proceedings. However, the inauguration of President Trump brought a change in leadership to those departments and a new direction in the litigation. Secretary of Transportation Sean Duffy stepped in as a defendant, enabling the new administration to agree with the plaintiffs’ premise of unconstitutionality while attempting to settle the case as described.

What’s next: Judge Van Tatenhove must still approve the consent order. Before taking action, he will likely consider the arguments of several pro-DBE organizations and companies, which recently intervened as parties to the suit. ARTBA has urged FHWA to issue appropriate guidance addressing this week’s filing, as well as the judge’s final order, if and when it occurs. This will help state DOTs and industry begin planning for significant changes in procurement procedures, while seeking to maximize opportunities and efficiencies in contracting.

The proposed settlement pertains to the federal DBE program, but not similar laws enacted at the state and local levels. ARTBA will seek clarity on the future application of those requirements to federal-aid projects.

Finally, Congress will likely address diversification of contracting opportunities as it considers the next surface transportation reauthorization bill, due by October 2026. In recommendations approved by the ARTBA Board of Directors on May 7, the association urged Congress to comply with current DBE-related court rulings in doing so.

If you have questions or comments about developments in the DBE program, please contact ARTBA’s Rich Juliano  or Prianka Sharma.