News Summary
The U.S. Department of Transportation has introduced a new interim rule that eliminates sex and race as criteria for automatic certification in the Disadvantaged Business Enterprise (DBE) program. Effective October 3, the update signifies that social and economic disadvantage will no longer rely on these factors, requiring a reevaluation of current DBEs on a case-by-case basis. This decision has sparked concerns among legal experts about the future of the 45-year-old program, which has historically supported minority- and women-owned businesses in federal contracting.
Washington, D.C. — On September 30, 2023, the U.S. Department of Transportation (DOT) announced an interim final rule that removes sex and race as criteria for automatic certification in the Disadvantaged Business Enterprise (DBE) program, effective October 3, 2023. Under the new regulations, determining social and economic disadvantage will no longer be based on these factors.
The rule change means that being born in a specific country will not automatically qualify a person as socially or economically disadvantaged. This shift is perceived by legal experts as significantly undermining the 45-year-old DBE program, which has been pivotal in supporting women- and minority-owned enterprises in federal contracting, particularly in the construction sector.
As part of this new policy, all current DBEs will have to undergo a reevaluation for certification on a case-by-case basis. Firms with existing DBE certifications will need to demonstrate their social or economic disadvantage without reference to sex, race, or ethnic origin. For those unable to meet the new criteria, decertification could follow, with no option for appeal.
All goals related to DBE participation are currently paused, pending this reevaluation process, affecting firms that rely on these designations for federal contract opportunities. Existing contracts that involve DBE requirements will likely still be enforceable, even as the criteria for certification change.
The DOT’s change comes just weeks ahead of the 2025 Construction Inclusion Week, scheduled to commence on October 13, which focuses on promoting diversity and inclusivity within the workforce. The timing highlights a broader push for diversity, even as the regulations governing DBE certification are tightening.
Currently, there are nearly 50,000 DBE-certified firms across the nation and about 3,500 additional firms in the DOT’s Airport Concessions DBE program. Each state, along with the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, is now tasked with reevaluating every certified DBE under the updated standards.
Firms that are certified as DBEs must prepare personal narratives to support their claims of disadvantage when they go through the new evaluation processes. The rule emphasizes that assessments will focus on other factors, as sex, race, and ethnic origin can no longer be considered under these guidelines.
The public has a 30-day window to comment on the new rule following its announcement, although the DOT bypassed standard public input procedures based on concerns of unconstitutional requirements. Legal experts have indicated that the new ruling could provoke additional lawsuits focused on its compliance with the Administrative Procedure Act, particularly in light of recent judicial decisions that have challenged reliance on race and sex in the DBE program.
This policy revision builds upon actions from the Trump administration, which had refrained from defending the DBE program’s racial and sexual criteria, electing instead to settle ongoing litigation connected to the matter. The landscape of the program has been evolving, especially after the Supreme Court’s ruling against affirmative action in higher education earlier this year.
As the construction industry prepares to navigate these significant regulatory changes, Construction Inclusion Week will proceed as planned, featuring programs designed to enhance workforce development and recruitment efforts in the sector. The industry faces a recalibration of how firms qualify for resources and opportunities, emphasizing the need for robust support in maintaining equitable access across diverse applicant pools.
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Additional Resources
- ENR: US DOT Calls DBE Program Unconstitutional
- Wikipedia: Disadvantaged Business Enterprise
- National Law Review: DBE Contracting After Affirmative Action
- Google Search: DBE Program Changes 2023
- JD Supra: Federal Highway Administration Releases Updates
- Encyclopedia Britannica: Disadvantaged Business Enterprise
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