The U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) program, a long-standing initiative aimed at promoting equity in federal contracting, is facing significant legal challenges that could reshape its future. 

A recent injunction issued by a federal judge has raised questions about the program’s constitutionality and its reliance on race- and gender-based presumptions.

The DBE program, established in 1983 and reauthorized in 2021 as part of the Infrastructure Investment and Jobs Act, sets a goal of awarding at least 10% of federally contracted project funds to DBEs. These businesses are owned and controlled by individuals who are socially and economically disadvantaged, including women and minorities.

However, a lawsuit filed by two Indiana-based highway contractors, Mid-America Milling Co. and Bagshaw Trucking, argues that the program’s presumption of disadvantage based on race and gender violates the Fifth Amendment’s equal protection clause. They claim this creates an uneven playing field and has caused them to lose contracts despite being the lowest bidder.

U.S. District Judge Gregory Van Tatenhove, presiding over the case in the Eastern District of Kentucky, issued an injunction on September 23, 2024, prohibiting DOT from using these presumptions in certain contracts. Initially, the injunction appeared limited to Kentucky and Indiana, where the plaintiffs operate. However, a subsequent clarification on October 31 expanded the scope to “any state in which Plaintiffs operate or bid on such contracts.”

This clarification has significant implications, as the plaintiffs currently do business in at least 23 states, including Tennessee, Arkansas, Ohio, Mississippi, and many others. Furthermore, because DOT cannot predict where these contractors might bid in the future, the injunction could effectively weaken the DBE program nationwide.

Attorneys following the case believe this ruling could embolden other contractors to challenge the program, potentially leading to further injunctions and a broader reassessment of its legality. Chris Slottee, an attorney at Schwabe, Williamson & Wyatt in Anchorage, Alaska, stated, “This could cause the DOT to hesitate to use the DBE program going forward, given that the DOT will not know what projects the plaintiffs are, or are not, going to bid upon.”

While DOT maintains its commitment to defending the program, it acknowledges the need to comply with the court’s ruling. A DOT spokesperson stated, “As the case moves forward, we will continue to defend the program. In the meantime, we will comply with the court’s ruling, and the program otherwise remains in effect.”

The legal challenges facing the DBE program mirror similar challenges to other federal programs aimed at promoting equity and inclusion. Earlier this year, the Small Business Administration’s 8(a) program, which assists socially and economically disadvantaged businesses, was also forced to alter its requirements following a lawsuit. The SBA now requires applicants to provide a narrative demonstrating their disadvantage, rather than relying on presumptions based on race or ethnicity.

The outcome of the Mid-America case and other potential challenges could have far-reaching consequences for the DBE program and its ability to achieve its goals. It remains to be seen whether DOT will be able to successfully defend the program or whether it will be forced to make significant changes to its structure and implementation, possibly also moving toward requiring a statement demonstrating an individual's disadvantage rather than basing it on a individual's gender or racialized status.

As the legal battles continue, the future of the DBE program hangs in the balance, with potential implications for countless minority- and women-owned businesses that rely on it for access to federal contracting opportunities. 

The construction industry, policymakers, and advocates will be closely watching the developments in this case, as its outcome could reshape the landscape of federal contracting and the pursuit of equity in the years to come.