The Trump administration has proposed to a district court that the U.S. Department of Transportation’s program that sets aside a percentage of contracts for women- and minority-owned effectively be ended, arguing that it is unconstitutional.
Congress first enacted the Disadvantaged Business Enterprise program in 1983 and has reauthorized it numerous times, most recently as part of the 2021 bipartisan infrastructure law. The program’s primary goal is to remedy ongoing discrimination by directing at least 10 percent of federal transportation infrastructure funding to contracting firms that are owned and controlled by “socially and economically disadvantaged individuals.” Under the law, while any individual can qualify as socially and economically disadvantaged regardless of race or gender, certain racial groups and women are presumed to be disadvantaged, while other individuals must prove that they are socially and economically disadvantaged. The program is administered at the state and local level by transportation agencies who receive federal transportation dollars and contract directly with companies, including CRM firms.
In 2023, two Indiana-based non-DBE subcontractors, Mid-America Milling Company and Bagshaw Trucking, filed suit in the U.S. District Court for the Eastern District of Kentucky against the program, arguing that it discriminates on the basis of race and gender, therefore violating the equal protection component of the Fifth Amendment’s due process clause.
On September 23, 2024, the Court issued a preliminary injunction that prohibited USDOT from requiring the use of the DBE program’s race- and gender-based presumptions of disadvantage on USDOT-funded contracts on which the plaintiff companies bid for work as subcontractors. The Court noted that while the injunction was temporary and limited, it found that the federal government failed to justify the program and that the plaintiffs would “likely win on the merits of their constitutional claims.”
On Wednesday, the U.S. Department of Justice filed a motion with the Court agreeing with the plaintiffs’ contention that the program violates the Constituion’s equal protection clause and proposing a consent order that would prohibit using race or gender as a consideration in the approval of a DBE contract.
DOJ stated in their filing that a 2023 Supreme Court ruling (Students for Fair Admissions, Inc. v. President & Fellows of Harvard College) finding that race-conscious collegiate admissions policies are unconstitutional means that “the race- and sex-based presumptions in its DBE program can no longer pass constitutional scrutiny.” Should the judge approve the consent order, the USDOT would apparently still be able to set goals for awarding contracts for disadvantaged businesses, but not be able to use race or gender as a factor.
As a number of CRM firms that compete for transportation contracts are eligible as DBEs, ACRA is watching this case closely. If you have questions, please contact us at info@acra-crm.org.