The DOT’s Disadvantaged Business Enterprise Program—Is the End Imminent?

By John F. Finnegan III and Thomas C. Dossey

Published in the Fall 2025 Issue of Surety Bond Quarterly

FOR MORE THAN 40 years, the U.S. Department of Transportation (DOT) has administered its Disadvantaged Business Enterprise (DBE) contracting program, which is designed to satisfy Congress’s mandate that at least 10% of federal highway construction funds be paid to small businesses owned and controlled by “socially and economically disadvantaged” people. This DBE program, however, may soon be “dead on arrival,” as recent litigation heads to an outcome with sweeping consequences for contractors as well as sureties who do business with them.

DOT’s DBE Program
Enacted in 1983 1, the DOT’s DBE program requires recipients of federal funds and grants—typically, state and local transportation agencies—to establish their own programs reflecting certain “participation goals.” These goals aim to allocate no less than 10% of federal monies to DBEs, that is, businesses owned and controlled by “socially and economically disadvantaged individuals.” Since its inception, the DBE program has been reauthorized periodically by Congress, including, most recently, in the 2021 Infrastructure Investment and Jobs Act. In passing that law, Congress found “discrimination and related barriers continue to pose significant obstacles for minority- and women-owned businesses.”2

To determine who is disadvantaged and therefore qualifies for DBE status, the program defines “socially disadvantaged individuals” as “those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group.” Similarly, “economically disadvantaged individuals” are those individuals “whose ability to compete in the free market enterprise system has been impaired due to diminished capital and credit opportunities.”3 Under the implementing regulations, only members of the following groups are entitled to a rebuttable presumption of social and economic disadvantage: “Black Americans,” “Hispanic Americans,” “Native Americans,” “Asian Pacific Americans,” “Subcontinent Asian Americans,” and women (of any race).4 Applicants for DBE certification who do not fall within any of these pre-selected racial, ethnic, or gender groups enjoy no such presumption. Instead, applicants must prove they are, in fact, socially and economically disadvantaged for their businesses to achieve DBE status.5

The DBE program forbids recipients of federal funds from utilizing quotas.6 Nevertheless, if recipients cannot meet their overall DBE “participation goals” through race- and gender-neutral means (for example, by awarding a prime contract to a DBE through customary competitive procurement procedures), they must set goals for DBE subcontractor participation on specific contracts.7 Notwithstanding the nominal prohibition of quotas, critics have long maintained that the DBE program functions as an unconstitutional quota-based program that improperly uses race and gender classifications to confer a preferred contracting status upon DBE contractors. And that criticism is rapidly gaining judicial traction—most prominently, in a pending case in the Eastern District of Kentucky titled Mid-America Milling Co., LLC, et al. v. United States Department of Transportation, et al. (MAMC Litigation), in which the DBE program’s facial constitutionality has been challenged.

MAMC Litigation—Challenging the Constitutionality of the DBE Program
In October 2023, two contractors filed suit against the DOT, asserting that the DBE program’s use of race and gender preferences is fundamentally at odds with constitutional equal protection guarantees.8 As they argued, DBE participation goals “amount to discriminatory barriers” that prevent non-DBE companies from competing “on equal footing” for a finite number of lucrative contracts. Accordingly, the MAMC contractors sought to “end[] the DBE program once and for all.”9

From a legal standpoint, the contractors principally relied upon the Supreme Court’s landmark decision in a wholly different context: college admissions. In Students for Fair Admissions, Inc. (SFFA) v. President & Fellows of Harvard College, 600 U.S. 181 (2023), the Supreme Court held that certain race-based admissions programs violated the Equal Protection Clause.10 As the Court explained, the programs neither (i) furthered the compelling government interest of “remediating specific, identified instances of past discrimination,” nor (ii) was their use of race necessary to achieve any compelling interest; and moreover, (iii) they lacked any temporal end point.11 Seizing upon this underlying rationale, the MAMC contractors cited extensively to SFFA to support their argument that the DBE program’s use of race and gender preferences is likewise unconstitutional.12

Under the previous presidential administration, the government resolutely defended the DOT’s DBE program. It argued that race-based measures may be used “when necessary to dispel the effects of invidious discrimination,” established by statistical proof of discriminatory acts.13 The government emphasized that unlike admissions programs, “DBE participation is not capped at a certain number, and the program provides an avenue for members of any group of any race or gender to apply for DBE certification on the basis of their social and economic disadvantage.”14

Preliminary Injunction Granted; DBE Program Is Likely Unconstitutional
In a resounding victory for the contractors, the MAMC Court determined in the fall of 2024 that the DBE program’s race and gender classifications violate the Constitution’s guarantee of equal protection. The Court dismissed the argument that the classifications addressed specific episodes of past, intentional government discrimination, reasoning that the DOT’s statistical evidence—even its “extensive portfolio of studies that show disparities exist for minority-owned businesses”—was simply too broad and imprecise.15 Indeed, the Court was unflinchingly “skeptical” of the DOT’s “societal discrimination” evidence, concluding it was inadequate to support the DBE program’s use of racial and gender classifications.16

Additionally, the Court determined the DBE program’s race- and sex-based presumptions were too expansive given the program’s purpose. Relying in part on SFFA, it found that providing the rebuttable presumption of “socially disadvantaged” to individuals from only some minority groups contradicted the DOT’s stated interest to broadly remediate past discrimination against minority-owned businesses.17 The Court concluded such a “scattershot approach” fell woefully short of prevailing constitutional requirements.18

While the MAMC Court acknowledged that non-minority-owned firms may apply for DBE certification on a case-by-case basis, it summarily rejected the notion that the program was therefore constitutionally sound. Instead, it determined non-DBE firms are placed on an unequal playing field to compete against DBE firms based on their owners’ race and sex.19 Such a disadvantage is not immaterial: according to the MAMC contractors, the DBE program covers over $37 billion for federally funded highway and transit construction contracts.20 The MAMC Court also found no logical or foreseeable end point for the DOT’s use of racial preferences.21 Accordingly, the Court issued a preliminary injunction barring federal officials from mandating the use of race- and gender-based rebuttable presumptions for DOT contracts.22 This injunction was limited, however, to those contracts both impacted by DBE goals and located in the states in which the MAMC contractors operate.:23

New Presidential Administration Agrees that the DBE Program’s Racial and Gender Classifications Are Unconstitutional
Approximately one week after the MAMC Court clarified the scope of its preliminary injunction, the 2024 U.S. presidential election took place. With that election came a new administration and its markedly different views on the propriety and constitutionality of the DBE program.

The DBE die was cast immediately with the issuance of twin executive orders (EOs) on January 20 and 21, 2025: (i) EO No. 14151, titled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” which called for the termination of all discriminatory programs within the federal government “under whatever name they appear”; and (ii) EO No. 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” which directed all executive agencies to terminate “all discriminatory and illegal preferences, mandates, policies, programs … and requirements.” While neither EO expressly mentioned the DOT’s DBE program, each one portended its eventual fate.

Sure enough, on May 28, 2025, the government stipulated that the DBE program’s use of race- and gender-based presumptions violates the equal protection guarantee of the Constitution and joined the contractors in a motion for consent order and entry of a permanent injunction.24 That requested injunction would preclude the government from approving “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 raceor sex-based presumption.”25 Shortly thereafter, the MAMC Court stayed the case until September 5, 2025, and took the joint motion under advisement.26

Conclusion
The convergence of the preliminary injunction ruling with the government’s newfound position that the DBE program’s race- and gender-based presumptions are unconstitutional, represents an immense paradigm shift in the world of DOT-let contracting. The high stakes are clear; in the last several months, various parties have intervened in the MAMC action and numerous amici curiae briefs have been filed by states, businesses, and interest groups both supporting and opposing the proposed consent order.

For now, uncertainty reigns for DBE and non-DBE contractors—as well as their sureties. Firms awarded DBE contracts may be disrupted by court action impacting the administration of projects or even the viability of the entire DBE program. Sureties that have issued related performance bonds will be well served to carefully monitor any further developments and their principals’ performance in this evolving landscape.

Non-DBE contractors must continue to operate within the strictures of the DBE program; however, depending on the nature and scope of the impending MAMC decision, non-DBE contractors may soon be able to bid for a large swath of federal contracts on equal footing with DBE contractors. Additionally, if non-DBE firms are no longer required to award subcontracts to more expensive DBE firms to fulfill participation goals, they may submit lower bids, which, naturally, have a greater likelihood of being accepted. Either result could increase the volume and scale of bonding opportunities for surety clients that have been negatively impacted by the DBE program.

While only the Court itself knows its next steps, all signs point toward entry of the consent order and permanent injunction, provided it does not amount to an impermissible “nationwide” injunction.27 All eyes will be on the MAMC Court this fall, as the end of the DOT’s DBE program may well be imminent.

End Notes

  1. See Surface Transportation Assistance Act of 1982, Pub. L. No. 97-424, § 105(f) (1983).
  2. See Pub. L. No. 177-58, § 11101(e), 135 Stat. 429, 448 (Nov. 15, 2021).
  3. See 15 U.S.C. § 637(a)(5), (6) & (d).
  4. See 49 CFR § 26.5; 49 C.F.R. § 26.67(a)(1).
  5. 49 C.F.R. § 26.67(d) & app. E.
  6. 49 C.F.R. § 26.43(a).
  7. 49 C.F.R. § 26.51(a), (d), (e).
  8. MAMC Compl. ¶ 1.
  9. MAMC Compl. ¶¶ 1, 10.
  10. SFFA, 600 U.S. at 206—218.
  11. SFFA, 600 U.S. at 206—218.
  12. MAMC Compl. at ¶¶ 1—10.
  13. MAMC Mot. Dismiss at 8—17.
  14. MAMC Mot. Dismiss at 17.
  15. MAMC 9/23/24 Op. & Order at 15—18.
  16. MAMC 9/23/24 Op. & Order at 17, 23.
  17. MAMC 9/23/24 Op. & Order at 19—20.
  18. MAMC 9/23/24 Op. & Order at 19—20.
  19. MAMC 9/23/24 Op. & Order at 20.
  20. MAMC Compl. ¶ 3.
  21. MAMC 9/23/24 Op. & Order at 21.
  22. MAMC 10/31/24 Op. & Order at 7—8.
  23. MAMC 10/31/24 Op. & Order at 7—8.
  24. MAMC Consent Order ¶¶ 5, 8—9, 12.
  25. MAMC Consent Order ¶ 12.
  26. MAMC Order Granting Stay ¶¶ 4, 6.
  27. Trump v. CASA, Inc., 145 S.Ct. 2540 (2025).