A legal settlement filed this week may lead to the dismantling of the federal Disadvantaged Business Enterprise (DBE) Program, a policy that has guided the allocation of certain federal transportation funds since the early 1980s.
The DBE Program, established by Congress in 1983 and administered by the U.S. Department of Transportation (DOT), is designed to ensure that small businesses owned by individuals considered socially and economically disadvantaged have access to federally funded transportation contracts. The program generally sets a national goal that at least 10 percent of DOT financial assistance for transportation infrastructure be awarded to DBE-certified firms. These funds are distributed through state and local agencies.
The change follows a 2023 lawsuit filed by two Indiana-based construction companies-Mid-America Milling Company and Bagshaw Trucking Inc.—which challenged the constitutionality of the program. The plaintiffs argued that the DBE’s reliance on race- and gender-based presumptions conflicts with the Equal Protection Clause of the U.S. Constitution.
Initially, the DOT, under the Biden administration, defended the legality of the program. However, a recent filing by the Department of Justice indicates that the Trump administration disavows the government’s previous position. It now asserts that the DBE program is unconstitutional based on its reading of the 2023 U.S. Supreme Court decision that determined that race-conscious admissions programs at Harvard University and the University of North Carolina violated the Equal Protection Clause of the Fourteenth Amendment.
According to the DOJ’s statement, “Defendants, upon review of the DBE program and their position in this litigation, have determined that the program’s use of race- and sex-based presumptions is unconstitutional.” The proposed settlement would lead to the program being phased out, pending judicial approval.
The DBE Program currently supports an estimated 49,000 businesses nationwide. It has been one of the primary tools used by federal and state transportation agencies to increase participation from historically underrepresented business owners in public contracting.
Reactions to the proposed phase-out vary. Some view it as a necessary recalibration of federal policy in light of recent court decisions. Others have raised questions about how the change might affect small business participation and diversity in transportation contracting.
At this stage, no new program has been proposed to replace the DBE framework. As federal and state agencies assess the implications of the settlement, additional guidance may emerge regarding future procurement practices and eligibility standards.
Stakeholders across the legal, infrastructure, and small business communities are expected to follow the resolution of this case closely. However, it should be noted that the proposed settlement will be limited to the federal DBE program, and will not impact similar laws enacted at the state and local levels. Since Congress will likely address diversification of contracting opportunities as it considers the next surface transportation reauthorization bill in third quarter 2026,focus may well remain on federal programs for the near future.
