Earlier this week, a Judge threw a wrench in the works of the Department of Transportation’s Disadvantaged Business Enterprise (DBE) program.
Unless you are in Kentucky or Indiana, there’s probably no immediate effect on you. But ultimately, this might lead to a more complex application process for the DBE program, and may even require existing DBEs to get recertified.
What Happened?
The DBE program is an important source of government contracting dollars to businesses owned by disadvantaged individuals. As one of several certifications available to disadvantaged businesses, it serves two functions: (1) directing a portion of federal transit dollars to disadvantaged businesses; and (2) helping state and local governments direct some of their own spending (transit or otherwise) to those businesses.
DBE certification is based on a “presumption” that business owners are disadvantaged if they are African American, Hispanic, Native American, Asian American, or female. Everyone else has to prove disadvantage on a case-by-case basis.
On September 23, a federal judge in Kentucky found this presumption unconstitutional, and blocked the DBE program in Kentucky and Indiana.
What Comes Next?
At first glance, this seems like huge news. Is this the end of the DBE program?
Probably not. We’ve been here before, and it wasn’t that bad. In 2023, a judge in Tennessee issued a similar ruling about the Small Business Administration’s 8(a) program. The SBA responded by requiring all applicants, regardless of race, to include a “Social Disadvantage Narrative” with their applications. Existing 8(a) firms were required to submit one of these narratives in order to win new contracts.
We at Potomac Contracting Solutions don’t have a crystal ball, but we’d be shocked if the DOT does anything significantly different. Our best guess is that, at some point in the future, DOT will revise the DBE application process to require a similar narrative, and may also require existing DBEs to submit one.
What Should I Do?
There are a few answers to this.
If you are currently a certified DBE (and don’t work in Kentucky or Indiana) the best answer is probably “nothing right now, but keep your eyes out.” Unless and until DOT issues new guidance, there is nothing for you to do. But, if and when DOT does issue new guidance, you’ll want to act fast to avoid missing any deadlines.
If you are in the affected states, the answer is more complicated. There likely won’t be any effect on existing contracts, but there may be some changes to open solicitations to remove or modify DBE set-asides or preferences. You should closely monitor any solicitations you’re interested in for these changes, and plan your bid or proposal strategy accordingly.
If you are planning to apply for DBE certification, our advice is to wait a bit. We can’t imagine that the application process makes it through this wholly unchanged, and you don’t want to waste time and effort moving through a process that’s about to be revised. (When this happened with the SBA, they moved pretty quickly – issuing new guidance within about a month.)
Regardless of who you are, the best answer to this question is to contact us! We’ll be monitoring closely for updates here. We can advise you through the application or recertification process, and well as help you apply for any other programs for which you might be eligible.