The U.S. DOT has issued an Interim Final Rule (“IFR”) that removes the race- and gender-based presumptions of social and economic disadvantage in the DBE program. The DOT cites the constitutional arguments and the judge’s preliminary ruling in the federal case in Kentucky, among other legal precedents. Mid-America Milling Co. v. USDOT (E.D. Ky.): Preliminary injunction (Sept. 23, 2024; clarified Oct. 31, 2024) barring DOT from mandating use of race- and gender-based rebuttable presumptions on bids involving the plaintiffs, applicable wherever they bid. While acknowledging that the proposed consent decree in the court case is still pending and a final ruling not made, U.S. DOT states that they have concluded that the rebuttable presumption is unconstitutional and a change to the program is required. Nevertheless, this action by U.S. DOT creates the possibility of a legal challenge to the rules change for failure to comply with the Administrative Procedure Act, especially since the underlying lawsuit challenging the constitutionality of the DBE program is not yet settled.
The IFR states that it will go into effect immediately upon publication in the Federal Register. There is a 30-day comment period, but U.S. DOT cites the unconstitutionality of the current law as justification for moving straight to a final rule to take immediate effect.
From now on, all applicants will have to provide a narrative and evidence of individualized social and economic disadvantage. Key components of the rule:
- Re-certification: Every currently certified DBE will lose certification and must undergo revaluation. Firms will be required to submit new documentation and personal narratives to establish eligibility.
- It does not appear that existing contracts would be impacted. Firms will need to go through recertification and agencies will need to redo their goals, but nothing compels agencies to recompete existing contracts. We are working to confirm this understanding.
- Burden of proof: The burden of proof is on the applicant firm.
- Suspension of goals: Until reevaluation is complete by the certifying agency, federal funding recipients may not set DBE contract goals or count DBE participation toward existing goals.
- Retention of Personal Net Worth cap: The rule retains compliance with the PNW cap in the current program.
It is not clear when the IFR will be published and go into effect. During the lapse in appropriations and government shutdown, the Office of the Federal Register only publishes documents “directly related to the performance of governmental functions necessary to address imminent threats to the safety of human life or protection of property and may publish documents related to funded programs if delaying publication until the end of the appropriations lapse would prevent or significantly damage the execution of funded functions at the agency, unless the document was received and scheduled for publication before the appropriations lapse began.” It’s not clear whether the IFR meets those standards.
Steps a DBE Firm Should Take Considering the USDOT IFR (September 30, 2025)
Start Preparing a “Story”
- Work on a narrative to show how you are socially and economically disadvantaged as an individual, including specific barriers you have faced in education, employment, financing, or business that has caused measurable hardship.
Stay Informed and Monitor Developments
- Closely monitor USDOT websites for updates on the IFR (issued September 30, 2025), as well as any new guidance or FAQs.
- Subscribe to the USDOT DBE listserv and your state’s Unified Certification Program (“UCP”) updates to receive timely alerts about changes to certification, counting, or contract goal requirements.
- Watch for communications from your certifying agency regarding any changes to forms, reporting, or compliance expectations.
Review and Update Certification Status
- Ensure your DBE certification is current and that all required annual affidavits or “no change” declarations have been submitted.
- Confirm that your firm’s NAICS codes and work types listed in the UCP directory accurately reflect your current capabilities. If you have expanded services, request an update before bidding on new work.
- If you operate in multiple states, review and comply with any new interstate certification requirements or documentation requests.
Prepare for Contracting and Bidding Changes
- Anticipate that some solicitations may be amended or reissued to reflect new DBE goal-setting or race-neutral compliance requirements, especially if the court approves the pending consent order.
- Document all outreach and good faith efforts, even if contract goals are reduced or eliminated, as agencies may still require evidence of efforts to include DBEs.
- Be prepared for increased emphasis on prompt payment, retainage, and documentation of commercially useful functions.
Strengthen Internal Compliance and Recordkeeping
- Update your internal compliance procedures to align with the new rules, including documentation of ownership, control, and commercially useful function.
- Maintain thorough records of all contracts, subcontracts, payments, and communications with primes and agencies.
- Ensure your staff understands the new requirements and is trained on compliance best practices.
Engage with Primes and Agencies
- Proactively communicate with prime contractors about your firm’s capabilities, certification status, and readiness to comply with new requirements.
- Ask primes and agencies for clarification if solicitations or contract requirements are unclear or appear to be changing.
- Participate in outreach events, pre-bid meetings, and supportive services programs to stay visible and competitive.
Plan for Contingencies
- If the court approves the consent order or further changes are announced, be ready to adapt quickly to a more race-neutral DBE program structure.
- Monitor for new small business opportunities, unbundled contracts, or supportive services that may be offered as agencies shift their compliance strategies.
If you are interested in discussing what this means for your business, please feel free to contact us.
