News Summary
The U.S. Department of Transportation has enacted a new rule eliminating race and sex as criteria for automatic certification in the Disadvantaged Business Enterprise (DBE) program. Effective immediately, this change mandates a case-by-case assessment for DBE certification, requiring businesses to demonstrate social and economic disadvantages without consideration of race or sex. Advocacy groups express concerns that this shift undermines decades of progress in promoting equity and diversity in federal contracting, particularly within the construction industry. The public will have 30 days to comment on the newly introduced regulations.
Washington D.C. – The U.S. Department of Transportation (DOT) has enacted an interim final rule that eliminates the consideration of race and sex as criteria for automatic certification within the Disadvantaged Business Enterprise (DBE) program. The change, effective as of October 3, 2023, represents a significant shift in how social and economic disadvantage is determined for businesses seeking federal contracting opportunities. This new rule states explicitly that the determination cannot be based on race or sex, signaling a fundamental reevaluation of the criteria used to support disadvantaged groups in federal contracting.
Under the updated regulations, businesses previously recognized as DBEs will now have to undergo a thorough re-evaluation on a case-by-case basis. This involves providing personal narratives that demonstrate social and economic disadvantage, independent of factors such as sex, race, or ethnic origin. The DOT’s decision halts all existing DBE goals and mandates that states reassess their current certified DBEs under these newly established guidelines.
Currently, chances for challenge or appeal for firms that lose their DBE certification under the new rule are nonexistent. However, existing contracts that incorporated DBE requirements are expected to remain enforceable, meaning that businesses previously certified can still be vital to ongoing projects until the new reevaluation process concludes.
The background of the DBE program itself reveals that it was originally established in 1980 and enacted into law in 1983, primarily to assist minority-owned and woman-owned businesses in securing a foothold in federal contracting ventures. Over the years, the program has been instrumental in promoting diversity within industries, particularly the construction sector.
The interim rule comes just days before the commemoration of Construction Inclusion Week, scheduled to begin on October 13, 2023. This annual event emphasizes broadening diversity in the workforce and might now be viewed in the context of this recent regulatory overhaul, impacting ongoing diversity initiatives within the construction industry.
According to statistics from the Biden administration prior to this announcement, there are nearly 50,000 DBE-certified businesses across the nation, including approximately 3,500 involved in the DOT’s Airport Concessions DBE program. With each state, plus the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, required to re-evaluate all existing DBEs, this could lead to significant changes in participation rates among DBEs in federal contracts.
The new regulation also suggests that future efforts to widen applicant pools for federal contracting may face legal challenges if they continue to be influenced by race or sex due to potential non-compliance with recent court rulings. Legal experts have noted that the rule change could instigate litigation focused on its adherence to the Administrative Procedure Act, building on a backdrop of recent Supreme Court decisions that have questioned affirmative action principles in educational settings.
Notably, under the previous Trump administration, changes were already underway that questioned the legitimacy of using sex and race as qualifiers for certification, leading to settled lawsuits related to the matter. The overall impact of this new policy shift has raised concerns among advocacy groups and legal professionals, as it essentially undermines a program that has functioned for 45 years to promote equity and inclusion in a historically challenging industry.
The DOT has opened a public comment period lasting 30 days following the announcement of this rule, although this was enacted without prior public input due to concerns regarding the constitutionality of enforcing the previous requirements. As businesses brace for the upcoming regulatory fallout, firms are strongly encouraged to prepare their narratives and respond timely to any communications from state or local agencies to avoid jeopardizing their certification status.
As the construction sector gears up for Construction Inclusion Week, it remains to be seen how this regulatory change will shape the landscape for DBE participation and broader efforts toward workforce diversity in upcoming projects.
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Additional Resources
- ENR: US DOT Calls DBE Program Unconstitutional
- Wikipedia: Disadvantaged Business Enterprise
- National Law Review: DBE Contracting After Affirmative Action
- Google Search: DBE Program Changes 2023
- JD Supra: Federal Highway Administration Releases Updates
- Encyclopedia Britannica: Disadvantaged Business Enterprise
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