Recently, the federal government shutdown led to delays in processing reimbursements for the bi-state Hudson Tunnel Gateway Program and New York City’s Second Avenue Subway. Amid these challenges, the Department of Transportation (DOT) issued an interim final rule (IFR), effective October 3, 2025. This rule significantly alters the Disadvantaged Business Enterprise (DBE) certification process.
Key Changes in DBE Certification
The DOT’s IFR removes race and gender-based presumptions from the DBE and Airport Concession Disadvantaged Business Enterprise (ACDBE) programs. It redefines previously used terms like “race-neutral” to “DBE-neutral,” establishing a new certification framework.
- New sections (§§ 23.81 and 26.111) mandate states to reevaluate currently certified DBEs.
- States must recertify those meeting new standards and decertify those who do not comply.
Concerns Over the Rule’s Implementation
The DOT’s decision to publish this rule without prior public comment has sparked substantial criticism. Although agencies typically solicit public input, exceptions exist. The DOT justified bypassing this requirement by stressing the urgency of aligning with constitutional standards following a court ruling.
The recent court case, Mid-America Milling Co. v. U.S. Department of Transportation, cast doubt on the legality of the race- and sex-based presumptions. The ruling highlighted that such assumptions may violate equal protection laws.
Impact of Executive Orders
Three Presidential Executive Orders also influenced the IFR’s development:
- Executive Order 14151: Ending Radical and Wasteful Government DEI Programs, January 20, 2025.
- Executive Order 14173: Ending Illegal Discrimination, January 21, 2025.
- Executive Order 14219: Deregulatory Initiative for Government Efficiency, February 19, 2025.
These orders call for a reevaluation of governmental programs, aligning them with constitutional values and mandates.
New Certification Process Guidelines
Under the restructured DBE certification process, applicants must now submit a Personal Narrative (PN) detailing hardships they faced compared to non-disadvantaged peers. This shift aims to ensure equitable treatment based on individual circumstances rather than demographics.
States are now required to temporarily suspend goals related to DBE/ACDBE participation until the reevaluation process is completed.
Challenges Ahead
This new rule introduces several challenges, including:
- The need for a standardized set of criteria to identify socially and economically disadvantaged individuals.
- Increased administrative burdens on state agencies sorting through applications.
- Potential halts in public procurement, affecting projects reliant on DOT funding.
The ongoing uncertainty may lead to more bid protests and appeals regarding DOT-funded projects.
Financial Implications
The IFR acknowledges potential costs related to implementation, estimating a one-time expense of about $95 million, with recurring annual burdens projected at $1.8 million.
Preparing for the Transition
As small firms navigate the new DBE landscape, they are encouraged to compile evidence supporting their claims of disadvantages. This preparation can help streamline their applications for certification under the new standards.
While the transition will require adaptability, it may also create opportunities for new entrants in the contracting sector, fostering competition and potentially lowering project costs in the long run.
