Dive Brief:

• A federal judge has blocked a key component of the U.S. DOT’s Disadvantaged Business Enterprise program in a move that could have widespread implications for workforce participation goals in federal contracts. 
• U.S. District Court Judge Gregory Van Tatenhove granted a limited preliminary injunction against the DOT’s DBE program, which sets goals that at least 10% of dollars in federal contracts be awarded to women- and minority-owned firms, which are presumed to be disadvantaged under the program.
• Two road contractors asserted in a lawsuit filed last year that they had suffered reverse discrimination because their firms didn’t fall into those categories. Van Tatenhove agreed. "Because these race and gender classifications violate the Constitution’s guarantee of equal protection, the pending request for a preliminary injunction will be granted,” the judge wrote. 

Dive Insight:

The preliminary injunction, issued Monday in U.S. District Court for the Eastern District of Kentucky, could impact billions of dollars in federal funding. DBEs have netted nearly $34 billion from federal transportation contracts in the last five years, according to public data cited by The Washington Post. 

For the time being, Van Tantenhove’s injunction only applies to the two firms and the contracts they bid on where they do business in Kentucky and Indiana, but it could open the doors for other challenges nationally.

Indeed, attorney Keith Wiener, a partner who specializes in state and local government procurement law at Holland & Knight in Atlanta, noted the judge wrote there was a good chance the plaintiffs would ultimately win their case on constitutional grounds — a point that other courts have previously not agreed with. 

“It’s a significant ruling, because it’s a case that now stands out as a federal court holding that it believes a plaintiff challenging the federal DBE program would likely succeed in showing that it’s unconstitutional,” Wiener said. 

Several additional suits

The suit was filed on behalf of Jeffersonville, Indiana-based Mid-America Milling Co. and Memphis, Indiana-based Bagshaw Trucking by the Wisconsin Institute for Law & Liberty, a conservative think tank focused on free market policy. It is one of several suits challenging workforce participation goals in public contracts. 

The suits gained steam following the U.S. Supreme Court’s decision in 2023 barring affirmative action admission policies in higher education, a ruling Van Tatenhove cited multiple times in his decision. 

The suits have targeted similar criteria in other government programs since then, notably the Small Business Administration’s 8(a) program. In April, DOT issued a final rule on its DBE program that could give it firmer legal standing for future challenges, attorneys told Construction Dive. Although the program applies nationally, it is administered by the states. 

But Chris Slottee, an attorney at Schwabe, Williamson & Wyatt in Anchorage, Alaska, who represents Alaska Native corporations in federal contracting, told Construction Dive the ruling was notable in its limited scope, as well. 

“The District Court only ruled that the DOT is barred from using race and gender-based presumptions for DOT contracts ‘impacted by DBE goals upon which the Plaintiffs bid,’” Slottee wrote in an email to Construction Dive. “As such, the District Court’s ruling will only, as a legal matter, affect those contracts that these specific plaintiffs bid upon.” 

From that perspective, Slottee said DOT could likely continue to apply and implement the DBE program without limitation in most contract opportunities, though it might also “see the proverbial writing on the wall and start to move away from the use of the race and gender-based [criteria].” 

Reuters reported that DOT said it will continue to defend the program but will also comply with Van Tatenhove’s preliminary injunction. 

Wiener said the judge left the door open for the government to challenge the suit on other grounds, and that it could also appeal the decision for the preliminary injunction, which he also noted was just that — preliminary. 

“The federal defendants have a decision to make here as to whether they appeal this decision, or whether they refile their previous motion to dismiss on another basis,” Wiener said.