In 1983, Congress authorized the Disadvantaged Business Enterprise (“DBE”) program, requiring the U.S. Department of Transportation to ensure that at least 10% of funding for federally-assisted highway and transit projects is set aside for businesses at least 51%-owned and controlled by “socially and economically disadvantaged” individuals. Federal construction contracts worth billions of dollars have gone to such businesses through programs administered by the states. New Hampshire’s administration of the program is described here. There are hundreds of DBE-certified businesses in New Hampshire, including some out of state businesses.
The DBE program defines “socially and economically disadvantaged” as anyone “who has been subjected to racial or ethnic prejudice or cultural bias within American society because of his or her identity as a member of a group.” Women, and members of five specific racial groups (African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent Asian Americans), are automatically presumed by the implementing regulations to be socially and economically disadvantaged.
Is this type of favoritism, intended to rectify past discrimination, constitutional? This month, one court gave its answer: No. A federal judge in Kentucky ruled that the set-aside’s presumption that these specific groups are disadvantaged was a violation of equal protection of the laws, and issued a preliminary injunction against DOT’s implementing such preferences.
The case is Mid-America Milling Company, LLC v. U.S. Department of Transportation, 2024 WL 4267183 (E.D. Ky. Sept. 23, 2024). The Plaintiffs, a construction contractor and a trucking firm, are two frequent bidders on DOT-funded contracts in Kentucky and Indiana that lost out to DBE businesses under the program, despite having lower bids. Their lawsuit challenges DOT’s race-based and gender-based classifications for awarding such contracts as a denial of equal protection, claiming that the presumption of disadvantage for certain enumerated groups discriminated against them as white-owned, male-owned businesses.
The court agreed, noting that while anyone may seek to qualify as socially and economically disadvantaged regardless of race or gender, the presumption of disadvantage enjoyed by those designated groups eliminates the need for them to prove their disadvantaged status – while all others had to prove it, tilting the playing field against them.
Relying on Sixth Circuit precedent, the court identified three hurdles that the Government must clear in order to show a compelling interest justifying the program under current Equal Protection jurisprudence: (1) the policy must target a specific episode of past discrimination, (2) that discrimination must have been intentional; (3) the government must have had a hand in it. The court held that the Government’s evidence wasn’t specific enough to clear these hurdles, colorfully writing “If it wants to grant preferences to certain groups, it must specifically show how the Department of Transportation has previously discriminated against those groups. It cannot group all minority owned businesses into one gumbo pot but then try to scoop out only the sausage and not the okra.”
Next, the court ruled that regardless of any compelling interest in redressing past discrimination, the program was not “narrowly tailored” to remedy the problem. Particularly on the race-based side, the door was opened to this conclusion by the U.S. Supreme Court’s decision last year in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), striking down race-based affirmative action programs for college admissions. The Mid-America court cited to that case half a dozen times.
Thus far the injunction is applicable just in states where the plaintiffs do business. But nothing prevents any non-DBE contractor who bids on federally-funded projects from bringing suit in New Hampshire on the exact same grounds.
[Update: On January 21, 2025, President Trump signed an Executive Order banning federal agencies from considering race or gender in the award of federal contracts.]
The DBE program defines “socially and economically disadvantaged” as anyone “who has been subjected to racial or ethnic prejudice or cultural bias within American society because of his or her identity as a member of a group.” Women, and members of five specific racial groups (African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent Asian Americans), are automatically presumed by the implementing regulations to be socially and economically disadvantaged.
Is this type of favoritism, intended to rectify past discrimination, constitutional? This month, one court gave its answer: No. A federal judge in Kentucky ruled that the set-aside’s presumption that these specific groups are disadvantaged was a violation of equal protection of the laws, and issued a preliminary injunction against DOT’s implementing such preferences.
The case is Mid-America Milling Company, LLC v. U.S. Department of Transportation, 2024 WL 4267183 (E.D. Ky. Sept. 23, 2024). The Plaintiffs, a construction contractor and a trucking firm, are two frequent bidders on DOT-funded contracts in Kentucky and Indiana that lost out to DBE businesses under the program, despite having lower bids. Their lawsuit challenges DOT’s race-based and gender-based classifications for awarding such contracts as a denial of equal protection, claiming that the presumption of disadvantage for certain enumerated groups discriminated against them as white-owned, male-owned businesses.
The court agreed, noting that while anyone may seek to qualify as socially and economically disadvantaged regardless of race or gender, the presumption of disadvantage enjoyed by those designated groups eliminates the need for them to prove their disadvantaged status – while all others had to prove it, tilting the playing field against them.
Relying on Sixth Circuit precedent, the court identified three hurdles that the Government must clear in order to show a compelling interest justifying the program under current Equal Protection jurisprudence: (1) the policy must target a specific episode of past discrimination, (2) that discrimination must have been intentional; (3) the government must have had a hand in it. The court held that the Government’s evidence wasn’t specific enough to clear these hurdles, colorfully writing “If it wants to grant preferences to certain groups, it must specifically show how the Department of Transportation has previously discriminated against those groups. It cannot group all minority owned businesses into one gumbo pot but then try to scoop out only the sausage and not the okra.”
Next, the court ruled that regardless of any compelling interest in redressing past discrimination, the program was not “narrowly tailored” to remedy the problem. Particularly on the race-based side, the door was opened to this conclusion by the U.S. Supreme Court’s decision last year in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, 600 U.S. 181 (2023), striking down race-based affirmative action programs for college admissions. The Mid-America court cited to that case half a dozen times.
Thus far the injunction is applicable just in states where the plaintiffs do business. But nothing prevents any non-DBE contractor who bids on federally-funded projects from bringing suit in New Hampshire on the exact same grounds.
[Update: On January 21, 2025, President Trump signed an Executive Order banning federal agencies from considering race or gender in the award of federal contracts.]
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