With the recent Supreme Court decision ending affirmative action in college admissions, similar statutory presumptions of disadvantage, such as DOT’s DBE program, are susceptible to similar challenge.
Takeaways
- The Court issued a preliminary injunction, preventing the U.S. Department of Transportation (DOT) from the use of gender- and race-based rebuttable presumptions for contracts utilizing DBE goals.
- DOT failed to prove that its gender-based preference served an important government interest and that its race-based preference was necessary to achieve a compelling government interest.
- The scope of the preliminary injunction is limited to Kentucky and Indiana.
On September 23, 2024, the U.S. District Court Eastern District of Kentucky granted a preliminary injunction, enjoining the U.S. Department of Transportation (DOT) from using the rebuttable presumption that businesses owned by women and persons of certain races and ethnicities are socially disadvantaged and therefore should be given preference when awarding federal contracts.
In 1983, the federal government enacted the Disadvantaged Business Enterprise (DBE) Program. This program establishes a goal that 10 percent of federal funds authorized for highway and transit projects be expended with small businesses owned and controlled by “socially and economically disadvantaged individuals.” Section 26 of title 49, Code of Federal Regulations, defines “socially and economically disadvantaged individuals” as those who have been subjected to racial or ethnic prejudice or cultural bias within American society based on circumstances beyond their control. The DOT affords all women-owned and certain minority-owned businesses a presumption of disadvantage. All other applicants who are not presumed disadvantaged on the basis of their gender or race status are required to prove, by a preponderance of the evidence, that they are socially and economically disadvantaged.
The Plaintiffs, Mid-America Milling LLC and Bagshaw Trucking Inc., who operate within Kentucky and Indiana, challenge the constitutionality of the rebuttable presumption. Both Plaintiffs regularly bid on DOT-funded contracts subject to DBE goals. The Plaintiffs were not eligible to receive the rebuttable presumption of disadvantage and lost federally funded contracts to women-owned and minority-owned businesses, even when the prices of the Plaintiffs’ bids were lower. The Plaintiffs filed suit seeking a declaratory judgment and to permanently enjoin DOT from applying gender- and race-based preferences in the federal DBE program. The Plaintiffs believe they were denied the opportunity to compete for federally funded transportation contracts on an equal basis.
While the Court acknowledged the past discrimination that certain groups of people have faced in this country and that Congress had periodically reviewed and approved the DBE program, those findings did not guarantee its constitutionality. The Court determined that DOT’s general claims of disadvantage were not sufficient to justify its gender and race preference policies. The Court further recognized that racial barriers will be a factor in the success of minority-owned businesses but found that DOT’s proffered evidence was too broad to support how societal discrimination against women-owned and minority-owned businesses is evidence of past discrimination in the transportation industry. Based on this, the Court granted the Plaintiffs’ preliminary injunction and enjoined DOT from using gender- and race-based rebuttable presumptions for DOT contracts utilizing DBE goals. The Court limited the preliminary injunction to the Plaintiffs in the states within which they operate, Kentucky and Indiana.
With the overturn of affirmative action through the Supreme Court case, Students for Fair Admissions, Inc. v. President & Fellows of Harv. Coll., 600 U.S. 181 (2023), other federal programs containing presumptions of disadvantage are facing new scrutiny. We anticipate similar additional challenges will be filed for the DOT DBE and other federal programs.
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