On September 23, the U.S. District Court for the Eastern District of Kentucky granted the plaintiffs’ request for a preliminary injunction partially halting certain aspects of the U.S. Department of Transportation’s (DOT) Disadvantaged Business Enterprise (DBE) program. Specifically, DOT is temporarily blocked from mandating the use of race- and gender-based “rebuttable presumptions” for contracts impacted by DBE goals upon which the plaintiffs bid.
Importantly, the court’s order only applies to the two companies that are plaintiffs in the case and only to contracts they bid in the states of Kentucky and Indiana. By granting the preliminary injunction the court in this case is recognizing that the plaintiffs will likely prevail on the merits. This case comes months after a similar challenge to the Small Business Administration’s (SBA) 8(a) Business Development program. In July 2023, the U.S. District Court for the Eastern District of Tennessee ruled that SBA’s 8(a) program’s “rebuttable presumption” that racial minorities are “economically and socially disadvantaged” failed to satisfy the strict scrutiny standard. The SBA quickly updated its evaluation factors to keep the program in compliance. The recent increase in legal challenges to government contracting preference programs is a result of the U.S. Supreme Court’s 2023 decision in two cases brought against a public institution (University of North Carolina) and a private institution (Harvard College) where the Court found race-conscious college admissions policies used in student admissions are unconstitutional.
The federal government’s DBE program has required at least 10 percent of federal highway construction funds be paid to small businesses owned and controlled by “socially and economically disadvantaged individuals.” The SBA 8(a) program is a business development program that is designed to assist socially and disadvantaged small business. There are good reasons to indicate that contractors will see more challenges and changes to government contracting preference programs. As such, AGC of America has established a Contracts Preference Program Taskforce to address potential changes to these programs, seek common cause with other construction groups, improve existing programs and services, and evaluate the need to develop new programs and services to help emerging small businesses.
For more information, please contact Jordan Howard.