As the second feature in our ongoing coverage of the transportation reauthorization renewal process, this article covers changes to the US Department of Transportation’s (USDOT) Disadvantaged Business Enterprise (DBE) program. When the Surface Transportation Assistance Act was passed in 1982, it made earlier efforts by USDOT to establish a uniform DBE program a statutory requirement for state and local government agencies that receive federal funding, especially for transportation infrastructure. Since then, numerous amendments and regulatory updates, prompted by court rulings and evolving best practices, have refined and formalized the federal DBE program. Originally, race-conscious mandates targeting 10% participation set the foundation. Over time, the program has grown into one rooted in established case law, accountability, rigorous data analysis, and measurable goals operating across jurisdictional boundaries. Now, for the first time in nearly four decades, the federal DBE program is undergoing its most substantial set of changes.
The 2025 Interim Final Rule and Legal Developments
On October 3, 2025, USDOT issued an Interim Final Rule updating and revising regulations affecting both DBE firms and Airport Concession Disadvantaged Business Enterprise (ACDBE) firms. These changes stem from legal challenges initiated in the Mid-America Milling Company v. U.S. Department of Transportation case that scrutinized the constitutionality of race- and gender-based presumptions of social and economic disadvantage used in DBE certification. The original court case, filed in Kentucky, resulted in a preliminary federal ruling issued on September 23, 2024, that raised questions about these presumptions. USDOT agreed with this preliminary ruling and, recognizing its significance, implemented the Interim Final Rule with immediate effect.
USDOT allowed a 30-day public comment period ending November 3, 2025. The USDOT has not yet issued any updates to the Interim Final Rule based upon the public comment period. Because the underlying court case remains unresolved and subject to further legal challenge, these program changes could be modified in the future. Nonetheless, at this time the USDOT requires all certifying agencies and current DBE and ACDBE firms to comply with the new regulations.
Enhanced Certification Criteria: Demonstrating Individual Social and Economic Disadvantage
Under the new Interim Final Rule, certifying agencies are required to apply a more rigorous review of economic disadvantage criteria. The DBE and ACDBE programs now focus on ensuring that firms certified as disadvantaged meet the updated criteria demonstrating social and economic disadvantage on an individualized basis.
All applicants must submit a narrative statement, along with supporting evidence, describing their personal social and economic disadvantage to be recertified as a DBE or ACDBE. This requirement applies regardless of race or gender and replaces prior broad presumptions of disadvantage. The narrative must explain how specific systemic barriers, economic hardships, and denied opportunities have prevented success in education, employment, or business ventures. Examples include challenges obtaining contracting opportunities or access to capital.
The responsibility of proving disadvantage rests entirely with the applicant. The Personal Net Worth Cap, which limits applicants’ net worth to qualify, remains in place and must be documented as part of certification.
This new individualized approach reflects an evolution of the program aligned with legal rulings. It acknowledges that disadvantage cannot be presumed on the basis of race or gender alone, but must be demonstrated on a case-by-case foundation.
Mandatory Recertification and Impact on Contract Goals
Every currently certified DBE and ACDBE firm must be reevaluated against the updated standards and either be recertified or decertified. Unified Certification Programs (UCPs) and certifying agencies are required to allow all DBE firms to reapply for certification within their original jurisdiction.
If recertification is granted, DBE firms can then pursue certification in other jurisdictions as applicable. Significantly, until a certifying agency completes the reevaluation and recertification process, it is not permitted to apply any DBE contract goals or ACDBE concession goals to projects. Work performed by DBEs and ACDBEs under existing certifications will not count toward these goals during recertification.
Guidance on Contract Advertisements and Awards
The USDOT released FAQs clarifying how state and local agencies should handle current and upcoming transportation projects under the new DBE rules. If a contract has been advertised but bids have not been opened, the agency must amend the advertisement to remove the DBE contract goal. For projects where bids have been opened but contracts not yet awarded, contract goals must be changed to zero. Agencies are generally not required to readvertise these projects but should consult state law regarding their own readvertising requirements.
Projects advertised, let, and awarded prior to October 3, 2025, do not require modification; however, DBE participation on those contracts cannot be credited toward DBE contract goals or a recipient’s overall DBE goal until recertification is finalized.
The FAQs also specify that during the recertification period, state and local agencies are not required to conduct Commercially Useful Function (CUF) reviews of DBE work on current contracts. Since DBE work will not be credited toward goals during recertification, CUF reviews are temporarily unnecessary.
These provisions apply equally to design-build projects, including the requirement to zero out DBE goals for unawarded work.
Unchanged Program Requirements
Several longstanding DBE and ACDBE requirements remain in effect under the new rule. For example, prime contractors must continue to demonstrate good cause and receive prior approval from the certifying agency or airport authority before terminating any DBE/ACDBE subcontractor or work segment. Prompt payment rules obligate prime contractors to pay DBE and ACDBE firms promptly for satisfactory work on existing contracts and remain unchanged.
Recertification Program Implementation and Appeals
The Interim Final Rule places responsibility on each UCP or certifying agency to establish recertification programs compliant with the new requirements. While no specific deadline has been mandated, agencies are urged to complete recertification “as soon as practicable.”
To allow firms adequate time, agencies are not permitted to impose deadlines for when currently certified DBEs must submit recertification materials. They also are not permitted to decertify all DBEs simultaneously. Each firm must be individually contacted and given the opportunity to submit documentation.
When a DBE or ACDBE firm is denied certification or recertification under the updated rules, the firm retains the right to appeal to USDOT as defined by existing federal regulations.
Maintaining Goal-Setting Methodologies and Program Review
USDOT will continue reviewing and approving DBE goal-setting methodologies submitted by state and local agencies receiving federal transportation funds. However, recipients are not required to update their overall goal-setting methodologies until recertification and reevaluation processes are complete.
Adapting to New Requirements: Considerations for DBE Firms and Certifying Agencies
The new requirements introduce additional steps and documentation that certifying agencies and DBE/ACDBE firms will need to incorporate. These changes may require agencies to revise internal business practices, update electronic certification systems, and train staff and DBE/ACDBE firms on new procedures.
DBE and ACDBE firms will be responsible for preparing personal narratives, updating Personal Net Worth Statements, and compiling supporting documentation as part of recertification. This effort represents an opportunity for firms to articulate their unique social and economic challenges and demonstrate eligibility under the revised program.
Firms should plan for these tasks to take time and consider whether professional assistance is needed to complete documentation effectively. Continuing strong contract performance and timely documentation submission during this transition will support positive relationships with certifying agencies and prime contractors.
Variability Across Jurisdictions and Interim Guidance
Given that each UCP, state, local agency, and airport authority will develop its own implementation plan, transitional processes and deadlines may vary among jurisdictions. DBE firms operating in multiple areas may encounter redundancies or differences in requirements, making ongoing communication with each certifying agency essential.
Several agencies and airport authorities have already issued preliminary information. Examples include the California, Florida, Georgia, and Texas Departments of Transportation, as well as the Port Authority of New York and New Jersey and the Chicago Department of Aviation. Comprehensive, finalized guidance for specific states and airports may take additional time to develop.
USDOT is expected to release further clarifications and FAQs to expand on the Interim Final Rule. Until then, DBE/ACDBE firms and prime contractors should regularly check with certifying agencies for updates and guidance.
Navigating a Critical Transition
The recent changes to the DBE and ACDBE programs represent a significant evolution from broad presumptions of disadvantage based on race or gender to one requiring individualized, documented demonstrations of social and economic hardship.
By proactively preparing personal narratives, updating net worth statements, and maintaining strong relationships with certifying authorities, DBE and ACDBE firms can effectively navigate this transition. Certifying agencies are also working diligently to update procedures and train staff to support firms through these changes.
As new developments around these programs unfold, the Gresham Smith team will continue to share insights on how to better understand and adapt to future changes. Follow along with us as we help our clients and partners understand how the reauthorization bill will impact their priorities and programs.
To read the first article in our transportation reauthorization series, click here.
Pam Kordenbrock joined Gresham Smith in 2025 as a technical advisor for clients following a long career with the Federal Highway Administration (FHWA). Her last position was as the FHWA Division Administrator of the Tennessee Division. In that role, Kordenbrock oversaw the USDOT’s surface transportation program in Tennessee. She provided leadership to advance and implement national transportation goals and objectives in partnership with the Tennessee Department of Transportation, metropolitan planning organizations, rural planning organizations, university partners and the private sector. In Tennessee, Kordenbrock led a multi-disciplinary staff responsible for the stewardship and oversight of a $1.2 billion annual Federal-aid Highway Program. She met regularly with state and local agency leadership to discuss key projects and programs and to understand how federal rules might best be leveraged or navigated to deliver them.
