On September 30th the U.S. Department of Transportation (DOT) released an Interim Final Rule (IFR) on the Disadvantaged Business Enterprise (DBE) Program which removes the race and sex-based assumptions from the program. However, questions remain about the rule and in particular WSDOT’s implementation of it, such as the impact on projects already underway. Plus, WSDOT is transitioning to a novel federal SBE program. More on that below; first some highlights from the rule (full text here):
Removes Race or Sex-Based Presumptions – The IFR removes the race and sex-based presumptions and states that the owner of a DBE must do the following to be certified as a DBE:
- Demonstrate that the owner is socially and economically disadvantaged based on his or her own experiences and circumstances that occurred within American society, and without regard to race or sex;
- Submit to the certifier a personal narrative establishing the existence of disadvantage by a preponderance of the evidence based on individualized proof regarding specific instances of economic hardship, systemic barriers, and denied opportunities that impeded the owner’s progress or success in education, employment, or business, including obtaining financing on terms available to similarly situated, non-disadvantaged persons;
- State how and to what extent the impediments caused the owner economic harm, including a full description of type and magnitude, and establish the owner is economically disadvantaged in fact relative to similarly situated non-disadvantaged individuals; and
- Attach to the Personal Narrative a current personal net worth statement and any other financial information the owner considers relevant.
New Certification Standards for DBEs – Unified Certification Programs (UCP) must reevaluate the eligibility of existing DBEs to ensure that they meet the new certification standards and decertify any DBE that does not.
No DBE Contract Goals During the Transition – The IFR states that until a UCP completes the new reevaluation process, each recipient may not include DBE contract goals; or count any participation toward overall DBE goals.
Race and Sex Removed from DBE Recordkeeping & Reporting – The IFR eliminates the requirements to provide bidders list information about the majority owner’s race and sex for all DBEs and non-DBEs who bid as prime contractors and subcontractors on each of a recipient’s federally assisted contracts.
Recently, USDOT released an official FAQ document. Regarding the question about existing projects, the FAQ says contracts that have been advertised but not yet let (i.e., bids not yet opened) must issue amendments to the advertisements removing the DBE contract goals. For projects with DBE contract goals that have been let (i.e., bids opened) but contracts not yet awarded (i.e., executed), recipients must take appropriate action to zero out the DBE goal. Contracts with a DBE goal that were let and executed prior to October 3, 2025, are not required to be modified, but DBE participation on such contracts cannot be counted toward the DBE contract goal or toward the recipient’s overall DBE goal until the DBE is recertified under the new process.
So current contracts are not required to be modified, except as they pertain to recertification. WSDOT is seeking further guidance from USDOT on the existing projects question, but as of press time they had not received it. Until they do, WSDOT has said, “Current projects will continue to be enforced until we are informed otherwise.”
AGC of America sent comments to USDOT about the existing contracts issue and the guidance provided in the FAQ. A particular concern is this: “AGC understands this to mean that if a DBE is not recertified, the contracts can continue as executed, but that such work will not count towards a recipient’s DBE goals. There is another possible reading of that sentence which would allow a recipient to terminate a contract if a DBE fails recertification. Question 3 of the FAQ document, in the Contracting Questions section, also says that good cause for termination exists if a DBE loses its DBE certification after the reevaluation process. Taken together, the possible interpretation of the ‘discontinue the effect’ clause and the termination good cause language can appear to authorize recipients to cancel contracts already awarded and executed if the contractor fails recertification. This would be an unacceptable result.”
AGC and WSDOT await further information from USDOT.
Meanwhile, WSDOT has said it will implement the Federal Small Business Enterprise program, which WSDOT uniquely has approval for and which due to its race-neutral nature is not affected by this rule.
For certified DBEs, the state’s Office of Minority and Women’s Business Enterprise (OMWBE) has provided this information. Among other things it notes,” We are reviewing the rule to understand its impact on existing certifications. At this time, no immediate action is required from you. When updates or documentation are needed, we will communicate next steps directly and provide clear instructions.”
For more information, contact AGC of Washington Chief Lobbyist Jerry VanderWood.