As discussed in a previous post on SmallGovCon, the Department of Transportation (DOT) recently issued a interim final rule removing certain presumptions of disadvantage from its eligibility requirements for the Disadvantaged Business Enterprise (DBE) Program. As part of that change, DBE Program participants and applicants will have to submit new narratives discussing their social disadvantage. The DOT has released further guidance on the changes felt by the interim final rule, including impacts on the disadvantage narrative and current contracts.

SmallGovCon has previously discussed the interim final rule removing presumed social disadvantage from DOT’s DBE Program. Key to that change was the removal of race and gender as bases for presumed social disadvantage, and the requirement for all current DBE participants to submit an updated narrative. The interim final rule states: “Under the revised rule, any individual seeking to demonstrate that he or she is a ‘socially and economically disadvantaged individual’ will be required to make the same individualized showing of disadvantage, regardless of the individual’s race or sex.” However, additional guidance on the specifics of the implementation and impact of the interim final rule was needed. Thankfully, DOT has released some more explicit guidance on those points.

The DOT’s Office of Civil Rights released a document providing further explanation of the changes from the interim final rule, and instructions on what the DOT expects going forward. (The DOT has links to this letter and the interim final rule here). The DOT lists five things it will look for in applications to the DBE program, many hitting on items expected in disadvantage narratives. Under the interim final rule, the owner of the applicant company must:

• “. . . 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”;
• “. . . state how and to what extent the impediments caused the owner economic harm, including
  a full description of type and magnitude”; and
• ” . . . attach to the Personal Narrative a current personal net worth statement and any other
  financial information the owner considers relevant”.

The DOT also issued a Frequently Asked Questions, which provides a good amount of information, including but not limited to:

• The DOT expects that “recipients will amend their [program] plans as soon as practical after the Unified Certification Program (UCP) in their jurisdiction completes the reevaluation process.”
• Contracts with DBE goals 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 Contracts that have been “let (i.e., bids opened) but contracts not yet awarded” recipients must take action to “zero out the DBE goal.” Due to the Interim Final Rule, DOT will allow contracts to be amended without re-advertising the projects, depending on applicable state law. Finally, for Contracts with DBE goals which have been executed prior to October 3, 2025, they are not required to be modified, but DBE participation cannot be credited towards DBE goals “until the UCP in the recipient’s jurisdiction completes the reevaluation process.”
• Contracts awarded on or after October 3, 2025, will have the new DBE regulations apply.
• Generally, UCPs will reevaluate the certifications of the DBEs for which the UCP was the jurisdiction of the original certification.
• There is no date for the reevaluations to be complete, just that they should be done “as quickly as practicable.”
• UCPs cannot simply decertify all currently certified DBEs without allowing for the recertification process to play out. The Interim Final Rule requires UCPS to provide identified DBE firms with “the opportunity to submit documentation demonstrating its DBE eligibility.”
• If a DBE firm is decertified in the reevaluation process, it can appeal such decertification.
• New DBE applications will be required to provide a personal narrative statement in addition to meeting all the other certification requirements. DOT expects to produce an updated application form, but does not provide a date for such.

Looking at this guidance, it would appear that the narratives now cannot reference social disadvantage felt due to race or gender. Disadvantage narratives need to focus on economic disadvantage and social disadvantage that have been experienced by the business owner, other than race or gender. Narratives also need to frame their disadvantage experiences relative to similarly situated non-disadvantaged individuals. Additionally, the DOT has not placed a deadline for completing all the requisite reevaluations.

Similar to the SBA’s 8(a) Program, it seems that currently awarded contracts with DBE goaling, will need its awardees re-evaluated prior to achieving credit. So, if DOT were to follow the example of the SBA, it likely will want those DBE participants with current contracts to update their narratives and be reevaluated first to prevent prolonged disruption to the DBE goaling of those contracts. Thankfully, it appears there will not be massive de-certifications, as all DBE participants who are targeted for reevaluation will go through a reevaluation process prior to any decertification. Finally, if a DBE firm finds itself decertified after this change, it may still appeal its decertification.

The DOT’s public guidance has somewhat provided additional clarity on the impacts of the interim final rule, but much will be learned in the coming days and months as DBE businesses navigate the reevaluation process. Given the continued uncertainty, contractors should also stay in contact with their federal contracting law counsel and advisers throughout the reevaluation and application process.

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