In Mid-America Milling Company v. United States Department of Transportation, Case No. 3:23-cv-00072 (“Mid-America”), the Plaintiffs challenged the United States Department of Transportation’s (“DOT”) use of a rebuttable presumption when determining if an individual is socially disadvantaged for purposes of the DOT’s Disadvantaged Business Enterprise program (“DBE Program”). The Plaintiffs in Mid-America argued that the DOT’s use of a rebuttable presumption that businesses owned by women and certain races and ethnicities are socially disadvantaged is unconstitutional disparate treatment on the basis of race and sex.

On September 23, 2024, the Mid-America court issued a preliminary injunction enjoining the DOT from mandating the use of race- and gender-based rebuttable presumptions for United States Department of Transportation contracts affected by DBE goals upon which the Plaintiffs bid in connection with the DBE Program.

On May 28, 2025, the DOT (through the Department of Justice (“DOJ”)) and the Plaintiffs submitted a proposed joint consent order that seeks to resolve by settlement the Plaintiffs’ claims of unconstitutional racial discrimination. The proposed consent order would bar the DOT from approving any federal, state, or local DOT-funded projects with DBE contract goals where any DBE in that jurisdiction was determined to be eligible based on a race- or sex-based rebuttable presumption.

The next iteration of this matter came from the DOT, which issued an Interim Final Rule, effective October 3, 2025, making immediate changes to the DBE Program in response to Mid-America. The Interim Final Rule:

• • Eliminates the rebuttable presumption of social disadvantage from the DBE regulation.
  • Requires all Unified Certification Program (UCP) entities to review and recertify existing DBEs without using the rebuttable presumption of social disadvantage; and
  • Prohibits the use of DBE goals on existing and new projects until the applicable UPC has recertified all existing DBEs.

In regard to recertifying existing DBEs, the Interim Final Rule provides that, starting on October 3, 2025, each UPC must:

(1) Identify each currently certified DBE

(2) Provide each currently certified DBE with the opportunity to submit documentation demonstrating its DBE eligibility under the new standards

(3) Determine whether each currently certified DBE meets the new DBE eligibility standards

(4) Issue a written decision to each currently certified DBE indicating that it has either been recertified or is decertified

The new definition of social disadvantage is:

Socially and economically disadvantaged individual means any individual who is a citizen (or lawfully admitted permanent resident) of the United States and who a certifier finds to be socially and economically disadvantaged on a case-by-case basis. A determination that an individual is socially and economically disadvantaged must not be based in whole or in part on race or sex. For that reason, all applicants shall qualify as socially and economically disadvantaged if they can meet the relevant criteria described in § 26.67. Being born in a particular country does not, standing alone, mean that a person is necessarily socially and economically disadvantaged.

The new criteria for proving social disadvantage are:

1. 1. Non-presumptive Disadvantage. All applicants must demonstrate social and economic disadvantage (SED) affirmatively based on their own experiences and circumstances within American society, and without regard to race or sex.

1. 1. 1. 1. To satisfy the SED requirement and ensure all determinations of disadvantage are not based in whole or in part on race or sex, an owner must provide the certifier a Personal Narrative (PN) that establishes 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.
         2. The PN must state how and to what extent the impediments caused the owner economic harm, including a full description of the type and magnitude, and must establish that the owner is economically disadvantaged in fact relative to similarly situated non-disadvantaged individuals.
         3. The owner must attach to the PN a current PNW statement and any other financial information he considers relevant.

The Interim Final Rule will therefore require existing (and new DBEs) to submit narratives and other information establishing social and economic disadvantage without reference to the race or sex of the owner.

This Interim Final Rule should not have a direct effect on Alaska Native Corporation DBEs, as they will generally not have relied upon on a rebuttable presumption of social disadvantage to be certified as a DBE. Under 43 USC 1626(e)(2), each Alaska Native Corporation subsidiary is, for all purposes under federal law, deemed to be “a minority and economically disadvantaged business enterprise,” and under 43 USC 1626(e)(4), each Alaska Native Corporation 8(a) is required to be certified as a DBE.

However, while Alaska Native Corporations’ ability to participate in the DBE Program will likely not be directly affected, the benefit from the DOT’s DBE Program could be limited, particularly in the short term. The Interim Final Rule prohibits the use of DBE goals, or the claiming of DBE credit, by a state or federal agency until the UPC in the applicable state completes its review and recertification of all DBEs in that state. As such, until that happens, an Alaska Native Corporation DBE might not be able to leverage their status as a DBE because the state agencies and prime contractors will not be required or encouraged to meet any DBE goals.

The opinions expressed herein are solely those of the author. This article does not constitute legal advice. For legal advice for your situation, you should contact an attorney