Effective October 3, 2025, the U.S. Department of Transportation (DOT) will remove the long-standing presumption that business owners are socially and economically disadvantaged based on race or sex. Under this change, DOT is eliminating the race- and sex-based presumptions of social and economic disadvantage that had previously allowed minority or women business owners to be treated as automatically disadvantaged for certification purposes.
Prior to the change, business owners could establish that they were “socially and economically disadvantaged” (as required for eligibility) via the presumption of disadvantage due to race or sex, or by demonstrating disadvantage based on their own individual experiences and circumstances. Now, business owners seeking DBE or ACDBE status may no longer rely upon the group-based presumptions. This means that all owners will be required to demonstrate disadvantage on an individualized basis. That means an applicant must provide a narrative and supporting evidence showing how they have faced barriers and disadvantages in education, employment, finance, or other business activity. The determination may no longer be based “in whole or part” on race or sex.
What if I am currently certified as a DBE or ACDBE?
Existing DBE-certified businesses are not automatically de-certified under the new rule. Firms currently certified as DBEs will remain as such until their certification is reviewed. Under the rule, DOT has ordered certifying agencies to reevaluate existing certified DBE and ACDBE businesses “as quickly as practicable” to verify eligibility under the new standard. Certifying agencies must provide firms with the opportunity to submit supplemental documentation to establish eligibility. If a firm does not meet the non-presumptive criteria, it may be decertified. During the transition period before recertification is complete, recipients of federal transportation funding may not set DBE contract goals nor count DBE participation toward overall goals.
Businesses previously relying on presumptive eligibility must prepare to submit detailed narratives, documentation, and evidence illustrating disadvantage specific to their circumstances. Firms should begin assembling personal and business histories, financial records, and examples of discriminatory or exclusionary challenges they have faced. Agencies and prime contractors must update their procurement and certification practices, suspend DBE goals until recertification is done, and ensure all future DBE determinations are made under the new, race- and sex-neutral standard. Legal review is strongly advisable to navigate decertification risk and compliance under the new rule.
What if I am certified under local MBE program(s)?
It is important to note that this new rule applies only to federal DOT programs. Local and state Minority Business Enterprise (MBE) programs — such as Illinois’ Business Enterprise Program (BEP) or Chicago’s MBE program — are established under local law and are not automatically altered by DOT’s decision. These programs may continue to apply race- and sex-based presumptions unless or until they are amended by local lawmakers or challenged in court.
However, the DOT’s action signals growing constitutional and legal pressure on programs that rely on race or sex classifications, and local MBE programs may face heightened scrutiny. Contractors and businesses that participate in both federal DBE programs and local MBE programs should prepare for differences in eligibility standards and potential future changes at the state or municipal level. If your business is DBE and/or ACDBE certified or is pending certification, it is strongly recommended that you immediately begin to prepare to establish eligibility under the new rule.
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