The U.S. Department of Transportation has issued a sweeping Interim Final Rule that fundamentally changes how businesses qualify for the Disadvantaged Business Enterprise (DBE) and Airport Concessions DBE (ACDBE) programs — affecting billions of dollars in federal transportation contracts.
For the first time in nearly 40 years, the automatic presumption that women and certain racial and ethnic groups are socially and economically disadvantaged is eliminated. Under the new rule, all applicants — regardless of race or gender — must now submit a detailed personal narrative demonstrating social and economic disadvantage through specific examples of hardship, discrimination, or denied opportunities.
The rule follows a federal case where the court found that race and gender-based presumptions likely violated equal-protection principles. Based thereon, the Department of Transportation subsequently filed a proposed nationwide consent order to permanently bar those presumptions. The new rule also implements recent Executive Orders directing agencies to eliminate race and gender classifications in federal programs. Further litigation is expected, including challenges under the Administrative Procedure Act questioning whether such a sweeping reform may be implemented through an interim final rule.
What’s Next
Effective immediately (October 3, 2025), all 41,000+ currently certified DBE/ACDBE firms must be reevaluated under the new standards. Recipients of federal transportation funds cannot set DBE goals or count participation until reevaluations are complete. Moreover, new applicants must meet the individualized narrative test from day one.
State and local Unified Certification Programs must now reevaluate every certified firm “as quickly as practicable” and either recertify or decertify under the new criteria. During this transition, the DBE program will effectively operate with “zero-percent” participation goals nationwide.
This represents the most significant change to federal diversity contracting in decades, replacing group-based presumptions with individualized determinations of disadvantage. The long-term effects on small, minority, and women-owned businesses in transportation contracting remain to be seen.
At Gibbs Giden, we are closely monitoring this development and its implications for contractors, suppliers, and agencies that rely on federal transportation funding.
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Christopher Ng is the managing partner of Gibbs Giden. Chris primarily represents companies in a wide range of business, commercial and construction transactions and disputes. Chris is a member of the State Bar of California, Texas, and District of Columbia and licensed to practice in all California state and federal courts. Chris is also an educator, active speaker, published author and frequent contributor to local, regional and national legal publications. For his achievements, Chris was recently named a “Legal Visionary” by the Los Angeles Times and a “Leader of Influence” by the Los Angeles Business Journal, and has been named a “Rising Star” and “Superlawyer” by Los Angeles Magazine and Super Lawyers® (Thomson/Reuters) regularly since 2009 (including again in 2025).
Chris is nationally recognized in the field of construction law and regularly pens articles and contributes to treatises for construction industry professionals and other lawyers including publications by ENR Engineering News-Record, Wolters Kluwer Law & Business (California Construction Law), BNi® (Acret’s California Mechanics Lien Laws), the California Continuing Education of the Bar (CEB) (California Mechanics Liens and Related Construction Remedies and California Construction Contracts, Defects and Litigation), Business Credit Magazine, and the American Bar Association (ABA) Forum on Construction Law.
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