On October 26, 2023, Mid-America Milling Company, LLC, along with others, initiated a legal action in the Federal District Court for the Eastern District of Kentucky against the Department of Transportation (DOT). This case, under the reference Mid-America Milling Company, LLC, et. al. v. U.S. Department of Transportation, et. al., Case No. 3:23-cv-72, challenges the DOT’s approach of using a rebuttable presumption to identify “socially disadvantaged” applicants for the DOT’s Disadvantaged Business Enterprise (DBE) Program.

    The DBE Program, a long-standing initiative, aims to counteract ongoing and historical discrimination in federally supported transportation contracts, such as in highway, transit, airport, and highway safety sectors. It mandates state and local transportation entities receiving federal funds to set participation goals for disadvantaged business enterprises, including specific DBE subcontracting goals.

    To be eligible for the DBE Program, businesses must meet size standards defined by the Small Business Administration and the DOT, and be owned and controlled by socially and economically disadvantaged individuals. Per DOT regulations, certain groups including African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent Asian Americans, and women are presumed to be disadvantaged. Other individuals can also qualify on a case-by-case basis, and economic disadvantage is considered for individuals with a personal net worth below $1.32 million.

    The Mid-America case specifically questions the constitutional validity of the DOT’s method of determining social disadvantage, alleging that this method discriminates based on race and/or sex. The plaintiffs argue that this presumption does not directly address specific instances of discrimination by the federal government, employs overly broad racial categories, and lacks a defined endpoint despite the program’s long duration. They seek a ruling declaring the race and gender-based criteria in the DBE Program unconstitutional and to stop the federal government from applying both the rebuttable presumption in the DBE Program and the 10% set-aside in the Infrastructure and Investment and Jobs Act for businesses owned by socially and economically disadvantaged individuals.

    This case is represented by the Wisconsin Institute for Law & Liberty, Inc., known for similar challenges in the Bruckner and Nuziard cases. With recent court decisions and the Supreme Court’s guidance in similar cases, this challenge could significantly impact the DOT’s application of the rebuttable presumption in the DBE Program. The outcome of this case could lead to a shift in how the DOT and perhaps other agencies approach these programs, as seen with the Small Business Administration’s response to similar challenges.

    We’ll continue to monitor this evolving situation and its potential implications for federal contractors. Remember, this article is for informational purposes and not legal advice. For specific legal guidance, it’s best to consult with an attorney.

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