What is the Disadvantaged Business Enterprise Program? Here’s Why It’s So Important

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IN BRIEF: In a recently proposed legal settlement, the federal government moved to end a decades-old contracting program meant to address discrimination against socially and economically disadvantaged business owners. The Department of Justice is claiming the Department of Transportation’s Disadvantaged Business Enterprise (DBE) program violates the U.S. Constitution’s Equal Protection Clause because it requires grantees who receive federal transportation dollars to set flexible goals for the number of socially and economically disadvantaged businesses that receive contracts and act in good faith to meet those goals.

If a federal judge agrees to the settlement, the Department of Transportation would be prohibited from taking these steps to ensure socially and economically disadvantaged small business owners have a fair chance to compete for federal transportation contracts.

WHY IT MATTERS: Since 1983, Congress has authorized funding for the DBE program, which has allowed firms owned by Black, Latino, Indigenous, Asian American, and women entrepreneurs to gain real traction in a historically closed-off marketplace. The program was intended to address ongoing discrimination against these businesses.

Without the DBE framework, minority-owned firms will lose their foothold in a market still dominated by historically advantaged companies.

We can easily look to the past to see what happens when these types of programs are ended or eliminated. As one example, when the Illinois Department of Transportation (IDOT) eliminated its DBE contract goals in 2002 and 2003 as part of an experiment, the share of the contracts’ value that disadvantaged business enterprises received dropped to less than 2% of the total value of the contracts. Another analysis from IDOT showed that more than half of the 4,129 construction, architecture, and engineering contracts awarded from 2006 to 2008 were advertised without DBE goals. In those advertised without a DBE goal, the participation rate for those eligible for the DBE program was less than 1%.

If similar patterns emerge if the national program no longer exists, thousands of small businesses could be deprived of significant funding, putting these business owners’ livelihoods at risk.

MOMENTUM: Many critics immediately voiced their opposition to the administration’s decision, and some organizations took steps to intervene in the courts. In May, a federal judge in Kentucky allowed a group of impacted contractors to defend the constitutionality of the DBE program.

LDF AT WORK: The Legal Defense Fund’s Equal Protection Initiative aims to fully realize the U.S. Constitution’s promise of equal protection under the law by safeguarding, expanding, and deepening efforts to remove and remediate barriers to opportunity for Black people. Initiatives like the DBE program help increase fairness and level the playing field for people who have been historically excluded from receiving federal contracts because of their race.

If a program like the DBE were ruled unconstitutional, it could spark more questions from opponents of equity programs about whether government agencies have the authority to address discrimination they actively or passively participated in, even when there's clear evidence of it. This could tie the government's hands in sectors far beyond contracting, diminishing efforts to close the racial wealth gap, reduce health disparities, or ensure fair access to public resources.

LDF will continue to defend and advance the proper interpretation of the equal protection clause and other anti-discrimination laws to ensure they are not weaponized and misconstrued in order to entrench discrimination and block Black people and other groups from the resources they need to thrive.