Rethinking Disadvantaged Business Enterprises

Changes to the Disadvantaged Business Enterprise program bring uncertainty

By Terri Marshall

n October 3, 2025, the US Department of Transportation (DOT) issued an Interim Final Rule (IFR) that introduces substantial modifications to the Disadvantaged Business Enterprise (DBE) program, significantly impacting contractors in Alaska.

The DBE program was set up to, as the Alaska Department of Transportation and Public Facilities (DOT&PF) describes it on its DBE website, “level the playing field by providing small businesses owned and controlled by socially and economically disadvantaged individuals a fair opportunity to compete for federally funded transportation contracts.”

The IFR removes the automatic presumption of social and economic disadvantage based on race, ethnicity, or gender and now requires a “personal narrative” to prove disadvantage. The IFR required all currently certified firms, including those in Alaska, to complete a thorough, individualized re-evaluation to retain their certification status.

Now months later, DBEs remain in an awkward position, as all current DBEs were de-certified and must recertify. This pertains to any businesses working with the Department of Transportation, including the Airport Concessions program.

“The DBE program is still in law. The part that has changed is how a DBE is defined,” explains Lauren Little, DOT&PF Northern Region acting director and chief engineer. “Before the ruling, we could issue presumptive approvals based on gender, race, and other factors. Now, the business has to establish why it is disadvantaged. Fortunately, Alaska is race-neutral, which means we don’t have project-specific goals but a program goal to attain.”

The DBE program was established by Congress in 1983 to ensure that small businesses owned and controlled by socially and economically disadvantaged individuals, including minority- and women-owned businesses as well as Native tribes, have a fair opportunity to compete for federally funded transportation contracts. A statutory provision to the program requires that at least 10 percent of funding for highway, transit, and airport projects be allocated to DBEs to address historical disparities and expand economic opportunities.

Three main DOT operating administrations administer the DBE program: the Federal Highway Administration (FHA), the Federal Aviation Administration (FAA), and the Federal Transit Administration (FTA). State and local transportation agencies also manage the DBE program according to regulations detailed in Title 49, Part 26 of the Code of Federal Regulations. Additionally, the FAA operates its own DBE program: the Airport Concession Disadvantaged Business Enterprise (ACDBE) for airport concessions, including food service, rental car operations, and retail.

The changes to the program have created challenges and confusion for contractors nationwide, including in Alaska. All currently certified DBEs are required to reapply and submit comprehensive, individualized narratives and supporting documentation demonstrating disadvantage (e.g., limited access to capital) to confirm their eligibility, creating an administrative burden. In mid-February, the state-operated DBE directory comprised 188 businesses, though that number fluctuates.

State agencies cannot set new DBE contract goals or count DBE participation toward existing goals until the Alaska Unified Certification Program (AUCP) finishes re-evaluating all firms.

Although Alaska Native corporations are recognized as socially and economically disadvantaged under federal law, the new IFR creates ambiguity. Native corporations may not be able to fully leverage their DBE status to meet program goals in the near term until the re-certification process is finalized.

Heightened competition among non-DBE contractors presents an additional concern. When DBE goals are suspended or reduced, non-DBE contractors may face increased competition for federal contracts.

“One of the confusing parts has been whether we should strictly enforce all of our DBE language from our contracts,” shares Little. “We’ve chosen to keep the forms the same but acknowledge that until all DBEs have been recertified no participation may be counted towards goals.”

DOT&PF aims to recertify the DBEs as soon as possible. “We’re still doing contracts, and the timing is unfortunate because next year’s work gets bid this time of year,” says Little. “Contractors may choose not to work with DBEs until they are requalified, which could mean less work for some of these small businesses. But they do understand the bigger picture and hopefully will continue to use the companies they’ve worked with previously.”

The changes to the DBE program are part of President Donald Trump’s administration-wide rollback of race- and gender-based affirmative action and diversity programs in federal contracting, highlighted by litigation and policy changes in similar programs such as the Small Business Administration’s 8(a) Business Development program. This program helps socially and economically disadvantaged small businesses obtain and perform federal contracts as part of a nine-year business development program. Notably, the Small Business Act of 1958 specifically defines the disadvantages as follows: “Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”

Supporters of the changes argue that individualized determinations increase fairness and legal durability. Critics express concern that removing categorical presumptions may weaken participation by historically disadvantaged groups unless agencies agreeably pursue race-neutral outreach and support strategies.

The current administration’s position is clear. In a late January press release, SBA Administrator Kelly Loeffler stated, “The 8(a) program was abused during the Biden administration to benefit favored minority groups at the expense of every other legitimate small business owner in America, including white Americans. The Trump administration has acted from day one to dismantle the discriminatory agenda that put white small business owners at a disadvantage and to crack down on the fraud and corruption that proliferates within DEI programs.”

The changes to acquisition regulations and other revisions have raised concerns and created uncertainty within the industry.

“With 8(a) contracts, the administration is not changing everything, but there is a focus on reducing regulations,” says Anne Marie Tavella, a partner at Davis Wright Tremaine LLP. “This is a very stressful time for the contractors, and I think there is a lot of fear and concern about the future of the program itself because it has been very publicly scrutinized. They’re worried about the future of their contracts and how they’re going to continue their business.”

On a national level, Associated General Contractors (AGC) of America began proactively addressing potential revisions to the DBE and 8(a) programs well ahead of the October 2025 announcement. This attention stemmed from ongoing discussions about the future of the programs, particularly in light of the US Supreme Court’s decision in Students for Fair Admissions v. Harvard, which held that race cannot be considered in college admissions. To explore viable alternatives, AGC of America established a Contract Preference Programs Task Force, resulting in the development of a “Key Elements” document.

This document outlines five principles to guide development of future initiatives supporting small and emerging contractors. AGC of America remains committed to monitoring the current programs and is preparing for the implementation of alternative strategies if warranted.

In the near term, Little says DOT&PF will continue working to assist formerly DBE-certified companies attain recertification and meet the established deadlines while everyone waits for additional guidance.

In the longer term, Alaska’s transportation sector may see a recalibrated DBE landscape, potentially smaller but legally reinforced, depending on how many firms successfully meet the new standards.

For now, Little and Tavella both believe the key takeaway is that the DBE and 8(a) programs remain operational, despite procedures that have seen substantial changes. For Alaska contractors, airport operators, and Native organizations, understanding and adapting to the revised framework will be critical to maintaining participation in federally funded transportation projects.