Legal Insights

USDOT Issues Interim Ruling Affecting Federally Funded Projects
 

October 14, 2025
By: Mason Avrigian Jr.

On Friday, October 3, 2025, the U.S. Department of Transportation (USDOT) released an Interim Final Rule (IFR), effective immediately, incorporating fundamental changes to the USDOT’s Disadvantage Business Enterprise (DBE) program for federally assisted highway, transit, and airport construction projects. Prior to the issuance of the IFR, women, Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans and Sub-Continent Asian Americans were presumed to be “socially and economically disadvantaged” for purposes of certification and participation in the DBE program. Unified Certification Program (UCP) certification made the firms eligible to be utilized and counted toward the DBE participation goals set for the federally funded projects. The IFR materially changes the way the DBE program will operate moving forward.

REMOVAL OF PRESUMPTION

The IFR rescinds the longstanding presumption of social and economic disadvantaged status. The USDOT adopted the evaluation of the DBE program by the Solicitor General of the United States and the United States Department of Justice, concluding that the presumptions in the DBE program violated the Fifth Amendment to the Constitution of the United States which prohibits the Federal Government from depriving individuals of equal protection of the laws. Based on this determination, the IFR requires each UCP to reevaluate each current DBE firm and conduct a recertification process based on the new standards in 49 CFR 26.67.

WHAT THIS MEANS FOR YOU?  

Importantly, the IFR does not apply to 100% state and/or local funded projects. Thus, DBE participation goals and requirements on state and local funded projects remain in place and unaffected by the IFR. 

On federally funded highway, transit and airport projects, however, the changes are immediate and significant. The Pennsylvania Department of Transportation has issued addenda for all advertised projects eliminating DBE participation goals. Other state DOT’s have taken similar actions.    

The effect of the IFR on ongoing projects, with contract effective dates before October 3, 2025, is not entirely clear. Based on the IFR, work on these projects by previously certified DBE firms cannot be counted toward DBE goals. Additional guidance from the USDOT is required for these awarded projects. For projects in the post-bid but pre-award/contracting phase, the IFR invalidates the DBE participation goals included in the bid solicitation. Open questions exist for these unawarded projects, including whether the bidding is open to challenge because the DBE program participation goals in the bid solicitations no longer apply. 

While the IFR leaves many open questions, here are a few key immediate takeaways: 

• If you are a current certified DBE company, you will be reevaluated for continued certification. The reevaluation process is not clear. Under the new certification standards in 49 CFR §26.67, you must be prepared to demonstrate that you are socially and economically disadvantaged based on your “own experiences and circumstances that occurred within American society, and without regard to race or sex.” 49 CFR §26.67(1). The UCPs are required to process each application for DBE certification on a case-by-case basis using the factors set forth in Section 26.67 and the UCP must either recertify or decertify each DBE firm. 

• If you are a DBE subcontractor or supplier on an existing, ongoing project, while the DBE participation requirements are no longer in place for the project, the IFR does not invalidate existing contracts, and the contracts will control the parties’ status and rights. 

• For bidders on advertised PennDOT projects that remain in the bidding stage, the DBE participation goals included in the solicitation documents will be removed and the DBE goals will not apply without further direction from PennDOT. For pending projects with other public owners in Pennsylvania or in another state, you should look for guidance from the owner on the bidding requirements.  

We will continue to monitor these important developments and will send further updates with new guidance and information as it becomes available.

In the meantime, should you have any questions, please contact Mason Avrigian, Jr., Principal and Co-Chair of the firm's Construction Practice Group at 215-587-1106 or mavrigian@postschell.com.