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1 1 (October 4, 2024)

handle is hein.crs/goveqxw0001 and id is 1 raw text is: District Court Ruling on DOT Disadvantaged Business Enterprise Program October 4, 2024 Awarding a preliminary injunction, a federal district court ruled inMid-America Milling Company v. United States Department of'Transportation that the U.S. Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program may no longer operate under existing program regulations in the states of Indiana and Kentucky. The U.S. District Court for the Eastern District of Kentucky concluded in a September 23, 2024, opinion that DOT's rebuttable presumptions of disadvantage based on race and gender pursuant to the program likely violated contractors' rights to equal protection under the Constitution. The challenged requirements gave some women- and minority-owned businesses competitive advantages for certain DOT-funded contracts. Under the applicable strict scrutiny standard, a race-based preference must be narrowly tailored to meet a compelling government interest. In Mid-America, the court did not find specific instances of intentional discrimination, as needed to establish a compelling interest. General assertions of discrimination, or statistical disparities, the court said, were not enough. Furthermore, the court held that the DBE program would not be narrowly tailored to remedy discrimination because it arbitrarily included and excluded certain racial groups, and because the decades-old preference lacked a termination date or other logical end point. Similarly, the court concluded that the government did not meet the intermediate scrutiny standard, applicable to sex-based preferences. This standard requires the preference to be substantially related to an important government interest (such as remedying discrimination). Disparity studies showed women-owned businesses had less access to credit, the court acknowledged, but it did not show intentional discrimination. Based on the ruling, DOT must change certain DBE program requirements in Indiana and Kentucky (where the plaintiffs in the case operate), at least until the case is fully resolved, or it may seek a stay of the injunction. DOT has yet to respond to the ruling. DBE program objectives include the promotion of the use of DBEs in federally-assisted transportation projects and the development of firms that can compete successfully in the marketplace. DBEs are defined as small businesses that are at least 51% owned by socially and economically disadvantaged individuals and that meet other corporate control and revenue criteria. The eligibility criteria are found in Small Business Administration (SBA) and DOT regulations (at 13 C.F.R. § 124.1001 and 49 C.F.R. Part 26 and 49 C.F.R. Part 23). Congressional Research Service https://crsreports.congress.gov IN12440 CRS INSIGHT Prepared for Members and Committees of Congress

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