On September 30, 2025, the United States Department of Transportation issued an Interim Final Rule revamping its Disadvantaged Business Enterprise (DBE) programs. The new guidance follows entry of a consent order in a federal court in Kentucky resolving constitutional claims about the program. The new rule upends a DBE program started more than 40 years ago by removing the use of race- and sex-based presumptions of social and economic disadvantage as program qualifications.
The Recertification Process
All previously DBE-certified businesses must now recertify on a case-by-case basis using the following criteria to demonstrate individualized social and economic disadvantage:
- Demonstrate the owner is socially and economically disadvantaged based on his or her own experiences and circumstances that occurred within American society, and without regard to race or sex;
- Submit a personal narrative establishing the existence of disadvantage by a preponderance of the evidence based on individualized proof regarding specific instances of economic hardship, systemic barriers, and denied opportunities that impeded the owner’s progress or success in education, employment or business, including obtaining financing on terms available to similarly situated, non-disadvantaged persons;
- State how and to what extent the impediments caused the owner economic harm, including a full description of the type and magnitude, and establish the owner is economically disadvantaged in fact relative to similarly situated non-disadvantaged individuals; and
- Attach a current personal net worth statement and any other relevant financial information.
The Interim Final Rule took immediate effect and bars even the collection of information based on race or sex by entities using DOT funds. In response, the Virginia Department of Transportation issued guidance on October 3, 2025 stating that DBE goals on all active, federally eligible contracts are 0%, and until the Virginia Department of Small Business and Supplier Diversity completes its recertification of participants, VDOT will not include DBE goals in future contracts or count participation on active contracts. Active contracts are no longer required to submit VDOT forms with this information.
This new rule appears to go further than the U.S. Small Business Administration’s September 2024 revised rules regarding qualification for its 8(a) Business Development Program. The standard for a socially disadvantaged individual under the SBA’s guidance requires individuals to show “at least one objective, distinguishing feature” contributing to social disadvantage such as race, ethnic origin, or gender. This Interim Final Rule prohibits reference to race or gender in establishing social and economic disadvantage.
Steps for DBE Entities to Take Now
Previously certified DBE entities should consult a Woods Rogers attorney and take immediate action to determine if they can recertify under the new standards. Virginia’s Department of Small Business and Supplier Diversity has not yet updated criteria for participation in its SWaM or DBE programs for these new requirements. Its program requirements now appear to contradict federal requirements and will continue to create confusion in the Virginia business community until resolved.
