The U.S. DOT Disadvantaged Business Enterprise Program

The U.S. DOT Disadvantaged Business Enterprise Program

Updated April 24, 2023
The U.S. DOT Disadvantaged Business Enterprise Program
The Department of Transportation (DOT) Disadvantaged
 meet SBA size standards, defined by the annual gross
Business Enterprise (DBE) program seeks to offer small
receipts or employee number caps outlined for each
disadvantaged businesses a fair opportunity to compete for
North American Industry Classification System code;
federally funded transportation contracts. Small
and
disadvantaged businesses are small businesses that are
owned and controlled by socially and economically
 have average annual gross receipts over the preceding
disadvantaged individuals, and have been certified as such
three fiscal years that do not exceed $26.29 million
by the state where they wish to operate as a DBE. The
program is implemented through DOT regulations
(although the Federal Aviation Administration (FAA)
published at Title 49, Parts 23 and 26, of the Code of
Reauthorization Act of 2018 removed the gross receipts
Federal Regulations (C.F.R.).
cap for FAA-assisted work). DOT set the gross receipts
cap and adjusts it annually to account for inflation.
Program Purpose
The DBE program aims to prevent discrimination against
To be considered socially and economically disadvantaged,
DBEs by providing them equal opportunity to compete for
a firm’s owners must either demonstrate disadvantage or be
federally funded transportation contracts. Although DOT,
presumed as such. DOT presumes social and economic
like all executive agencies, establishes agency procurement
disadvantage for citizens of the United States (or lawfully
goals for contracting with small disadvantaged businesses
admitted permanent residents) who are: women, Black
(P.L. 100-656), this program is distinct from that effort
Americans, Hispanic Americans, Native Americans, Asian-
because it applies to the contracts awarded by state and
Pacific Americans, Subcontinent Asian Americans, or other
local governments that receive DOT grant assistance.
minorities found to be disadvantaged by the SBA (49
Funding for transportation projects flows through grant
C.F.R. §26.67). If not presumed disadvantaged by DOT, an
assistance, making the contracts awarded by grant
owner must demonstrate social and economic disadvantage
recipients relevant to DOT policy.
by meeting conditions explained in Appendix E to 49
C.F.R. Part 26. The DOT definition of “socially and
Program objectives related to ensuring nondiscrimination
economically” disadvantaged differs from that of the SBA
include the following:
for its programs, found at 13 C.F.R. §124.1001.
In addition to meeting the DOT definition of disadvantaged,
 removal of barriers to the participation of DBEs in
each socially and economically disadvantaged owner must
DOT-assisted contracts;
not have a personal net worth in excess of $1.32 million.
The net worth cap excludes ownership interest in the
 a level playing field on which DBEs can compete fairly
owner’s firm and equity in their primary residence. For
for DOT-assisted contracts;
highway and transit projects, the cap also excludes taxes
and fees that would be incurred to distribute assets held in
 promotion of the use of DBEs in all types of federally
vested pension plans, IRAs, 401(k) accounts, or other
assisted contracts and procurement activities conducted
retirement savings or investment programs (49 C.F.R.
§26.67(a)(2)).
by grant recipients; and

Program Origin and Guiding Goal
development of firms that can compete successfully in
Congress has regularly reauthorized the DBE program for
the marketplace outside the DBE program.
highway and transit projects in surface transportation bills
since 1983, most recently in the Infrastructure Investment
DBE Qualifications
and Jobs Act (P.L. 117-58). DBE programs for airport
A DBE is defined by criteria from both Small Business
projects and airport concessionaires were authorized by the
Administration (SBA) and DOT regulations. A DBE must
Airport and Airway Safety and Capacity Expansion Act of
be (1) a for-profit small business, and (2) at least 51%
1987 (P.L. 100-223). As early as 1969, DOT imposed a
owned by socially and economically disadvantaged
requirement on federal-aid highway construction projects to
individuals. A firm must also be organized so that the
make their best effort to use minority-owned firms, and
disadvantaged individuals hold the highest positions in the
established a Minority Business Enterprise program through
company or, in the case of corporations, control the board
agency regulations in 1980.
of directors (49 C.F.R. §26.69, 49 C.F.R. §26.69, and 49
C.F.R. §26.71).
Since the first DBE program authorizing legislation in
1983, Congress has maintained a cumulative national goal
To be a small business, a firm must:
of at least 10% contracting by DBEs where federal
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The U.S. DOT Disadvantaged Business Enterprise Program
highway, transit, or airport project assistance is used. State
and might provide technical assistance to area DBE firms.
and local transportation agencies that receive DOT grants
Grantees are required to use “race-neutral” and “gender-
are required to develop aspirational DBE contracting goals
neutral” means to meet their goals to the extent possible,
of their own. These goals are based on the share of DBEs
without using criteria favoring DBEs over non-DBEs (49
ready, willing, and able to perform the contracts a grantee
C.F.R. §26.5 and 49 C.F.R. §26.51). Examples of neutral
expects to award. Grantees are not required to use the same
means are informational programs on contracting
10% goal that DOT uses to guide program policy at the
procedures and opportunities, unbundling large contracts to
national level (49 C.F.R. §26.41).
make them more accessible, and offering business support
services. Grantees are not permitted to use quotas or set
Program Structure
aside contracts for DBEs (49 C.F.R. §26.43).
DBE contracting goals apply to the projects funded by
federal grants from the following DOT agencies: the
Certification of DBE Firms
Federal Highway Administration (FHWA), National
While contracting goals vary by grantee, the requirements
Highway Traffic Safety Administration (NHTSA), Federal
for DBE certification do not. DOT regulations lay out the
Transit Administration (FTA), and the Federal Aviation
“certification standards” to be used when certifying DBE
Administration (FAA).
firms (49 C.F.R. Part 26 Subpart D). Only certified firms
are eligible for a contract award as a DBE and states must
All direct recipients of FHWA financial assistance must
establish Unified Certification Programs (UCP) that handle
implement DBE programs regardless of anticipated contract
state-wide firm certification. UCPs make certification
award size; recipients of aid from other DOT agencies are
decisions on behalf of all DOT grant recipients in a state,
required to implement DBE programs when they anticipate
and maintain a state’s directory of DBE firms.
awarding prime contracts of more than $250,000 per fiscal
year with those funds.
A business seeking DBE certification submits an
application to the state UCP in order to be eligible for
Although projects are necessarily funded by nonfederal
contracts throughout the state. Certification decisions are
sources in addition to federal grants, only the federal funds
made through on-site visits to firms and personal
from the FHWA, NHTSA, FTA, and FAA are subject to
interviews, as well as reviews of licenses, stock ownership,
DBE contracting goals. However, contracts for the purchase
equipment, bonding capacity, work completed, financial
of transit vehicles are not subject to DBE goals regardless
capacity, and type of work preferred (49 C.F.R. §26.83(c)).
of federal assistance.
DBEs seeking to do business in multiple states generally
need to recertify themselves with all applicable UCPs but
State and Local Program
states can accept certification from other states.
Implementation
Grantees implement DBE programs using their own locally
Program Outcome Determinants
developed DBE contracting goals. The goal setting process
Key factors that affect the level of DBE contracting include
focuses on estimating the level of contracting to DBE firms
the type and scale of projects undertaken in any fiscal year
that would take place in the absence of discrimination.
and the federal share of funds allocated to projects. In
Grantees set their goals based on the market conditions and
addition, the availability of DBEs able to perform the
upcoming projects in their location. Regulations specify
needed work in a given location, as well as the number of
how to create goals using data on the availability of DBEs
DBEs that ultimately bid on contracts there, affect annual
relative to contracts to be awarded in a given fiscal year (49
DBE awards and commitments.
C.F.R. §26.45). Grantees set goals for three-year periods
and submit them, along with the “determining
Considerations for Congress
methodology,” to the FAA, FHWA, or FTA for review and
Due to the significant amount of funding provided through
approval. In some cases, DOT permits DBE goal-making
DOT grants from FHWA, NHTSA, FTA, and FAA,
for a particular grant or project rather than on a fiscal year
particularly with the passage of the Infrastructure
basis (49 C.F.R. §26.45(e)(3)).
Investment and Jobs Act (P.L. 117-58), Congress may be
interested in the DBE program’s effectiveness and fraud
Grantees cannot be penalized for noncompliance with the
risks. Congress may also consider program impacts on
program so long as they administer their programs in good
businesses in the transportation sector, as well as diversity
faith (49 C.F.R. §26.47). Nevertheless, eligibility for DOT
among these businesses. Information provided by grant
financial assistance depends on DOT approval of grantee
recipient reporting to DOT agencies may inform Congress’s
DBE programs (49 C.F.R. §26.21(c)). Grantees must also
considerations and shed light on this program’s
maintain records of data on DBE firm participation in
significance.
federally funded projects and report it to DOT; specifically,
FHWA and FTA grant recipients must submit a report
R. Corinne Blackford, Analyst in Small Business and
twice per fiscal year, and FAA recipients must submit a
Economic Development Policy
report once per fiscal year (49 C.F.R. §26.11).
IF12055
In order to attain approved DBE contracting goals, grant
recipients utilize state directories of certified DBE firms

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The U.S. DOT Disadvantaged Business Enterprise Program

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https://crsreports.congress.gov | IF12055 · VERSION 4 · UPDATED