Indiana companies await results from DBE certification changes

Indiana companies are still waiting to see the impact from a contentious fight over the future of a federal contracting requirement that prioritizes disadvantaged businesses.

The Disadvantaged Business Enterprise program, enacted by Congress in 1983, requires state and local transportation agencies that receive federal Department of Transportation funds, including the Indiana Department of Transportation, to award a certain percentage of their contracts to businesses certified as disadvantaged business enterprises.

The program was the subject of a Kentucky-based lawsuit from Indiana companies Mid-America Milling Co. of Jeffersonville and Bagshaw Trucking Inc. of Memphis. The companies claimed the DBE program resulted in reverse discrimination against them, and U.S. Judge for the Eastern District of Kentucky Gregory  F. Van Tatenhove issued an injunction that prevented the use of the requirements on any contracts that the companies bid on, in any state.

In October, months after that injunction was filed, the Department of Transportation released an interim final rule that removed race- and sex-based assumptions from the DBE goals. Based on that decision, Tatenhove dismissed the pending case on March 19 and wrote that the entire matter had “become moot” because of the regulatory overhaul. That dissolved the injunction.

Nonprofit conservative law firm Wisconsin Institute for Law & Liberty represented the plaintiffs in the DBE lawsuit. The firm wrote in a press release that it applauds the move and  is “prepared to take nationwide legal action to enforce it.”

Stephanie Allen, the Mooresville-based owner of Crossroads Highway Products, has consistently raised alarm that the lawsuit could have been the end of the DBE program altogether. Allen runs a Facebook group with more than 700 owners of DBE-certified companies in which she shares information regarding the program and recently traveled to Washington, D.C., to speak to members of Congress.

“The day that the lawsuit was dismissed, I was screaming,” Allen said. “I was just about in tears.”

She and others have been working to show that the program is about economic opportunity, not diversity, equity and inclusion. The latter has been villainized by the Trump administration, which Allen said is lumping the longstanding DBE program into that category.

“This is a bipartisan issue,” Allen, a Republican, told IBJ. “But this administration is lumping it in with DEI, and it’s not DEI.”

As part of the federal rule change, all DBE-certified firms must argue that they are disadvantaged for reasons that aren’t sex- or race-based.

Previously, businesses needed to be small, independent and owned by someone who is part of a group designated as socially and economically disadvantaged. Disadvantaged groups include women, Blacks, Hispanics, Native Americans and Asian-Pacific Americans.

Now they are required to submit financial evidence and a written narrative to 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,” according to a DOT document on the rule. State departments of transportation are reviewing those applications for recertification.

The Indiana Department of Transportation began accepting DBE certification reevaluation applications, as well as new applications, on Feb. 23, spokeswoman Cassy Bajek told IBJ in an email. INDOT will report applications back to the federal department until 60 days after it began accepting them, but will continue to accept applications after that point.

Bajek said she could not provide a number on how many DBE firms have reapplied, how many have been recertified and if any had been denied.

Allen, of Crossroads Highway Products, has been recertified. Still, the federal pivot has put contractors in the DBE category in a “holding pattern,” Allen said, because states including Indiana haven’t reinstated the goals. With those on hold, her business was down 68% in sales of expansion joint material, which connects highway bridges, last year partially due to the lack of DBE requirements steering bids toward her small, woman-owned business.

“My line of credit has been reduced at my bank,” Allen said. “It’s really affecting me. I’ve honest to God been in a year and a half of terrible depression.”

Some states that requested this information from DBE bidders previously have reinstated the goals, Allen said. That’s her hope for the Indiana program, too.