The federal program that offers advantages for minority and women-owned businesses on highway construction contracts may disproportionately burden subcontractors, but it is still constitutional, the Seventh Circuit ruled.
Midwest Fence, a specialty contractor focused on guardrails and fencing, challenged the federal government’s program that offers help for disadvantaged business enterprises (DBEs), small businesses owned and managed by racial minorities and women.
The DBE program, in effect since 1983, establishes a goal of spending at least 10 percent of federal highway funds on contracts with disadvantaged businesses. DBE business owners must certify their disadvantaged status, and qualify only if their net worth does not exceed $1.32 million.
Participation in the federal program is a requirement for states that want to use federal highway funds.
However, the program offers the states significant flexibility. Contractors bidding on highway construction work in Illinois cannot be automatically rejected for failure to meet diversity goals, and quotas are flat-out prohibited. Instead, the state must determine if the bidder has made good faith efforts to find DBE subcontractors that could perform 10 percent of the work.
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