As PilieroMazza previously reported, via an interim final rule (IFR) effective October 3, 2025, the U.S. Department of Transportation (DOT) removed the use of race- and sex-based presumptions of social and economic disadvantage for establishing eligibility for its Disadvantaged Business Enterprise (DBE) and Airport Concessions DBE (ACDBE) Programs.[1] Given the lack of clarity with various aspects of the IFR, there is significant confusion among DBE Program stakeholders in terms of how the IFR is to be carried out. On October 24, 2025, DOT issued guidance in the form of answers to Frequently Asked Questions (FAQs) on the IFR which provide much-needed clarity and protection for DBE firms, while leaving other critical issues unaddressed. This Client Alert summarizes the key takeaways from DOT’s guidance.
1. There is no set deadline for firms to submit their reevaluation documentation or for UCPs to complete the reevaluation process.
The guidance confirms that Unified Certification Programs (UCPs) cannot simply decertify all DBE firms without going through the reevaluation process, nor may UCPs impose a deadline on DBE firms for submission of the newly-required personal narratives and supporting financial information.[2] This is a welcome clarification as several UCPs have taken the position that all DBE firms are automatically decertified pending reevaluation, and a number of UCPs have set deadlines, some of them quite short, for firms to submit their reevaluation documentation.
If a disadvantaged owner needs more time to complete their personal narrative and pull together their financial information, they should reach out to the UCP to confirm that any previously identified deadline is no longer effective in light of DOT’s guidance. That said, firms will remain ineligible until they submit the required documentation and establish their eligibility under the new standards, so firms should strive to submit as soon as their documentation is finalized.
The guidance also clarifies that there is no deadline for UCPs to carry out the reevaluation other than they must proceed “as quickly as practicable.” Some UCPs have indicated they anticipate the process may take a year or longer to complete.
2. DBE firms must be reevaluated by their jurisdiction of original certification (JOC) UCP and then reapply for interstate certification after being recertified.
In response to questions about whether firms need to be reevaluated solely in their home state (now called their JOC) or also in every other state where they are certified, DOT’s guidance clarifies that the JOC UCP is responsible for the reevaluation process. As a result, DBE firms need only submit their personal narrative and financial information to the UCP in their JOC. This makes sense as the alternative of requiring firms to submit the same information to potentially dozens of UCPs would create an unnecessary, duplicative burden on UCPs and likely result in contradictory reevaluation decisions.
However, the Q&A states that DBE firms must reapply for interstate certification after being recertified by the UCP in their JOC. Though the interstate certification process was substantially streamlined via DOT’s 2024 Final Rule, this still results in extra work for DBEs who want to maintain their certifications in multiple states.
3. DBE firms that are decertified have the right to appeal the decertification to DOT.
While the IFR removed the key DBE due process right to notice and a hearing prior to decertification following reevaluation, the Q&A confirms that a DBE firm that is decertified under the reevaluation procedures retains the right to appeal the decertification to DOT pursuant to the normal appeal process set forth in 49 C.F.R. § 26.89.
4. Contracts executed prior to October 3 may maintain their DBE goals, and DBE credit may be counted for recertified firms once the reevaluation process is complete.
Importantly, the Q&A clarifies that contracts with a DBE goal executed prior to October 3, 2025, need not be modified to remove the DBE goal. DBE participation cannot be counted toward the DBE contract goal or the recipient’s overall DBE goal until the UCP in the recipient’s jurisdiction completes the reevaluation process. Assuming the DBE firms slated to work on the contract are recertified, their participation can be counted once the reevaluation process is complete.
For contracts advertised or let (i.e., bids opened), but not yet executed, prior to October 3, the DBE goal must be removed.
5. The DBE rule prohibiting the termination or reduction of DBE workshare without the recipient’s prior written approval continues to apply.
Many DBE firms have justifiably raised concerns as to whether prime contractors can use the reevaluation process—and temporary inability to count DBE credit for their performance—as good cause to terminate all or a portion of their work. The Q&A should alleviate those concerns as it makes clear that such action is not allowed.
DOT’s guidance states that the DBE regulation governing termination of DBE firms listed in a bid (49 C.F.R. § 26.53(f)) continues to apply to existing contracts. Under this regulation, a prime contractor cannot terminate a DBE firm listed in response to the “good faith effort” bidding requirements without the recipient’s prior written consent upon a showing of good cause, unless the recipient causes the termination or reduction. DOT states that “[g]ood cause for termination exists if a DBE loses its DBE certification after the reevaluation process . . . is completed because it is ineligible to receive DBE credit for the type of work required.”[3]
As a result, a prime contractor cannot terminate a DBE firm unless and until the firm is decertified (or another basis for good cause is established), notwithstanding that the prime contractor currently is unable to take credit for the DBE firm’s performance while the reevaluation process takes place.
6. The DBE rule requiring prompt payment to DBE firms continues to apply.
The Q&A confirms that the prompt payment requirements in 49 C.F.R. § 26.29 apply during the reevaluation period. This means DOT recipients must ensure (1) prime contractors pay subcontractors for satisfactory performance of their contract no later than 30 days from receipt of each payment made to the prime contractor, and (2) prompt and full payment of retainage from the prime contractor to the subcontractor within 30 days after the subcontractor’s work is satisfactorily completed.
7. DOT’s guidance provides no insight into the standards UCPs should apply in evaluating whether DBE firm owners are socially and economically disadvantaged.
Many certifiers and DBE firms are unclear about the standard certifiers should use in evaluating whether an individual qualifies as socially and economically disadvantaged. The IFR provided a general framework for what DBE firm owners must address in their narratives (i.e., 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 persons who did not face barriers in obtaining terms; and a description of the type and magnitude of economic harm caused by the impediments, establishing the owner is economically disadvantaged relative to similarly situated non-disadvantaged individuals). However, the IFR did not elaborate on the type of circumstances and extent of economic harm that would be sufficient to prove by a preponderance of the evidence that the individual is disadvantaged.
Unfortunately, DOT did not address this significant issue in its answers to the FAQs, wasting a crucial opportunity to eliminate ambiguity, lessen the likelihood of subjective and inconsistent decisions among different certifiers, and speed up the process. Notably, some UCPs have indicated they are holding off on reevaluating DBE firms until they receive further guidance from DOT, highlighting the critical need for more input from DOT to complete the reevaluation process quickly and in an even-handed manner.
PilieroMazza will continue to monitor and report on developments with the DBE Program as they arise. If you have questions about the IFR, DOT’s latest guidance, or how to prepare for the reevaluation process, please contact Jackie Unger or another member of the Firm’s Government Contracts Group.
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[1] References herein to the DBE Program and DBE firms also apply to the ACDBE Program and ACDBE firms, respectively.
[2] See Official FAQs, Q&A C.3. (“Can a UCP impose a deadline on currently certified DBEs for submission of the reevaluation documentation required under 49 CFR § 26.111? No, the regulation at 49 CFR § 26.111 does not provide a deadline for a currently certified DBE to submit documentation demonstrating its DBE eligibility under the new standards provided in the IFR.”).
[3] See Official FAQs, Q&A B.3. (emphasis added).
