In 1977, the late Parren Mitchell—a Maryland representative, founder of the Congressional Black Caucus and chair of the House Small Business Committee—attached an amendment to a public works bill that compelled state and local governments seeking federal grants to set aside 10% of those funds for minority-owned firms. Congress codified the federal Disadvantaged Business Enterprise program In 1983 to require state and local governments receiving federal transportation project funds to set aside 10% of contracts for such companies.

"These were laws we had fought for more than 60 years ago," said Rev. Larry Bullock, president and CEO of the U.S. Minority Contractors Association, which represents minority contractors and subcontractors in 28 states.  

Bullock said current administration executive orders do not change any federal laws. "We are advising our members that removal of federal DEI/DBE programs has not been decided by any court and we believe this will ultimately be decided by the [U.S.] Supreme Court." 

In the current case, the National Association of Diversity Officers in Higher Education, city of Baltimore and state of Maryland are among plaintiffs who challenged two executive orders signed in the early days of the second Trump administration terminating all federal DEI programs. 

The plaintiffs charged that President Donald Trump and Russell Vought, U.S. Office of Management and Budget director, could not enforce their orders. Writing for the Richmond appeals court panel, Chief Judge Albert Diaz said that  "the President may determine his policy priorities and instruct his agents to make funding decisions based on them." 

Diaz added that "President Trump has decided that equity isn’t a priority in his administration and so has directed his subordinates to terminate funding that supports equity-related projects to the maximum extent allowed by law. Whether that’s sound policy or not isn’t our call. We ask only whether the policy is unconstitutionally vague for funding recipients."

Citing a 1998 National Endowment for the Arts funding case as precedent, Diaz wrote that the policy of ending equity efforts in agencies was not unconstitutionally vague and that the administration may continue to carry it out while the legal challenge heads back to the district court for trial. 

In a separate concurring opinion, however, Diaz also hinted that DEI participants and proponents could pursue further action. “For those disappointed by the outcome, I say this: Follow the law,” he said. “Continue your critical work. Keep the faith. And depend on the Constitution, which remains a beacon amid the tumult.”

Challenges on Several Fronts

A separate case in 2023 challenged the legality of M/WDBE requirements for federal projects in Kentucky under the constitution's due process clause and eventually saw the U.S. Dept. of Transportation call its own program unconstitutional. 

This has prompted other challenges to DEI programs across the country. Many state transportation agency programs have since shifted their focus to assisting small businesses without regard to owners' gender or minority status, or asking applicants to explain their social disadvantage. The Kentucky case was originally limited in scope to two plaintiffs, Mid-American Milling Co. and Bagnell Trucking operating in Kentucky and Indiana, but it was expanded to any state in which those firms they bid projects, giving it much more legal impact.

The federal DOT's updated policy guidance in September removed race and gender-based preferences from its DBE programs and instructed state agencies to base their programs on other forms of disadvantage.

"The Interim Final Rule removes race- and sex-based presumptions from the definitions of 'socially and economically disadvantaged individual,'" it reads, instead providing that the owner of a DBE or ACDBE applicant must demonstrate on a case-by-case basis that the individual meets the criteria."

"As a direct result of these cases, you are going to see some states that enforce the requirements of the law and some that do not, citing the ongoing litigation," said Bullock of the U.S. Minority Contractors' Association. 

In another federal challenge last year, Louisiana construction technology firm Revier Technologies challenged two U.S. Small Business Administration programs as violating the Constitution’s equal protection clause because of race-based classifications. They are the State Small Business Credit Initiative and the Department of Homeland Security Intelligence and Cybersecurity Diversity Fellowship. Revier's lawsuit says both programs put it at a disadvantage to win work based on not being a minority or woman-owned business.

The case  in the Richmond court and the Revier challenge both "address the related concept of race-based government action," said Matthew Schultheis, founder and CEO of Revier, which is the parent company of HAULR, a construction trucking management application. 

"Federal courts do not need to decide what 'socially and economically disadvantaged' means. The terms are in a regulation being challenged in my lawsuit" said Schultheis, who previously worked for Autodesk and PlanGrid. "The administration could revise that regulation to make clear that the racial presumption is no longer the law. The [Small Business Administration] recently suggested that it may be doing that, we'll just have to wait and see what [it] does."

Schultheis was referring to a January policy guidance from the agency that mirrors the federal DOT policy guidance after the Kentucky case, instructing employees to not make decisions about social disadvantage based on race or gender. The small business agency also says that it "fully agrees that the presumption of social disadvantage based on enumerated races in its regulations is unconstitutional."

The Minority Contractors Association said in a statement that the expanded scope of the injunction in the Kentucky case to states where the plaintiffs operate or bid will create inconsistent application of DBE policies, leading to uneven economic opportunities for minority contractors across regions. 

"It is important to point out that this is not the end of the discussion about the executive orders," said David Cayamitte, president and CEO of EMBRACE Partners, an insurance consultant and CEO of the Minority Business Development Institute, who assisted MWDBE firms in getting bonded to work on federal projects after Hurricane Katrina in Louisiana and numerous other projects.

"There are other cases in other Circuits that are yet to be decided, most importantly, in the seventh circuit," he said. "Chicago Women in Trades (CWIT) v. Department of Labor will be decided soon." In this case, the appeals court refused to lift a preliminary injunction that blocks the certification provision in the second Trump executive order. If the injunction is upheld, "we will have a formal circuit split—where the fourth circuit says the orders are legal and the seventh circuit says they aren't." Cayemitte explains. "The Supreme Court will have to step in to make the final decision."

Bullock said that the various court cases could take up to two or more years to progress through a legal process that could, indeed, end in a Supreme Court decision. The Maryland officials and Higher Education officers can appeal the ruling on the injunction to the full Richmond appellate court or forward its challenge immediately to the high court.