Understanding DBE Rules During a Period of Transition

The Interim Final Rule (IFR) effective October 3, 2025, triggered a pause of DBE contract goals on new solicitations as well as not to enforce goal-related bid conditions or good faith effort requirements on U.S. Department of Transportation (DOT) contracts advertised or awarded after October 3, 2025 until each state’s unified certification program (UCP) completes its recertification process.

The IFR did not pause the entire DBE Program. It only temporarily suspended traditional DBE goals and related provisions. Certain key DBE contract clauses must continue to be included in DOT-funded contracts. The following clauses must continue to appear in DOT-funded contracts:

1. DBE non-discrimination and compliance assurance clause (49 CFR §26.13). This clause requires contractors not to discriminate on the basis of race, color, national origin, or sex, and to carry out all applicable requirements of 49 CFR Part 26 in performing the contract.
2. Prompt Payment (49 CFR §26.29). Prime contractors and subcontractors that contract with lower tier subcontractors are required to pay all subcontractors (DBEs and non-DBEs) in full within 30 days of receiving payment and to release retainage within 30 days of a subcontractor’s satisfactory completion of its work. In California the prompt payment requirement is more stringent than the federal requirement. The California Department of Transportation (Caltrans) implements these federal requirements and adds stricter state-level rules – for example, California law generally requires paying subcontractors within 7 days of receiving payment (shorter than the federal 30-day rule).
3. Termination protections (49 §26.53(f)). USDOT has clarified that the regulatory provisions barring prime contractors from terminating or reducing a DBE subcontractor’s work without prior written consent and good cause remain in full effect during the reevaluation (See, DOT FAQs dated 12-01-25). In other words, a prime still cannot “release” a DBE firm it listed to meet an earlier DBE commitment unless the funding recipient (e.g. state DOT or transit agency) approves and determines good cause exists.

So, what should not be included in DOT-funded solicitations and contracts that are issued or awarded after October 3, 2025 and before a UCP has completed its reevaluation of DBEs and prepared a revised overall DBE goal (a recipient’s triennial goal)? The following items should not be included or performed during this “limbo” period:

• DBE contract goals or good faith effort provisions. Do not set new contract goals or enforce goal-related bid conditions or good faith efforts requirements. These provisions should be removed or revised for new contracts during this “limbo” period. New DOT-funded contracts during the reevaluation period will be “DBE Neutral” This means there are no DBE goals or GFE provisions until after the transition period.
• Commercially Useful Function (CUF) monitoring requirements. Since no DBE participation is being counted toward DBE contract goals, CUF reviews, which ensure a DBE is actually performing the work for DBE credit are deemed unnecessary. However, prime contractors are still expected to utilize DBEs that were listed in their bids, and they should internally monitor performance to ensure contract compliance (i.e., DBEs are not being terminated or partially terminated).

Monitoring DBE Utilization and Payments: The DOT expects recipients to continue tracking and enforcing whatever DBE commitments are in the contract to ensure DBE firms on projects get the work and payment promised.

Open-Ended Performance Plans: Although the latest DOT FAQs address how the IFR affects DBE open-ended performance plans for design-build projects that have been executed prior to October 3, 2025, they do not address design-build contracts that are entered into after October 3, 2025.  It’s understood that the same clauses that must continue to appear in other DOT-funded contracts will also be required for design-build contracts.  However, because of the nature of a design-build and other alternative delivery method projects, there are other factors to consider.

For contracts that are entered into after the effective date of the IFR, open-ended performance plans must not include a contract goal for any phase of the project.  However, because some alternative delivery projects, such as progressive design-build (PDB) and construction manager/general contractor (GM/GC) projects may require an amendment for the construction phase, it’s possible to either include language in the solicitation or contract that a DBE contract goal may be included in the separate construction phase of the project or simply say nothing at the time the solicitation or first phase of the contract is issued then add the DBE contract goal and related provisions to the amendment.  Of course, the DBE contract goal or goals may only be added once the UCP has completed its reevaluation process and a revised overall goal has been developed and issued by the recipient agency.

Summary: In summary, the IFR and official FAQs make it clear that while the DBE program reboot is underway, recipients must continue to include and enforce the core DBE provisions in their contracts but must remove or omit any elements of the old DBE contract provisions that are tied to setting or fulfilling specific DBE goals. What’s temporarily halted is the affirmative action component (goals for DBE participation), until all DBE firms under each applicable UCP are screened under the new eligibility rules. As a result, contracts during this period focus on race-neutral compliance: they enforce fair treatment and prompt payment of any and all subcontractors (including DBEs), and they retain safeguards against cutting certified firms out of work without oversight. The rules for how to handle the construction or later phases of alternative delivery method projects with open-ended performance plans are less clear. 

Once the reevaluation is complete and new DBE goals are adopted, DOT will allow recipients to reintroduce contract goals and full DBE special provisions.

Written By: Edward Salcedo, Jr., Esq., President of GCAP

GCAP can help support you in navigating these new DBE requirements, please Contact Us at your convenience.