Transportation department's changes to federal diversity program risks hurting Chicago's small businesses

Some diversity and construction industry advocates say a recent change by the U.S. Department of Transportation to a federal program could hurt smaller companies owned by minorities and women — and possibly drive some in Chicago out of business.

In October, the federal agency said businesses under the Disadvantaged Business Enterprise program must be recertified without using race or gender as a factor. The directive came amid recent efforts by President Donald Trump’s administration to end diversity initiatives.

“The American people don’t care what race or gender construction workers, pipefitters or electricians are. They just want these massive projects finally built quickly and efficiently,” the DOT said.

Congress created the Disadvantaged Business Enterprise program in 1983. It calls for transportation agencies to set contract goals for federally funded infrastructure projects to include smaller “disadvantaged” businesses, typically owned by racial minorities and women.

Last year, the program included about 50,000 businesses nationwide, including thousands in Illinois.

The DOT has called the Chicago Transit Authority’s diversity programs “discriminatory” and has said it's reviewing the $5.7 billion Red Line Extension and Red and Purple Modernization projects “to determine whether any unconstitutional practices are occurring.” It froze the remaining federal funding for both projects, totaling $2.1 billion. It also put under review New York’s Second Avenue Subway and Hudson Tunnel projects.

“Illinois, like New York, is well known to promote race- and sex-based contracting and other racial preferences as a public policy,” the DOT said.

Illinois lawmakers, including U.S. Sens. Tammy Duckworth and Dick Durbin, sent a letter to the DOT in October, saying pausing federal funding for the CTA’s projects “creates funding uncertainty at the state and local level. It also threatens jobs, economic development and the livelihood of hardworking Americans who rely on public transit every day.”

On Friday, the CTA filed a lawsuit against the federal government over the funding freeze and said if the funds aren't restored the agency would be forced to stop work on both projects.

‘Devastating blow’

Weakening the DBE program is a “devastating blow” that could put minority-owned construction companies out of business, according to Michael Bempah, chief executive officer of Pinpoint Precision Engineering in Chicago. It would also mean “reduced access for new businesses trying to get started,” he said.

Bempah’s company has about 25 employees and recently worked on the Kennedy Expressway 90/94 deck repairs.

The new federal policy creates significant uncertainty for infrastructure projects, as well as construction service firms.

“That has translated into real-world impacts for companies, including delays to pending and upcoming projects as agencies seek clarity and compliance,” said Kevin Artl, chief executive officer of the American Council of Engineering Companies of Illinois.

The new regulations have had “a disruptive effect across the industry, extending beyond DBE firms to any company working with agencies subject to the new rules,” Artl said.

According to Bempah, “Some business owners are selling their companies, while others may continue to fight. As for my company, we see this as an opportunity to fight for greater access.”

Setback for Illinois?

Illinois is considered a leader in opening infrastructure contracts to smaller businesses owned by minorities and women.

Transportation agencies such as the CTA have some of the most successful DBE programs in the nation, according to Colette Holt of Colette Holt & Associates in Texas, who has studied DBE programs at large infrastructure projects in Illinois and elsewhere.

The CTA exceeded its goal of awarding 20% of contracts to DBEs in its $2.1 billion renovation of the Red and Purple L lines. The Red and Purple Modernization is the agency’s second-largest project. Minorities accounted for nearly 53% of the project’s workforce, according to the CTA.

The overhaul of the DBE program “will no doubt make it more challenging to maintain the gains and continue to support the health and growth of minority- and woman-owned firms,” Holt said.

Adrian Mobley, who owns A&W Contractors in Englewood, made a career shift into construction, spurred by the Red and Purple Modernization’s goals to include more DBE subcontractors. For 25 years, she was a respiratory therapist at Chicago hospitals and started her own business in 2014 to offer workplace CPR and safety training. She shifted into construction in 2020 and won a $4.5 million subcontract to manage traffic flow and safety at CTA construction sites for the Red and Purple Modernization.

Since then, her company has grown from three employees to about 30. Many are union members making nearly $50 an hour.

Last year, Mobley applied for DBE recertification with the city of Chicago, although the criteria weren't clear. Her five-page application answered open-ended questions seeking a “personal narrative” to prove her business is disadvantaged, she said. Certification still requires financial documentation.

In January, the city notified her that A&W will be recertified as a DBE. That was “absolutely imperative,” Mobley said. At least 40% of her company’s contracts are for federally funded projects.

Bempah applied for DBE recertification in November with the Illinois Department of Transportation. The state notified him this month that his company has been recertified.

“The certification is important because, without it, it limits the amount of networking and subcontracting opportunities for big projects,” Bempah said.

Without broader diversity goals, big construction companies might not see a need to hire small, local subcontractors.

“Contract goals work," Holt said. "Agencies that have seen their programs shut down, like Cook County in the early 2000s, saw minority business enterprise participation drastically decline. I hope that doesn’t happen here.”

IDOT: DBE goals intact

Businesses can be certified as DBEs by different agencies, such as IDOT. Local agencies review applications and grant certification, but their decisions can be audited by the federal government. Deadlines vary and response times var, which can create uncertainty for companies and infrastructure projects.

IDOT, the CTA and industry organizations such as the American Council of Engineering Companies of Illinois have hosted workshops on the new DBE rules.

“IDOT will not be including DBE goals on newly advertised projects and contracts until the DBE reevaluation process is completed,” the department announced in November. “Once that reevaluation process is completed, IDOT intends to include DBE goals on projects and contracts where applicable.”

The Illinois agency said DBE goals will remain intact on contracts made before Oct. 3, 2025, the date of the federal order. It urged the construction industry and partners to continue supporting and hiring DBE firms.

IDOT must comply with federal regulations, but it says that compliance “does not reflect a change in IDOT’s long-standing commitment to equity, inclusion and opportunity in the transportation industry, especially because all businesses are impacted when there are limited opportunities for small business inclusion.”