US highway program's use of race, gender in contracting is unlawful, judge says

By Nate Raymond

(Reuters) - A U.S. judge ruled that the U.S. Department of Transportation's consideration of race or gender when awarding billions of dollars in federal highway and transit project funding set aside for disadvantaged small businesses is unconstitutional.

U.S. District Judge Gregory Van Tatenhove in Frankfort, Kentucky, on Monday ruled that a federal program enacted in 1983 that treats businesses owned by racial minorities and women as presumptively disadvantaged and eligible for such funding violated the U.S. Constitution's equal protection guarantees.

"The court is keenly aware of the past discrimination that certain groups of people have faced in this country," Van Tatenhove wrote. "And the court is sure that the federal government has nothing but good intentions in trying to remedy past wrongs."

But Van Tatenhove, an appointee of Republican former President George W. Bush, said the federal government cannot classify people in ways that violate the principles of equal protection in the U.S. Constitution.

He relied in part on a ruling last year by the U.S. Supreme Court, which has a 6-3 conservative majority. The ruling effectively prohibited affirmative action policies long used in college admissions to raise the number of Black, Hispanic and other underrepresented minority students on American campuses.

The judge blocked the Transportation Department from relying on race or gender when considering contracts bid for by two companies that sued last year over the policy, Mid-America Milling Company and Bagshaw Trucking, which operate within Kentucky and Indiana.

A spokesperson for the department said it will continue to the defend the program as the case moves forward but will comply with the court's ruling in the meantime.

The ruling marked the latest instance of a court blocking a federal program designed to benefit minority-owned businesses following the Supreme Court's ruling.

In March, a judge in a different case barred a federal agency called the Minority Business Development Agency tasked with providing assistance to minority-owned businesses from turning away applicants based on race.

Since 1983, Congress has authorized the Disadvantaged Business Enterprise program, which requires the Department of Transportation to ensure at least 10% of funding for highway and transit projects are spent on disadvantaged businesses.

It was reauthorized in 2021 through Democratic President Joe Biden's signature Infrastructure Investment and Jobs Act, which set aside more than $37 billion for that purpose.

While any business can qualify as socially and economically disadvantaged, Black, Hispanic and certain other racial groups along with women were presumed disadvantaged.

The plaintiffs argued the program discriminated against other racial groups, such as white people, and violated the Constitution's Fifth Amendment.

(Reporting by Nate Raymond in Boston; Editing by Matthew Lewis)