As Governments Retreat From Race and Gender Based Contracting, Contractors Face a New World of “Prove It” Eligibility
Across the country, it is no longer just Washington that is re examining programs historically reserved for minority and women owned businesses. States, cities, school districts, and even transportation authorities are rapidly rewriting, or outright repealing, long standing public sector contracting programs that once relied on racial or gender classifications.
The pivot follows a cascade of court rulings that began in 2023 and accelerated through 2024–2025, culminating in formal federal directives instructing agencies to eliminate “illegal DEI” preferences. That national shift has now touched everything from the SBA’s 8(a) program to local M/WBE construction goals in cities like St. Louis and county procurement rules in Kansas City, Kansas.
While each jurisdiction cites its own reasons, legal exposure, federal funding risk, or ideological opposition, the cumulative effect is unmistakable:
Race and gender based presumption models are being replaced with individual, evidence based standards or race neutral small business criteria.
And for government contractors, the message is equally clear: prepare now for a contracting landscape where categorical eligibility is gone, and documentation, compliance, and strategic repositioning are essential.
A National Realignment: From Presumptions to Proof
The federal government set the tone when the 2023 Ultima Services v. USDA ruling struck down the SBA’s use of racial presumption in its 8(a) program. Barely a year later, courts applied similar logic to the Minority Business Development Agency (MBDA), and the Department of Transportation voluntarily dismantled the decades old presumption for Disadvantaged Business Enterprises (DBEs).
Where federal agencies go, state and local governments often follow, and this moment is no exception.
States Leading the Retrenchment
Arkansas, North Carolina, and Texas have enacted or implemented broad bans on preferential treatment, forcing agencies to scrub MWBE references entirely.
Missouri rescinded long standing M/WBE purchasing targets amid concerns that goals themselves could violate equal protection jurisprudence.
Florida reversed decades of supplier diversity policy and is moving toward eliminating MBE programs altogether under SB 1694.
Cities and Counties Following Suit
Municipalities from Philadelphia to Tampa, St. Louis, and Wyandotte County (Kansas City, KS) have either suspended M/WBE programs or reconfigured them into small business or local business preference systems to align with new legal interpretations.
A Shift Driven by Funding Threats as Much as Law
In several cases, including St. Louis and Kansas City, KS, local governments acted not merely out of legal obligation but in response to explicit warnings that federal agencies could pull or claw back grant funding for jurisdictions using race conscious procurement policies. That pressure has proven to be as powerful a motivator as the court rulings themselves.
What Contractors Should Do Now: Five Strategic Steps
For government contractors, especially those who have long relied on M/WBE, DBE, HUB, or 8(a) certifications, this is a defining moment. The playbook that worked for decades will not be sufficient in a world that demands individual narratives of disadvantage, socioeconomic documentation, and race neutral justification.
Below are the most important steps firms should take to prepare:
1. Prepare Strong “Individual Disadvantage” Narratives
Under the new federal framework, particularly for 8(a) and DBE programs, eligibility now hinges on documented personal disadvantage. Contractors should:
Compile detailed narratives describing barriers, discrimination, or obstacles encountered in business formation and operation.
Gather supporting evidence: financial records, business history documents, affidavits, or market analyses.
Ensure compliance teams and consultants are trained in the new narrative driven requirements.
Firms that cannot articulate or evidence individualized disadvantage may lose access to set aside opportunities they once qualified for automatically.
2. Reorient Toward Size Based and Local Business Programs
As Philadelphia, Jacksonville, and other cities pivot toward Small Business Enterprise (SBE) or Local Business Enterprise (LBE) models, small contractors, minority owned or otherwise, may find new opportunities if they:
Confirm their size standard eligibility under SBA and local rules.
Strengthen their presence in local markets (e.g., local offices, local workforce, local tax registration).
Track emerging race neutral initiatives designed to survive strict scrutiny.
This shift favors nimble, community based firms.
3. Reevaluate Certifications and Maintain Multiple Pathways
With uncertainty around the future of HUB, MBE, and W/MBE programs:
Maintain all certifications still offered, but anticipate modifications or recertification demands.
Consider federal small business routes such as SDB (Small Disadvantaged Business) status based on economic criteria.
Where possible, diversify procurement channels beyond set aside programs.
Redundancy is now a risk mitigation strategy.
4. Strengthen Competitive Positioning Beyond Preferences
As government agencies eliminate preferential scoring, contractors must:
Improve pricing strategies.
Enhance compliance readiness.
Build joint ventures or teaming arrangements to compete head to head.
Invest in quality, safety, and performance metrics that become more important in a race neutral environment.
Competitive excellence, not eligibility category, will increasingly determine awards.
5. Monitor Policy Shifts and Federal Guidance Continuously
This is a legally volatile moment. Agencies are revising rules in real time, sometimes with little public notice.
Contractors should establish:
Regular tracking of SBA, DOT, and state level updates.
Quarterly reviews of certification status.
A compliance calendar for narrative submissions, net worth statements, and recertification deadlines.
Being caught off guard could result in sudden loss of contracting eligibility.
Full Summary Table of Government Set Aside Changes (2023–2025)
Summary Table of Major Changes to Set Aside and Preference Programs (2023–2025)
Bringing it All Together: A New Contracting Paradigm Takes Shape
The dismantling of race and gender based presumptions in government contracting is not a temporary wave, it is an emerging national model. Federal directives, state legislation, and local policy shifts now point in the same direction: a contracting system grounded in race neutral standards, individual narrative proof, and socioeconomic criteria rather than demographic categorization.
For contractors, preparation is not optional. Those who adapt early, by strengthening individual disadvantage documentation, embracing small business pathways, and improving competitive performance, will seize opportunities in the next generation of public procurement. Those who wait risk finding themselves shut out of programs that no longer exist.
Want help understanding how these changes are going to impact your business? Want to win contracts and grow within the government markets? If so, reach out to us and let’s chat.
