Abstract
On October 3, 2025, the U.S. Department of Transportation published its Interim Final Rule (IFR) ending race- and sex-based presumptions of disadvantage in the Disadvantaged Business Enterprise (DBE) program under 49 C.F.R. Part 26.[1] The rule now requires all certified DBEs and applicants to submit individualized proof of social and economic disadvantage through personal narratives and documentation. Approximately 41,000 firms nationwide were affected immediately by this mandate, according to official USDOT and industry estimates.

The USDOT guidance issued October 24, 2025 clarified that Unified Certification Programs (UCPs) have no fixed national recertification deadline and that no new DBE participation may be counted on pending or future contracts until reevaluations are complete.[2] As a direct result, billions of dollars in federal infrastructure contracts—such as nearly $18 billion in review for the Hudson Tunnel Gateway Program and the Second Avenue Subway, and $2.1 billion for Chicago’s Red Line and Red/Purple Modernization—were paused, with DBE credits and goal enforcement suspended.[3]

Introduction
On October 3, 2025, the U.S. Department of Transportation published an Interim Final Rule in the Federal Register, immediately removing race- and sex-based presumptions of social and economic disadvantage from the DBE certification program under 49 C.F.R. Part 26. All existing DBE certifications thereby entered a suspended status, with certified firms required to undergo individualized reevaluation and recertification in order to count toward program goals.

The revised rule mandates that all applicants—both new and currently certified—demonstrate disadvantage through a written personal narrative supported by current financial documentation. Previously, women and minority owners benefited from group-based presumptions; now, every DBE or Airport Concession DBE is responsible for establishing eligibility by a preponderance of individualized evidence, as described in DOT guidance published September 30, 2025 and enforced on October 3, 2025.[4]

UPCs in every state must now develop procedures to recertify all DBE firms according to the new standard, including narrative submissions, net worth statements, and additional documentation as required, a process without a mandated federal timeline for completion. Until each certifier reevaluates the full DBE roster, agencies are prohibited from setting new DBE goals or counting DBE participation toward existing goals on federally funded contracts.

The burden of proof for continued program eligibility now shifts to each applicant firm, and firms found not to meet the more rigorous requirements will be decertified from the DBE program. In the interim transition, state DOTs and local agencies must delay new advertising and contract awards incorporating DBE requirement, reset their overall goals, and communicate procedural changes to certified firms and contractors. Although existing contracts are not necessarily subject to cancellation or recompete, future DBE utilization and credit is strictly dependent on completed recertification, as clarified by DOT and state-level guidance during October 2025.

Impact of the IFR on Advertised Projects, Pending Awards, and Executed Contracts with DBE Goals

• For projects that have been advertised but not yet let, recipients must remove DBE contract goals by issuing amendments to the advertisements.[5]
• For projects where bids have been opened but contracts have not yet been executed, recipients must zero out the DBE goal. DOT permits recipients to amend these contracts without readvertising; however, each recipient should independently determine whether state law requires recompetition.[6]
• For contracts with DBE goals that were executed prior to October 3, 2025, no modification is required and the existing DBE goal language may remain in place. However, DBE participation on these contracts cannot be counted toward either the DBE contract goal or the recipient’s overall DBE goal until the Unified Certification Program (UCP) in the recipient’s jurisdiction completes its reevaluation process. If all DBEs performing work on the contract are recertified under the new standards following reevaluation, the contract requires no modification and counting can resume. Conversely, if any DBE performing work on the contract fails recertification, the recipient must take appropriate action to discontinue the effect of de-certification. Recipients that fail to take such action may be declared ineligible to receive DOT payments on the affected contract.[7]

Major Infrastructure Projects Impacted by the DOT IFR and Funding Freeze

Hudson River Tunnel (Gateway Program)
The Hudson River Tunnel, a central component of the multi-billion-dollar Gateway Program, is among the most vital transportation infrastructure projects in the Northeast Corridor. This $16.1 billion initiative, jointly overseen by the Gateway Development Commission in partnership with New York and New Jersey, is designed to upgrade and expand rail capacity across the Hudson River.[8]

The project relies on $11.7 billion in federal funding—about 70% of its total cost—while state and local governments contribute the remaining $4.4 billion.[9]

Before the October 1, 2025 funding freeze, the Gateway Program had achieved significant progress, with $182.1 million in reimbursements processed and active construction underway at five sites across the tri-state area. Just one day prior to the freeze, the Gateway Development Commission approved a $665 million, five-year contract extension for MPA Delivery Partners, signaling strong momentum toward critical construction phases.[10]

However, on October 1, 2025, the Federal Transit Administration halted reimbursements pending an administrative review of the project’s DBE compliance. This freeze now delays reimbursement for completed work, creating serious cash flow challenges for ongoing activities. While the project currently has enough resources to continue temporarily, the indefinite suspension of federal reimbursements threatens future phases and introduces significant scheduling risks for its projected completion.

Second Avenue Subway Phase 2
New York’s Second Avenue Subway Phase 2 represents the largest Capital Investment Grant ever awarded by the Federal Transit Administration, underscoring the project’s significance as a transformative piece of the city’s transit infrastructure. The $6.9 billion project will extend subway service from 96th Street to 125th Street in East Harlem, fundamentally improving transit access to a historically underserved community.[11]

The project is funded through a combination of sources including $3.4 billion in federal capital grants (49 percent of total cost), congestion pricing revenues, and state and local contributions. The MTA’s commitment to the project was made abundantly clear in August 2025 when the MTA Board approved the $1.972 billion tunnel-boring contract, awarded to Connect Plus Partners, a joint venture between Halmar International and FCC Construction. Construction on utilities relocation began following the award of the first construction contract in January 2024, and by the time of the October 1, 2025 freeze, active construction was underway along the planned route with utilities work progressing. The project targets a revenue service date of September 2032, providing the first new subway line extension to East Harlem in over 75 years.[12]

However, the administrative review placed the project under indefinite hold as part of the $18 billion in combined New York infrastructure funding frozen on October 1, 2025.[13]

The suspension of federal reimbursements poses a significant threat to the carefully orchestrated construction timeline and risks delay to a project that has been anticipated for decades and is critical to addressing geographic equity in the city’s transit system.

Chicago Red Line Extension
The Chicago Red Line Extension stands as a critical equity-focused infrastructure investment designed to bring rapid transit access to the predominantly Black South Side communities that have been historically underserved by the CTA system. The $5.7 billion project would extend the Red Line 5.5 miles southward, adding four new stations and providing transformative mobility improvements for a region with significant transportation gaps.[14]

In January 2025, just before leaving office, the Biden administration awarded $1.9 billion in federal funding for this project, marking a historic commitment to addressing long-standing transportation inequities in Chicago. This federal award was part of a broader infrastructure investment strategy, representing the largest single transit project investment secured by the CTA.[15]

At the time the October 3, 2025 freeze was implemented, the Red Line Extension was in planning and design phases with community engagement ongoing; no major construction activities had commenced. On October 3, 2025, the Trump administration froze $2.1 billion in federal funding for Chicago transit projects, with the Red Line Extension representing a substantial portion of this freeze. The CTA issued a statement affirming its full commitment to the project despite the funding pause, indicating that project leadership did not anticipate near-term impacts to schedules.[16]

However, the indefinite administrative review now may suspend a project that received only months of funding certainty before facing suspension. The freeze raises questions about the sustainability of the project timeline and the ability of Chicago to move forward with this critical South Side investment in the face of federal funding uncertainty.

Chicago Red and Purple Modernization Program
The Red and Purple Modernization (RPM) Program represents Chicago’s most significant transit infrastructure investment, designed to modernize two of the CTA’s busiest and oldest rail lines that serve residents and workers across much of the city’s North, South, and West sides. The $2.1 billion program encompasses comprehensive upgrades to aging infrastructure, including construction of a new bypass, track replacement, station renovations, signal system upgrades, and accessibility improvements that have been deferred for decades.[17]

Unlike the Red Line Extension which had not yet begun construction at the time of the freeze, the RPM program was already actively under construction when the funding pause took effect on October 3, 2025.

The North Side modernization work was ongoing with contracts executed and crews actively engaged in rebuilding the rail system. The program had secured both local and federal funding commitments, with the $2.1 billion freeze affecting the federal reimbursement stream for both this project and the Red Line Extension combined. This represents a particularly acute challenge for the RPM program given that construction activities cannot easily be paused without incurring significant demobilization costs and project delay penalties.

The CTA stated it remained fully committed to the Red and Purple Modernization Program and did not anticipate significant impacts to construction schedules, suggesting the agency believes sufficient local and uncommitted funding exists to bridge the federal reimbursement gap temporarily. Nevertheless, the indefinite freeze on federal reimbursements introduces substantial uncertainty into project financing and threatens to compound delays on a modernization program that Chicago residents have awaited for many years.

Conclusion
The U.S. Department of Transportation’s Interim Final Rule has introduced sweeping changes to the DBE program, with immediate effects on certification processes and federal infrastructure funding. As agencies and contractors adjust to the new requirements, the future of major projects like the Hudson Tunnel, Second Avenue Subway, and Chicago’s transit expansions remain uncertain. Continued guidance from USDOT and proactive coordination among stakeholders will be critical to ensure these transformative investments move forward while maintaining compliance and equity.

© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice. 

Pasha Ameli is a managing director at Ankura, Washington, DC. He is a registered professional civil engineer with 12 years experience in construction cost advisory, quantification of damages, calculation of lost productivity, construction cost estimation, and allocation of the responsibility of damages. Ameli will be a panelist at the Dec. 9 Construction Super Conference session listed below. 

Tuesday, Dec. 9

Please contact Greg Thompson at [email protected] for all references / footnotes.