Airports have a legal obligation to pursue minority set-asides in their contracting. Under the Biden administration that was fine – Biden’s Department of Transportation Secretary focused on the problem of infrastructural racism. However, the current DOT and Trump administration want to eliminate diversity policies entirely.

Indeed, the Trump administration is requiring airports to disavow such programs as a condition of receiving federal money. Atlanta airport has just lost grants that were supposed to be paid this month by refusing to accept these grant conditions. Here’s the crux of the issue.

• There are federal rules that have been in place for over 40 years requiring airports to set aside a portion of their contracting for minority and women-owned firms. This is couched in language about ‘goals’ and ‘good faith efforts’ to avoid being framed as quotas.

• The Trump administration believes these are illegal, and the current direction of jurisprudence suggests they may be correct.

• So they are requiring airports to say they won’t pursue any illegal DEI. But what’s illegal is something of a disagreement right now!

To get the grants, airports have to certify they aren’t doing what the Trump administration believes is illegal. But if they don’t do it, they run afoul of federal rules that are still on the books (and the next Administration may seek to enforce).

This is all going to need to get sorted. Since there’s little effort to actually rewrite laws or regulations it’s going to be left up to the courts, or what the Trump administration is doing will simply get reversed by the next administration from another party.

“DEI” Is Actually Written Into Law For Transportation Projects

The DOT’s Disadvantaged Business Enterprise program was established by Congress in 1983 as a form of affirmative action. It originally said at least 10% of funds for highway and transit projects funded with federal dollars had to be spent with ‘disadvantaged’ firms.

When Congress reauthorized the program in 1987, women-owned businesses were added and consolidated into a single disadvantaged business participation target. It’s been continually reauthorized by every relevant funding law since then, including in the November 2021 Infrastructure Investment and Jobs Act. The program is codified at 49 U.S.C. §47113 and 49 C.F.R. Part 26.

Meanwhile, the Airport Concessions Disadvantaged Business Enterprice Program is the related effort for airport concession contracts (e.g. retail shops, restaurants, car rentals, third party lounges). It is mandated by 49 U.S.C. §47107(e) and implemented under 49 C.F.R. Part 23. Airports receiving federal grants have to promote opportunities for disadvantaged businesses in concessions.

Both programs are ‘goal-based affirmative action programs’ rather than strict quotas. Funding recipients are required to establish annual minority enterprise participation goals based on their local market, and make “good faith efforts” to meet those goals. If there aren’t enough certified bidders available so the goal can’t be met, then goals can be waived or adjusted.

These Programs May Be Illegal

The landscape for race-conscious programs shifted with the Supreme Court’s June 2023 decision in , which struck down affirmative action in college admissions. The Court held that use of race as a factor violated the Equal Protection Clause, and that any racial classification by government must meet strict scrutiny and be narrowly tailored to a compelling interest.

While the ruling directly concerned universities, its reasoning extends to race-based policies in general where federal dollars are involved. And Mid-America Milling Co. v. DOT quickly followed in which two white-owned highway contractors sued to invalidate the Department of Transportations’ Disadvantaged Business Enterprise program as unconstitutional.

In September 2024, a U.S. District Court in Kentucky agreed with the challengers, finding that the program failed strict scrutiny, criticizing the program’s use of race-based presumptions without sufficient evidence of past discrimination for each included group (“failed to present evidence of specific instances of past discrimination” against many of the ethnic groups receiving preferential consideration).

The judge noted that a person of Pakistani origin qualifies as “disadvantaged” under DOT’s rules, but someone of Afghan origin does not, despite no clear evidence justifying why one group is included and the other excluded, calling it a “scattershot approach” that “does not conform to the narrow tailoring strict scrutiny requires.” The program also lacks an end point, and has been in place “since the Cold War” with no sunset, underscoring that the program is not narrowly time-limited.

Without precise targeting or limited duration, the court concluded the program likely violated the Equal Protection Clause and issued a preliminary injunction prohibiting DOT from enforcing the program’s rules.

The Disadvantaged Business Enterprise and Airport Concessions Disadvantaged Business Enterprise programs are in a precarious position. The Biden administration was prepared to defend them, but the Trump administration has reversed course and in May filed a proposal to settle the Mid-America case by dismantling the program altogether, sating that the government had “re-evaluated its position” in light of the 2023 Supreme Court decision and “determined that the [DBE] program’s use of race- and sex-based presumptions is unconstitutional.”

The statutes and regulations remain on the books, essentially unenforced by the federal government, but it appears that most airports continue to follow them in their contracting. However Nashville airport removed race and gender considerations from its contractor goals last month, switching to race-neutral small business targets.

However, the position of the Department of Transportation appears to be that grant recipients need to termiate subcontractors and suppliers who were brought on because of disadvantaged business enterprise programs.

• The law requires participation by disadvanted business enterprises in airport contracting
  
• But the administration says that complying with the law violates the constitution
  
• And warnings have been issued that continuing these policies may trigger audits and funding clawbacks

What Is Happening In Atlanta

The Trump administration now requires that any entity receiving federal funds certify that it isn’t running an unlawful affirmative action or diversity program (not to “operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws”).

This is deliberately generally and doesn’t ban DEI, just ‘illegal DEI’. But the administratoin’s interpretation is that any initiative involving preferences or set-asides is presumed to be legally suspect.

An airport that has adopted a goal that a specific percentage of contracts go to minority-owned businesses could be interpreted as a “program promoting DEI” that violates federal equal protection principles. The new grant language forces the recipient to explicitly disavow such policies as a condition of getting the funds, under consequences of loss of funding and enforcement actions.

Atlanta’s airport was slated to receive about $57 million in FAA grants for infrastructure projects (upgrades to restrooms, taxiways, sustainability initiatives) however the airport’s leadership refused to sign the new grant agreement language that included anti-DEI certification.

As a result, Atlanta forfeited those federal funds. About $37.5 million of the grants were permanently lost, while the remainder could be reoffered in the next fiscal year if Atlanta reverses its position.

These Programs Are Broken

The program doesn’t seem to actually work at developing a pipeline of minority-owned businesses. There are a group of entrenched incumbents at large airports, and the group of contractors was already in steep decline. There just isn’t churn and mobility being driven by the programs, according to the DOT Office of Inspector General.

Airports go after compliance, a handful of qualifying firms partner with large companies to win contracts, but there’s still a pretty high barrier to entry.

There are also strong incentives for “fig‑leaf” structures to comply with these rules. There have been several cases of sham joint ventures to satisfy goals on paper while operational control sits with large prime contractors. The Office of Inspector General has called this area high‑risk for fraud.

At Chicago O’Hare, a pass-through was created as part of a sound insulation contract leading to a $5.8 million civil judgment, and FAA debarrment. At the Miami airport $20 million in electrical work was awarded to a contractor who ‘rented’ a disadvantaged business enterprise to win the contract. The scheme wound up with federal prison time.

In any case, the large concessionaires take on an airport’s favored qualifying partners, and have built operating models around this. This drives up costs (best estimates are these these goal regimes increase winning bids about 5–6%) and airports incur compliance costs.

It leads to contract selection that’s probably suboptimal, bid scoring often treats this as 15% of a score (pushing down passenger and airline value). And with increased costs in these projects, you either get higher prices for concessions to passengers (especially where street pricing rules, where they exist, are flouted) or thinner investment, slower refresh, and overall worse experiences.

So What’s To Be Done?

Any program that’s been around for over 40 years is likely to be gamed and need reform. It seems worth looking at areas of specific discrimination and targeting that with programs that last for a defined period of time, not just to survive judicial scrutiny but because it’s likely that contractors figure out how to game rules in ways that subvert a program’s intent after not too long.

Meanwhile, RFPs really should focus on project outcomes – things like sales per enplaned pax, net promoter score, on‑time building, food safety, and reliability. Too many airports don’t see to view passengers as customers.

Personally I prefer when Secretary Duffy focuses on making the case that “All nations benefit when they can align their standards to facilitate the flow of goods and people around the world.” I don’t know whether he’ll convince ICAO, but maybe he can convince the rest of the Trump administration?