A collaboration between Lewis McLain & AI
On Tuesday, July 28, 2026, U.S. District Judge David Hittner permanently enjoined the City of Houston from enforcing the race-conscious portion of a contracting program the city had operated since 1984. The Midtown Management District, whose board is appointed by the mayor and council, was enjoined on the same terms.
For anyone who works in Texas municipal procurement, finance, or economic development, this is not a Houston story. It is the latest entry in an eighteen-month sequence that has already redrawn state and federal contracting rules, and it arrives with a set of practical questions that every city, county, EDC, and special district in Texas should be able to answer.
What the court actually decided
Gerald (“Jerry”) and Theresa Thompson own Landscape Consultants of Texas and Metropolitan Landscape Management. Their workforce is predominantly Hispanic. Their ownership is white, which excluded them from Houston’s Minority, Women and Small Business Enterprise program and required them to subcontract portions of work they were qualified to self-perform. Represented at no charge by the Pacific Legal Foundation, they filed suit in September 2023, roughly two months after the Supreme Court decided Students for Fair Admissions v. Harvard.
Hittner denied all summary judgment motions in February 2025 and tried the case to the bench over four days in December 2025. His findings of fact and conclusions of law, entered this week, describe the decision as the first to extend the SFFA framework to municipal public contracting.
The reasoning is narrow and it matters. Under strict scrutiny, a government using racial classifications must identify concrete, particularized discrimination and show that the racial remedy is necessary to correct it. Hittner found that Houston had not done so. He pointed to testimony from the city’s own expert that Houston’s 2024 disparity study identified no specific instances of intentional discrimination by city officials or employees in recent years, and that the city had disciplined no one for contracting discrimination. General statistical underutilization, standing alone, did not carry the burden.
That holding is not new law so much as a hard application of old law. City of Richmond v. J.A. Croson Co. has required exactly this since 1989: strict scrutiny, evidence of identified discrimination, serious consideration of race-neutral alternatives, and narrow tailoring. What SFFA changed is the appetite of federal courts to enforce Croson without slack.
What survived
The injunction reaches the race-based components only. Houston and the Midtown district may continue to direct contracts toward small businesses and women-owned businesses. City Attorney Arturo Michel confirmed the city is evaluating an appeal, stated that the ruling does not disturb the city’s Small Business Enterprise Program, and said Houston will abide by the decision as to existing and recently awarded contracts pending further order.
That severability is the single most useful fact in the opinion for other Texas jurisdictions. Programs built as a single undifferentiated ordinance are exposed in full. Programs with a clean architectural separation between small-business provisions and race-conscious provisions can lose the second without losing the first.
The dollars in dispute
Houston awarded roughly $2,500,000,000 in construction, professional services, goods, and other services contracts in fiscal year 2025. Of that, $579,000,000 went to firms certified under the MWSBE program across more than 1,600 separate contracts. Within that $579,000,000, Hispanic-owned firms received 34%, Asian-owned firms 22%, firms owned by white women 17%, and Black-owned firms 14%.
Those percentages explain why the city’s own 2025 council debate was complicated. The disparity study that preceded the trial found no disparity for Asian- and Hispanic-owned firms in certain spending categories, and disparities across all categories for Black-owned firms. Council accepted the study results, declined to narrow the program, and added a veteran-owned small business certification. Mayor John Whitmire argued at the time that visible consensus mattered for the coming litigation.
The reaction, from both directions
Erin Wilcox of the Pacific Legal Foundation framed the outcome as equal protection applying to everyone, and said the Fourteenth Amendment guarantees every owner the same shot at a public contract regardless of race.
Harris County Commissioner Rodney Ellis, who championed the Houston program four decades ago, said the disparities documented then still exist today and that the decision falls hardest on family firms and small contractors. U.S. Rep. Christian Menefee described it as part of a sustained campaign against tools that minority and women business owners use to compete. Carol Guess, chair of the Texas Association of African-American Chambers of Commerce, warned that the greater risk is other municipalities preemptively dismantling their programs to avoid the cost of a court fight.
That last concern is the one with the most direct operational relevance, because it is already happening, and it started before this ruling.
The statewide landscape this ruling landed in
Texas municipal contracting policy has been under simultaneous pressure from three directions since mid-2025.
State level. On October 28, 2025, Acting Comptroller Kelly Hancock suspended all new and renewed Historically Underutilized Business certifications pending legal review, citing Governor Abbott’s January executive order. On December 2, 2025, his office issued emergency rules restructuring the HUB program as VetHUB, limited to businesses owned by veterans with a service-connected disability of 20% or higher. On January 6, 2026, more than 15,000 minority- and women-owned firms were decertified, leaving roughly 500 certified businesses statewide. For scale, HUB firms held 3,634 contracts worth more than $4,000,000,000 in 2024.
Four businesses and a statewide trade association sued Hancock in Travis County district court on March 2, 2026, arguing that the Comptroller exceeded his statutory authority under Government Code Chapter 2161, bypassed the Administrative Procedure Act, and violated Texas constitutional protections including separation of powers. Two more businesses joined on March 13. On April 14, 2026, the court granted a preliminary injunction and ordered the six named plaintiffs reinstated. Other decertified firms were not automatically restored. Permanent VetHUB rules took effect May 12, 2026. The merits remain undecided.
Note the political detail: the 89th Legislature considered and declined to pass bills eliminating the HUB program in the 2025 session. The plaintiffs’ separation-of-powers claim rests squarely on that fact.
Federal transportation. On October 3, 2025, USDOT issued an Interim Final Rule eliminating the race- and sex-based rebuttable presumption of social and economic disadvantage from the Disadvantaged Business Enterprise and Airport Concession DBE programs. Owners must now demonstrate individualized disadvantage by narrative. Every Unified Certification Program entity must recertify its existing DBE roster, and DBE contract goals are prohibited until recertification is complete. On March 19, 2026, the Eastern District of Kentucky dismissed Mid-America Milling Co. v. USDOT as moot, since the rule gave the plaintiffs everything they had asked for, and dissolved the September 2024 preliminary injunction. This reaches TxDOT-funded local projects, DART, Metro, Capital Metro, VIA, and every commercial service airport in the state.
Federal grant conditions. Executive Order 14173 pushed a separate wave, tied not to litigation risk but to grant eligibility. Fort Worth’s council voted 7 to 4 on August 5, 2025, to suspend the Business Equity Ordinance, MWBE requirements in economic development incentive policies, and the standalone Diversity and Inclusion department, after staff warned that roughly $277,100,000 in federal grants was at risk. The city manager estimated a property tax rate increase of about four cents per $100 of valuation would be required to replace that revenue. Fort Worth replaced the program with a Small Business Development Program offering a 5% bid preference on contracts up to $100,000 and a 30% utilization target above that threshold.
Dallas suspended its Business Inclusion and Development Policy in June 2025 and is standing up the Developing Regional and Inclusive Vendor Enterprises framework, a small-business-focused policy grounded in a market utilization study rather than a disparity study, with first-look access, a small business directory, and bonding and technical assistance. Dallas receives roughly $305,000,000 annually in federal grants.
San Antonio discontinued the M/WBE component of its SBEDA program, which had operated since 1989, in late 2025. The city’s 2023 disparity study had found that minority- and women-owned firms accounted for 53% of city-funded contract payments.
Austin, as of late 2025, took the position that its MBE/WBE Procurement Program remained active and compliant, and issued public notice that the state HUB suspension did not affect the city program. That position is now the outlier among the large Texas cities and deserves watching.
Still pending. The Pacific Legal Foundation’s parallel suit against Harris County remains live. Interim County Attorney Abbie Kamin noted that MWBE participation in county contracts rose from 9% to nearly 30% over four years, with nearly $400,000,000 of $1,500,000,000 in program-eligible contracts going to MWBE firms. PLF has publicly identified Port Houston, Metro, Harris Health System, and Houston ISD as entities with comparable programs.
What this means operationally
A district court judgment binds the parties. Hittner’s ruling controls Houston and the Midtown Management District. It is not binding precedent on other Texas cities, and it may go to the Fifth Circuit. But a fully tried case with findings of fact, in the Southern District of Texas, applying SFFA to municipal contracting, is persuasive authority that opposing counsel will cite in the next filing. The practical question for a city manager or finance director is no longer whether the program is defensible in theory. It is whether the city wants to fund the defense.
A short checklist for Texas jurisdictions:
- Inventory every place a racial, ethnic, or sex-based classification appears. This is broader than the procurement ordinance. Check EDC and CDC incentive policies, Chapter 380 and 381 agreements, bond program participation goals, developer agreements, grant subrecipient terms, and standard contract boilerplate. Fort Worth’s action reached its economic development incentive policy, not just its purchasing rules.
- Confirm severability. If race-conscious provisions are struck, does the small-business framework survive on its own text? Houston’s did. Ordinances drafted as a single integrated scheme may not.
- Stop treating a disparity study as a safe harbor. Hittner’s ruling turned in part on the city’s own expert conceding that the 2024 study identified no specific instances of intentional discrimination. Statistical underutilization was the evidentiary foundation of nearly every MWBE program in the state, and this decision holds that it is not sufficient by itself.
- Build out the race-neutral tools that actually move participation. Contract unbundling, bonding and insurance assistance, prompt payment and mobilization advances, reduced prior-experience thresholds, local and small business preferences, mentor-protégé structures, and best-value evaluation. These are defensible, they are what Croson asked jurisdictions to try first, and they are what Dallas and Fort Worth are now leaning on.
- Plan for certification churn. Firms are moving among NCTRCA, SCTRCA, the DFW Minority Supplier Development Council, the Women’s Business Council Southwest, SBA size standards, and the federal DBE recertification queue. Vendor lists, reciprocity provisions, and compliance reporting all need review, and small vendors will need help navigating it.
- Watch three dockets. The Houston appeal, if the city files. The Travis County HUB case on the merits. The PLF suit against Harris County.
The honest bottom line
Whatever a given official thinks about the merits of race-conscious contracting, the compliance environment has changed materially and in one direction. Between the state’s VetHUB restructuring, USDOT’s elimination of the DBE presumption, federal grant conditions, and now a tried-and-decided federal judgment applying SFFA to a municipal program, the legal position of race-conscious municipal contracting in Texas is substantially weaker in July 2026 than it was in June 2025.
The programs that survive this period are going to be the ones built on small business size standards, local presence, and capacity building, with the goals grounded in market availability rather than racial classification. Cities that have not yet done that inventory should start it before the next bid package goes out.