A federal judge blocked Houston from setting contracting goals based on the race or ethnicity of a business owner.
Houston can no longer use the race or ethnicity of business owners when deciding which companies should participate in the city’s public contracts.
A federal judge blocked that part of Houston’s procurement program on July 28. The order also applies to the Midtown Management District.
The change could affect Latino-owned businesses seeking municipal contracts or subcontracts, especially in areas such as construction, professional services, and procurement. However, the ruling does not cancel contracts already awarded nor prevent Hispanic-owned businesses from continuing to compete for city work.
Houston can also maintain programs that do not rely on the race or ethnicity of the owner, such as some options for small businesses. Programs for women-owned businesses were not automatically eliminated by this decision either.
What changed in Houston’s contracts
Before the ruling, Houston set targets for certain contracts to include the participation of businesses certified as owned by minorities, women, or small businesses.
For example, a contractor awarded a city project could have to subcontract a portion of the work to certified firms or demonstrate that they had attempted to include them.
Now, Houston cannot require targets based on whether the owner of a business is Latino, Black, Asian, or another race or ethnic group. The city will have to decide how it will adjust its rules for future contracts.
The lawsuit was filed in 2023 by two landscaping companies. Their owners argued that the rules made it harder for them to compete for municipal contracts because they did not meet the program’s racial classification.
Judge David Hittner concluded that Houston did not present sufficiently specific evidence of discrimination within its own procurement processes to justify the use of racial criteria.
The decision does not mean that minority entrepreneurs have not faced obstacles in Houston’s market. What the judge determined was that the city failed to show what was necessary to continue using race as part of its contracting goals.
Hispanic-owned businesses received $176.9 million in contracts with participation goals
The ruling matters for Latino business owners because these firms had a significant share of contracts subject to goals.
During fiscal year 2025, Houston awarded about $514.7 million to certified firms through contracts that included participation goals.
Hispanic-owned businesses received $176.9 million, equivalent to 34.4% of that total. It was the largest share among the groups included in the city’s report.
Of that amount, about $129.2 million went to construction, $39.4 million to professional services, and $8.2 million to goods and other services.
These figures show that municipal contracts are a significant source of work for Hispanic-owned businesses. But that does not mean that those $176.9 million will disappear: they correspond to contracts already awarded, and Houston has yet to explain how its rules will change for future bidding.
What supports remain available for businesses
The order blocks the use of racial criteria, not all of Houston’s business support programs.
Businesses can still apply for city contracts and may participate through programs that do not depend on the race or ethnicity of the owner, provided they meet the requirements of each certification.
The decision does not resolve what will happen with contracting programs in Harris County, METRO, Port Houston, or other public entities. A separate suit against Harris County’s program remains pending.
See our related note about the changes Houston had already considered for its minority contracting program.
Houston weighs a possible appeal
The city is considering appealing the decision, but as of the time of writing had not confirmed that it had begun that process.
Until another court order suspends or modifies the ruling, Houston must stop using racial or ethnic criteria in those contracting goals.
Business owners with bids, subcontracts, or ongoing agreements should review communications related to each project. The removal of a racial target does not necessarily change all existing contracts in the same way.
Updates on certifications and contracting opportunities can be checked at Houston’s Office of Business Opportunities. The contact phone is 832-393-0600.
