President Trump signed an Executive Order (EO) mandating that federal departments and agencies include clauses in federal contracts and contract-like instruments prohibiting Diversity, Equity, and Inclusion-related practices in hiring, training, and contracting. The new executive order is more specific and applies to a broader range of activities than the President’s prior DEI executive orders. It bans disparate treatment based on race or ethnicity in recruitment, hiring, promotions, participation in training or mentorship programs, and the selection of vendors or subcontractors. This extends to banning disparate treatment in “participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities that are sponsored or established by the contractor or subcontractor.” The legality of a DEI program is irrelevant to whether it is proscribed by this mandate. Federal agencies are directed to implement this Order within 30 days of its issuance.
The penalties for violations of the DEI prohibition in this Executive Order are significant. The contracting clause required by this Order will state that: “In the event of the contractor’s or a subcontractor’s noncompliance with this clause, this contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts.” The new contracting clause will also require federal contractors to provide access to records and information so the government can confirm compliance, monitor subcontractor compliance, and report known or suspected violations by subcontractors. The Order also makes compliance with the DEI prohibition contracting clause material to federal payment decisions under the False Claims Act and authorizes contract termination, suspension, or debarment for violations.
The Office of Management and Budget will issue implementing guidance. The Department of Justice is required to prioritize enforcement of the new contracting clause. The Federal Acquisition Regulatory Council is also directed to update the Federal Acquisition Regulations to incorporate the new contracting requirements across federal procurement.
A fact sheet on the EO is available here.