Federal contractors and subcontractors, take note:
On March 26, 2026, President Trump issued Executive Order No. 14398, which requires that a new contract clause be added to all contracts and contract-like instruments with Executive departments and agencies within 30 days, with the goal of prohibiting federal contractors and subcontractors from engaging in “racially discriminatory DEI activities.”
Specifically, the clause requires a federal contractor to agree, among other things, to the following:
- The contractor will not engage in any “racially discriminatory DEI activities”, which it defines as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”
- The contractor will furnish all information and reports (including providing access to books, records, and accounts) as required by the contracting agency for purposes of ascertaining compliance with the clause; and
- The contractor will report any subcontractor’s conduct that may violate the clause to the contracting Executive department or agency and take any appropriate remedial actions directed by the contracting department or agency.
Consequences for noncompliance with this clause include potential liability under the False Claims Act, cancellation or suspension of the federal contract, and/or being declared ineligible for future federal contracts.
You can view a copy of the Executive Order here: Federal Register :: Addressing DEI Discrimination by Federal Contractors