President Donald J. Trump issued an executive order on March 26 directing federal agencies to address and prevent racially discriminatory diversity, equity, and inclusion (DEI) activities among federal contractors.
The order aims to promote economy and efficiency in federal contracting by prohibiting racial discrimination in employment, contracting, and program participation practices of companies that do business with the government. The administration said that despite progress in ending racial discrimination, some entities continue to engage in DEI activities that treat individuals differently based on race or ethnicity.
According to the order, DEI activities are described as unethical and often illegal. The document states they "cause inefficiencies, waste, and abuse within entities that engage in such practices," including increased costs for hiring and operations by moving away from merit-based principles. These costs may ultimately be passed on to the federal government through contracts with companies participating in such practices.
The executive order requires all new contracts or contract-like instruments with the government to include a clause prohibiting racially discriminatory DEI activities as defined by the order. Contractors must also provide information upon request for compliance reviews, report any noncompliance by subcontractors, inform agencies if lawsuits challenge the validity of these requirements, and acknowledge that adherence is material for payment decisions under the False Claims Act.
Penalties for noncompliance can include cancellation or suspension of contracts as well as debarment from future government work. The Director of the Office of Management and Budget is tasked with issuing guidance to ensure compliance across agencies. Agency heads must review their implementation efforts within 120 days and regularly thereafter.
The Federal Acquisition Regulatory Council is directed to amend regulations so these requirements are incorporated into procurement processes within 60 days. The Attorney General will consider actions under the False Claims Act against violators.
Trump signed off on the directive at the White House.
