Addressing DEI Discrimination by Federal Contractors

What it does

• •Requires all federal contracts and subcontracts to include a clause prohibiting contractors from engaging in 'racially discriminatory DEI activities,' defined as disparate treatment based on race or ethnicity in recruitment, employment, contracting, program participation, or resource allocation.
• •Authorizes federal agencies to cancel, terminate, or suspend contracts for contractor noncompliance with the DEI prohibition clause, and to suspend and debar contractors or subcontractors from future federal contracts.
• •Directs the Federal Acquisition Regulatory Council to amend federal procurement regulations within 60 days to incorporate the required clause and remove conflicting provisions.
• •Requires contractors to provide information and reports to verify compliance, report subcontractor violations, and comply with False Claims Act liability for noncompliance.

Why it matters

• •The order frames DEI activities as creating operational inefficiencies and unnecessary costs in federal contracting by limiting labor pools and imposing artificial hiring or promotion restrictions based on race or ethnicity.
• •Establishes enforcement mechanisms including potential False Claims Act liability, allowing the Attorney General to bring civil actions and private parties to pursue qui tam suits against violators.
• •Applies to all federal contracts government-wide, creating uniform requirements across executive departments and agencies within 30 days of the order's issuance.

Who is affected

• •Federal contractors and subcontractors at all tiers who perform work on U.S. government contracts.
• •Federal agencies and executive departments responsible for federal procurement and contract administration.
• •Prospective federal contractors and vendors who may face eligibility restrictions or debarment for noncompliance.

What happens next

The Federal Acquisition Regulatory Council must issue interim guidance within 60 days and complete regulatory amendments to the Federal Acquisition Regulation; each agency head must review and report on implementation within 120 days; and the Attorney General shall consider False Claims Act actions against violators.