Overview
- President Trump’s executive order, signed March 26, directs agencies to add a standardized clause to new contracts and all subcontract tiers by April 25 that bars specified race‑based DEI practices.
- The order defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in hiring, promotions, vendor deals, access to training or mentoring programs, and even how a company allocates its resources, while race‑neutral initiatives remain permissible.
- Compliance with the clause is declared material to government payment decisions for False Claims Act purposes, and violations can lead to contract cancellation, suspension, debarment, and potential treble‑damages FCA cases or whistleblower suits.
- Contractors must give agencies access to books and records on request, monitor subcontractors, report conduct that is known or reasonably knowable to violate the clause, and notify agencies if a subcontractor lawsuit challenges the clause’s validity.
- Agencies are preparing to implement the clause ahead of FAR Council interim guidance due by May 25, and OMB, DOJ, and the EEOC are set to identify high‑risk sectors, prompting legal advisors to urge immediate audits, documentation, and updates to subcontract oversight.