Trump Issues Order Banning DEI Activities for Federal Contractors

On March 26, 2026, Donald Trump signed Executive Order 14398, titled Addressing DEI Discrimination by Federal Contractors. The order prohibits federal contractors and subcontractors from engaging in racially discriminatory diversity, equity, and inclusion (DEI) activities, which it defines as disparate treatment based on race or ethnicity in recruitment, employment, promotions, vendor agreements, resource allocation, and program participation.

Federal agencies were required to incorporate a mandatory prohibitory clause into all covered contracts by April 25, 2026. This clause requires contractors to certify compliance, grant government access to books and records for audits, and report known violations by their own subcontractors. Noncompliance may result in contract cancellation, suspension, termination, or debarment from future government contracts.

The order emphasizes that compliance is material to government payment decisions, allowing the United States Department of Justice to pursue liability under the False Claims Act and expedite the review of whistleblower actions. To support implementation, the Office of Management and Budget and the Equal Employment Opportunity Commission are tasked with identifying high-risk economic sectors. Additionally, the Federal Acquisition Regulatory Council must amend the Federal Acquisition Regulation to formally integrate these restrictions.

This directive builds upon a series of policy shifts beginning in January 2025 that eliminated internal government DEI programs and rescinded affirmative action mandates. The General Services Administration has also proposed revising the System for Award Management to require certifications against illegal DEI practices.