• On March 26, 2026, President Trump issued an executive order (EO) with broad applicability to federal contractors and subcontractors, but certain agreements would not likely be covered by the EO, including Other Transaction Agreements (OTAs), cooperative agreements, and grants.
• The EO defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity across hiring, promotions, vendor agreements, training, and program participation—a notable departure from earlier EOs that used the phrase “unlawful DEI” without defining it.
• Enforcement authority appears to rest with individual contracting agencies, which may terminate or suspend contracts and initiate debarment, while the attorney general is directed to “consider” or, per the White House fact sheet, “prioritize” False Claims Act actions against violators.
• Agencies must include the mandatory clause in contracts within thirty days ahead of the FAR Council’s sixty-day deadline for interim deviation guidance raising practical considerations around DEI program audits, subcontractor oversight, recordkeeping, and False Claims Act exposure.

The EO applies to contracts that are subject to the Federal Property and Administrative Services Act of 1949 (FPASA), which is a core statutory authority for the federal procurement system. The EO requires a mandatory clause in covered federal contracts prohibiting “racially discriminatory DEI activities,” with noncompliance carrying contract termination,...

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