Executive Order 14398 (“EO 14398”) imposes significant new compliance obligations and risks on federal contractors and subcontractors. Among other requirements, contractors must agree to: (1) not engage in “racially discriminatory DEI activities”; (2) report to the government any “reasonably knowable” “racially discriminatory” activities by their subcontractors; and (3) provide access to books and records to show compliance. With the FAR Council’s newly minted mandatory contract clause, FAR 52.222-90, the government is poised to swiftly insert these requirements into new and existing contracts.
The government has signaled its intent to vigorously enforce these requirements. Although it is unclear whether widespread enforcement will actually occur, the stakes are high. Non-compliance exposes contractors to potential False Claims Act (FCA) liabilities and investigations, as well as potential contract termination, suspension, or debarment. DOJ has also already reached one settlement with a contractor for $17 million for alleged FCA violations for their DEI practices.
Contractors would be well advised to consider their existing compliance measures now. This article:
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