New EO targets federal contractor DEI practices, signals increased enforcement activity

On March 26, 2026, President Donald J. Trump issued the “Addressing DEI Discrimination by Federal Contractors” Executive Order (EO) and a White House fact sheet. The EO continues the administration’s efforts to eliminate what it calls unlawful diversity, equity, and inclusion (DEI) practices and signals heightened enforcement risk, including under the False Claims Act (FCA).

Highlights from new EO

New terminology. The EO prohibits federal contractors and subcontractors from engaging in “racially discriminatory DEI activities,” which it defines broadly to include “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

Certification and contract risk. Contractors should expect an amendment to the federal acquisition regulations (FAR) and a new, standardized contract clause requiring contractor agreements not to undertake racially discriminatory DEI activities and to comply with agency compliance audits.

Flow-down obligations. Requirements will extend to subcontractors, increasing oversight and compliance burdens for prime contractors.