New Trump Order Allows Federal Contract Bans Over DEI Violations

President Donald Trump directed agencies to cancel federal contracts and subcontracts with businesses that engage in “racially discriminatory” diversity, equity, and inclusion activities or fail to adhere to new anti-DEI reporting requirements.

Within 30 days of Trump’s March 26 executive order, federal contracts must include a number of specific clauses, such as requiring companies to renounce DEI, agreeing to provide agencies with access to company records to show compliance, and reporting subcontractors that appear to be in violation.

Failure to adhere to these mandates can result in contracts being terminated or suspended, and businesses being declared ineligible for future business opportunities with the government.

The order is the administration’s latest effort to root out what it considers illegal DEI in the public and private sectors, claiming that initiatives intended to support historically underrepresented groups are biased against White individuals and provide preferential treatment based on race and gender.

The order also directs the White ‌House Office of Management and Budget to coordinate with the US attorney general, chair of the Equal Employment Opportunity Commission, and assistant to the president for domestic policy to “identify economic sectors that pose” a higher risk of “engaging in discriminatory DEI activities based on current or past conduct.”

It also doubled down on the government’s novel use of the False Claims Act, a law meant to target fraud by government contractors and federal-funding recipients, as a tool to target companies over their DEI policies.

The attorney general will work with contracting agencies to review violations of contractual terms prohibiting DEI and consider whether to bring FCA actions against contractors or subcontractors, the order said. The attorney general would also “ensure prompt review of civil actions” brought by workers who blew the whistle on employers for allegedly misrepresenting their compliance with the order.