President Trump signed Executive Order 14398, "Addressing DEI Discrimination by Federal Contractors," on March 26, 2026. The order directs agencies to insert clauses prohibiting "racially discriminatory DEI activities" in federal contracts, including subcontracts and lower tiers. Per the White House, Government Executive, and Seyfarth Shaw.
Implementation timeline
- March 26, 2026: EO 14398 signed
- April 17, 2026: FAR Council issues implementation guidance memorandum
- April 24, 2026: New solicitations and contracts above the micro-purchase threshold ($15,000) must include the anti-DEI clause
- July 24, 2026: Existing contracts above the micro-purchase threshold must be bilaterally modified to add the clause (for U.S.-performance work)
Penalties
Non-compliance exposes contractors and subcontractors to contract termination, suspension, debarment, and civil action under the False Claims Act — the FCA hook, as flagged by Wiley, Snell & Wilmer, and Holland & Knight, mirrors the cybersecurity-FCA wave of 2024–25.
The legal challenge
On April 20, 2026, a coalition led by the National Association of Diversity Officers in Higher Education and including the American Association of University Professors filed a complaint in the U.S. District Court for the District of Maryland. Represented by Democracy Forward, the complaint alleges EO 14398 violates the First Amendment (free speech and association), unlawfully equates DEI with racial discrimination, and exceeds the President's authority under the Procurement Act.
What to do now
- Review your DEI-related contractual representations and certifications before April 24
- Update your subcontract flow-down templates: lower tiers must also carry the clause
- Plan for the July 24 bilateral-modification cycle — that's a heavy lift on existing contract portfolios
- Monitor the Maryland litigation — preliminary-injunction motions are likely
