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. The FAR Council issued an implementation memo on April 17, 2026, and the new clause must appear in solicitations valued over the micro-purchase threshold beginning April 24, 2026. Coverage from Government Executive.
The legal challenge
A complaint was filed in the U.S. District Court for the District of Maryland by a coalition including the American Association of University Professors and the National Association of Minority Contractors, represented by Democracy Forward. The suit alleges EO 14398 unlawfully equates DEI with racial discrimination, violates First Amendment free-speech and association rights, and exceeds presidential authority under the Procurement Act.
Why this drags FCA exposure in
Multiple firms (Snell & Wilmer, Holland & Knight, Dentons) have flagged that the EO creates False Claims Act exposure: a contractor that certifies compliance with the clause but later faces a DEI allegation could face FCA liability on the certification — analogous to the cybersecurity-FCA wave of 2024–25.
What to do now
- Review your DEI-related contractual representations and certifications before April 24
- Monitor the Maryland litigation — preliminary-injunction motions are likely
- Update your subcontract flow-down templates: lower tiers must also carry the clause