Sen. Mike Lee (R-Utah) and Rep. Glenn Grothman (R-Wisconsin) have introduced legislation that would eliminate many of the federal government's race- and sex-based small business contracting preferences, according to reporting by Government Executive. The Ending Discrimination in Government Contracting Act — Senate bill S. 4390, House bill H.R. 8511 — was introduced in late April 2026 and remains in committee with no co-sponsors as of publication.
What the Legislation Would Do
The bill's central provisions would eliminate programs and regulatory requirements that direct federal contract and grant opportunities toward companies based on the race or sex of the business owner. The most significant programs that would be eliminated include the Small Business Administration's 8(a) Business Development Program, the women-owned small business contracting goal and associated set-aside authority, and the socially and economically disadvantaged small business framework that the 8(a) program has historically depended upon to qualify participants.
The legislation would also repeal the Minority Business Development Act of 2021, which established the Minority Business Development Agency as a permanent federal agency within the Department of Commerce with a statutory mission to promote the growth of minority-owned businesses. The MBDA repeal would eliminate that agency's authorization along with the grant programs and advisory services it administers for minority business owners.
Beyond eliminating specific programs, the bill would mandate that no-DEI clauses be included in all federal contracts, prohibiting contracting agencies from considering sex, race, or ethnicity in contract and grant award decisions. The bill would also require prime contractors to report subcontractors that violate no-DEI contractual requirements and would require reporting of subcontractors who file legal challenges to those clauses. Additionally, the legislation would repeal the reporting requirements currently imposed on federal agencies to track and disclose data on contract awards to women-owned and disadvantaged small businesses.
Programs the Bill Would Retain
The legislation specifically exempts from elimination three small business preference programs that the sponsors characterize as economically rather than demographically based. The HUBZone program, which directs federal contracting opportunities to small businesses operating in historically underutilized business zones as defined by SBA geographic criteria, would be retained. The veteran-owned small business program and service-disabled veteran-owned small business program would also continue, as would contracting preferences for businesses operating in rural areas.
This distinction reflects the bill's stated constitutional rationale: the sponsors characterize the programs being eliminated as unconstitutional race- or sex-based discrimination, while the programs being retained are structured around geographic, economic, or veteran status criteria that do not implicate the equal protection concerns the sponsors cite as the bill's primary motivation.
Legislative Context: Executive Order and Supreme Court Precedent
The Ending Discrimination in Government Contracting Act builds on two earlier developments in federal contracting policy. President Trump issued Executive Order 14398 on March 26, 2026, directing federal agencies to address DEI discrimination in contractor practices and requiring that federal contracts include clauses prohibiting contractors from maintaining DEI programs as a condition of contract performance. The Lee-Grothman legislation would codify and expand that executive action by embedding similar prohibitions in statute, making them less vulnerable to reversal by a future administration.
The bill also draws on the Supreme Court's 2023 decision in Students for Fair Admissions v. Harvard, which prohibited race-conscious admissions policies at colleges and universities receiving federal funds. Although that decision directly addressed admissions rather than contracting, the bill's sponsors and some legal analysts have argued that the constitutional principles the Court applied — strict scrutiny of racial classifications under the Equal Protection Clause — are applicable to federal contracting preferences as well. The 8(a) program and the socially disadvantaged small business framework have been the subject of multiple legal challenges since the Harvard decision, with lower courts reaching mixed conclusions on whether the SFA v. Harvard holding extends to contracting preferences.
The SBA has separately modified the 8(a) program's social disadvantage certification requirements in response to earlier litigation, eliminating a presumption that members of certain racial or ethnic groups automatically qualify as socially disadvantaged and instead requiring all applicants to submit individual narratives demonstrating their personal experience of social disadvantage. The Lee-Grothman bill would go considerably further by eliminating the program entirely rather than reforming its eligibility criteria.
What It Means for Contractors
The bill's introduction signals legislative intent to permanently restructure the small business contracting landscape in ways that executive action alone cannot guarantee. Contractors who currently hold 8(a) certifications or who market their businesses as qualified women-owned small businesses for set-aside competitions should monitor the bill's progress carefully, though its near-term prospects are limited by the absence of co-sponsors and by the considerable political resistance that elimination of the 8(a) program has historically generated among small business advocacy organizations and within the congressional small business committees that oversee SBA programs.
Large prime contractors who currently have formal supplier diversity programs that include tracking and reporting on subcontracting to minority-owned and women-owned businesses should consult with legal counsel on whether the mandatory no-DEI clause and subcontractor reporting provisions, if enacted, would create compliance obligations that conflict with state law requirements in states that independently mandate supplier diversity reporting. The interaction between a federal no-DEI clause and state-level diversity requirements has been an active area of legal uncertainty since the issuance of the Trump executive order, and legislation formalizing those requirements would intensify that tension.
Contractors in the HUBZone, SDVOSB, and veteran-owned small business programs can note that the bill expressly preserves those preferences, reflecting a legislative judgment that status-based programs rooted in geography or military service rather than race or sex are constitutionally and politically sustainable even as the race- and sex-based programs face elimination.
Contractors
The legislation directly affects firms currently certified in the SBA's 8(a) Business Development Program, the Women-Owned Small Business program, and the Economically Disadvantaged Women-Owned Small Business program. HUBZone, SDVOSB, and VOSB certifications would not be affected if the legislation advances in its current form.
Sources
S. 4390 — Ending Discrimination in Government Contracting Act — Congress.gov
