The President signed an executive order directing federal agencies to ensure that contracts include a clause regarding diversity, equity, and inclusion activities. The document, signed March 26, 2026, and published in the Federal Register on March 31, 2026, requires agencies to add the clause to contracts and subcontracts within 30 days.
The order defines racially discriminatory DEI activities as disparate treatment based on race or ethnicity in recruitment, employment, contracting, program participation, or the allocation of an entity’s resources. Program participation includes access to training, mentoring, clubs, or educational opportunities sponsored by the contractor or subcontractor.
Under the mandated clause, a contractor agrees not to engage in the defined activities. The order states contractors must report any subcontractor’s known or reasonably knowable conduct that may violate the clause to the contracting department or agency. The order also requires contractors to furnish access to records and accounts for agencies to ascertain compliance.
Consistent with guidance from the Office of Management and Budget, agencies are directed to cancel, terminate, or suspend contracts if a contractor or subcontractor fails to comply with the clause. The order instructs agencies to take appropriate action to suspend and debar contractors or subcontractors for such failures. The Attorney General is directed to consider actions under the False Claims Act against contractors or subcontractors that violate the clause.
The Office of Management and Budget director is directed to issue compliance guidance for contracting agencies. The order directs the director to coordinate with the Attorney General, the Equal Employment Opportunity Commission chairman, and the Assistant to the President for Domestic Policy to identify economic sectors that pose a particular risk of entities engaging in the activities and to issue additional guidance regarding best practices.
Within 60 days, the Federal Acquisition Regulatory Council is directed to issue deviation and interim guidance regarding agency implementation of the clause before completion of amendments to the Federal Acquisition Regulation. Agency heads have 120 days from the date of the order to review their implementation of the section and report their compliance to the Assistant to the President for Domestic Policy.