in effect
Executive Order 14398, signed March 26, 2026, directs federal agencies to add a new compliance clause to government contracts prohibiting contractors and their subcontractors from engaging in what the order defines as “racially discriminatory DEI activities” — meaning treating people differently based on race or ethnicity in hiring, promotions, vendor selection, or program participation. It is issued under the President’s authority over federal procurement policy.
Within 30 days, all federal agencies must insert the new clause into contracts and contract-like instruments, flowing down to subcontractors at every tier. Contractors who violate the clause face cancellation, suspension, or termination of their contracts, and can be barred from future government work. Violations are expressly designated as “material” under the False Claims Act, meaning the Attorney General may pursue civil fraud actions — and private whistleblowers may also file suit. The Federal Acquisition Regulatory Council must issue interim guidance within 60 days and formally amend the Federal Acquisition Regulation to embed the clause permanently. Within 120 days, each agency head must report to the White House on their implementation progress.
Any company, nonprofit, or other entity that holds a federal contract or subcontract must comply, regardless of size or industry sector. The Office of Management and Budget is directed to identify economic sectors considered at higher risk for violations and issue additional guidance targeting those areas. Private individuals (whistleblowers) gain a potential enforcement role through the False Claims Act’s qui tam provisions, allowing them to sue contractors on the government’s behalf.