DEI terms now show up in contracts
A new Executive Order reportedly requires DEI terms in federal contracts and subcontracting, marking a practical shift that small government contractors will need to address in proposals and compliance. Accounting and advisory firms have already started publishing guides to help small govcons revisit policies and controls in light of the change. ( )
A federal supplier can now win a contract on Monday and inherit a new compliance clause on Tuesday. Executive Order 14398, signed on March 26, 2026, tells agencies to put a new term into covered federal contracts, subcontracts, and lower-tier subcontracts within 30 days. (whitehouse.gov) The new term does not just ban illegal discrimination in the abstract. It specifically bars what the order calls “racially discriminatory diversity, equity, and inclusion activities” in hiring, promotions, vendor agreements, program participation, and resource allocation. (federalregister.gov) That means this is moving from speeches and policy memos into contract boilerplate. In federal contracting, boilerplate is the part that gets flowed down to subcontractors, audited in files, and cited in disputes years later. (presidency.ucsb.edu) The order says agencies must include four practical pieces in that clause. Contractors must certify compliance, report violations by subcontractors within 10 days, give agencies records on request, and acknowledge that a false certification can trigger liability under the False Claims Act. (gibsondunn.com) The False Claims Act is the federal government’s main fraud statute. It is the law used when a company gets paid by the government after making a false statement in a claim or certification. (justice.gov) That is why small contractors are paying attention even if they have never used the phrase diversity, equity, and inclusion in a proposal. A certification requirement turns internal training slides, internship criteria, supplier programs, and promotion policies into contract-risk documents. (dlapiper.com) This lands on top of an older federal contracting system that already had mandatory equal opportunity clauses. Federal Acquisition Regulation 52.222-26 and Subpart 22.8 still govern equal employment opportunity requirements in many covered contracts. (acquisition.gov) So contractors are now reading two layers at once. One layer is the long-running equal opportunity framework under Executive Order 11246, and the new layer is Executive Order 14398’s ban on race-based treatment inside programs that had often been grouped under diversity, equity, and inclusion. (acquisition.gov, federalregister.gov) Law firms started publishing client alerts within days because the order reaches past the prime contractor. DLA Piper, Mayer Brown, Proskauer, and Gibson Dunn all flagged the same point: if you sell to a federal prime, your subcontract terms and internal controls may now be reviewed through this new clause. (dlapiper.com, mayerbrown.com, proskauer.com, gibsondunn.com) The immediate homework is not philosophical. It is contract mapping, subcontract flowdown language, policy review, training review, and a decision about who inside the company is willing to sign a certification that could later be examined by an agency, an inspector general, or the Department of Justice. (gibsondunn.com, governmentcontractslegalforum.com) The bigger shift is that the federal government is using procurement language, not just civil rights enforcement, to reshape workplace programs. Once a rule shows up in the contract itself, it stops being a Washington debate and starts being a line item in proposal reviews, supplier questionnaires, and compliance checklists. (whitehouse.gov, federalregister.gov)
