Federal contractors must incorporate mandatory compliance clauses under the new executive order to address DEI discrimination issues in their supply chain.

US – April 2026 On March 26, 2026, President Donald Trump signed Executive Order 14398 “AddressingDEI Discrimination by Federal Contractors”1(the “EO”) directing federal agencies to includemandatory anti-diversity, equity and inclusion (DEI) compliance clauses in all government Federal contractors and their subcontractors that engagein “racially discriminatory DEI activities” now face contractsuspension, termination, debarment and potential False •“Racially discriminatory DEI activities” – Disparatetreatment based on race or ethnicity in the recruitment,employment (e.g., hiring and promotions), contracting Background •“Program participation” – Membership or participation in,or access or admission to training, mentoring or leadershipdevelopment programs; educational opportunities; clubs; The EO is the latest signed by the Trump administration toeliminate DEI-based preferences from the federal sphere. Inhis first term, President Trump issued Executive Order 13950,“Combating Race and Sex Stereotyping,” which prohibited Mandatory Contract Clause Requirements By April 25, 2026, all executive departments and agencies,including independent establishments, subject to FPASA4must ensure that contracts and contract-like instruments,including subcontracts and lower-tier subcontracts, contain Upon returning to office, President Trump signed Executive Order14151, “Ending Radical and Wasteful Government DEI Programsand Preferencing” in January 2025, directing agency headswithin 60 days to terminate all DEI, diversity, equity, inclusion andaccessibility (DEIA) and “environmental justice” offices, positions, 1.The contractor will not engage in any racially discriminatoryDEI activities, as defined in section 2 of the EO 2.The contractor will furnish all information and reports,including providing access to books, records and President Trump also issued Executive Order 14173 “EndingIllegal Discrimination and Restoring Merit-based Opportunity”in January 2025, which repealed certain affirmative actionrequirements for federal contractors and prohibited DEIprograms that violated anti-discrimination regulations. These 3.In the event of the contractor’s or a subcontractor’snoncompliance with this clause, this contract may be 4.The contractor will report any subcontractor’s known orreasonably knowable conduct that may violate this clauseto the contracting department or agency, and take any Revised Definitions under the EO The EO invokes the president’s authority under the FederalProperty and Administrative Services Act (FPASA) to promoteeconomy and efficiency in federal contracting. It rests onthe stated rationale that DEI activities “cause inefficiencies,waste and abuse” and “impose artificial costs in hiring, 5.The contractor will inform the contracting department oragency if a subcontractor sues the contractor and the suit 6.The contractor recognizes that compliance withthe requirements of this clause is material to the Enforcement The EO establishes a layered enforcement regime: •Contracting agencies are mandated to cancel, terminate or suspend any contract for failure to comply with this clause•Agencies must take appropriate action to suspend and debar noncompliant contractors or subcontractors•Within 120 days of the EO (i.e., July 24, 2026), each agency head must review implementation and report compliance to theassistant to the president for domestic policy•The attorney general will consider whether to bring FCA actions against noncompliant contractors, and will conduct promptreview ofqui tamactions concerning federal contracts within 60 days where practicable The director of the Office of Management and Budget (OMB) will issue guidance to contracting agencies to ensure complianceand, in coordination with the attorney general, the assistant to the president for domestic policy and the US Equal Employment Contractors and Subcontractors Must Immediately Check Their Supply Chain for DEI The EO applies broadly to any contractor or subcontractor at any tier performing work under a federal contract or contract-like Contractors and subcontractors should act now to address any practices or programs that meet the definition of “raciallydiscriminatory DEI activities,” and then take measures to eliminate such practices and programs internally and from their supply •Perform an internal audit to identify any practices or programs that may be considered “racially discriminatory DEI activities”•Create a plan to phase-out or eliminate any such practices or programs •Send a notice to all vendors in the supply chains about this EO •Prepare and be ready to send a certification to be executed by all parties in the supply chain certifying that they do not have •Establish an internal reporting mechanism, including procedures for reporting violations by subcontractors•Maintain records of compliance efforts for federal If you have any questions regarding this EO or need assistance in implementing a strategy for complian