By David Cohen
BLOG OVERVIEW: On March 26, 2026, President Trump signed an executive order targeting racially discriminatory DEI activities by federal contractors, with enforcement mechanisms including contract termination, debarment, and False Claims Act liability. The order signals a shift toward certification-based compliance backed by data-driven analysis and documentation. Federal contractors should prepare for a verification-focused regime and begin reviewing race-conscious programs, policies, and decision-making processes proactively.
On March 26, 2026, President Donald Trump signed a significant new executive order (EO) titled Addressing DEI Discrimination by Federal Contractors and published a related fact sheet. This EO seeks to ban unlawful diversity, equity, and inclusion (DEI)-related activities, which the administration claims is “unethical and often illegal,” as well as a cause of “inefficiencies, waste, and abuse” by federal contractors.
Focus on Race
One of the most notable aspects of the executive order is what it does and does not cover; it explicitly targets “racially discriminatory DEI activities” but does not extend this language to sex or other protected characteristics. This is particularly interesting when viewed alongside other Administration actions that have addressed sex-based preferences in different contexts, such as the removal of non-binary reporting options in the 2025 EEO-1 filing.
The EO defines racially discriminatory DEI as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”
From a compliance standpoint, this creates a more targeted regulatory lens. Contractors should expect scrutiny specifically around race-conscious decision-making, programming, and outcomes, rather than a uniform approach across all protected classes.
Enforcement Mechanisms
The executive order has a clear emphasis on enforcement and accountability for federal contractors, including:
- Requiring new contract clauses prohibiting certain DEI practices
- Calling for the Federal Acquisition Regulatory (FAR) Council to amend Federal Acquisition Regulations to include this clause and remove any conflicting provisions
- Authorizing termination, suspension, and debarment for noncompliance
- Directing the Department of Justice (DOJ) to prioritize False Claims Act (FCA) enforcement
- Importantly, the EO states that compliance must be “genuine and verifiable.” Although it does not yet prescribe specific mechanisms, it strongly suggests that contractors should expect a structured compliance infrastructure, which could include the following:
- Formal certifications through the annual registration process in the System for Award Management (similar to those proposed by the General Services Administration for financial assistance recipients)
- Data collection and analytics to support compliance assertions and certifications
- Audits or review by contracting agencies. The EO directs the Office of Management and Budget to issue guidance.
- Documentation requirements sufficient to withstand False Claims Act scrutiny
In other words, contractors would be wise to expect a “show your work” approach to compliance.
False Claims Act
Federal contractors should also note the linkage to the False Claims Act. Under the FCA, a contractor’s certification of compliance is not just a representation or pro forma, it is a potential liability trigger that, if later challenged, can turn into a material financial and legal risk issue that could result in treble damages tied to the value of federal contracts.
What This Means for Federal Contractors
Federal contractors and subcontractors should expect a new compliance regime that is defined by verification, certification, and enforcement risk. While the FAR Council and other federal agencies have yet to release specific requirements or enforcement methodologies, the contractor community can now be sure of three things:
- Certification without data-driven analysis will no longer be viable
- Documentation and defensibility will be essential
- Conducting proactive EEO analytics to identify a pattern or practice of disparate treatment or proxy discrimination will become standard practice
DCI will continue to monitor this executive order along with any related regulatory developments or guidance that may emerge. Be sure to sign up for updates to stay informed as new information becomes available.
