White House issues Executive Order addressing DEI discrimination by federal contractors

The President issued Executive Order 14398 to direct federal agencies to prevent racially discriminatory diversity, equity, and inclusion activities in federal contracting. The order defines these activities as disparate treatment based on race or ethnicity in recruitment, employment, contracting, program participation, or resource allocation. It states that such practices impose costs by limiting merit-based decisions and reducing the labor pool, with those costs passed to the government. Agencies must include a specific contract clause within 30 days. The clause requires contractors to avoid the defined activities, furnish compliance reports, and report subcontractor violations. Noncompliance may lead to contract cancellation, suspension, or debarment. The Office of Management and Budget will issue guidance on enforcement. The Federal Acquisition Regulatory Council has 60 days to provide interim guidance and amend regulations to align with the order. Agency heads must review implementation and report to the Assistant to the President for Domestic Policy within 120 days. The Attorney General may pursue actions under the False Claims Act for violations. The order includes severability provisions and does not impair existing legal authorities of agencies.