President Trump has signed a new executive order called Addressing DEI Discrimination by Federal Contractors that has important implications for engineering firms that work as federal contractors or subcontractors. This follows an initial EO that was signed at the beginning of the President’s term in January 2025.
By April 25, federal agencies must ensure that all contracts and subcontracts include the following clause:
“In connection with the performance of work under this contract, [the contractor/appropriate party (contractor)] agrees as follows:
- The contractor will not engage in any racially discriminatory DEI activities, as defined in section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors);
- The contractor will furnish all information and reports, including providing access to books, records, and accounts, as required by the contracting agency pursuant to the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors), for purposes of ascertaining compliance with this clause;
- In the event of the contractor’s or a subcontractor’s noncompliance with this clause, this contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts;
- The contractor will report any subcontractor’s known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency;
- The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and
- The contractor recognizes that compliance with the requirements of this clause are material to the Government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act).”.
It’s important to note that contractors will be required to monitor their subcontractors for compliance with the EO. Penalties for violating the EO include potential termination of contracts and debarment.
The Office of Management and Budget (OMB) has 30 days to issue guidance, the FAR Council has 60 days to issue new rules, and each department/agency has 120 days to report to the Domestic Policy Council on implementation of this order.