Federal Contractors Face New Challenges as Trump Administration Targets DEI Initiatives
The Trump administration recently issued three executive orders (E.O.s) that aim to dismantle diversity, equity, and inclusion (DEI) programs in federal government operations and contracting. The report by Miller & Chevalier Chartered provides an in-depth analysis of these orders, which collectively reshape federal procurement policies under a new "merit-based" framework.
The first executive order, “Initial Rescissions of Harmful Executive Orders and Actions,” revokes several Biden-era policies, including E.O. 13985, which focused on advancing racial equity in federal contracting. By removing these provisions, the administration signals a shift away from policies that provided equitable access to underserved communities. While contractors are not immediately required to take action, those from minority and underserved backgrounds may find themselves disadvantaged as federal agencies move away from prior commitments to removing barriers to contracting opportunities.
The second executive order, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” escalates the rollback of DEI initiatives. It requires the Office of Personnel Management (OPM) and other agencies to terminate all DEI-related contracts, positions, and programs. This poses immediate risks for contractors engaged in equity-related scopes of work, as the government may terminate such contracts for convenience. While contractors could recover termination costs, such terminations create operational and financial uncertainty. Miller & Chevalier emphasizes the importance of contractors working with legal counsel to document incurred costs and prepare for potential contract adjustments.
The third executive order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” takes aim at longstanding affirmative action policies by rescinding E.O. 11246. It mandates contractors certify compliance with anti-discrimination laws and explicitly prohibits DEI programs deemed to violate federal regulations. These certifications are tied to payment eligibility, exposing contractors to liability under the False Claims Act (FCA) for any misrepresentation of compliance. This order also directs agencies to include certification clauses in new contracts and calls for a government-wide review of DEI policies in acquisitions, potentially affecting a broad range of contractors.
Miller & Chevalier highlights the far-reaching implications of these orders, particularly the ambiguity surrounding enforcement and the administrative hurdles contractors may face. Contractors are advised to reassess their DEI programs, EEO policies, and existing contracts to ensure compliance with the new requirements. Failure to adapt could result in increased scrutiny, potential FCA liability, and loss of business opportunities.
The report also critiques the lack of clarity and procedural safeguards in the administration’s approach, which bypasses typical rulemaking processes. The new certification requirements, for instance, could deter contractors from participating in federal acquisitions due to heightened risks and administrative burdens. Moreover, the exclusion of private-sector preferences for veterans and Randolph-Sheppard Act beneficiaries leaves room for further interpretation and challenges.
These executive orders mark a significant policy shift that will likely disrupt federal contracting practices. Contractors must act proactively, conducting internal reviews, consulting legal experts, and preparing for the impact of these changes. As Miller & Chevalier notes, while legal challenges may delay or alter the implementation of these policies, contractors should not delay in evaluating their compliance strategies to mitigate risks.
Disclaimer: This blog post is based on a report by Miller & Chevalier Chartered and is for informational purposes only. It does not guarantee accuracy or constitute legal advice. Readers are encouraged to consult legal professionals for specific guidance.
