EO Seeks to Prevent Racial Discrimination in Federal Contracting
The White House issued an Executive Order (EO) to address diversity, equity and inclusion discrimination by federal contractors. Specifically, according to the EO, it is the “policy of the United States to promote economy and efficiency in Federal contracting by preventing racial discrimination.”
By April 25, 2026, the EO calls for all federal agencies to ensure that their contracts and “contract-like instruments” include a clause stating the contractor agrees to not engage in racially discriminatory activities. Unlike previous EOs that did not define unlawful DEI activities, the new EO provides a definition that prohibits “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.”
Because federal law already prohibits disparate treatment based on race, the EO does not create new antidiscrimination obligations for institutions that contract with the federal government. However, in addition to agreeing to the non-discrimination clause, the EO requires contractors to provide records to ascertain compliance with the clause. If the contractor does not comply with the antidiscrimination policy, the contract can be canceled, and the contractor can be declared ineligible for further government contracts. Likewise, contractors alleged to have engaged in prohibited race discrimination will potentially be liable under the False Claims Act, which could lead to substantial monetary penalties for institutions that have federal contracts.
It is unclear how some aspects of the EO will affect colleges and universities that participate in student aid and higher education programs. While contractors and vendors who work with the Office of Federal Student Aid and institutions engaged in contract work, including research contracts, with a federal agency are clearly covered by the EO, student financial assistance and direct grants to institutions are not covered under the definition of “contracts.” However, it is ambiguous whether “contract-like instruments” would include documents like the program participation agreement that all institutions sign in order to participate in the Title IV student financial aid programs.
For more information, please contact:
Jody Feder