On March 26, 2026, President Trump signed Executive Order 14398 (“EO 14398”) titled Addressing DEI Discrimination by Federal Contractors, taking aim at the diversity, equity, and inclusion (“DEI”) practices of federal contractors. EO 14398 ventures into territory already covered by the President’s prior DEI-related executive orders (“EOs”), in particular EO 14173, which requires a contractor certification regarding “illegal DEI,” but goes further. It directs federal agencies to include a mandatory contract clause prohibiting “racially discriminatory DEI activities” in all covered contracts and subcontracts, requires prime contractors to police the DEI practices of subcontractors at every tier, imposes new reporting requirements, and threatens a panoply of consequences for noncompliance, including contract termination, False Claims Act (“FCA”) exposure, and suspension and debarment. Like EO 14173, it also requires the government to “identify economic sectors that pose a particular risk of entities engaging in racially discriminatory DEI,” signaling the Administration’s ongoing desire to stamp out DEI. The accompanying White House Fact Sheet declares that the EO will ensure “merit-based and efficient contracting and employment.”
EO 14398 is likely to be challenged in court on a variety of theories, similar to the ongoing wave of EO 14173 litigation. Contractors will almost certainly question the EO’s scope and the ambiguity in its key terminology, as well as its enforcement assumptions.
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