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Living With the EO 14173 Certification Requirement for Federal Contractors, One Year In

Dominique L. Casimir and Sara N. Gerber●

Throughout 2025, the Trump administration communicated that it considered Diversity, Equity, and Inclusion (“DEI”) programs legally suspect. Executive Order 14173 (“EO” or “EO 14173”) declared that DEI programs “violate the text and spirit of our longstanding federal civil-rights laws” and directed agencies to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” The EO invoked the False Claims Act (“FCA”) to signal substantial financial exposure for federal contractors, and the Department of Justice (“DOJ”) established a Civil Rights Fraud Initiative to pursue claims. Throughout 2025, federal agencies presented government contractors with EO 14173 certifications, requiring contractors to agree that compliance with federal antidiscrimination laws is material to the government’s payment decisions under the FCA and attesting that any DEI programs do not violate federal antidiscrimination law. Many companies responded by undertaking privileged reviews of their DEI programs and, in some cases, rolling them back.

More recently, however, DOJ has vocally affirmed that DEI programs can in fact be lawful. At the Federal Bar Association’s FCA conference on February 19, 2026, Deputy Assistant Attorney General Brenna Jenny from DOJ’s Civil Division stated plainly: “Let me start by making absolutely clear, DOJ Civil Fraud is not investigating companies for having a DEI program.” She emphasized that companies “can engage in discrimination with or without DEI programs” and “can also operate a DEI program without it being discriminatory.” Instead, she explained that DOJ’s investigations focus on “companies that implemented programs and practices that pressured supervisors and management to make hiring and promotion decisions based on race or sex,” including setting and tracking demographic goals, tying executive compensation to diversity metrics, and requiring employees to set DEI-related goals that affect compensation and promotion. In Fourth Circuit litigation, DOJ conceded that there is “‘absolutely’ DEI activity that falls comfortably within the confines of the law.” Nat’l Ass’n of Diversity Officers in Higher Educ. v. Trump, No. 25-1189, slip op. at 26 (4th Cir. Feb. 6, 2026) (Diaz, C.J., concurring).

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Decoupling from Chinese Chips: Unpacking the Proposed Section 5949 Supply Chain Ban

Robyn N. Burrows and Samarth Barot ●

In December 2022, we discussed the passage of Section 5949 of the Fiscal Year 2023 National Defense Authorization Act (“NDAA”), which introduced prohibitions on certain semiconductor products and services from designated Chinese manufacturers. At the time, the statute’s scope remained unclear, particularly regarding whether the restrictions would apply only to federal sales or extend to contractor “use” of covered technologies, similar to Section 889’s Part B prohibition. On February 17, 2026, the Federal Acquisition Regulatory (“FAR”) Council released a proposed rule that provides important clarity on these questions and establishes a compliance framework for government contractors.

Understanding the Potential Anthropic Ban: Key Considerations for Federal Contractors

Robyn N. Burrows and Merle M. DeLancey, Jr. ●

On February 27, 2026, President Trump posted on Truth Social directing all federal agencies to “immediately cease” use of Anthropic’s artificial intelligence (“AI”) technology. Simultaneously, Defense Secretary Pete Hegseth announced on X he was designating the company a “supply chain risk to national security” and prohibiting federal contractors from doing any business with Anthropic. This unprecedented action against a domestic company has significant supply chain implications for government contractors. Below, we summarize what led to this development, the legal authorities pertaining to supply chain bans, and practical guidance for contractors navigating this evolving situation.

1. Background: From Contract Dispute to Presidential Directive

The conflict between Anthropic and the federal government emerged from a contract dispute over the company’s AI usage restrictions. Anthropic, which holds a $200 million Pentagon contract and was the first frontier AI company to deploy its models on classified government networks, maintained two “red lines” in its contract negotiations: it refused to allow its AI model, Claude, to be used for mass domestic surveillance of Americans or in fully autonomous weapons systems.

The Pentagon demanded that Anthropic agree to “all lawful use” of its technology without Anthropic’s proposed restrictions. Anthropic’s refusal led President Trump and Secretary Hegseth to announce their decisions against Anthropic on social media. Secretary Hegseth stated that Anthropic would be “immediately” designated a supply chain risk, prohibiting any federal contractor working with the military from “any commercial activity with Anthropic.”

Anthropic has announced it will challenge the supply chain risk designation in court, calling it “legally unsound.”

Top 10 Points for Contractors from DOJ’s February 19 Comments on “DEI” Enforcement

Luke W. Meier ●

Yesterday, Brenna Jenny, Deputy Assistant Attorney General, Commercial Litigation Branch, Department of Justice (“DOJ”) Civil Division, offered remarks on False Claims Act enforcement related to so-called “illegal DEI.” Other outlets have broadly recapped these remarks, a rare opportunity for direct insight into DOJ’s thinking on these issues.

Below are 10 key points for government contractors from the remarks of Ms. Jenny (who spoke for herself, and not officially for the DOJ).

GSA Issues New Framework for Protecting CUI in Contractor Systems

Michael Joseph Montalbano ●

Last month the General Services Administration’s (“GSA”) Office of the Chief Information Security Officer (“OCISO”) issued CIO-IT Security-21-112 Rev. 1, a procedural guide governing how Controlled Unclassified Information (“CUI”) must be protected when it resides in nonfederal contractor systems. Although styled as internal process guidance rather than a regulation, the document establishes a detailed approval framework that will determine which contractors are eligible for GSA contracts that include CUI.

Background and Scope

The guide, which implements GSA’s approach to safeguarding CUI, uses National Institute of Standards and Technology (“NIST”) SP 800-171, Revision 3, selected enhanced requirements from NIST SP 800-172, and selected privacy controls from NIST SP 800-53, Revision 5. It applies where CUI is resident in a contractor system that is not operated on behalf of the federal government, and therefore is not subject to the Federal Information Security Modernization Act or the Federal Risk and Authorization Management Program (“FedRAMP”). Use of this process requires coordination with OCISO and approval by the GSA Chief Information Security Officer. GSA intends to eventually incorporate these requirements into applicable contracts and solicitations.

DOJ Announces Record-Breaking False Claims Act Recoveries in FY 2025: What the Stats Portend for 2026

Jennifer A. Short and Oliver E. Jury ●

Fiscal Year (“FY”) 2025 yielded a historic high of over $6.8 billion in False Claims Act (“FCA”) settlements and judgments, underscoring the Department of Justice’s (“DOJ”) aggressive enforcement. DOJ’s annual report, released January 16, 2026, showed that healthcare fraud matters again dominated the lion’s share of the moneys recovered, accounting for more than $5.7 billion, and reaffirming the sector’s centrality to FCA priorities. Qui tam lawsuits also retained an outsized influence, representing approximately $5.3 billion in recoveries for both intervened ($3.0 billion) and declined ($2.3 billion) cases. On the flip side, that means the government recovered some $1.5 billion without the aid of an underlying whistleblower complaint. The pipeline of new cases looks robust moving forward: whistleblowers filed a record 1,297 new qui tam suits, and DOJ opened 401 new investigations.

Prioritizing the Warfighter in Defense Contracting—What Does the New EO Mean for Contractors?

Scott Arnold ●

President Trump issued an Executive Order (“EO”) on January 7, 2025, that seeks improved performance of defense contracts and enhanced contractor investments in production capacity through measures that would impose limits on executive compensation when contractor performance or investment levels are deemed inadequate. The EO, Prioritizing the Warfighter in Defense Contracting, appears predicated on the belief that “after years of misplaced priorities, traditional defense contractors have been incentivized to prioritize investor returns over the Nations’s warfighters.” To address this, the EO states that “[m]ajor defense contractors will no longer conduct stock buy-backs or issue dividends at the expense of accelerated procurement and increased production capacity.” While the desire to improve defense contract performance is understandable, the attempt to do so through regulation of executive compensation is unprecedented.

What Does the EO Require?

The EO sets forth two key mechanisms through which the new priorities will be implemented.

Preliminary Takeaways as DoD Seeks to Redesign the Defense Acquisition System for Wartime Speed

Oliver E. Jury ●

During a speech before key players in the defense industrial base on Friday, November 7, Secretary Hegseth announced plans for a sweeping transformation of the Defense Acquisition System, redesignating it as the Warfighting Acquisition System (“WAS”) and elevating speed-to-field as the organizing principle. The reforms would concentrate authority, expand competition and modularity, adopt commercial-first pathways, modernize contracting and training, and streamline oversight—all aimed at accelerating capability delivery and scaling industrial capacity for surge. While much will depend on how these announced changes are implemented, in this post we highlight key aspects of the changes and identify potential impacts to monitor. Secretary Hegseth’s full recorded remarks are available on C-SPAN’s website.

Redesignation and Organizing Principle

Acquisition is to be treated as a warfighting function, with every process required to justify its value to timely capability delivery. The WAS will reframe success around time-to-capability rather than exhaustive specification compliance.

Potential impact: Companies should expect solicitations and evaluations to prioritize schedule credibility and operational outcomes, reshaping win strategies toward demonstrable speed and adaptability.

BIS Rescinds 2024 Firearms Export Controls, Reduces Regulatory Burdens on U.S. Firearms Industry

Anthony Rapa and Patrick F. Collins ●

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a final rule on September 30, 2025, rescinding the 2024 interim final rule (“Firearms IFR”) under the Export Administration Regulations (“EAR”) that had imposed new export license requirements and restrictions on firearms, ammunition, and related items. The new rule restores export controls for these items to their pre-May 2024 status, with the exception of maintaining certain new Export Control Classification Numbers (“ECCNs”). The action is intended to reduce regulatory burdens on U.S. firearms exporters while maintaining appropriate controls to protect national security and foreign policy interests.

Background

BIS issued the Firearms IFR on April 30, 2024, tightening controls on commercial firearms, ammunition, and related items under the EAR. It created four new ECCNs for semi-automatic rifles, pistols, shotguns, and certain parts (0A506-0A509) on the Commerce Control List (“CCL”). It also applied broad crime-control licensing worldwide, shortened license validity to one year, curtailed certain license exceptions, and adopted presumptions of denial for non-government end users in 36 high-risk destinations.

The Firearms IFR followed a 2023 licensing pause and policy review that identified significant diversion and misuse of U.S.-origin guns abroad. BIS used the Firearms IFR to act swiftly while soliciting public comment on further refinements.

E‑Verify, FAR 52.222‑54, and Renewed FCA Risk: What Contractors Need to Know

Jennifer A. Short, and Oliver E. Jury ●

The current administration’s focus on immigration played out in a recent False Claims Act (“FCA”) matter in which a federal contractor was alleged to have billed for unauthorized workers in violation of FAR 52.222‑54 (Employment Eligibility Verification, “E-Verify”).

On September 18, 2025, the Department of Justice (“DOJ”) announced that Bayonne Drydock and Repair Corporation (“Bayonne”) agreed to pay $4,043,810.56 to resolve allegations that unauthorized workers worked on Bayonne’s Navy contracts over multiple years.

According to DOJ’s press release, in 2016, the Department of Homeland Security (“DHS”) sent a “Notice of Suspect Documents” to a subcontractor controlled by Bayonne’s Risk Manager, questioning the work authorization of certain subcontractor employees. While the Risk Manager terminated the unauthorized employees, she re-hired some of them through another subcontractor that she controlled. Bayonne’s settlement agreement with DOJ asserts that between 2016 and 2020, Bayonne billed the government for the work of approximately 52 unauthorized employees working for entities owned or controlled by Bayonne’s Risk Manager. The settlement agreement also confirmed that the Risk Manager pled guilty to criminal charges stemming from her role with Bayonne and its subcontractors.

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1. Background: From Contract Dispute to Presidential Directive

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Redesignation and Organizing Principle

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Background

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