Trump's DEI Order Creates Dilemma for Federal Contractors

Source:Bloomberg

Federal contractors are scrambling to figure out how far they should go in changing policies they’ve used to recruit and retain employees, in light of the Trump administration’s crackdown on what it describes as “illegal” DEI.

Companies that provide goods and services to the US government have a lot at stake. Agencies reported spending more than $770 billion in prime contracts in 2024, and there could be legal repercussions and hefty penalties for crossing the line on diversity, equity and inclusion— a line the administration hasn’t clearly defined. At the same time, existing contracts obligate these companies to maintain hiring policies they’ve been practicing for decades.

“The biggest question to me is, what is still in the contract that you need to comply with? How does it get changed, and when, and by whom?” said David Berteau, president and CEO of the Professional Services Council, an industry group that represents federal contractors.

“Those are still, at least from my perspective, unanswered questions on an uncertain timetable,” he added.

President Donald Trump rescinded Executive Order 11246, a 1965 rule that required contractors to practice “affirmative action” in their hiring, recruiting and promotion policies. In practice, this has meant tracking race and gender in their workforces, and identifying any policies that led to some groups being underrepresented, contracting attorneys said.

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