New Guidance on U.S. Procurement Raises Risk to Federal Contractors From Potentially Discriminatory Practices

Continuing to target practices that it views as unlawfully discriminatory, the Trump Administration has issued Federal Acquisition Regulation (FAR) guidance directing revisions to federal contracts and proposed changes to the System for Award Management (SAM) certification requirements for recipients of federal funds. Federal Acquisition Regulatory Council guidance directs federal agencies to incorporate into contracts provisions prohibiting what the Administration views as unlawful discrimination. Via SAM, recipients of federal financial assistance (e.g., grants and cooperative agreements) would be required to certify compliance with the Administration’s understanding of federal antidiscrimination law.

These efforts reinforce the guidance announced in the July 29, 2025, memorandum from then-U.S. Attorney General Pam Bondi (the Bondi Memorandum), which provides examples of what the Administration says qualifies as unlawful discrimination, including (1) using race, sex, or other protected characteristics for “employment, program participation, [or] resource allocation” and (2) “unlawful segregation” via race-based training sessions or “implicit segregation through program eligibility.”

In April 2026, the U.S. Department of Justice announced its first False Claims Act (FCA) settlement with a company — IBM — to resolve allegations that violations of federal antidiscrimination laws caused the submission of false claims for payment to the government. In future FCA enforcement actions, the new FAR provision and the changes to SAM certification requirements (if finalized) promise to strengthen the government’s hand for both federal contractors and other recipients of federal financial assistance.

New FAR Council Guidance

On March 26, 2026, President Donald Trump signed Executive Order 14398 (the EO), “Addressing DEI Discrimination by Federal Contractors.” The EO directs the Federal Acquisition Regulatory Council to amend the FAR to add a new clause prohibiting what the EO calls illegal discriminatory policies. The EO also calls for enhanced oversight, reporting, and enforcement — including, in particular, via the FCA. 

Last week, on April 17, the Federal Acquisition Regulatory Council issued guidance directing that agencies implement the EO’s requirements, including via efforts to incorporate the new clause into solicitations, new contracts, and contracts already in process or previously awarded.

The new clause, FAR 52.222-90, is notable because it

• prohibits contractors and subcontractors from engaging in certain defined discriminatory practices
• requires contractors to provide access to records to support agency compliance reviews
• provides a mechanism for canceling, terminating, or suspending government contracts found to be violative, including declaring the contractor ineligible for future government contracts 
• states that compliance with the clause is material “for purposes of” the FCA definition of materiality, an element in FCA cases imposes a mandatory obligation on contractors to report potentially violative subcontractor 

This obligation to report potentially violative subcontractor conduct is particularly noteworthy because it reflects a potential asymmetry with existing reporting obligations under FAR 52.203-13 (the Contractor Code of Business Ethics and Conduct). While the new clause obligates contractors to report any potentially violative conduct by subcontractors, FAR 52.203-13 does not expressly impose a parallel obligation to report the contractor’s own potential violations, absent credible evidence that the activity is a violation of the FCA or certain federal criminal statutes. In effect, the new clause may create practical tension by subjecting subcontractor compliance in this area to a reporting regime more expansive and proactive than the regime applicable to the contractor’s own conduct.

SAM Certification Changes

In tandem with these new requirements for federal contractors, the Trump Administration is pursuing an expansion of the certifications required of recipients of federal grants. 

In February 2026, the General Services Administration proposed revisions to the representations and certifications required to be submitted by potential recipients of federal funds when registering in SAM, the governmentwide portal. Those certifications often serve as the foundation for contractor obligations and compliance — and subsequent liability. The proposed revisions would expand the Financial Assistance General Representations and Certifications, a requirement for all prospective awardees of federal grants. 

The proposed Title VII–related certification provides that entities “that receive federal funds ... must ensure that their programs and activities comply with federal law and do not discriminate on the basis of race or color.” The certification further provides that “antidiscrimination laws apply to programs or initiatives that involve discriminatory practices, including those labeled as Diversity, Equity, and Inclusion (DEI) or ‘diversity, equity, inclusion, and accessibility’ (DEIA).” The certification also includes the following specific examples, among others, of activities that assertedly violate federal antidiscrimination laws:

• “unlawful use of race or color as criteria” including in “race-based selection for contracts, or race-based program participation or resource allocation”
• “granting preferential treatment based on race or color, such as race-based scholarships or programs, preferential hiring or promotion practices, or access to facilities or resources based on race or ethnicity, including through the use of ‘cultural competence’ requirements, ‘overcoming obstacles’ narratives, or ‘diversity statements’”
• “segregation based on race or color, such as race-based training sessions, segregation in facilities or resources, or implicit segregation through program eligibility”
• “other unlawful use of race or color as criteria, such as race-based ‘diverse slate’ policies in hiring, race-based selection for contracts, or race-based program participation or resource allocation”
• “training programs that stereotype, exclude, or single out individuals based on protected characteristics or create a hostile environment”
• “retaliation by taking adverse actions against employees, participants, or beneficiaries because they engage in protected activities” related to opposing practices that “they reasonably believe violate federal antidiscrimination laws”; protected activity includes “raising concerns or filing complaints about, or objecting to or refusing to participate in” activities the Administration views as discriminatory

These examples mirror those listed in the Bondi Memorandum. By requiring prospective recipients of federal grants to attest to compliance with the Administration’s interpretation of federal antidiscrimination laws, the revised certification significantly increases the risks to entities using DEI or DEIA programs that may have been condoned or even encouraged under previous administrations.  

Key Takeaways

The recent FCA settlement with IBM underscores the government’s focus on leveraging the FCA to combat allegedly discriminatory practices. Yet the government may have recognized weaknesses in prevailing in an FCA case should future defendants choose to litigate — including materiality problems and the contradictory approach taken by prior administrations. The FAR guidance and proposed SAM revisions reflect an increasingly integrated enforcement approach meant to eliminate such weaknesses in future fights in a number of ways:

• First, the government is leveraging certifications in service of enforcement. By expanding the scope of required representations, the government is creating additional opportunities to argue that alleged noncompliance renders claims false within the meaning of the FCA. These proposed changes, if approved, would apply to recipients of federal grants, but there is potential that the scope will be expanded to include all SAM registrants, including federal contractors.
  
• Second, the new required contractual clause linking supposed violations to FCA materiality suggests a deliberate effort to ease the path to FCA liability for federal contractors.
• Third, the government is increasing contractor reporting and oversight obligations, which may generate additional information for government investigations and FCA qui tams.

In this evolving landscape, federal contractors should consider

• reassessing discrimination-related policies and programs in light of the EO’s positions and enforcement posture
• evaluating and strengthening internal controls surrounding SAM certifications and other procurement representations
• reviewing subcontractor compliance and reporting mechanisms
• preparing for increased scrutiny from both contracting agencies and enforcement authorities

Although the FAR Council’s April 17 guidance is an initial step and the SAM certification revisions remain merely proposed, the trajectory is clear. The Administration is actively building a framework that links federal antidiscrimination-related compliance to federal procurement eligibility and payment — thereby expanding the potential for FCA liability for both federal contractors and grant recipients.