What President Trump’s Executive Orders Could Mean for the Disadvantaged Business Enterprise Program

By Ryan J. Regula, Charlene A. Warner, and Lilly M. Harris

Since taking office, President Donald Trump has enacted two Executive Orders aimed at eliminating diversity, equity, and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) programs from all aspects of the federal government, including federal contracts. Understandably, these actions have sparked many questions about the Orders’ impact on various government programs — including the disadvantaged business enterprise (DBE) program, a program where businesses owned and controlled by “socially and economically disadvantaged individuals” receive priority for federally funded contracts. While the long-term effects still remain to be seen, it is possible that government agencies may reduce the number of contracts to which the DBE program requirements apply, or agencies may abandon the program altogether.

Ending Radical and Wasteful Government DEI Programs and Preferencing

First, on January 20, 2025, the President signed Ending Radical and Wasteful Government DEI Programs and Preferencing. This Executive Order declares, “Americans deserve a government committed to serving every person with equal dignity and respect, and to expending precious taxpayer resources only on making America great.” To that end, the Office of Management and Budget (OMB) must “coordinate the termination of all discriminatory programs, including DEI.”

In response to this mandate, the OMB issued a memorandum requiring agencies to pause all activities related to the obligation or disbursement of federal funds, and any other actions potentially implicated by President Trump’s Executive Orders. This pause was intended to provide the Trump Administration time to review and make decisions regarding agency funding. In response to a federal injunction, however, the OMB rescinded the memorandum.

Further, agencies must provide a list of all “[f]ederal contractors who have provided DEI training or DEI training materials to agency or department employees” and “[f]ederal grantees who received federal funding to provide or advance DEI, DEIA, or ‘environmental justice’ programs, services, or activities since January 20, 2021.” Although the creation of these lists will not have an immediate impact on federal contractors, the message is clear: the Trump Administration will almost certainly take steps to curb DEI.

Ending Illegal Discrimination and Restoring Merit-Based Opportunity

Second, on January 21, 2025, the President signed Ending Illegal Discrimination and Restoring Merit-Based Opportunity. This Executive Order observes that “[h]ardworking Americans who deserve a shot at the American Dream should not be stigmatized, demeaned, or shut out of opportunities because of their race or sex.” Accordingly, agencies must “terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements,” including DEI. This Executive Order also repeals a slew of Executive Actions from prior administrations, including those requiring federal contractors to create affirmative action programs. Further, the Department of Labor must stop requiring federal contractors to take “affirmative action” and allowing federal contractors “to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” Finally, the Executive Order permits federal contractors a ninety-day grace period to comply.

Effect on DBE Programs and Federal Contractors

The stated goal of the DBE program is to create fair opportunities for small businesses owned and controlled by a majority of socially and economically disadvantaged individuals to obtain federally funded transportation contracts. Currently, the DBE program’s race and gender classifications are the subject of a legal challenge under the Equal Protection Clause in federal court.¹ Under the former administration, the Department of Labor defended the constitutionality of the DBE program. Facing the likelihood that the DBE program will go undefended under the new administration, however, multiple groups representing DBEs have sought to intervene in the lawsuit to defend the program. While the outcome of this litigation remains uncertain, President Trump’s Executive Orders — if left unchallenged — may spell a hastened end to the DBE program.

But regardless of the DBE program’s ultimate fate, ensuring legal compliance with the Executive Orders in the meantime is critical, and federal contractors should exercise caution moving forward. Notably, although President Trump has already revoked Executive Orders from prior administrations requiring affirmative action contract terms in federal contracts, these terms remain in existing contracts and enforceable during the ninety-day grace period. As a result, federal contractors should contact their contracting officers and legal counsel to determine when and how their existing contracts should be amended.

Relatedly, it is important to note that federal contracts must now include a “term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” for purposes of the False Claims Act (FCA). The FCA is a regulatory requirement that federal contractors must be aware of and comply with on all federal contracts. Nonetheless, in light of the Trump administration’s recent Executive Orders, a contractor may be subject to heightened compliance obligations due to new liability concerns. Namely, because federal contractors will be required to have this new anti-DEI and anti-DEIA language, it is possible that a business that continues to operate DEI programs past the compliance date may inadvertently expose itself to FCA enforcement penalties.

Consequently, federal contractors should not delay in reviewing their policies and practices to ensure that their businesses are brought into compliance with the Executive Orders and other laws. To that end, Snell & Wilmer monitors Executive Orders and their relationship to federal contracting, and is ready to assist with the regulatory and compliance needs of all affected businesses.