Implications of Executive Order 14173 on Government Construction Contracts

by Kylie Brooks

April 1, 2025

On January 24, 2024, President Trump signed Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” directing all federal agencies to “terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements” and “enforce our longstanding civil-rights laws and to combat illegal private-sector [diversity, equity, and inclusion] DEI preferences, mandates, policies, programs, and activities.”

Executive Order 14173 Generally.

This Executive Order significantly deviates from longstanding affirmative action and diversity initiatives, which have been in place for decades, and have significant implications for contractors, particularly those who perform federal work. Among other things, this Executive Order:

  • Revokes numerous previous executive orders, including President Lyndon B. Johnson’s Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity);
  • Requires the Office of Federal Contract Compliance Programs within the Department of Labor to immediately cease, among other things, “allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin;” and
  • Prohibits the employment, procurement, and contracting practices of Federal contractors and subcontractors from being considered based on race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.

In sum, the Executive Order terminates DEI discrimination in the federal workforce, and federal contracting and spending. The Trump administration’s goal, according to the White House Fact Sheet published on January 22, 2025, is to require “[F]ederal hiring, promotions, and performance reviews to reward individual initiative, skills, performance, and hard work and not, under any circumstances, DEI-related factors, goals, policies, mandates, or requirements.”

Additionally, the Executive Order requires each agency to include in every contract or grant a term requiring contractors to agree that compliance with all applicable federal anti-discrimination laws is “material” to the government’s payment decisions and to certify that they do not operate any programs promoting DEI that violate federal anti-discrimination laws. Essentially, contractors receiving federal funding are required to agree that they will not engage in illegal discrimination, including the now illegal DEI initiatives.

Unchanged Anti-Discrimination Laws.

Despite these sweeping changes, federal contractors must retain compliance with existing anti-discrimination laws, such as:

  • Title VII of the Civil Rights Act,
  • the Equal Pay Act,
  • the Age Discrimination in Employment Ac,
  • the Americans with Disabilities Act,
  • Section 503 of the Rehabilitation Act, and
  • the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA).

These statutes continue to require affirmative action and non-discriminatory practices.

Federal Funding Implications.

Consistent with this Executive Order, on January 27, 2025, the Office of Management and Budget (OMB) published Memorandum M-25-13: “Temporary Pause of Agency Grant, Loan, and other Financial Assistance Programs,” directing Federal agencies to “identify and review all Federal financial assistance programs and supporting activities consistent with the President’s policies and requirements” and “temporarily pause and potentially cancel federally funded programs that conflict with the administration’s priorities.” Although Memorandum M-25-13 was quickly rescinded by Memorandum M-25-14 after a federal court in the District of Columbia issued a temporary restraining order, the Trump administration continues to indicate that it intends to freeze federal funds for certain programs for being inconsistent with the Executive Order’s objectives related to DEI.

Status of State and Local Government.

Local governments that receive federal funding for a variety of activities are likely to face obstacles as a consequence of the recent and developing actions of the Trump administration. Following the Trump administration’s lead, Texas lawmakers have introduced legislation that seeks to prohibit state and local government contracts from applying DEI principles. Currently, Texas House Bill 167, titled “The Ending Institutional Racism Act,” seeks to prohibit certain diversity, equity, and inclusion (DEI) initiatives by governmental entities in Texas by introducing Chapter 621 to the Government Code and amend existing laws regarding governmental contracting —including, without limitation, Chapter 2252.911 of the Texas Government Code—prohibiting contracts based on race, color, ethnicity, sex, gender identity, or sexual orientation. If House Bill 167 is signed into law, state and local government contracts would be prohibited from being awarded to any contractor bids based on race, color, ethnicity, sex, gender identity, or sexual orientation.

Conclusion.

While political activity is still evolving and the future remains uncertain, government funded projects are likely to face significant challenges awarding projects based on affirmative action and diversity principles. Contractors should be aware of rule changes and how they affect qualifications, bidding, and the contract process.

To discuss how the Executive Order could impact your business, contact Kylie Brooks at Griffith Davison’s Dallas office at (972) 392-8900, or email Kylie directly at kbrooks@griffithdavison.com.