In January 2025, President Donald Trump issued several executive orders that have sparked significant discussions across various sectors, including the government contracting (GovCon) space. These orders cover a range of matters, from diversity and inclusion mandates to federal hiring practices and remote work policies. While the full implications of these directives will unfold over time, they bring both opportunities and concerns for government contractors, particularly small and medium-sized businesses.
Rescission of Executive Order 11246
One of the most notable changes is the rescission of Executive Order 11246, which had prohibited federal contractors from engaging in employment discrimination and mandated affirmative action programs. By removing these requirements, the administration aims to reduce compliance burdens for contractors. This change may make it easier for small and medium businesses to compete in federal contracting without the administrative overhead of maintaining affirmative action programs. Recruitment processes could also become simpler for smaller firms with limited resources.
However, the absence of affirmative action requirements raises questions about equal opportunity in hiring, potentially affecting workforce diversity. Contractors may also face reputational risks or challenges from clients who continue to prioritize diversity and inclusion
Prohibition of DEI Programs
Another significant directive prohibits federal contractors and grant recipients from implementing diversity, equity, and inclusion (DEI) programs. This shift is expected to impact recruitment and training practices across the GovCon sector. While some contractors may experience reduced reporting and compliance requirements, leading to cost savings, others may find the absence of DEI initiatives limiting their efforts to build a diverse and inclusive workforce. This could potentially impact employee morale and public perception.
Balancing federal mandates with private-sector norms and expectations may also pose challenges, particularly for businesses serving both markets.
Mandated Return to In-Person Work
The executive order requiring federal employees to return to in-person work has implications for contractors providing staffing and IT support services. This directive could lead to increased demand for on-site support services, such as facilities management, IT infrastructure, and security. Recruitment firms may also see higher demand for cleared personnel or staff willing to work on-site. However, contractors accustomed to offering remote services may need to adjust their operational strategies, potentially increasing costs. Recruitment challenges could also arise, especially in fields where remote work has become a standard expectation.
Federal Funding Freeze and Potential Furloughs
A now-rescinded memo from the Office of Management and Budget (OMB) instructed all federal agencies to temporarily freeze most grants, loans, or other financial assistance programs while agency leaders reviewed them to identify any that may violate the new policies and priorities established by recent executive orders. While the freeze is no longer in effect, federally funded programs are still under review, and the possibility for a future freeze on spending remains a possibility. Contractors that receive and rely on such federal funding may need to furlough employees and reduce or suspend operations during such a pause in funding.
Major Changes to Affirmative Action and DEI Requirements
Recent executive orders have eliminated the requirement for government contractors to comply with affirmative action obligations and to maintain Affirmative Action Plans. However, they must continue tracking veteran and disability employment due to statutory obligations: the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act, respectively. Federal contractors will be required to certify they do not and will not engage in any illegal discrimination, including DEI, as part of the contracting process. If this certification is found to be false and a company is still engaging in DEI activity, they can face penalties under the False Claims Act.
Conclusion
The recent executive orders issued by President Trump have introduced significant changes to the GovCon sector. While these directives aim to reduce compliance burdens and streamline processes for contractors, they also present challenges related to workforce diversity, operational adjustments, and potential funding uncertainties. For government contractors, staying informed and adaptable is crucial to navigating these new mandates and maintaining compliance.
By understanding the implications of these executive orders, contractors can better prepare for the evolving landscape and continue to thrive in the GovCon sector. Stay tuned to our blog for more updates and insights on navigating the GovCon space!