On January 21, 2025, the U.S. Office of Personnel Management (OPM) issued initial guidance to implement the Executive Order Ending Radical and Wasteful Government DEI Programs. This order requires federal agencies to review, identify, and report all government contracts connected to diversity, equity, inclusion, and accessibility (DEIA) programs and any modifications that may have obscured their DEIA intent.
This shift is particularly significant for small business set-asides and Part 19 solicitations, which include programs such as 8(a), Women-Owned Small Business (WOSB), Service-Disabled Veteran-Owned Small Business (SDVOSB), and Historically Under-utilized Business Zone (HUBZone) contracting. The order suggests an increased scrutiny of contracts awarded under DEIA initiatives and could lead to restructuring, cancellation, or reallocation of federal contracting opportunities.
For contractors who rely on these designations, the changes could be significant. The Department of Defense (DOD) has already issued compliance instructions, requiring agencies to identify and report all DEIA-related contracts and changes made to contract descriptions that may obscure their original DEIA intent.
Key Requirements Under the Executive Order
1. Agencies Must Identify DEIA-Related Contracts
Federal agencies must compile and submit a full list of all contracts tied to DEIA initiatives as of November 5, 2024. This includes contracts that were specifically set aside under DEIA policies or had funding allocated based on diversity-related goals.
2. Review of Part 19 Solicitations and Set-Asides
One of the most critical aspects of this order is its impact on Part 19 solicitations, which govern small business set-asides. Agencies must report whether any contract descriptions have been modified to obscure their connection to DEIA programs, a move that suggests increased scrutiny over small business preferences tied to diversity initiatives.
3. Mandatory Compliance Reports Due by February 21, 2025
By this date, federal contracting agencies must submit their findings to the Defense Pricing, Contracting, and Acquisition Policy (DPCAP) office within the Office of the Under Secretary of Defense for Acquisition and Sustainment (OUSD(A&S)). These reports must include:
- Contracting agency and command details;
- Contract numbers and delivery orders tied to DEIA;
- Vendor type (e.g., WOSB, SDVOSB, HUBZone, SDB);
- Actions taken to comply with the order; and
- Contact information for compliance inquiries.
How This Affects Government Contractors
Potential Set-Aside Program Changes
Small businesses that have relied on set-aside programs may see changes in how contracts are awarded. While general small business preferences will likely remain, contracts explicitly tied to DEIA objectives could be canceled or restructured.
Increased Scrutiny Over Small Business Qualifications
Firms that previously benefited from diversity-related set-asides should expect agencies to reexamine their eligibility under the new policy. There could be changes in:
- The criteria used to qualify for 8(a) or WOSB status
- How past performance under DEIA-focused contracts is viewed in future solicitations
- The extent to which agencies prioritize social and economic equity in procurement
Impact on Federal Contracting Opportunities
For companies with federal contracts tied to DEIA, this order raises two key questions:
- Will existing DEIA-related contracts be canceled, renegotiated, or reallocated?
- Will future solicitations under Part 19 be restructured to remove DEIA considerations?
Agencies may shift funding toward cost-cutting and efficiency-driven contracts, potentially reducing opportunities for businesses that rely on diversity-related procurement programs.
What Government Contractors Should Do Next
1. Review Existing Contracts
Government contractors should audit their current federal contracts to determine if any are at risk under the new policy. If a contract was awarded based on DEIA considerations, prepare for possible modifications or terminations.
2. Monitor Small Business Program Updates
The Small Business Administration (SBA) and DOD may issue additional guidance on how set-aside programs will be affected. Contractors should track any changes to eligibility requirements for 8(a), WOSB, SDVOSB, and HUBZone programs.
3. Prepare for Shifting Procurement Priorities
With a renewed focus on cost-cutting and efficiency, contractors should assess how to reposition their bids. Emphasizing compliance, cost-effectiveness, and technical capability will be critical in a changing federal landscape.
Conclusion
The rollback of government-backed DEIA programs will likely reshape federal contracting, particularly for set-aside and Part 19 solicitations. While small business preferences will likely persist in some form, contracts explicitly tied to diversity-related objectives may be restructured or eliminated.
Contractors should take proactive steps to evaluate their current agreements, track evolving policies, and adjust their federal procurement strategies accordingly. Staying ahead of these changes will be key to ensuring continued success in the government contracting space.
Contact a member of GRSM’s Government Contracts practice for assistance navigating these changes or for more information on how this may impact your contracts.