The White House’s efforts to remake the federal government isn’t limited to federal employees. It’s spilling into the private-sector economy because it’s affecting federal contractors.
The government spends nearly $800 billion a year paying private businesses to provide all sorts of services, including janitorial, landscaping, human resources and high-tech engineering.
And for decades, federal agencies have had policies in place that can give a leg up to women- and minority-owned businesses that provide the contracting services the government needs.
”It wasn’t ever the case that prime contractors were required to exclusively award subcontracts to minority-owned or woman-owned small businesses,” said Dominique Casimir, a partner at the law firm Blank Rome. “But there would be targets and goals, and that seems to be exactly the kind of thing that this administration finds to be unacceptable or discriminatory.”
One of President Donald Trump’s Day 1 executive orders requires federal agencies to “excise references to DEI and DEIA principles, under whatever name they may appear, from Federal acquisition, contracting, grants, and financial assistance procedures.”
Additionally, it bans federal contractors and sub-contractors from engaging “in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”
“The executive order … directed the government to terminate all government contracts that they view as being equity-related,” Casimir said.
That’s already begun throughout the government, with agencies canceling contracts tied to specific DEI programs, but it’s less clear what these orders mean for minority contractors.
The anti-DEI executive orders are being challenged in court, but in the meantime, many of the businesses that have benefited from these programs over the years are worried about their future.
Larry Bullock, president of the U.S. Minority Contractors Association, said policies in place since the Civil Rights Movement that ban discrimination in federal contracting and set targets for assigning contracts to “disadvantaged” small businesses have given a boost to his members. The group represents about 220 companies across the United States.
“The bulk of our firms are into the infrastructure,” Bullock said. “That means that they do site work, roads, hauling concrete, asphalt, utilities. … Some of them are really carving out niches for themselves in sustainable energy, in terms of the electric vehicle installations.”
Many of these firms are certified by the federal government to compete for contracts set aside for “small disadvantaged businesses.” Even though the several executive orders calling for an end to DEI programs don’t explicitly cancel these programs, Bullock said his membership is worried the changes are going to limit opportunities.
“Several of our firms are fearful. I dare say some border on paranoia,” he said.
We reached out to the Small Business Administration for comment on how the executive orders might affect minority contractors, but we didn’t get a response on that issue before our deadline. The agency did say in an email that Biden administration contracting targets for small disadvantaged businesses “unfairly tipped the scales against any small business that did not qualify as ‘disadvantaged,’ negatively impacting many qualified job creators.”
Those targets represent a significant amount of federal spending, said Deepak Bhat, director of federal product management at GovSpend, which tracks federal contracting data.
“That spending in 2024 was 9.8%,” Bhat said. “So this is about $76 billion.”
The Trump administration has lowered the target for awarding these contracts from the 15% Biden administration goal to at least 5%.
“That could amount to about $38 billion of contract spending that’s currently going to a small disadvantaged business that will potentially no longer go to some of those companies,” Bhat said.
Many minority-owned contracting companies have built their business strategies around these targets and set-asides as a way to compete for contracts against firms that are bigger, better-connected or have more resources.
But given the current administration’s anti-DEI push, that strategy could now be a liability.
“Everybody’s terrified right now that their contracts will be terminated,” said Casimir of Blank Rome. “Everybody is terrified right now of just drawing a spotlight.” She said her clients are scrambling to make sure their programs and policies don’t run afoul of new — and shifting — contracting guidelines.
“What you’re seeing right now is government contractors making all sorts of changes to their programs because they don’t want to become the target of a government investigation,” Casimir said.
All of the minority-owned contracting firms Marketplace reached out to declined to speak on the record out of concern about drawing attention to themselves in a risky political and business environment.
Members of the U.S. Minority Contractors Association were wary of drawing attention to themselves as well. Nevertheless, Bullock, the association’s president, said his group is planning to fight these executive orders in court.
In the meantime, he’s advising members to turn to other levels of government as a backup plan.
“We’ve encouraged our members to look at the local and state government policies that say the people who are in a certain geographic, demographic area should get an opportunity to participate, and they call them local preferences,” Bullock said.
Because, he said, some communities are digging in on their diversity commitment, even as the administration pulls back on the federal government’s.
This story was originally written by Kimberly Adams for Marketplace and was republished with permission from the author.
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