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Sec. 3. Requirements for Federal Contractors. Within 30 days of the date of this order, executive departments and agencies, including independent establishments subject to FPASA, 40 U.S.C. 102(4)(A) (agencies), shall, to the extent permitted by law, ensure that contracts and contract-like instruments, including contractors' subcontracts and subcontractors' lower-tier subcontracts, include the following clause:
"In connection with the performance of work under this contract, [the contractor/appropriate party (contractor)] agrees as follows:
1. The contractor will not engage in any racially discriminatory DEI activities, as defined in section 2 of the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors);
2. The contractor will furnish all information and reports, including providing access to books, records, and accounts, as required by the contracting agency pursuant to the Executive Order of March 26, 2026 (Addressing DEI Discrimination by Federal Contractors), for purposes of ascertaining compliance with this clause;
3. In the event of the contractor's or a subcontractor's noncompliance with this clause, this contract may be canceled, terminated, or suspended in whole or in part, and the contractor or subcontractor may be declared ineligible for further Government contracts;
4. The contractor will report any subcontractor's known or reasonably knowable conduct that may violate this clause to the contracting department or agency and take any appropriate remedial actions directed by the contracting department or agency;
5. The contractor will inform the contracting department or agency if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of this clause; and
6. The contractor recognizes that compliance with the requirements of this clause are material to the Government's payment decisions for purposes of section 3729(b)(4) of title 31, United States Code (False Claims Act).".
Sec. 4. Penalties. (a) The Director of the Office of Management and Budget shall issue guidance to contracting agencies to ensure compliance with this order. Consistent with any such guidance provided, contracting agencies shall:
(i) cancel, terminate, suspend, or cause to be cancelled, terminated, or suspended, any contract or contract-like instrument, or any portion or portions thereof, for failure of the contractor or subcontractor to comply with the clause described in section 3 of this order; and
(ii) take appropriate action to suspend and debar contractors or subcontractors for such failures to comply.
(b) The Director of the Office of Management and Budget, in coordination with the Attorney General, the Assistant to the President for Domestic Policy, and the Chairman of the Equal Employment Opportunity Commission, shall identify economic sectors that pose a particular risk of entities engaging in racially discriminatory DEI activities based on current or past conduct and issue additional guidance to contracting agencies regarding best practices to ensure compliance with this order within such sectors.
(c) Within 120 days of the date of this order, each agency head shall review the agency's implementation of section 3 of this order and report to the Assistant to the President for Domestic Policy regarding its compliance with that section. Thereafter, each agency head shall regularly review and take appropriate measures to ensure such compliance.
(d) The Attorney General, in consultation with relevant contracting agencies, shall:
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