Indiana Suspends Statutory Supplier Diversity Programs

At a Glance

• Indiana Executive Order 26-17 (Executive Order or EO), issued on July 14, 2026, immediately suspends the minority business enterprise (MBE) and women's business enterprise (WBE) components of Indiana's Diversity Business Enterprises Program (Program) and directs the creation of a race- and sex-neutral Indiana Small Business Program.
• The same day, Indiana Attorney General Todd Rokita issued Attorney General Official Opinion 2026-3, which concludes that the MBE and WBE components of the Program violate equal protection principles under the US Constitution.
• Existing State of Indiana (State) contracts with M/WBE supplier diversity commitments remain enforceable, while pending solicitations may be amended, reissued, or re-evaluated. Indiana municipalities, public education organizations, State contractors, and nonprofits receiving State funds should closely assess the impact of the Executive Order on their procurement processes, certifications, and compliance obligations.

On July 14, 2026, Indiana Governor Mike Braun issued Executive Order 26-17 (Executive Order or EO), directing the immediate suspension of the Minority Business Enterprise (MBE) and Women's Business Enterprise (WBE) components of the State of Indiana's (State) Diversity Business Enterprises Program (Program), established under Indiana Code, Ch. 4-13-16.5 and administered by the Indiana Department of Administration (IDOA) Division of Supplier Diversity.

The same day, the Indiana Attorney General (AG) Todd Rokita issued AG Official Opinion 2026-3 (AG Opinion), concluding that the MBE and WBE components of the Program violate equal protection principles under the US Constitution. The AG Opinion includes a legal analysis of the Program and found that the governor could lawfully direct IDOA to discontinue its implementation and administration of the MBE and WBE components of the Program under Indiana law.

We summarize below several key provisions of the Executive Order and the AG Opinion, and provide brief guidance and considerations for affected municipalities, public education organizations, and other entities receiving State funding.

Context and Legal Background

The Program, established by statute in 1983 and with implementing regulations in the Indiana Administrative Code at 25 IAC 5 and 25 IAC 9, sets State contracting goals for State-certified MBEs, WBEs, and veteran-owned small businesses (i.e., 8% for minority-owned businesses, 10% for women-owned businesses, and 3% for veteran-owned small businesses). IDOA's Division of Supplier Diversity has historically carried out its mission through three core functions: certification, contract compliance, and business development and outreach. In August 2025, Gov. Mike Braun's administration asked the AG's office to review the Program's legality.

In practice, the Program has operated through a certification-and-goals model, where businesses seeking MBE, WBE, or veteran-owned small business certifications may submit materials to IDOA, and certified firms receive access to subcontracting opportunities on State contracts, notice of State business opportunities, training and networking opportunities, and inclusion in the State's certified-business directory. IDOA guidance describes certification eligibility as generally requiring 51% ownership by qualifying minorities, women, or veterans who possess relevant expertise, control the business enterprise, and are US citizens.

Notably, the Executive Order and the AG Opinion were issued as part of a broader push from states following federal-level action under the Trump administration to apply greater legal scrutiny of race-conscious diversity initiatives in the public sector and the private sector. At the federal level, Executive Order 14151 (issued January 20, 2025) directed the termination of "illegal Diversity, Equity, and Inclusion ('DEI')/Diversity, Equity, Inclusion, and Accessibility ('DEIA') mandates, policies, programs, preferences, and activities" across the federal government, while subsequent executive orders and regulatory guidance have imposed new conditions on federal contractors and grant recipients. President Trump also subsequently issued Executive Order 14398, "Addressing DEI Discrimination by Federal Contractors," in March 2026, requiring that by April 25, 2026, federal agencies ensure all federal contracts include a clause prohibiting "racially discriminatory" DEI activities in connection with the performance of a federal contract.

At the state level, Texas Attorney General Opinion KP-0505 (issued January 19, 2026) similarly declared seven categories of public-sector DEI programs, including "historically underutilized business" and the US Department of Transportation’s Disadvantaged Business Enterprise programs, to be unconstitutional. Meanwhile, Missouri Executive Order 25-18 (issued February 18, 2025) directed state agencies to eliminate DEI initiatives from contracts and procurement. State officials in Indiana had also previously issued new State contractor requirements addressing DEI practices, requiring contractors and grantees "to covenant that [they do] not operate any programs or engage in any practices promoting DEI that violate Indiana or federal civil rights laws." In addition, on July 28, 2026, the US District Court for the Southern District of Texas in Landscape Consultants of Texas, Inc. et al v. City of Houston, Texas et al., No. 4:23-cv-03516 (S.D. Tex. Sept. 19, 2023) ruled that the MBE provisions of the City of Houston's and Midtown Management District's procurement programs were unconstitutional under the Equal Protection Clause of the Fourteenth Amendment and permanently enjoined them from administering those provisions of the programs.

Key Provisions of Executive Order 26-17

The EO mandates that IDOA may not issue new MBE/WBE certifications or recertifications, and all pending and active certifications are suspended. However, State contracts with MBE or WBE participation commitments remain in full force and effect, and agencies must administer and enforce them according to their terms. The EO expressly disclaims any impairment of vested contractual rights. Veteran-owned small business certification continues.

Solicitations currently under evaluation must be amended, reissued, or rescored as IDOA determines necessary to ensure fair competition. The EO does not apply to preliminary solicitation awards as of July 14, 2026, or subsequent contracts then in negotiation. IDOA must also immediately update procurement templates, evaluation guidance, and materials to remove supplier diversity references for solicitations issued on or after the suspension date. The EO notes that veteran-owned small business certifications and preference points remain in effect, and that the EO does not apply to emergency procurement for immediate and serious government needs.

Looking ahead, the EO also creates a new Indiana Small Business Program within IDOA to promote qualified Indiana small businesses in State procurement. The State's Office of Management and Budget, relevant agencies, and the Indiana Economic Development Corporation are directed to develop implementing policies for the Indiana Small Business Program by October 1, 2026. The new program will expand the existing Buy Indiana preference to include eligible small business prime contractors and subcontractors in RFP evaluation and establish annual expenditure goals.

Overview of Attorney General Opinion 2026-3

The AG Opinion primarily conducts a legal analysis of the Program under both federal and State Equal Protection principles, while also assessing how alternative programs might comply with federal legal requirements and how the State should address contracting activities under the existing Program.

In concluding that the MBE component of the Program is unconstitutional, the AG applied strict scrutiny and found that the MBE spending goals (aggregated across agencies) cannot establish a "compelling" government interest without identifying specific and intentional discrimination by the State. The AG found that the program was also not "narrowly tailored" because its racial categorizations are overbroad, its goals are uniform rather than group-specific, and it has operated for more than 40 years without a durational limit. Similarly, regarding the WBE components of the Program, the AG applied heightened scrutiny (requiring an "exceedingly persuasive justification") and concluded the WBE program was unlawful for materially the same reasons: that there was not a specific showing of past discrimination in State procurement and an insufficient connection between WBE goals and certifications and any "remedial purpose."

Regarding the State's prospective application of the current Program, the AG concluded that "executive declination" (i.e., the governor's refusal to enforce "clearly unconstitutional" statutory provisions) is appropriate here because continued implementation would deprive Indiana residents of equal protection under the US Constitution. The AG also found that the governor could discontinue the MBE and WBE components of the Program while preserving existing contractual obligations and the "severable" provisions of the Program related to veteran-owned, small, and Indiana-domiciled businesses.

Some Indiana lawmakers have disagreed with the AG's position that the governor can exercise "executive declination" to suspend the Program, noting that the Program is itself codified in Indiana law. Affected entities should closely track any formal legal challenges to the Executive Order or its subsequent implementation in the coming months.

Key Implications for Affected Entities

The Executive Order applies to State agencies as defined in Indiana Code § 4-13-1-1 (i.e., "an authority, board, branch, commission, committee, department, division, or other instrumentality of the executive, including the administrative, department of State government") and does not automatically bind city, county, or municipal corporations that operate under separate federal (i.e., US Department of Transportation) or local authority. However, local governmental authorities should review any procurement policies that incorporate IDOA MBE/WBE certifications, rely on State procurement templates, receive State-administered funds, or build on Indiana's certification regime, given the State's efforts to discontinue existing MBE/WBE programs. Municipalities should consider reviewing small-business set-aside programs, outreach programs, and technical assistance efforts to determine how such programs would be treated under the AG Opinion. These entities may face pressure or legal exposure to reassess their own programs given the State's constitutional rationale and the reasoning of the court in the Landscape Consultants case. Although neither is controlling on the legality of supplier diversity programs of other units of government, it is highly likely that challenges to programs sponsored by those units will be forthcoming.

Similarly, school corporations, public universities, charter-related entities, and educational service providers should review State-funded procurement, grants, and supplier diversity programs for compliance with the AG Opinion, particularly where they use State certification, percentage goals, or preferences tied to race or sex. Funding conditions from other states may also impose separate nondiscrimination or diversity obligations and grant terms that operate independently of Indiana's state program, raising compliance and conflict of law questions for funding recipients.

State contractors should review their active contract commitments, pending bids, scoring criteria, certifications, reporting obligations, and subcontractor plans. Importantly, existing State contracts remain enforceable on their current terms, but new solicitations will not include supplier diversity references and pending evaluations may be amended, reissued, or rescored. All interested parties should prepare to address revised "Buy Indiana" preference criteria and keep tabs on updates to the Indiana Small Business Program in the coming months.

For More Information

For further information regarding the Executive Order, the AG Opinion, and their implications for Indiana municipalities, institutions, and contractors, please contact the authors or any member of the firm's government and regulatory group. We will continue to monitor additional developments, including further agency guidance, regulatory materials, and any future legal challenges.