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At a Glance
- The Federal Acquisition Regulatory (FAR) Council issued guidance implementing Executive Order (EO) 14398 through a new mandatory contract clause, FAR 52.222-90, which agencies must incorporate into new solicitations beginning April 24, 2026, and into existing contracts via bilateral modifications by July 24, 2026.
- Consistent with the EO, the new FAR clause broadly prohibits "racially discriminatory DEI activities," requires significant documentation and information-sharing upon agency request, flows down to subcontractors at all tiers, and makes noncompliance an express basis for suspension and debarment.
- Federal contractors and subcontractors should assess their internal programs and compliance frameworks in anticipation of receiving new compliance requests from contracting officers, even as a pending federal lawsuit challenging the EO on constitutional grounds works its way through the legal system.
In a memo dated April 17, 2026, the Federal Acquisition Regulatory (FAR) Council issued guidance and model deviation text to implement Executive Order (EO) 14398, "Addressing DEI Discrimination by Federal Contractors." The guidance operationalizes the EO's mandate by introducing new mandatory contract clauses at FAR Parts 9, 12, 22, and 52, and directing agencies to incorporate a new clause at FAR 52.222-90 into federal contracts on an accelerated timeline. Although the EO itself is currently subject to ongoing litigation, as discussed below, the FAR Council guidance gives the EO immediate operational effect and expedites the shift in how federal contractors and their DEI-related practices are regulated across the federal procurement system.
Background
As discussed in our previous client alert on EO 14398, the EO directed federal agencies to prohibit federal contractors and subcontractors (together, "contractors") from engaging in what the administration characterizes as "racially discriminatory" diversity, equity, and inclusion (DEI) practices and to include new compliance, reporting, and enforcement mechanisms into the federal procurement system. The EO directed the FAR Council to move quickly to implement a mandatory contract clause prohibiting "racially discriminatory DEI activities" among federal contractors.
Unlike previous executive orders, EO 14398 focused only on race and ethnicity-based discrimination, and did not address sex-based discrimination. Instead, EO 14398 specifically defined "racially discriminatory DEI activities" as "disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity's resources." The FAR Council has incorporated this definition into its new guidance, as outlined below. The EO similarly provided a more granular definition of "program participation" in this context, defining it as "membership or participation in, or access or admission to: training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities that are sponsored or established by the contractor or subcontractor."
Implementation Guidance and Timeline
The FAR Council guidance is structured around coordinated class deviations to four FAR Parts, each of which plays a distinct role in implementing the EO. Most importantly, the guidance establishes model deviation text for a new clause at FAR 52.222-90 to be inserted into new solicitations and resulting contracts valued over the micro-purchase threshold (i.e., generally $15,000), including contracts for commercial products and commercial services, beginning April 24, 2026. The clause also flows down to subcontracts at any tier, including commercial subcontracts, for covered US performance.
The $15,000 micro-purchase threshold that triggers FAR 52.222-90 is notably lower than the jurisdictional thresholds for other contractor nondiscrimination obligations enforced by the Office of Federal Contract Compliance Programs (OFCCP), such as the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act (Section 503), which cover protected veterans and individuals with disabilities, respectively. For example, as of October 1, 2025, VEVRAA's affirmative action requirements apply to contracts of $200,000 or more, and Section 503's affirmative action requirements apply to contracts of $50,000 or more. Thus, FAR 52.222-90 likely covers a broader range of contracts than the other major nondiscrimination regulations with which contractors may be required to comply.
Agencies are further directed to insert FAR 52.222-90 into all existing contracts, and are expected to "make every effort to bilaterally modify existing contracts by July 24, 2026." The guidance further specifies that, if a contractor refuses to agree to a bilateral modification, "the contracting officer should consider whether, absent the modification, the contract no longer meets the agency's needs and should therefore be terminated for convenience." The guidance provides an exception for contracts with a final expiration date before December 31, 2026, allowing contract modification for those contracts at the discretion of their respective contracting officers.
Separately, the FAR Council guidance includes model deviation text for FAR Part 9 to expressly include "failure to comply with the requirements of the clause at 52.222-90" as a cause for suspension and debarment. While the existence of a cause alone does not mandate suspension or debarment in every case, the deviation significantly heightens enforcement exposure and underscores FAR 52.222-90 as a key responsibility-related requirement for contractors.
The guidance further includes model deviation text to add to FAR Part 12 to clarify that FAR 52.222-90 applies to commercial contracts. It also adds new language to FAR Part 22 that directs contracting officers to include FAR 52.222-90 in covered solicitations and contracts. Agencies are directed to update their respective "Revolutionary FAR Overhaul" class deviations for FAR Parts 9, 12, 22, and 52 by April 27, 2026.
The New Contract Clause: FAR 52.222-90
Under FAR 52.222-90, contractors are required to agree that they will not engage in any "racially discriminatory DEI activities." The clause incorporates the definitions of "racially discriminatory DEI activities" and "program participation" from EO 14398, as described above, and further requires contractors to:
- Furnish all information and reports, including providing access to books, records, and accounts, as required by the Contracting Officer, for purposes of ascertaining compliance with the clause
- Flow down FAR 52.222-90 to covered subcontracts and commercial subcontracts
- Oversee subcontractor compliance and "report any subcontractor's known or reasonably knowable conduct that may violate" the clause to the contracting officer, and take any appropriate remedial actions directed by the Contracting Officer
The FAR Council does not provide any additional insight into the scope of the new requirements, including the novel subcontractor reporting and notice obligations set forth by the clause. However, the clause does provide that, in the event of contractor noncompliance, the 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." Further, and importantly, FAR 52.222-90 requires contractors to "recognize[ ] that compliance with the requirements of this clause are material to the Government's payment decisions for purposes of 31 U.S.C. 3729(b)(4)," raising enforcement risks associated with the False Claims Act (FCA).
The FAR Council has also submitted an Office of Management and Budget (OMB) Justification seeking approval under the Paperwork Reduction Act for the new information collection obligations associated with FAR 52.222-90 regarding the "furnish[ing of] all information and reports" for purposes of ascertaining compliance with the clause. The OMB Justification estimates that more than 6,000 contractors annually will be newly required to submit data under the clause, signaling that agencies expect active, document-supported compliance with the new requirements.
Ongoing Legal Challenge to EO 14398
On April 21, 2026, a coalition of higher education organizations, faculty groups, DEI professionals, and contractor associations filed suit in the US District Court for the District of Maryland seeking to block the enforcement of the EO. The complaint alleges that EO 14398 and its implementing mechanisms violate the First Amendment's free speech and association protections, are unconstitutionally vague, and exceed the president's authority under the Federal Property and Administrative Services Act. Specifically, the plaintiffs argue that the order impermissibly conflates unlawful discrimination with lawful DEI-related expression and programming, chilling protected conduct and academic freedom.
While the litigation may ultimately affect the scope or enforceability of EO 14398 and FAR 52.222-90, no court has yet paused enforcement. As agencies proceed with implementation, compliance remains mandatory at this time. Accordingly, contractors should prepare for agencies to implement the new model deviation text referenced in the FAR Council guidance, while closely monitoring developments in the active litigation.
Practical Compliance Considerations
In light of the steep cost of noncompliance, particularly with respect to FCA liability, contractors should act promptly to assess and manage any risks arising from the approaching implementation of FAR 52.222-90 and FAR Council guidance. Specifically, contractors should ensure all employees responsible for contracting and procurement are aware that contracts containing the new clause or amendment requests from contracting agencies may begin to appear soon, and coordinate across legal, human resources, and compliance teams to address implicated organizational policies and practices as a whole.
Further, contractors should also take steps now to evaluate their recruiting, hiring, promotion, training, mentoring, and leadership programs to identify practices that could be construed as conditioning access or benefits on race or ethnicity; review employee resource groups, affinity groups, and targeted development initiatives; ensure all subcontractors are positioned to respond to any future contracting officer requests; and prepare internally to comply with the subcontractor monitoring and reporting obligations required by the clause.
Conclusion
As agencies begin implementing the guidance issued by the FAR Council, contractors should prepare for near-term contract modifications and expect increased scrutiny, expanded reporting obligations, and heightened FCA risks. Contracting officers may also seek written descriptions of DEI-related policies and decision-making frameworks, documentation regarding eligibility criteria for training and mentoring programs, internal audits addressing compliance with FAR 52.222-90, and other records reflecting subcontractor oversight. We will continue to monitor relevant litigation updates, OMB's review of the related information collections, and any transition from deviation-based implementation to permanent FAR rulemakings.
For More Information
For further information, you may contact the authors. Faegre Drinker's government contracts and labor and employment teams will also continue to monitor additional developments in the coming months.
