As discussed in our March 30, 2026, client alert, Déjà Vu: New Executive Order Outlines Restrictions on Contractor and Subcontractor DEI Activity, President Trump issued Executive Order 14398 (EO 14398), Addressing DEI Discrimination by Federal Contractors, on March 26, 2026. The EO declared DEI activities “unethical and often illegal,” required a new mandatory contract clause for federal contracts and subcontracts, and directed the Federal Acquisition Regulatory (FAR) Council to issue an implementing deviation. That deviation has now arrived. At the same time, a coalition of higher education and government contractor associations has filed suit seeking to block the underlying executive order.

On April 17, 2026, the FAR Council issued a memorandum and class deviation providing implementation guidance for EO 14398, establishing that agencies should not do business with contractors that engage in racially discriminatory DEI activities and providing a new FAR clause 52.222-90 — ADDRESSING DEI DISCRIMINATION BY FEDERAL CONTRACTORS (APR 2026). The guidance and deviation require contractors to agree to:

• Not engage in any “Racially Discriminatory DEI Activities,” which means 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. 
• “Program participation” means 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.
• 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.
• 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.
• Inform the contracting officer if a subcontractor sues the contractor and the suit puts at issue, in any way, the validity of the clause.

Agencies must insert FAR 52.222-90 in new solicitations and resulting contracts, as well as current contracts valued over the micro-purchase threshold — including those for commercial products and services — where the place of performance is in the United States. Open solicitations must be amended to incorporate the clause. The clause must be flowed down to subcontracts at any tier, including for commercial products and services. If a contractor refuses a bilateral modification, the contracting officer should consider whether the unmodified contract still meets agency needs or should be terminated for convenience.

The deviation makes explicit the enforcement consequences for noncompliance. Contractors must recognize that compliance with the requirement is material for the government’s payment decisions. In addition, failure to comply with FAR 52.222-90 is now an enumerated cause for debarment under FAR 9.406-2(b)(viii) and suspension under FAR 9.407-2(a)(11). These additions give Suspension and Debarment Officials express authority to pursue these remedies against contractors and subcontractors found to have violated the clause — a significant escalation in enforcement risk.

Key Considerations for Contractors

The issuance of FAR 52.222-90 answers some of the questions raised in our March 30, 2026, alert, but raises new and pressing considerations for contractors:

• With the April 24, 2026, effective date approaching, contractors should immediately assess whether their current DEI programs, practices, and activities could constitute “racially discriminatory DEI activities” as defined in the clause, and whether modifications are warranted.
• Given that debarment and suspension are now express consequences of noncompliance, contractors with existing DEI programs should evaluate their litigation risk and whether voluntary remediation or disclosure is appropriate — particularly in light of the credit IBM received for disclosure, cooperation, and remediation in its False Claims Act (FCA) settlement, as discussed in our April 14, 2026, client alert.The flow-down obligation requires contractors to assess and monitor their subcontractor base and to develop compliance programs and contractual protections sufficient to satisfy the “reasonably knowable” standard for subcontractor violations.

This alert should be read in conjunction with our prior alerts: Déjà Vu: New Executive Order Outlines Restrictions on Contractor and Subcontractor DEI Activity (March 30, 2026) and DOJ’s False Claims Act Resolution Against IBM Signals Heightened Risk for Federal Contractors With DEI Programs (April 14, 2026).