As discussed in our March 31 bulletin, Executive Order 14398 (“EO 14398”) instructed federal agencies to prohibit contractors and subcontractors from engaging in diversity, equity, and inclusion (“DEI”) practices deemed “racially discriminatory”. The FAR Council has now issued a government-wide deviation to implement EO 14398 through the new clause FAR 52.222-90 (Addressing DEI Discrimination by Federal Contractors (APR 2026) (DEVIATION APR 2026)).

Effective April 24, 2026, this clause applies to all new contracts and subcontracts exceeding the $15,000 micro-purchase threshold, where performance occurs in the United States. For existing contracts, agencies must pursue bilateral modifications by July 24, 2026. Contractors who refuse these modifications face potential termination for convenience. Contracts expiring before Dec. 31, 2026, are exempt from mandatory modification, leaving such modification to the discretion of the individual contracting officers. Once the clause applies, contractors are required flow it down in all subcontracts, at any tier, including those for commercial products and services.

To verify compliance with FAR 52.222-90, contracting officers may conduct internal audits and request specific documentation, including written DEI policies, eligibility criteria for training and mentoring programs, and records of subcontractor oversight. To add to the risk for non-compliance, FAR Part 9 has been revised to establish that non-compliance with FAR 52.222-90 is grounds for suspension or debarment.

On April 20, 2026, a coalition of education and industry groups filed a lawsuit in Maryland to block the enforcement of EO 14398, alleging it violates First Amendment rights, is unconstitutionally overbroad, and exceeds presidential authority. The plaintiffs argue the order chills protected speech by conflating lawful DEI programming with discrimination. While this litigation may eventually limit the order’s scope, to date no court has paused enforcement and compliance therefore remains mandatory.

Contractors should prepare for immediate contract modification requests, increased scrutiny of internal programs, expanded reporting duties, and heightened False Claims Act risk.  We will continue to monitor EO 14398 and FAR 52.222-90  for relevant updates and corresponding litigation. If you have questions, contact a member of Taft’s Government Contracts group.