FAR Council Implements Executive Order 14398 DEI-Related Contract Requirements

On April 17, 2026, the Federal Acquisition Regulatory Council (FAR Council) issued implementing guidance and Revolutionary FAR Overhaul (RFO) updates that reflect the requirements of the March 26, 2026 Executive Order 14398, Addressing DEI Discrimination by Federal Contractors, which directed agencies to implement new contract language prohibiting “racially discriminatory DEI activities”¹ (the EO). The FAR Council issued model class deviations,² which agencies may adopt to give the new provisions immediate contractual effect.

Key Takeaways for Federal Contractors

• Agencies are expected to rely on a newly-created model deviation, RFO FAR 52.222-90, and agency class deviations (an agency‑wide authorization to depart from the FAR under FAR 1.404) to immediately implement the EO without waiting for formal rulemaking.
• RFO FAR 52.222-90 will be added to most open solicitations and new solicitations and contracts beginning April 24, 2026.
• Nearly all existing contracts with expiration dates later than December 31, 2026 will be modified to incorporate the EO’s requirements. The guidance requires contracting officers to make every effort to bilaterally modify existing contracts by July 24, 2026. Refusal to agree to a bilateral modification can result in a termination for convenience. Modification of contracts with expiration dates before the end of 2026 will be at the contracting officer's discretion.
• The FAR Council is seeking clearance for additional information collection related to the new FAR clause, including requiring contractors to furnish “all information and reports . . . as required by the contracting officer for purposes of ascertaining compliance with the clause” and to “report any subcontractor’s known or reasonably known conduct that may violate the clause.”

FAR Overhaul (RFO) Updates Implement EO 14398 Across Key FAR Parts

The FAR Council adopted the proposed clause in the EO as RFO model deviation FAR 52.222-90, Addressing DEI Discrimination by Federal Contractors. This clause must be included in most contracts and subcontracts at any tier that are performed or delivered in the United States, including contracts for commercial products and commercial services. RFO FAR Subpart 9.4 now lists evidence of failure to comply with the requirements of RFO FAR 52.222-90 as grounds for debarment or suspension.

The updates also include changes to RFO FAR Part 12 (adding FAR 52.222-90 to the matrix of clauses required to be included in contracts for commercial products and commercial services) and RFO Part 22 which addresses the application of labor laws to Government acquisitions (adding a new subpart related to implementation of the EO, including new definitions and an express policy statement).

According to the guidance, the FAR Council intends to conduct rulemaking pursuant to the notice and comment process. As such, the Council encourages agencies to make class deviations that will be effective until the EO’s requirements are formally implemented into the FAR. Agencies may adopt the model deviation text provided by the FAR Council without further coordination with the Council or may request approval from the Council for alternate-language class deviations.

Practical Implications

Although the FAR Council’s guidance focuses on rapid implementation mechanics, the risks associated with RFO FAR 52.222-90 extend beyond routine contract administration and compliance. The Government has expressly framed compliance with the clause as a condition of eligibility to do business with federal agencies. As a result, alleged noncompliance may give rise to portfolio-wide consequences, including contract terminations, adverse responsibility determinations and heightened enforcement scrutiny.

FCA Enforcement and Risk

RFO FAR 52.222‑90 states that compliance with the clause is material to the Government’s payment decisions “for purposes of 31 U.S.C. 3729(b)(4)” (the False Claims Act), thereby creating potential exposure under the False Claims Act for knowing noncompliance. The Department of Justice has made it a priority to use the False Claims Act to pursue “illegal DEI,” on April 10, 2026 announcing its first such resolution, a $17 million settlement with IBM.³ Contractors submitting invoices while failing to comply with the inclusion of FAR 52.222‑90 in the contract—or while continuing prohibited DEI practices—may face allegations of false certification or fraudulent inducement, including in whistleblower “qui tam” actions. The EO encouraged the Department of Justice to act swiftly on qui tam complaints reporting contractors’ illegal DEI. Additionally, the new clause’s affirmative obligation that contractors “report any subcontractor’s known or reasonably knowable conduct” that may constitute prohibited DEI practices creates FCA risk for both the contractor and subcontractor. Given the Administration’s stated enforcement priorities, contractors should assume that DEI‑related noncompliance, including by subcontractors, will be scrutinized not only by contracting officers but also by agency inspectors general and the Department of Justice. 

Bilateral Modifications and Termination for Convenience Risk

Under the FAR Council’s guidance, agencies must make every effort to incorporate the RFO FAR 52.222‑90 model deviation into existing contracts exceeding the micro‑purchase threshold through bilateral modifications by July 24, 2026. Contractors that decline to execute the modification face the risk that the agency will determine the contract no longer meets its needs and will terminate their contracts for convenience. Because termination for convenience does not require contractor fault and is difficult to challenge absent bad faith, this Government leverage may significantly constrain contractors’ negotiating positions.

Suspension, Debarment and “Present Responsibility” Concerns

The RFO updates expressly amend RFO FAR Subpart 9.4 to identify failure to comply with RFO FAR 52.222‑90 as a potential basis for suspension or debarment. This change elevates compliance with the new DEI clause to a present‑responsibility issue similar to ethics or integrity requirements. As a result, alleged violations may expose contractors to exclusion risk across their entire federal business portfolio, even where issues arise under a single contract.

Accordingly, contractors may need to accelerate timelines for review of internal DEI policies, training materials and subcontracting practices in order to ensure alignment with the EO as implementation proceeds. Contractors should consider documenting good-faith compliance assessments and implementation decisions to mitigate enforcement and responsibility risk.

It will also be important to closely monitor agency-specific deviations and guidance. Initial inconsistencies in implementation and enforcement across agencies should be expected.

Footnotes

1. Akin published a client alert discussing the EO on March 27, 2026.

2. Class deviations are not formal amendments to the FAR itself; rather, they authorize agencies to depart from existing FAR provisions on a class-wide basis while the rulemaking process is ongoing.

3. Akin published a client alert on the IBM settlement April 13, 2026.