Government contractors, if they have not seen it already, are likely to begin seeing FAR 52.222-90, Addressing DEI Discrimination by Federal Contractors, in solicitations, contracts, and subcontract flowdowns.

After Executive Order 14398 was issued (which our team discussed previously),[1] the FAR Council issued guidance on April 17, 2026, directing federal agencies to incorporate the new clause into new and existing government contracts.

Effective April 27, 2026, federal agencies are required to include FAR 52.222-90 in new solicitations and contracts above the micro-purchase threshold, including those for commercial products and services, when performance or delivery occurs in the United States. The clause also flows down to subcontracts at any tier, so subcontractors may soon begin seeing it in flowdown provisions. Prime contractors should update their standard subcontract and purchase order language accordingly.

Agencies are obligated to modify existing contracts by July 24, 2026, to add the new clause. The guidance directs contracting officers to make “every effort” to obtain bilateral modifications, but warns that if a contractor refuses, the contracting officer should “consider whether the contract still meets the agency’s needs and should be terminated for convenience.” Whether contracting officers will exercise that authority remains unclear.

The clause requires contractors to do the following:

1. Not engage in “racially discriminatory DEI activities”—defined 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.”
2. Contractors must provide all information and reports—including access to books, records, and accounts—as required by the contracting officer for purposes of ascertaining compliance with the clause. This provides significantly expanded access to contractor records as compared to existing contract authorities, which are typically limited to work performed and cost incurred under the contract, and may reasonably be expected to lead to EEOC and Department of Justice investigations of the contractor.
3. Be subject to termination, suspension, or debarment of federal contracts in the event of noncompliance.
4. Report on subcontractors’ noncompliance with the clause(s) to the extent of subcontractors “known or reasonably knowable conduct” that may violate the clauses, or who sue the contractor and put the “validity of the clause” at issue.
5. Acknowledge that compliance with the clause(s) is material to the government’s decision to pay and subjects the contractor to liability under the False Claims Act.[2]

Importantly, the clause applies only in connection with the performance of work under a government contract. It purportedly does not reach conduct tied solely to commercial work, although it could extend to some indirect functions charged to the government under cost-reimbursement contracts.

Companies should also understand their obligation to report any “known or reasonably knowable” subcontractor or supplier conduct that may constitute racially discriminatory DEI activities. Contractors should consider implementing supplier awareness and subcontractor screening procedures accordingly. Companies seeking a more risk-averse approach may also want to update internal policies governing government contracting relationships to state that the company does not engage with entities engaging in potentially racially discriminatory DEI activities deemed unlawful under the executive order and FAR clause.

Finally, companies should consider a jurisdiction-specific review in states where they operate, because the FAR clause and recent Executive Orders may conflict with state and local affirmative action statutes and regulations, as well as minority business enterprise (MBE) contracting requirements, which contractors will need to carefully assess.

FAR 52.222-90 is expressly grounded on Executive Order 14398 and its reliance on the Federal Property and Administrative Services Act (40 U.S.C. § 101, et seq.) for legal authorization, and it builds on prior Department of Justice guidance explaining the administration’s view of how federal antidiscrimination laws apply to recipients of federal funding, including the DOJ’s non-exhaustive list of unlawful practices. For more details, see our August 8, 2025 post. Companies subject to the new FAR clause now face contractual penalties, including potential False Claims Act liability, in addition to potential liability under federal antidiscrimination laws.[3] 

In general, companies that do not maintain or engage in “racially discriminatory DEI activities” in connection with government contracting likely face lower compliance risk under the current EO/FAR framework. Even so, the scope and intensity of future enforcement remain uncertain.

[1] On April 20, 2026, groups representing university faculty and minority business owners filed a lawsuit challenging the constitutionality of the EO.

[2] Note that the FAR Council is still seeking clearance from OMB under the Paperwork Reduction Act (PRA) for the information collections related to the clause, including contractors’ obligations to furnish information, report subcontractor violations, and notify contracting officers of litigation. Until OMB approves the information collection under the PRA, full enforcement of the broader information collection requirements may be deferred.

[3] These requirements may also collide with expanded state false claims act statutes in many jurisdictions, which are increasingly being used by state attorneys general to pursue contractors on state and local projects, consistent with state policy priorities. For more information, see our recent CLE presentation to the State Bar of Wisconsin touching on this topic.