The FAR Council’s April 2026 class deviation implementing EO 14398 puts contractors on a compressed timeline to accept a new FAR clause addressing DEI, with termination for convenience as the stated consequence for refusal.
The Federal Acquisition Regulatory Council issued a memorandum dated April 17, 2026, directing agencies to implement Executive Order 14398, Addressing DEI Discrimination by Federal Contractors. The vehicle is a model class deviation creating FAR 52.222-90. The clause has already been in effect for new solicitations and contracts, which were required to include the clause by April 24, 2026. For existing contracts, contracting officers must make every effort to bilaterally modify existing contracts to include the clause by July 24, 2026.
The bilateral modification deadline presents a decision point for contractors with existing awards. The FAR Council’s guidance states that contracting officers who cannot obtain bilateral agreement “should consider whether, absent the modification, the contract no longer meets the agency’s needs and should therefore be terminated for convenience.” Contractors who decline the bilateral mod are not guaranteed termination — contracting officers retain discretion — but the administration has made its intent clear, and the threat of a termination for convenience is structurally embedded in the guidance. Additionally, the clause flows down to subcontracts at any tier, including those for commercial products and commercial services, for which the place of delivery or performance is in the United States.
Applicability and Requirements of the Clause
FAR 52.222-90 applies to commercial product and service contracts above the micro-purchase threshold (currently $15,000) and applies to contracts with a place of delivery or performance in the United States. COs have discretion over whether to modify contracts that expire on or before December 31, 2026, but that discretion does not relieve contractors from engaging in the process.
The clause requires contractors to do the following:
- Certify that they do not engage in any “racially discriminatory DEI activities”;
- Provide the CO with access to all records, documents, and information necessary for the agency to ascertain compliance with the clause;
- Include the substance of the clause in subcontracts at any tier, including those for commercial products and commercial services (except where the place of delivery or performance is outside the United States);
- Report any subcontractor’s known or reasonably knowable conduct that may violate this clause and take any appropriate remedial actions directed by the CO;
- Inform the CO if a subcontractor sues the Contractor in a manner that puts at issue, in any way, the validity of the clause; and
- Recognize that compliance with the requirements of the clause is material to the Government’s payment decisions for purposes of 31 U.S.C. 3729(b)(4).
Enforcement Mechanisms – False Claims Act and Suspension-and-Debarment
The compliance certification in FAR 52.222-90 is explicitly material to the government’s payment decisions for purposes of the False Claims Act (FCA). That language is not boilerplate — it is specifically designed to reduce the materiality hurdle in FCA suits and to expose contractors who certify compliance while maintaining practices the government characterizes as racially discriminatory DEI activity. The clause also modifies FAR Part 9: failure to comply with FAR 52.222-90 is an express ground for debarment under FAR 9.406-2(b)(viii) and for suspension under FAR 9.407-2(a)(11).
Pending Litigation Challenging the Implementation of EO 14398
On June 10, 2026, 20 state attorneys general filed a lawsuit seeking to enjoin the FAR Council and other agencies from implementing EO 14398 and prevent the federal government from enforcing it in contracts. Among the arguments, the states claim there is no useful explanation for how “racially discriminatory DEI activities” differ from existing prohibitions of discrimination.
The case, filed in the United States District Court, District of Maryland, under Case No. 1:26-cv-02322 remains pending. Contractors should not assume the litigation will delay the implementation of EO 14398.
Practical Takeaways
- The July 24, 2026 deadline to include FAR 52.222-90 in existing contracts is approaching; contractors should identify all active contracts and be prepared to respond to modification requests to include FAR 52.222-90.
- Rejecting the request invites the CO to consider termination for convenience; contractors should weigh that risk with the costs of compliance, including added risks of exposure to FCA claims, and S&D.
- FAR 52.222-90 is already included in new solicitations and contracts. Contractors should audit existing DEI programs, compensation structures, mentorship initiatives, and hiring processes against the clause’s standard before responding to any government inquiry or accepting a modification.
- Flow-down obligations require the same clause in subcontracts at all tiers; prime contractors should update any subcontract templates and communicate with subcontractors before the deadline.
Do not assume ongoing litigation will forestall agency action; the implementation timeline is running and no injunction is currently in place.