Implementation of Trump’s March 26 Executive Order on DEI Set to Begin on April 24

On March 26, 2026, President Trump issued Executive Order 14398, Addressing DEI Discrimination by Federal Contractors, which instructed executive departments and agencies to add language to federal contracts barring racially discriminatory DEI activities. Consistent with deadlines established by the executive order, the Federal Acquisition Regulatory Council (FAR Council) issued a memorandum dated April 17, 2026, providing guidance to agencies that issue contracts to support their implementation of EO 14398. 

The memorandum informs agencies that they must use the new contract clause at FAR 52.222-90 as follows:

• Beginning April 24, 2026, the new clause must be inserted in new solicitations and resulting contracts that are valued over the micro-purchase threshold, including contracts for commercial products and services. The micro-purchase threshold is $15,000. Open solicitations are also to be amended to incorporate the new clause. 
• Contracting officers are further instructed to “make every effort to bilaterally modify existing contracts by July 24, 2026.” If a contractor exercises its right to refuse to agree to such a bilateral modification, the memorandum counsels contracting officers to “consider whether, absent the modification, the contract no longer meets the agency’s needs and should therefore be terminated for convenience.”

The full text of the new Federal Acquisition Regulation, as set forth in the FAR Council’s memo, is as follows:

ADDRESSING DEI DISCRIMINATION BY FEDERAL CONTRACTORS (DEVIATION DATE)

(a) Definitions. As used in this clause—

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.

Racially discriminatory diversity, equity, and inclusion (DEI) activities 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.

(b) In connection with the performance of work under this contract, the Contractor agrees as follows:

(1) The Contractor will not engage in any racially discriminatory DEI activities.

(2) The Contractor will 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 this clause.

(3) In the event of the Contractor's or a subcontractor's noncompliance with this clause, this contract may be canceled, terminated, or suspended in whole or in part, and the Contractor or subcontractor may be declared ineligible for further Government contracts.

(4) The Contractor will report any subcontractor's known or reasonably knowable conduct that may violate this clause to the Contracting Officer and take any appropriate remedial actions directed by the Contracting Officer.

(5) The Contractor will inform the Contracting Officer if a subcontractor sues the Contractor and the suit puts at issue, in any way, the validity of this clause.

(6) The Contractor recognizes that compliance with the requirements of this clause are material to the Government's payment decisions for purposes of 31 U.S.C. 3729(b)(4).

(c) The Contractor must include the substance of this clause, including this paragraph (c), in 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.

The FAR Council has further requested “emergency clearance” from the Office of Management and Budget (OMB) under the Paperwork Reduction Act for information collections related to EO 14398 and the new FAR Clause. If approved, government contractors would be required to: 

• Furnish all information and reports, including providing access to books, records, and accounts, as required by a contracting officer, for purposes of ascertaining compliance with FAR 52.222-90.
• Report any subcontractor's known or reasonably knowable conduct that may violate this clause to the appropriate 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.

The FAR Council’s submission to OMB provides no information as to what would trigger requests for this information or how the information would actually be collected. 

Both the substance of EO 14938 and the manner in which it is being implemented are subject to legal challenge. One such challenge was filed on April 20, 2026, in the United States District Court for the District of Maryland by the National Association of Diversity Officers in Higher Education and other groups claiming that the executive order violates the First Amendment. As it appears that the executive order is being implemented without appropriate notice and opportunities for comment and may result in a regulatory scheme that will be both burdensome and susceptible to arbitrary enforcement, other grounds for legal challenge might emerge. 

With the government offering no guidance as to how compliance with these new requirements will be assessed or alleged violations remedied, government contractors are being placed in a very difficult situation. When President Obama attempted to adopt a similar regulatory scheme for scrutinizing federal contractors’ compliance with federal labor laws, a federal judge struck the rule down on multiple grounds. Associated Builders and Contractors of Southeast Texas v. Rung, 1:16-cv-00425-MAC (E.D. Tex. Oct. 24, 2016). Similar challenges could be brought here. In the meantime, government contractors that are being asked to accept contracts with this new language should consult legal counsel regarding the associated risks and their options for mitigating those risks.