As we previously covered, on March 26, 2026, President Trump issued Executive Order (EO) 14398, “Addressing DEI Discrimination by Federal Contractors,” to address “racially discriminatory DEI activities” in federal contracting.  Among other things, EO 14398 directed the FAR Council to issue deviation and interim guidance within 60 days to implement the new contract clause set forth in Section 3 of the EO.  On April 20, the FAR Council issued those model deviations[1] ahead of schedule, along with corresponding implementation guidance. 

Model Deviations

The FAR Council issued model deviations[2] to four FAR Parts to implement EO 14398:

• New Clause (Part 52):  RFO 52.222-90 is the new contract clause promised by Section 3 of the EO.  The new clause generally aligns with the language of Section 3, with two notable additions:  (1) it incorporates the definitions of “program participation” and “racially discriminatory DEI activities” contained in Section 2 of the EO; and (2) it includes (as expected) a mandatory flow-down provision requiring contractors to include the substance of the clause “in subcontracts at any tier, including those for commercial products and commercial services, except those where the place of delivery or performance is outside the United States.”  RFO 52.222-90 is also added to RFO 52.244-6 for mandatory incorporation in commercial subcontracts.
• Suspension & Debarment (Part 9):  RFO 9.406-2 and 9.407-2 add that “[f]ailure to comply with the requirements of clause 52.222-90” are causes for suspension and debarment.  Notably, “[t]he existence of a cause for debarment . . . does not necessarily require that the contractor be debarred,” see RFO 9.406-1(a), notwithstanding the statement in Section 4(a)(ii) of the EO directing agencies to “take appropriate action to suspend and debar contractors or subcontractors for such failures to comply.”
• Commercial Contracts (Part 12):  RFO 12.205 adds the new clause as a required commercial solicitation provision and contract clause, to the extent applicable as prescribed.
• Policies & Procedures (Part 22):  RFO Subpart 22.22 prescribes policies and procedures to implement the EO, including that the new clause be inserted in solicitations and contracts, except where the resulting contract will have a place of delivery or performance outside the United States.

Implementation Guidance

Perhaps equally notable is the Memorandum issued to provide guidance to implement the EO: “Agency Implementation of Executive Order 14398, Addressing DEI Discrimination by Federal Contractors.”  The Memorandum characterizes the new EO as “establish[ing] that agencies should not do business with contractors that engage in any racially discriminatory [DEI] activities.” 

The Memorandum states agencies must take three actions to implement the EO’s new contract clause: 

• update their RFO class deviations for Parts 9, 12, 22, and 52 by this coming Monday, April 27, 2026;
• use the new model deviation clause (RFO 52.222-90) beginning this Friday, April 24, 2026; and
• modify existing contracts by July 24, 2026.  However, the Memorandum affords contracting officers discretion as to whether to modify contracts that have a final expiration date later this year.

Agencies must seek approval from the FAR Council before adopting deviation text that differs from that of the model deviation, unless “existing statutory direction that requires reconciliation with this guidance.”

The Memorandum contemplates that the new clause will be included in new solicitations and both new and existing contracts if they exceed the micro-purchase threshold and the place of delivery or performance is within the United States.  Further, although “contracting officers must make every effort to bilaterally modify existing contracts by July 24, 2026,” “[i]f a contractor refuses to agree to a bilateral modification, the contracting officer should consider whether, absent the modification, the contract no longer meets the agency’s needs and should therefore be terminated for convenience.”

The Memorandum goes on to explain that the FAR Council is seeking Office of Management and Budget clearance under the Paperwork Reduction Act for the information collection requirements set out in the new clause but that, until that approval is given, “agencies may still enforce the requirement for contractors to submit existing records regarding compliance with the requirements of the clause in connection with individual investigations,” including records “requested by the Equal Employment Opportunity Commission or the Department of Justice as part of an investigation of an alleged violation of the clause.”

Takeaways for Contractors

Ultimately, the model deviations and interim guidance highlight the intended broad applicability of the EO, including to commercial contractors and to most existing contracts.  Moreover, the deviations and guidance reflect the potentially severe penalties for contractors who do not agree to accept the new clause in their contracts (namely, termination for convenience), or who fail to comply with the requirements of the new clause (namely, suspension or debarment).

Federal prime and subcontractors should remain alert to continued developments in this space—the speed with which the model deviations and corresponding Memorandum were issued indicate the Administration’s ongoing focus on DEI-related compliance issues.  Notwithstanding this speed, individual agencies are still expected to issue corresponding deviations before implementing the clause in solicitations and contracts.  The Memorandum indicates that agencies should do this within one week, i.e., by April 27, 2026.  However, if the implementation of the RFO thus far is any indication, agency implementation of FAR deviations are likely to vary by agency and on a part-by-part basis.  Contractors should keep an eye on the agency deviations available on acquisition.gov to assess a particular agency’s implementation posture.

Further, in the coming weeks, contractors should expect agencies to incorporate the new contract clause in new solicitations and awards and to propose bilateral modifications to existing contracts to incorporate the new clause.  (It is also possible that agencies may attempt to implement the new clause through less formal means, such as e-mail and other correspondence, but contractors would be well-advised to insist that any purported changes to existing federal contracts are memorialized in formal contract modifications.)  Once accepted into a new award or as a modification to an existing contract, the contractor thereafter will be obligated to flow down the new clause to its subcontractors (and those positioned as subcontractors should be on the lookout for efforts to impose the new clause in existing subcontracts).  

Moving forward, contractors should also carefully track their compliance obligations with respect to both prime and subcontracts governed by the new clause, including new reporting obligations of contractor and subcontractor activity. Contractors may also consider reviewing their key subcontracts to determine whether they have the right to modify those agreements when the corresponding prime contract is modified and, if not, to consider when and how to roll out those modifications.  More generally, contractors should also monitor legal challenges to the EO and related activity, such as the National Association of Diversity Officers in Higher Education et al. v. Trump, 8:26-cv-01532 (D. Md.) case filed on April 20, which challenges the EO as unconstitutional. 

[1] The model deviations have been a central feature of the Administration’s “Revolutionary FAR Overhaul” (RFO) process, which we have previously covered here and here.

[2] These latest model deviations are attached to the corresponding Memorandum and also available on a part-by-part basis within the RFO materials posted at https://www.acquisition.gov/far-overhaul/far-part-deviation-guide.