FAR Council Rolls Out New Contractor DEI Restrictions for Federal Contracts
The FAR Council issued guidance and a mandatory clause enforcing new DEI restrictions for federal contractors.
Why it matters: Legal and compliance teams advising federal contractors must address sweeping new limits on DEI in workforce and subcontractor management. Failure to adhere may trigger contract loss, suspension, or debarment, raising compliance and reporting stakes for procurement work above $15,000.
- Executive Order 14398, signed March 26, 2026, targets 'racially discriminatory DEI activities.'
- FAR 52.222-90 clause must be added to new federal contracts from April 24, 2026, and to existing ones by July 24, 2026.
- Contractors must report noncompliant DEI activities by themselves or subcontractors, facing potential suspension or debarment for violations.
- Over 6,000 agency inquiries into contractor DEI activities are expected annually as enforcement ramps up.
The Executive Order 14398, signed by President Trump on March 26, 2026, directs federal contractors to avoid 'racially discriminatory DEI activities.' This is defined broadly as disparate treatment in recruitment, employment, contracting, program participation, or resource allocation based on race or ethnicity, a definition described as "likely broader than existing antidiscrimination law."
On April 17, 2026, the FAR Council released guidance and a new deviation clause—FAR 52.222-90—to carry out these requirements. Federal agencies must insert this clause into all new solicitations and contracts from April 24, 2026, and must update existing contracts by July 24, 2026, using bilateral modifications. Any federal contract valued above $15,000 falls under the new rule.
Contractors are required not only to avoid 'racially discriminatory DEI activities' themselves, but also to report any such conduct by subcontractors that is known or reasonably knowable. The FAR Council has made clear that noncompliance with these mandates constitutes explicit grounds for suspension, debarment, or termination of federal contracts, with further liability possible under the False Claims Act.
To facilitate oversight, the FAR Council has requested approval to collect all necessary "books, records, and accounts" from contractors and subcontractors. The Office of Management and Budget expects agencies to conduct over 6,000 inquiries into contractor DEI activities annually.
With this regulatory pivot, legal and compliance teams must move quickly to revise policies, undertake training, and enhance due diligence processes on both their own and their subcontractors’ DEI practices.
By the numbers:
- $15,000 — Minimum contract value impacted by new FAR clause
- April 24, 2026 — New contracts must include FAR 52.222-90
- 6,000+ — Annual agency inquiries into contractor DEI compliance expected
Yes, but: Significant questions remain about precisely what conduct qualifies as 'racially discriminatory DEI activities' and how to assess subcontractor compliance.
What's next: Federal contractors should expect contract modifications and compliance requests ramping up between April 24 and July 24, 2026.