FAR Council to Implement Executive Order 14398

The FAR Council Has Issued Instructions to Implement Executive Order 14398

Summary of This Post

The Federal Acquisition Regulation (FAR) Council has issued instructions to federal agencies to implement Executive Order (EO) 14398. EO 14398 requires federal contractors and subcontractors to end the use of "racially discriminatory DEI activities." The FAR Council's instructions direct federal agencies to include certain language required by EO 14398 in new and existing contracts. This language includes prohibitions regarding recruitment, selection, subcontracting, and program participation.

Federal contractors and subcontractors should:

• Recognize that the EO 14398 language will be included in new or modified contracts

• Be aware that federal agencies may attempt to change existing contracts to include language associated with EO 14398

• Review all diversity, equity, and inclusion (DEI) activities to determine whether they may be suspect under EO 14398.

• Prepare for requirements associated with monitoring compliance by subcontractors with EO 14938

Introduction

The Federal Acquisition Regulation Council has taken action to implement Executive Order 14398. Executive Order 14398 was issued on March 26, 2026, and published in the Federal Register on March 31, 2026. EO 14398, entitled "Addressing DEI Discrimination by Federal Contractors," requires that federal contractors and subcontractors end the use of "racially discriminatory DEI activities." The FAR Council sent an emergency request to the Office of Management and Budget on April 15, 2026 explaining its rationale to immediately implement the EO 14398 requirements for federal contractors and subcontractors. The council sent a separate memo to federal agencies with instructions on how to implement EO 14398 on April 17, 2026.

The FAR Council

The FAR Council includes representatives of the Office of Federal Procurement Policy, the Department of Defense, General Services Administration, National Aeronautics and Space Administration (NASA), and OMB. The FAR Council is responsible for maintaining the federal acquisition regulations, which provide instruction for federal procurement policy and regulatory activities. The actions of the FAR Council affect a vast number of federal contractors and subcontractors.

Regulations proposed by the FAR Council typically must go through a notice and comment process that allows the public to provide input on a proposed regulation. However, the FAR Council can request an emergency exemption to allow rules to go into effect before a formal notice and comment process is completed. The FAR Council must provide a rationale to OMB when it requests an emergency exemption.

FAR Council Issues Instructions for Federal Agencies

The FAR Council's April 17 memo states that beginning on April 24, 2026, contract language found in EO 14398 must be included in all new contracts or contracts going through revisions. For existing contracts not otherwise going through revision, federal agencies are instructed to "make every effort to bilaterally modify contracts" by July 24, 2026. If a federal contractor refuses to incorporate the new language into existing contracts, agencies must determine whether "the contract no longer meets the agency’s needs and should therefore be terminated." The new contract language applies to all contracts of $15,000 or more.

The April 17 memo from the FAR Council provides the text of a new contract clause that will be used to meet the requirements in EO 14398. FAR 52.222-90 reads as follows:

(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; and

(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, except those where the place of delivery or performance is outside the United States.

During the period when the FAR Council prepares formal changes to its regulations to implement EO 14398, federal agencies theoretically have the option to use different language to meet the requirements in EO 14398. Agencies that intend to use different language must request approval from the FAR Council. It seems likely that all federal agencies will simply use the language found in the April 17 memo.

Emergency Request to OMB Regarding EO 14398

The FAR Council's April 15 memo to OMB requests to immediately allow federal agencies to request information from federal contractors and subcontractors. Such an information request may require the collection of:

• Books, records, and accounts that show compliance with EO 14398 as per FAR 52.222-90(b)(2);

• Reports on any subcontractor's known or reasonably knowable conduct that may violate EO 14398 as per FAR 52.222-90(b)(4); and

• Notice to a federal agency by a federal contractor if a subcontractor sues the contractor regarding EO 14398 as per FAR 52.222-90(b)(5).

OMB was provided with two reasons for the FAR Council's emergency request:

• Executive Order 14398 has a compressed timeframe for implementation of its provisions. Section 3 of EO 14398 requires federal agencies to amend contracts within 30 days of publication of the executive order.

• A delay in implementing the provisions of EO 14398 would supposedly harm the public. The FAR Council's memo cites the rationale found in EO 14398 regarding this public harm.

The FAR Council's memo to OMB asks for an exemption from formal rulemaking of up to six months. The memo states that the FAR Council will engage with the public and prepare formal regulations during this six month period.

Actions for Federal Contractors and Subcontractors

The FAR Council's rapid release of instructions to federal agencies regarding EO 14398 demonstrates the Trump administration's intention to aggressively implement this executive order. Federal contractors and subcontractors should take the following actions:

• Examine all DEI activities and ensure that records regarding DEI activities have been reviewed. The new executive order expects employers to review employee selection procedures, outreach activities targeted at developing diverse candidate pools, vendor diversity programs, membership in organizations that promote the advancement of a particular race or ethnicity, and other DEI activities. Records regarding these activities may be requested by federal agencies and will be important in demonstrating compliance with EO 14398.

• Prepare for implementation of the new contract language. Employers with new contracts or contracts going through revisions may see new contract language immediately. Employers with existing contracts are likely to be contacted before July 24, 2026, about modifying these contracts.

• Understand requirements regarding subcontracts. EO 14398 requires federal contractors to monitor compliance with the executive order by subcontractors. Direct contractors and subcontractors need to determine what information might be requested regarding EO 14398 and how this information will be requested and reviewed.

We encourage you to read our blog on EO 14398 for more information about the contents of the executive order and what it means for federal contractors and subcontractors.