The Federal Acquisition Regulatory Council (FAR Council) issued a memorandum dated April 17, 2026, providing guidance to contracting officers on the implementation of Executive Order 14398, which directs all federal agencies “not to do business with contractors that engage in any racially discriminatory diversity, equity, and inclusion (DEI) activities” and requires the addition of a new clause to all existing and future federal contracts.
Elements of the New EEO Clause
- Contractors are required to provide Contracting Officers with access to documents and information needed to assess compliance with the terms of the new clause.
- Noncompliance with the clause may lead to the cancellation of existing contracts and debarment from future contracts.
- Contractors must include the clause in all subcontracts at any tier, including those for commercial products and commercial services, provided the place of delivery or performance is in the United States.
- Contractors are required to report to their Contracting Officer any subcontractors they believe are engaged in conduct that may violate the terms of the clause.
- Contractors must acknowledge 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).
The new clause applies to all new solicitations and contracts.
Existing contracts must be amended by July 24, 2026. Should a contractor disagree with the modification, the contract may be “terminated for convenience.” Contracting officers may use their discretion with respect to the modification of contracts scheduled to expire by December 31, 2026.
Next Steps
Compliance with Executive Order 14398 and the new contracting clause is subject to the False Claims Act (FCA). Certification is not a check the box exercise. Contractors should engage legal counsel to assess compliance and address any potential FCA liability.
