Executive Order 14398 & FAR 52.222-90: What Federal Contractors Need to Know Now

On March 26, 2026, Executive Order 14398 introduced sweeping new compliance requirements for federal contractors and subcontractors—specifically targeting certain DEI-related practices. With the release of FAR 52.222-90, these requirements are no longer theoretical—they’re being actively incorporated into federal contracts today.

The result? A rapidly evolving compliance landscape with significant legal, operational, and financial risks.

The Short Answer

Federal contractors must act now.
FAR 52.222-90 introduces new certification, reporting, and compliance obligations tied to contract performance—and failure to comply could expose contractors to False Claims Act (FCA) liability, contract termination, suspension, or even debarment.

What EO 14398 Changes

Executive Order 14398 builds on earlier federal efforts to regulate DEI practices but takes a more expansive approach. It requires contractors to:

• Avoid “racially discriminatory DEI activities”
• Report subcontractor violations that are “known or reasonably knowable”
• Provide access to records demonstrating compliance

Importantly, these requirements are now embedded into contracts through FAR 52.222-90, strengthening the government’s ability to treat compliance as material to payment decisions, increasing FCA exposure.

Where and When This Applies

Contract Coverage

FAR 52.222-90 must be included in:

• Contracts over $15,000

• Commercial products and services contracts
• Contracts performed within the United States

Implementation Timeline

• April 24, 2026: Required in all new solicitations

• July 24, 2026 (target): Agencies must make "every effort" to modify existing contracts
• Contracts expiring by December 31, 2026 may be modified at agency discretion

Flow-Down Requirements

Prime contractors must flow this clause down to all subcontractors at every tier performing work in the U.S.

Why This Is Different

Unlike prior DEI-related directives:

• Scope is broader - Applies beyond traditional anti-discrimination law

• Focus is narrower - Primarily on race and ethnicity-based disparate treatment
• Enforcement in stronger - Tied directly to payment under the FCA

The government has not clarified key terms like “disparate treatment” or “allocation of resources,” creating significant ambiguity and compliance risk.

Key Compliance Obligations

Under FAR 52.222-90, contractors must:

• Certify they do not engage in prohibited DEI practices
• Provide records, reports, and documentation upon request
• Monitor and report subcontractor conduct
• Report suspected subcontractor violations and provide requested information related to compliance
• Acknowledge potential consequences including termination or debarment

The “reasonably knowable” standard introduces expanded expectations for subcontractor oversight, including potential responsibility for issues contractors knew or should have known.

Enforcement Risks Are Real

The federal government has already signaled aggressive enforcement:

False Claims Act (FCA) Exposure

• Compliance is explicitly tied to payment decisions
• Violations can lead to:
  • Treble damages
  • Penalties of ~$14,000–$28,000 per claim
• Risk extends to both contractor and subcontractor conduct

Debarment & Suspension

• Noncompliance is now an independent basis for exclusion
• Even good-faith mistakes may trigger enforcement
  
  

Early Enforcement Activity

The DOJ has already:

• Launched a Civil Rights Fraud Initiative
• Issued investigative demands to contractors
• Reached at least one $17 million settlement tied to DEI practices
  • IBM Pays $17 Million to Resolve Allegations of Discrimination Through Illegal DEI Practices

Notably, enforcement has included historical practices, not just current programs.

What Contractors Should Do Now

Waiting for more guidance is risky. Contractors should begin taking action immediately:

1. Audit Your DEI Programs

• Identify all programs tied to:
  • Hiring and promotions
  • Supplier diversity
  • Training and mentorship
• Evaluate risk under the new definitions
• Document findings and remediation decisions

2. Prepare for Contract Modifications

• Expect requests to incorporate FAR 52.222-90
• Develop a response strategy
• Assess potential business and legal impacts

3. Update Subcontractor Oversight

• Revise subcontract agreements to include:
  • Flow-down clauses
  • Compliance certifications
  • Monitoring provisions
• Establish processes to meet the “reasonably knowable” standard

4. Get Ready for Records Requests

• Organize documentation now
• Build systems to track compliance activities
• Prepare for audits or investigations

5. Stay Alert for Updates

• Ongoing developments may include:
  • Legal challenges to EO 14398
  • Agency-specific guidance
  • Formal FAR rulemaking
  • OMB approval of reporting requirements

The Bottom Line

EO 14398 and FAR 52.222-90 significantly raise the stakes for federal contractors.
With broad definitions, unclear standards, and aggressive enforcement mechanisms, compliance is no longer a passive exercise—it requires proactive risk management and documentation.

Contractors that act early will be best positioned to navigate these requirements and avoid costly enforcement actions.

How Onsi Group Can Help

Navigating new federal compliance mandates like FAR 52.222-90 requires a strategic, well-documented approach. Onsi Group partners with contractors to assess risk, strengthen compliance programs, and prepare for government scrutiny.

From DEI program audits and subcontractor compliance frameworks to training through Onsi University, our experts are here to help you stay ahead of evolving regulations.

👉 https://www.onsigroup.com/contact to learn how we can support your compliance strategy.

Author: Emmi Gaytan

Editor: Angela Hendrix, Jennifer Loya, Aaron Ramos, Luis Decker