On June 4, 2026, a coalition of contractor and higher-education associations filed a motion for a preliminary injunction and a 5 U.S.C. § 705 stay in National Association of Diversity Officers in Higher Education v. Trump, No. 8:26-cv-01532-ABA (D. Md.), asking the court to block Executive Order 14398 and the FAR Council guidance implementing it before the July 24, 2026 deadline for agencies to insert the new “DEI” clause into existing federal contracts. For Alaska Native Corporations, Tribes, and Native Hawaiian Organizations—and their government-contracting subsidiaries—this motion is the most significant litigation development yet on a clause that many of your contracting officers are already asking you to sign.

This update summarizes the Executive Order, the new FAR clause implementing it, and the pending OMB notice-and-comment process on the clause’s recordkeeping and reporting obligations, and then turns to what the preliminary injunction motion means for Native-owned contractors. The short version: the motion is well-constructed, and the assigned judge enjoined the predecessor 2025 certification requirement, but no ANC, Tribe, or NHO should plan around a court rescue. The July 24 modification deadline, the July 6 OMB comment deadline, and the clause’s ambiguity regarding lawful Native hiring and contracting preferences all require attention now.

Background: Executive Order 14398

President Trump issued Executive Order 14398, Addressing DEI Discrimination by Federal Contractors, on March 26, 2026. The Order is the successor to the contractor certification requirement in EO 14173, which Judge Abelson of the District of Maryland preliminarily enjoined in 2025 before the Fourth Circuit vacated that injunction on the ground that the certification, by its terms, reached only violations of existing federal anti-discrimination law. EO 14398 takes a different—and broader—approach.

Rather than requiring a certification of legal compliance, EO 14398 directs that every federal contractor agree, as a contract term, that it “will not engage in any racially discriminatory DEI activities” in connection with the performance of work under the contract. The Order defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in recruitment, employment (hiring and promotions), contracting (including vendor agreements), program participation, or the allocation or deployment of an entity’s resources. Critically, the definition is not tied to conduct that violates Title VII or any other federal anti-discrimination statute, and the Order contains no exemption or savings clause for preferences that federal law expressly authorizes—a point we address below because it is where the Order intersects most directly with ANC, Tribal, and NHO operations.

The Order specifies severe consequences for noncompliance: cancellation, termination, or suspension of the contract; ineligibility for future contracts; and referral to the Department of Justice for potential False Claims Act enforcement. It directs OMB to issue implementation guidance and to identify the “economic sectors” most likely to engage in the prohibited activities, directs the FAR Council to amend the FAR and issue interim deviation guidance, and directs contracting agencies to enforce the clause, including through suspension and debarment.

The Implementing FAR Clause: FAR 52.222-90

The FAR Council issued its implementation memorandum on April 17, 2026, adopting the Order’s language essentially verbatim through a model class deviation clause, FAR 52.222-90. The key mechanics are as follows:

• • New contracts. Beginning April 24, 2026, the clause must be inserted into new solicitations and resulting contracts valued over the micro-purchase threshold ($15,000), including contracts for commercial products and services.
  • Existing contracts. Contracting officers must make every effort to bilaterally modify existing contracts to add the clause by July 24, 2026. If a contractor declines the modification, the agency is instructed to consider whether the contract still meets its needs and should be terminated for convenience. Contracts expiring on or before December 31, 2026, may be modified at the contracting officer’s discretion.
  • Flow-down. The substance of the clause must be included in subcontracts at every tier, including subcontracts for commercial products and services, except where performance or delivery occurs outside the United States.
  • Reporting and access obligations. The contractor must furnish all information and reports the contracting officer requires—including access to books, records, and accounts—to ascertain compliance; must report any subcontractor’s “known or reasonably knowable” conduct that may violate the clause; and must notify the contracting officer if a subcontractor sues the contractor and the suit puts the clause’s validity at issue.
  • False Claims Act materiality. The contractor must “recognize” that compliance with the clause is material to the government’s payment decisions for purposes of 31 U.S.C. § 3729(b)(4)—a provision designed to manufacture FCA exposure for invoices submitted while the contractor is allegedly out of compliance.
  • Debarment. The memorandum adds a new debarment basis for failure to comply with the clause, and—unlike the existing debarment standards in FAR 9.406-2—does not require a showing that the failure was willful or part of a history of nonperformance.

The FAR Council stated that it intends to conduct formal rulemaking, but the deviation clause is operative now, and agencies have been issuing their own class deviations and modification requests since late April.

The OMB Notice and Comment Process on the Recordkeeping Obligations

The clause’s information-collection components—the obligations to furnish information and reports, provide access to books, records, and accounts, report subcontractor conduct, and notify the government of subcontractor litigation—are subject to the Paperwork Reduction Act, which generally requires a 60-day public comment period and OMB approval before an agency may impose new information collection requirements on the public. The FAR Council requested emergency clearance from OMB and, on May 6, 2026, OFPP, DoD, GSA, and NASA published a Federal Register notice inviting public comment on the new information collection (OMB Control No. 9000-XXXX, Docket No. 2026-0067). Comments are due July 6, 2026.

Two points are worth emphasizing. First, until OMB approval is obtained, agencies’ ability to enforce the clause’s full information-collection requirements is constrained—at least one agency class deviation (VA) expressly instructs contracting officers that full enforcement of the recordkeeping and reporting obligations awaits OMB approval. Second, the comment period is a genuine opportunity. The notice invites comment on whether the collection is necessary, whether the burden estimates are accurate (the government estimates roughly 1,365 respondents and about 7,965 annual burden hours—figures we believe substantially understate the compliance burden on entities with large subcontractor networks, such as ANC holding companies with multiple 8(a) and full-and-open subsidiaries), and how to minimize the burden on respondents.

The Preliminary Injunction Motion

The plaintiffs—the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the National Association of Minority Contractors and its DMV chapter, and a University of Maryland academic union—ask the court to (1) preliminarily enjoin EO 14398 as a likely violation of the First and Fifth Amendments; (2) stay the FAR Implementation under 5 U.S.C. § 705 or enjoin it as unconstitutional and as arbitrary and capricious under the APA; (3) prohibit the agency defendants from taking any steps to implement or enforce the Order or the clause; and (4) require agencies, within 30 days, to strike clause language already inserted into contracts, subcontracts, and lower-tier agreements and restore the status quo ante. The case is before Judge Abelson—the same judge who preliminarily enjoined the EO 14173 certification provision in 2025.

The constitutional claims

Plaintiffs argue the clause is viewpoint-discriminatory compelled speech and an unconstitutional condition: contractors must adopt the administration’s position on “DEI” or forgo federal work entirely, and the ban is not limited to activity that violates federal law—the precise defect the Fourth Circuit flagged as a path to a successful challenge when it vacated the 2025 injunction. They also argue the clause is void for vagueness under the Fifth Amendment: terms like “program participation” and “allocation or deployment of an entity’s resources” give contractors no fair notice of what is prohibited, while the threat of termination, debarment, and treble FCA damages forces contractors to steer far wide of any activity touching on race or ethnicity. The declarations filed with the motion describe contractors abandoning lawful mentorship programs, trainings, and trade-association memberships out of fear of enforcement.

The APA claims—including the PRA and § 1707 timing problem

Plaintiffs argue the FAR Implementation is final agency action that is arbitrary and capricious because the FAR Council provided no reasoned explanation for any of its choices beyond citing the Order itself: it did not justify the universal insertion mandate, the relaxed debarment standard, the July 24 bilateral modification deadline, or the termination-for-convenience instruction; it ignored the reliance interests of contractors and subcontractors in the existing FAR framework; and it considered no alternatives.

Of particular interest is the timing argument. Plaintiffs contend the FAR Council adopted the Order’s deadlines without grappling with the fact that those deadlines are legally impossible to meet: the PRA’s standard clearance process (60-day comment period plus OMB review) could not conclude before mid-July at the earliest, and 41 U.S.C. § 1707 independently prohibits a procurement policy with a significant cost or administrative impact on contractors from taking effect until at least 30 days of public comment—which, run sequentially, pushes the earliest lawful effective date to roughly August 16, 2026, weeks after the July 24 modification deadline. In the plaintiffs’ telling, the FAR Council ordered agencies to violate the PRA and § 1707, which is itself arbitrary and capricious.

Likely timing and scope of relief

Given the July 24 deadline, we expect the court to rule on an expedited basis, likely in early-to-mid July. The scope of relief is unclear. After the Supreme Court’s 2025 decision limiting the availability of universal injunctions, any injunction may be limited to the plaintiff organizations and their members. However, plaintiffs also seek a § 705 stay of the FAR Implementation itself—relief that operates on the agency action rather than the parties and would, if granted, suspend the clause’s insertion government-wide. An injunction limited to plaintiffs’ members would not relieve ANCs, Tribes, or NHOs of the modification campaign, while a § 705 stay would.

Why This Matters for ANCs, Tribes, and NHOs

The Order and clause were not written with Native contractors in mind—and that is precisely the problem. The definition of “racially discriminatory DEI activities” sweeps in “disparate treatment based on race or ethnicity” in hiring, promotion, contracting, and program participation without any carve-out for preferences that Congress has expressly authorized. ANC shareholder hire preferences are protected by 43 U.S.C. § 1626(g), which exempts ANCs and their majority-owned affiliates from Title VII for preferential treatment of shareholders, descendants, and spouses. Indian preference in employment and contracting is protected by § 703(i) of Title VII, the Indian Self-Determination and Education Assistance Act, and a half-century of precedent beginning with Morton v. Mancari, holding that Native preferences are political classifications based on the government-to-government relationship, not racial ones. NHO preferences raise parallel points under federal programs serving Native Hawaiians.

None of that doctrine appears in the Order, the FAR Council memorandum, or the clause. A contracting officer, agency inspector general, or qui tam relator reading the clause’s text could characterize a shareholder hire preference, a subsidiary’s Native-preference subcontracting program, or a scholarship and internship program limited to shareholders and descendants as “disparate treatment based on race or ethnicity” in employment, contracting, or program participation. We think the better legal answer is that these preferences are lawful political classifications and statutorily protected conduct that the clause cannot reach—and that any contrary application would be independently unlawful. But the clause’s silence converts a settled legal question into a contract administration and FCA risk, and the motion papers confirm that the government has refused to clarify whether the ban is limited to unlawful conduct or to the use of federal funds.

The structural features of the clause compound the exposure for Native-owned contracting families:

• • The flow-down requirement means a holding company’s prime contracts pull every subsidiary, teaming partner, and lower-tier subcontractor into the clause’s coverage—and the obligation to report any subcontractor’s “known or reasonably knowable” violations effectively deputizes ANC primes to police their own affiliates’ lawful Native-preference practices.
  • The FCA materiality acknowledgment means every invoice submitted under a covered contract carries potential treble-damages exposure if the government later characterizes a preference program as noncompliant—a risk we take seriously in light of the government’s recent appetite for DEI-adjacent FCA enforcement.
  • The relaxed debarment standard—no willfulness, no history of nonperformance—poses portfolio-level risk: a single adverse compliance determination against one subsidiary could, in theory, support suspension or debarment actions that reach across an ANC family whose revenue is concentrated in federal work.
  • The books-and-records access obligation, once OMB approval issues, would give contracting officers a broad inspection right into shareholder hire data, employment records, and subcontracting decisions—information that intersects with confidential shareholder information and, for Tribes, with sovereignty concerns.

Next Steps

Pending the court’s ruling, ANC, Tribal, and NHO contractors should consider the following options:

• • Inventory and triage. Identify every contract over $15,000, flag those with periods of performance extending past December 31, 2026, and track which contracting officers have issued (or are expected to issue) bilateral modification requests ahead of July 24.
  • Review modifications. Each modification request warrants review. There may be room to negotiate clarifying language, to seek written confirmation that statutorily authorized Native preferences fall outside the clause, or to time responses against the expected ruling. Declining outright carries termination-for-convenience risk.
  • Documenting the legal basis for preference programs. Consider preparing or refreshing memoranda grounding shareholder hire, Indian preference, and descendant program practices in § 1626(g), § 703(i), ISDEAA, and Mancari. If a compliance inquiry comes, you want the political-classification analysis ready to go.
  • Consider filing OMB comments by July 6. The information-collection comment period is the nearest-term opportunity to put the Native contracting community’s concerns—burden, flow-down scale, shareholder data confidentiality, and the absence of a Native-preference accommodation—into the administrative record. We are happy to prepare comments for individual clients or coordinate a joint submission.
  • Review flow-down and teaming practices. Review of subcontract templates and teaming agreements for how the clause would flow down is appropriate, as is considering how the subcontractor-reporting obligation would operate across affiliated entities before agreeing to it.
  • Continue monitoring the court case and the scope of any ruling. If the court grants only a member-limited injunction, the modification campaign continues for everyone else. If it stays the FAR Implementation under § 705, the July 24 deadline likely dissolves government-wide.

This article summarizes aspects of the law and contains opinions that are solely those of the authors. This article does not constitute legal advice. For legal advice regarding your situation, you should contact an attorney.