FAR 2.0: What Federal Contractors Should Consider
The The Office of Management and Budget’s (OMB) proposed rewrite of the Federal Acquisition Regulation (FAR), referred to as FAR 2.0, has the potential for significant impacts on the small business contractor community. Rumors and word on the street are that this initiative may exclude GSA, Civilian Agency Acquisition Council (CAAC), and Defense Acquisition Regulations Council (DARC) from the rewrite process, with a focus on removing FAR language not explicitly required by statute.
Here’s what companies doing business with the government should look for:
1. Reduced Regulatory Complexity and Compliance Burden
Removing non-statutory language could streamline compliance requirements, potentially making federal contracting more accessible and reducing overhead costs for maintaining compliance. Our analysis shows ~45% of FAR clauses are classified as non-statutory.
2. Accelerated Timeline and Implementation Risks
A rewrite without the usual notice-and-comment periods could create gaps in guidance, affecting businesses that rely on clear rules. Quickly adapting to elimination of non-statutory clauses like 52.204-7 (System for Award Management) and 52.204-8 (Annual Representations and Certifications) will be challenging, especially with limited resources.
3. Loss of Socioeconomic Status Provisions
Many Executive Order-based clauses supporting socioeconomic programs could be lined-out, potentially affecting small businesses that currently benefit from these provisions. While core small business provisions like 52.219-8 (Utilization of Small Business Concerns) are statutory, and 8(a) Program provisions (52.219-17 and 52.219-18) are based on statutory authority (15 U.S.C. 637a); other supporting provisions like 52.219-2 (Equal Low Bids) could be removed. Businesses relying on Executive Order-based preferences for Veteran-owned, women-owned, and HUBZone programs may face greater uncertainty.
4. Impact on Competition and Market Dynamics
Simplified rules might lower barriers to entry, bringing new competitors into your market space. The elimination of non-statutory contract administration clauses like 52.216-18 (Ordering) and 52.216-19 (Order Limitations) could create uncertainty in contract management.
5. Possible Delay in Contract Actions:
Expect potential disruptions in contracting activities during the transition to the next FAR version, which could affect your cash flow if you rely on timely awards. The elimination of framework clauses for commercial items like 52.212-4 could particularly have an impact on businesses focused on commercial solutions.
6. Reduced Opportunity for Advocacy
Without traditional public notice and comment periods, small business concerns might have less influence on the final product. The absence of established acquisition councils from the process removes entities that have historically balanced regulatory requirements with small business considerations.
7. Increased Reliance on Legislative Actions
With a shift toward statutory-only provisions, future small business support measures would need to come through legislation, which can be a slower and less predictable process. The potential elimination of non-statutory pricing clauses like 52.216-7 (Allowable Cost and Payment) could create uncertainty around payment frameworks.
Recommendations and Support
While streamlining regulations could offer relief from compliance burdens, the rapid pace and potential exclusion of traditional stakeholders might create short-term turbulence. With ~45% of FAR provisions potentially on the chopping block, we’re looking at a significant possible shift in the federal contracting landscape.
Consider mapping your compliance systems against statutory vs. non-statutory provisions and develop contingency plans for a potentially different contracting environment. Red Team offers specialized services to help you navigate this transition, including:
- Contract clause assessment and statutory basis evaluation
- Development of transition strategies for existing contracts
- Guidance on responding to solicitations during the transition period
Our team is monitoring these potential changes closely. We recommend companies consider taking proactive steps, before these changes may be implemented.
Red Team continues to offer complimentary 30-minute consultations to help Federal contractors discuss their potential exposure to these generational industry changes and next steps to consider in developing strategic adaptation plans.
