FAR Overhaul 2026: What Every Government Contractor Must Know

What Is the Revolutionary FAR Overhaul?

The Revolutionary FAR Overhaul (RFO) is the most sweeping transformation of federal procurement regulation in four decades. Initiated under Executive Order 14275, "Restoring Common Sense to Federal Procurement," the RFO has stripped the Federal Acquisition Regulation to its statutory essentials -- removing nearly all non-statutory prescriptive language, explanatory text, and procedural "bloat" that had accumulated over decades of rulemaking. For government contractors, this is not a minor update. It fundamentally changes how contracts are competed, awarded, and administered.

The scale of this change cannot be overstated. Where the FAR previously served as both law and guidebook -- telling contracting officers exactly how to execute each step of a procurement -- it now contains only what Congress has legally mandated. Everything else has been either eliminated or moved to a separate body of non-regulatory guidance called the Strategic Acquisition Guidance (SAG).

"The FAR Overhaul did not just simplify procurement rules. It shifted interpretive risk from the government to the contractor. The rules of engagement are now less explicit, and the burden of understanding statutory intent falls squarely on industry."

What Changed in the FAR and Why Does It Matter?

The core philosophy of the RFO is deregulation paired with increased contracting officer discretion. Here is what changed and the practical impact for contractors.

The FAR Is Now Statutory-Only

Previously, the FAR contained thousands of pages of detailed procedures, explanations, and examples that guided both government buyers and industry sellers through every phase of procurement. The RFO has reduced this to statutory essentials and Executive Orders only. The dense explanatory text that contractors relied on to understand expectations, navigate disputes, and structure proposals has been removed.

What this means in practice: Contractors can no longer point to a specific FAR paragraph to justify a procedural position or protest basis. Internal legal and compliance teams must now possess a sophisticated understanding of the underlying statutes -- the Competition in Contracting Act, the Federal Property and Administrative Services Act, and the Small Business Act, among others -- to interpret procurement rules correctly.

Strategic Acquisition Guidance Replaces Prescriptive Rules

The guidance that was stripped from the FAR did not simply disappear. Much of it has been reorganized into the Strategic Acquisition Guidance, a collection of "buying guides" and "practitioner albums" maintained separately from the regulatory text. SAG documents offer common-sense advice and best practices for the acquisition workforce.

For contractors, SAG represents what can be called "soft requirements." They are not legally binding in the same way FAR clauses are. However, contracting officers use them as benchmarks for best value determinations and procurement planning. A contractor that ignores SAG guidance is not technically non-compliant -- but may find themselves consistently rated lower in evaluation criteria shaped by that same guidance.

Contracting Officers Have Broad New Discretion

Under the pre-2026 FAR, contracting officers operated within tightly defined procedural lanes. The RFO has fundamentally expanded their authority to tailor procurement procedures, take calculated risks, and exercise independent judgment about what constitutes best value.

This discretion cuts both ways:

• Opportunity: Contractors who build strong relationships with COs and demonstrate value can benefit from streamlined evaluations, flexible contract structures, and faster awards.
• Risk: COs can now make judgment calls that were previously constrained by procedural rules. Protest grounds are narrower because there are fewer specific procedures to violate.

The Structural Shift at a Glance

<!-- GREEN: Table data sourced from EO 14275, Wiley Rein analysis, and APMP analysis of RFO -->

How Does the Commercial-First Mandate Affect Contracting?

One of the RFO's most consequential provisions is the "commercial-first" mandate. Agencies are now required to leverage existing government-wide contract vehicles before creating new standalone procurements. This policy is being enforced through the General Services Administration and the newly formed Office of Centralized Acquisition Services (OCAS).

The practical effect is contract consolidation at scale. The government is channeling spending through major Indefinite Delivery, Indefinite Quantity (IDIQ) vehicles and Government-Wide Acquisition Contracts (GWACs) such as:

• OASIS+ -- the GSA's professional services GWAC covering a broad range of disciplines
• SHIELD -- the Scalable Homeland Innovative Enterprise Layered Defense vehicle for the Golden Dome initiative, with a potential ceiling of $151 billion over 10 years
• GSA Multiple Award Schedules (MAS) -- the long-standing but increasingly prioritized commercial products and services vehicle

For contractors without positions on these vehicles, the window of opportunity is narrowing. Open-market bidding -- where agencies post standalone solicitations on SAM.gov -- will not disappear entirely, but will account for a shrinking share of addressable spend as agencies comply with the commercial-first directive.

"The commercial-first mandate is not a suggestion. It is a structural shift in how agencies are directed to buy. Contractors without a vehicle presence are not just at a disadvantage -- they are increasingly invisible to the buyer."

What Are the New Cost Accounting Thresholds?

The FY2026 National Defense Authorization Act (NDAA) introduced significant relief for mid-market contractors by raising key compliance thresholds. These changes reduce administrative burden and are designed to incentivize commercial firms to enter the defense market.

<!-- GREEN: Threshold data sourced from FY2026 NDAA, governmentcontractslaw.com, and Cherry Bekaert analysis -->

These threshold increases do not mean less scrutiny. The Defense Contract Audit Agency (DCAA) is refocusing its resources on post-award oversight and trend analysis of indirect costs. Contractors that fall below the new thresholds still face audit risk -- the nature of that oversight is simply shifting from pre-award documentation to post-award performance.

How Does the FAR Overhaul Impact Small Businesses?

The RFO's impact on small businesses is nuanced. On one hand, the simplified regulatory framework reduces compliance overhead. On the other, the expanded CO discretion and commercial-first mandate create new challenges for firms that historically competed through open-market set-asides.

Size Status Is Fixed at the Contract Level

Under the RFO, small business size status is now fixed at the time of contract award rather than recertified at periodic milestones. This provides stability for single-award contracts. However, IDIQ and Multiple Award Contract (MAC) holders face event-driven recertification risks, particularly:

• Mergers and acquisitions: Any change in controlling interest triggers a 30-day recertification window. If the firm is found to be "other than small" post-transaction, it loses eligibility for future set-aside orders on its existing MACs.
• Sixth-year recertification: Firms approaching their sixth year on a long-term contract must recertify before renewal.
• Agency discretion: Agencies can request recertification for any specific task order.

The SBA Recertification Cliff

The SBA's Final Rule on Recertification, effective January 17, 2026, has created what industry observers are calling a "recertification cliff." Small businesses acquired by large firms must recertify within 30 days and will likely lose set-aside eligibility. This has significant implications for M&A valuations -- small businesses deriving most of their revenue from set-aside task orders are now less attractive to large strategic acquirers.

However, the rule provides an exemption for small-to-small acquisitions: a newly combined entity can continue competing for set-aside orders even if it exceeds the size standard, provided both firms were small at the time of merger.

The Mentor-Protege Path

The SBA Mentor-Protege Program remains a strategic tool for firms navigating these transitions. Mentors can provide practical business experience while proteges gain access to larger contracts through joint ventures eligible for set-aside awards. These agreements last up to six years and allow large businesses to partner with up to three proteges simultaneously.

What Is the Firm-Fixed-Price Shift and Why Does It Matter?

The efficiency mandate driving the RFO has accelerated the government's preference for Firm-Fixed-Price (FFP) contracts. The logic is straightforward from the government's perspective: FFP shifts performance and inflationary risk to industry, reduces administrative oversight, and aligns with the "commercial-first" approach.

For contractors, this shift arrives during a period of tariff-driven inflationary pressure and wage growth. The combination creates a margin compression risk that is particularly acute for:

• Labor-intensive services: Where wage escalation over a multi-year period can erode profitability
• Supply-chain-dependent work: Where tariff volatility affects material costs unpredictably
• Long-duration contracts: Where the original pricing assumptions may become obsolete

Financial managers must implement more rigorous price realism and cost-to-complete analyses. Labor rates, overhead pools, and escalation assumptions must be defensible -- not just to win the award, but to sustain margins against what the research report describes as an "emboldened workforce of efficiency auditors."

How Should Contractors Prepare for the New FAR Environment?

Adaptation requires concrete action across five areas.

1. Rebuild Internal Compliance Around Statutory Requirements

With prescriptive FAR guidance stripped away, your internal compliance framework must be grounded in the underlying statutes. This means your contracts, legal, and proposal teams need training not just on what the FAR says, but on what the Competition in Contracting Act, the Small Business Act, and agency-specific regulations actually require.

2. Monitor and Integrate SAG Guidance

Establish a process for tracking SAG publications, buying guides, and practitioner albums as they are released. These documents may not carry regulatory force, but they define what contracting officers consider best practice -- and by extension, what evaluators reward in proposals.

3. Prioritize Vehicle Positioning

If your firm does not hold positions on OASIS+, GSA MAS, or agency-specific IDIQs and GWACs, closing that gap should be a top capture priority. The commercial-first mandate is not theoretical -- it is actively reducing the volume of open-market solicitations.

4. Strengthen CO Relationship Management

In a discretion-based procurement environment, relationships with contracting officers matter more than they have in decades. This does not mean informal influence -- it means structured, transparent engagement through industry days, capability briefings, and responsive communication that demonstrates your value as a trusted partner.

5. Review Indirect Rate Structures

The combination of new CAS thresholds, DCAA's shifted focus to post-award oversight, and the efficiency mandate's preference for streamlined pricing all point to the same conclusion: contractors should evaluate whether their indirect rate structures are optimally aligned. Many firms are transitioning from multi-layered rate architectures to simplified two-tier or three-tier models that better reflect modern, hybrid workforces.

What Does This Mean for Win Strategy?

The FAR Overhaul does not just change compliance requirements -- it changes how contracts are won. In the new environment:

• Best value is defined by the CO, not by FAR prescription. Your proposal must demonstrate value in terms the specific contracting officer and evaluation team care about, informed by SAG guidance and agency priorities.
• Past performance and relationship equity carry more weight when COs have discretion to weigh qualitative factors more heavily.
• Pricing must be defensible on two axes: competitive enough to win, and realistic enough to perform. The FFP shift means underpricing to win creates execution risk that the government is now pushing entirely to industry.
• Quantitative intelligence becomes essential. Understanding historical pricing bands, incumbent performance, and recompete timing through data analysis -- rather than intuition -- provides a measurable advantage when evaluation criteria are less prescriptive.

"The contractors who thrive under the new FAR will be those who treat regulatory change as a competitive opportunity rather than a compliance burden. Simplified rules reward firms that are agile, well-informed, and transparent."

The Bottom Line

The Revolutionary FAR Overhaul is not a minor regulatory update. It represents a fundamental shift in the relationship between the government and its contractors -- from prescriptive compliance to discretion-based partnership. Contractors who cling to pre-2026 processes will find themselves operating against a rulebook that no longer exists.

The firms that adapt will be those that invest in statutory-level expertise, secure vehicle positions in a consolidating market, build genuine CO relationships, and leverage quantitative intelligence to make faster, better-informed capture decisions.

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Aliff Solutions tracks regulatory changes, contract vehicle opportunities, and competitive dynamics across the federal and SLED markets. Our intelligence platform is designed to help contractors identify which opportunities align with their capabilities and make data-driven GO/NO-GO decisions. Explore the platform or assess your readiness with our free tools.