Federal Acquisition Regulations guide how government contractors and their government counterparts conduct business — essentially a massive and complex list of the mechanics of government contracting. For those hoping to secure government contracts, we’ll explain FAR, highlight key areas to look at when entering the federal government contracting space, and break down two critical areas of documentation and guidelines for businesses.
What is the Federal Acquisition Regulation?
The Federal Acquisition Regulations (FAR) guide how government solicitation contract work should be conducted. It’s mostly written from the perspective of the government officials evaluating the businesses vying for federal contract work, and how these officials award those contracts. However, business owners should be aware of FAR because their adherence to these guidelines and requirements may determine if they win contracts.
Also, if a business can understand and speak the language of the government, there’s a good chance that its contract bidding, marketing, and networking will improve. In fact, upon SAM registration, the government will require that businesses understand critical sections of the FAR before allowing them to compete for federal awards.
FAR and DFARS
While FAR serves as the foundational set of rules for all federal procurement processes, DFARS (Defense Federal Acquisition Regulation Supplement) is an addendum to this system that is specifically tailored for the Department of Defense. In other words, the FAR provides a broad framework and the DFARS adds additional requirements and stipulations pertinent to DoD contracts. For example, DFARS often includes clauses related to cybersecurity, export controls, and specific cost accounting standards that are unique to defense contracting.
FAR Cheat Sheet: Important Terminology
As we said above, FAR is an extensive set of documents. As a business owner, don’t let its sheer size overwhelm you. To further familiarize ourselves with FAR, let’s briefly break down the terminology used within FAR and highlight which sections business owners should really understand.
- Parts: If you see the term “Part” across FAR, this describes the overlapping “theme” of a section. For example, Part 19 covers the topic of small business programs.
- Subparts: A subpart refers to a specific set of rules in the FAR. In Part 19, you will find Subpart 19.30, which outlines what companies qualify as a small business, HUBZone, or disadvantaged business.
- FAR Classification: The FAR uses the following format to describe subparts within a part — FAR Part 19 and Subpart 19.30 would read “FAR 19.301-1.” This directs individuals to a specific area of the FAR documentation.
FAR Regulations and Requirements
Contract clauses can cover a wide range of topics from labor standards to environmental protections to non-discrimination policies. Businesses also need to follow FAR’s ethical guidelines, which include avoiding conflicts of interest and maintaining transparency in all dealings.
Another critical aspect is the need for accurate record-keeping and reporting (more on this below). This requirement not only ensures accountability but also aids in any audits or reviews that may happen down the road. FAR ensures that the government pays a fair and reasonable price for goods and services, which is particularly important for small businesses because it helps level the playing field when competing with larger, more established companies.
Profit Guidelines
As part of the record-keeping and reporting mentioned above, the FAR provides specific guidelines for the profit margins that contractors can earn on federal contracts. These are designed to reward businesses for their work and services, but also to prevent excessive spending that hurts taxpayers. These profit margins are typically determined based on several factors, like the complexity and risk associated with the contract, the contractor’s past performance, and the level of competition for the contract. However, these are guidelines — not guarantees. Negotiation skills and a deep understanding of your value proposition can help you secure better profit margins.
Timekeeping Requirements
Timekeeping is another critical area where the FAR imposes strict requirements. Accurate timekeeping is essential for the government to know that it’s only paying for work that is actually performed. This is particularly important for time-and-materials contracts, where labor costs are a significant component.
The FAR mandates that contractors use a timekeeping system capable of providing detailed reports that can be audited by the government. Additionally, the FAR requires that time records be maintained for a specified period (typically three years) and that they be available for government review upon request. For small businesses, this means investing in a reliable timekeeping system and training employees on the importance of accurate time tracking. Non-compliance with FAR timekeeping requirements can result in penalties, payment withholds, or even False Claims Act violations.
FAR Sections for Government Contractors
As we’ve alluded to, FAR’s documentation is extensive. It’s comprised of 53 parts, each an individual deep dive into extensive information, caveats, and more. From competition requirements to socioeconomic programs, FAR covers it all. However, detailing every element of FAR isn’t necessary for potential government contractors (especially those working with a partner who has experience dealing with this). Let’s look at the major areas small business owners should focus on.
FAR Part 11: Describing Agency Needs
In this section, business owners can ascertain what the various government agencies need. Business owners can further understand their potential buyers by learning brand names, products, restrictions, and buying schedules.
FAR Part 13: Simplified Acquisition Procedures (SAP)
Generally, purchases under $250,000 are considered eligible for simplified acquisition procedures (SAPs). SAPs come into effect because the government often needs to speed up and simplify its acquisition of contract work. SAPs make it easier and faster for businesses to win smaller (yet still lucrative) contracts.
FAR Part 15: Contract Negotiation
FAR Part 15 describes how solicitations for the competition will be built, how proposals will be evaluated, how offers will stack up against one another, and what constitutes a responsive bid.
FAR 19: Small Business Programs
Ever wonder how small businesses compete on the same playing field as Fortune 500 companies? One of the ways is by participating in the small business programs spelled out in FAR Part 19.
FAR 52: Solicitation Provisions and Contract Clauses
Part 52 explains the required contract clauses for biobased product certification, affirmative procurement, recovered material certifications, EPA-designated item recovered material content, energy efficiency, and service and construction contracts.
Federal Acquisition Regulation News
As of October 25, 2022, the DoD, GSA, and NASA issued a final ruling that amended FAR to implement an executive order addressing domestic preferences in government procurement. This ruling stemmed from President Biden’s directive to enhance American manufacturing companies’ ability to win federal contract work. Because of rulings like this, American small businesses are more capable than ever of winning lucrative government contracts in 2024 and beyond.
In addition to this amendment, on August 15, 2024 the DoD also proposed an amendment to DFARS that would update requirements around the CMMC (Cybersecurity Maturity Model Certification) program. Updates include new requirements for any systems that handle sensitive information, as well as continuous compliance with these guidelines throughout the contract’s entire duration (not just compliance at the beginning). Another change in this amendment is that prime contractors will now be responsible for ensuring that their subcontractors are also CMMC compliant. The effort is aimed at improving cybersecurity across the DoD’s supply chain, with the finalization of this amendment expected in Spring 2025.
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