FAR Part 2: Definitions, Dollar Thresholds, and Key Contract Terms

The definitions in FAR Part 2 are the federal government’s controlling procurement vocabulary: they fix what words like “contract,” “offer,” “small business concern,” and “commercial product” mean everywhere in the Federal Acquisition Regulation, and they get incorporated directly into your solicitation and contract documents. Because these definitions decide which rules apply to a purchase, which thresholds trigger which procedures, and who qualifies for which set-asides, a term you read past casually can be the one that determines whether you win an award, keep it, or defend it later.

How the Definitions Govern

Part 2, codified at Title 48 of the Code of Federal Regulations, does three things: it defines words used throughout the FAR, points to alternative definitions located elsewhere in the regulation, and lets those definitions be incorporated into solicitations and contracts by reference.¹

A Part 2 definition carries the same meaning everywhere in the FAR with two exceptions: when the context clearly requires a different meaning, or when another specific part, subpart, or section supplies its own definition.² Part 31 (cost principles) and Part 45 (government property) are the common examples: their specialized definitions govern only inside those areas, and everything outside falls back to the Part 2 default.³

How Definitions Enter Your Contract

Part 2 definitions don’t stay in the regulation. They get physically pulled into contracts through FAR clause 52.202-1, which contracting officers must insert into solicitations and contracts exceeding the simplified acquisition threshold.⁴ The clause locks in the Part 2 definitions as they existed when the solicitation was issued, giving both sides a fixed reference for the life of the contract.⁵

Five exceptions displace a Part 2 definition: the solicitation supplies a different one, the parties agree to a different one, the FAR section prescribing the clause provides a different meaning, the term is defined in Part 31 for cost-principle purposes, or the term is an acquisition-related threshold that gets adjusted for inflation. That last exception matters in practice. Inflation-adjusted thresholds change during a contract’s life and apply automatically going forward, without any contract modification.⁵

The Terms That Matter Most

Section 2.101 is an alphabetical catalog, but a handful of entries drive most of the day-to-day questions.

Contract

A “contract” is a mutually binding legal relationship where the seller furnishes supplies or services (including construction) and the buyer pays for them. The definition is deliberately broad and covers bilateral instruments, awards and notices of award, job orders or task letters issued under basic ordering agreements, letter contracts, and purchase orders that become effective through written acceptance or performance. Grants and cooperative agreements are excluded.² That breadth catches vendors off guard. A task order under a basic ordering agreement is a “contract” for FAR purposes even without a standalone signed document.

Contracting Officer

A “contracting officer” is the person with authority to enter into, administer, or terminate contracts and make related determinations. The role has subtypes: an Administrative Contracting Officer administers existing contracts, a Termination Contracting Officer settles terminated ones, and a single individual can hold both responsibilities along with the base contracting officer authority. The definition also reaches authorized representatives acting within their delegated authority.² The practical point for contractors: if the person giving you direction lacks contracting officer authority, their instructions generally cannot bind the government or change your contract terms.

Offer, Bid, Proposal, and Quotation

An “offer” is a response to a solicitation that, if accepted, would bind you to perform. The FAR then splits the term by procurement method. In sealed bidding, the offer is called a “bid.” In negotiated procurements, it’s a “proposal.” A response to a request for quotations under simplified acquisition procedures is a “quotation” and is not an offer at all.² The distinction has consequences. A quotation doesn’t bind you the way a bid does, which affects when and how you can withdraw or modify your response.

Small Business Concern

A “small business concern” is independently owned and operated, not dominant in its field, and qualified as small under the Small Business Administration’s size standards at 13 CFR Part 121. The definition captures affiliates, meaning the government looks at related businesses that share common ownership, management, or contractual relationships when it decides whether you qualify.² Size standards vary by industry and use either average annual revenue or employee count, with the SBA periodically adjusting monetary thresholds for inflation.

Commercial Product and Commercial Service

The FAR now uses two separate definitions where it once used the umbrella term “commercial item.” A commercial product is essentially something the general public or nongovernmental buyers already use for non-governmental purposes and that has been sold or offered for sale commercially. The definition also reaches products that evolved from commercial items through technology advances and aren’t yet on the market, products with minor modifications to meet government requirements, and nondevelopmental items sold in substantial quantities to state, local, or foreign governments.²

A “commercial service” covers installation, maintenance, repair, and training in support of a commercial product when the provider offers similar services to the general public on comparable terms, and it also covers any service sold competitively in substantial quantities in the commercial marketplace.² Qualifying as commercial matters because it triggers the streamlined procurement procedures in FAR Part 12, cutting paperwork and compliance load for both sides.

In Writing and Signature

“In writing” means any worded or numbered expression that can be read, reproduced, and later communicated, and it expressly includes electronically transmitted and stored information.² An email confirming delivery terms satisfies the requirement.

“Signature” is similarly technology-neutral. It’s a discrete, verifiable symbol of an individual that, when attached to a writing with the person’s knowledge and consent, shows a present intention to authenticate the document. Typed names, scanned handwritten signatures, and e-signature platforms all qualify, provided the signature is traceable to the person who made it and reflects a deliberate choice to be bound.²

Dollar Thresholds That Change the Rules

Several thresholds defined in Part 2 decide which procurement track applies to a given purchase. These are inflation-adjusted, and the most recent adjustment took effect on October 1, 2025.

The micro-purchase threshold is $15,000, up from $10,000. Purchases at or below this amount can be made without competitive bidding, using a government purchase card or similar method. Lower sub-thresholds apply for construction subject to prevailing wage requirements ($2,000) and services subject to service contract labor standards ($2,500). For contingency operations and emergency response, the ceiling rises to $25,000 for domestic contracts and $40,000 for overseas contracts.⁶

The simplified acquisition threshold is $350,000. Purchases at or below this amount qualify for the streamlined procedures in FAR Part 13, which reduce administrative overhead for both buyer and seller. The threshold rises for contingency and emergency work: $1 million for domestic contracts and $2 million for overseas work, with a $650,000 threshold for humanitarian or peacekeeping operations outside the United States.⁶

Counting Days and Filing Deadlines

Time calculations sit under a separate definition in FAR 33.101, and they trip up filers more than they should. “Day” means a calendar day unless the regulation says otherwise. When computing a deadline, you exclude the day of the triggering event and include the last day of the period. If the last day falls on a Saturday, Sunday, or federal holiday, the deadline extends to the next business day. A document is “filed” only upon complete receipt before an agency’s close of business, which is presumed to be 4:30 p.m. local time. Anything received after close of business counts as filed the following day.⁷ Assuming “end of day” means midnight has ended more than one protest right.

What Happens When You Get a Definition Wrong

These definitions carry real liability. A company that claims small business concern status while its affiliates push it past the SBA’s size standards, or that labels a custom-developed product as a commercial product to avoid disclosure requirements, risks investigation under the False Claims Act. That statute reaches anyone who knowingly submits a false claim to the government, and “knowingly” does not require deliberate fraud: reckless disregard for whether a claim is true is enough. Penalties include treble damages and per-claim fines. The contract can be terminated for default, and the company can face suspension or debarment from future federal work.

Honest mistakes carry costs too. If a contracting officer determines mid-performance that a product doesn’t meet the commercial product definition, the contract can lose its FAR Part 12 streamlined treatment and become subject to full cost-accounting and reporting requirements. If a subcontractor turns out not to qualify as a small business, the prime contractor can lose credit toward its small-business subcontracting goals. The definitions in Part 2 set the rules of the game, and the penalties for playing under the wrong set tend to surface at the worst possible moment.

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eCFR. 48 CFR 2.000 – Scope of Part
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Acquisition.GOV. 48 CFR 2.101 – Definitions
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Acquisition.GOV. FAR Part 2 – Definitions of Words and Terms
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eCFR. 48 CFR Part 2 Subpart 2.2 – Definitions Clause
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Acquisition.GOV. 48 CFR 52.202-1 – Definitions
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Federal Register. Inflation Adjustment of Acquisition-Related Thresholds
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Acquisition.GOV. 48 CFR 33.101 – Definitions