The Federal Acquisition Regulation, known as the FAR, is the single rulebook that governs how every executive branch agency of the United States buys goods and services. It sits in Title 48, Chapter 1 of the Code of Federal Regulations and standardizes the whole procurement lifecycle: how solicitations are written, how bids are evaluated, what clauses go into contracts, how contractors get paid, and how poor performers get pushed out of future opportunities. If your company wants to sell to the federal government, the FAR is the framework you are selling inside.
What the FAR Covers
The regulation applies to procurement contracts, meaning agreements where the government acquires property or services for its own direct use. That is a narrower category than “federal money,” and the distinction matters. The federal government also moves funds through grants and cooperative agreements, which exist to support a public goal rather than to buy something the government will use itself. Grants carry minimal federal oversight of the recipient’s daily work; cooperative agencies expect more involvement from the awarding agency.1U.S. Department of Energy Office of Science. Grants/Contracts Differences If you are responding to a solicitation to build something, deliver supplies, or provide professional services for an agency, the FAR governs the deal. If you are receiving a grant to conduct independent research, it does not.
The reach on the contractor side is broad. It covers a sole proprietor offering consulting through a multinational defense company building weapons systems. Obligations run in both directions. Agencies must follow prescribed procedures for competition and evaluation. Contractors must register, accept mandated clauses, and comply with ongoing reporting.
How the Rulebook Is Organized
The FAR is divided into subchapters, parts, subparts, sections, and subsections, and each part covers a distinct piece of the acquisition process.2Acquisition.GOV. 48 CFR 1.105-2 – Arrangement of Regulations Part 12 handles commercial products. Part 15 covers negotiated procurements. Part 19 addresses small business programs. Part 31 lays out cost principles. The numbering is designed so any requirement can be traced back to its parent regulation.
Two terms come up constantly. A provision is a term that appears only in solicitations and applies only before contract award. A clause is a term that becomes part of the contract itself and governs the parties after award.3Acquisition.GOV. 2.101 Definitions Many clauses are incorporated by reference, meaning the contract lists only the clause number and title rather than reproducing the text. The clause still carries full legal weight. High-stakes terms, particularly those involving intellectual property or indemnification, are sometimes written out in full so both sides can see exactly what they signed.
Agency Supplements
The FAR is Chapter 1 of Title 48. Later chapters are reserved for agency-specific rules that implement or supplement it.4Acquisition.GOV. Part 1 – Federal Acquisition Regulations System The most prominent supplement is the Defense Federal Acquisition Regulation Supplement, or DFARS, which adds Department of Defense requirements including cybersecurity standards for controlled unclassified information and specialized cost accounting rules.5Acquisition.GOV. Defense Federal Acquisition Regulation Supplement Other agencies publish their own supplements that mirror the FAR’s numbering. If you are selling to a specific agency, check both the FAR and that agency’s supplement, because the supplement can add obligations the base regulation does not.
Dollar Thresholds That Change How You Sell
Two dollar thresholds shape how much paperwork and competition a purchase requires.
The micro-purchase threshold, set at $15,000 as of October 2025, lets agencies buy supplies and services with minimal competitive procedures, essentially treating these as routine purchases that do not justify a formal solicitation.6GSA SmartPay. Micro-Purchase Threshold Limit Increased to $15,000
The simplified acquisition threshold sits at $350,000 after an inflation adjustment that took effect in 2025.7Federal Register. Inflation Adjustment of Acquisition-Related Thresholds Below that line, agencies can use streamlined purchasing methods that cut administrative burden for both sides. Above it, full competition and formal evaluation procedures kick in. For acquisitions supporting contingency operations, the simplified threshold rises to $1 million. These numbers affect which clauses go into a contract and how many bids an agency must collect.
Contract Types and Who Carries the Risk
The FAR divides contracts into several families. The type chosen determines who absorbs the loss when costs run higher than expected and who benefits when they run lower.8Acquisition.GOV. Part 16 – Types of Contracts
A firm-fixed-price contract locks the contractor into delivering at a set price regardless of what performance actually costs. Maximum risk sits with the contractor, maximum predictability with the government. It works when the scope is well-defined and costs can be estimated with confidence.
A fixed-price contract with economic price adjustment lets the base price move up or down if specific market conditions change, such as labor rates or material costs. Agencies use these when a contract runs long enough that a firm price would force excessive contingency padding.
A cost-reimbursement contract has the government pay allowable costs up to a ceiling plus an agreed fee. Risk shifts toward the government, and this type is reserved for work too uncertain to price up front, such as research and development. It cannot be used to buy commercial products.
A time-and-materials contract pays fixed hourly labor rates plus actual material costs. This is the contract type of last resort, used only when no one can reasonably estimate how long the work will take or how much material it will consume.
Picking the wrong type is one of the costlier mistakes in federal procurement. A cost-reimbursement contract for work that could have been fixed-price strips out the contractor’s incentive to control costs. A firm-fixed-price contract for genuinely unpredictable work forces the contractor to either pad the price or absorb losses.
The Commercial Products Shortcut
The government has a statutory preference for buying commercial products and services whenever they meet the agency’s needs.9Acquisition.GOV. Part 12 – Acquisition of Commercial Products and Commercial Services FAR Part 12 creates a streamlined path for these acquisitions, exempting them from several laws that apply to custom government work. Cost Accounting Standards do not apply to firm-fixed-price commercial contracts. Contractors selling commercial items do not have to submit certified cost or pricing data. If the government terminates a commercial contract for convenience, the contractor can demonstrate its costs using standard business records rather than complying with the detailed cost principles in Part 31, and the government has no right to audit the contractor’s records solely because of that termination.
The practical effect is significant. A company that already sells a product on the open market can often bid on a government contract without rebuilding its accounting and compliance infrastructure from scratch. Contracting officers can also tailor solicitation provisions and contract clauses to align with customary commercial practices, as long as the changes stay within legal bounds.
Registering and Staying Compliant
Before you can bid on any federal contract, your company must register in the System for Award Management at SAM.gov.10SAM.gov. Entity Registration Registration requires a Unique Entity Identifier, a 12-character alphanumeric code that replaced the older DUNS number in April 2022. SAM.gov assigns the UEI as part of the registration, so businesses no longer need to obtain an identifier from a third-party provider. Registration also collects your Taxpayer Identification Number, banking information for electronic payments, and North American Industry Classification System codes categorizing what your business sells.
A critical part of registration is the Representations and Certifications section, where businesses self-certify their status on matters like small business size, ownership structure, and legal compliance.11U.S. Small Business Administration. Small Business Size Standards Small business size standards vary by industry, based on either employee count or average annual receipts, with receipt-based thresholds ranging from $8 million to $47 million depending on the NAICS code. Getting the self-certification wrong can create a false claims problem, so verify your size standard before checking any box.
Cybersecurity Baseline
Any contractor whose information systems process, store, or transmit federal contract information must implement 15 basic security controls under FAR clause 52.204-21.12Acquisition.GOV. 52.204-21 Basic Safeguarding of Covered Contractor Information Systems These cover fundamentals: limiting system access to authorized users, authenticating users before granting access, protecting communications at network boundaries, destroying media containing federal information before disposal, and keeping malware protections current. Defense contractors handling controlled unclassified information face considerably stricter requirements under the DFARS, including compliance with NIST SP 800-171 and, increasingly, third-party certification through the Cybersecurity Maturity Model Certification program.
Small Business Set-Asides
The FAR implements several programs that direct a share of federal contracting dollars to small businesses. Each has its own eligibility criteria and certification process, and agencies must consider set-asides before opening a procurement to unrestricted competition.
The 8(a) Business Development program is open to small businesses at least 51% owned by socially and economically disadvantaged U.S. citizens. Owners must have a personal net worth of $850,000 or less, adjusted gross income of $400,000 or less, and total assets of $6.5 million or less. Participation lasts up to nine years, with a four-year development stage followed by a five-year transitional stage.13U.S. Small Business Administration. 8(a) Business Development Program
The HUBZone program requires the business to maintain its principal office in a Historically Underutilized Business Zone and have at least 35% of employees living in a HUBZone. Certification must be renewed every three years.14U.S. Small Business Administration. HUBZone Program
The Women-Owned Small Business and Service-Disabled Veteran-Owned Small Business programs let contracting officers set aside or sole-source contracts above $250,000 when at least two qualified businesses are expected to submit offers at a fair market price.15U.S. Small Business Administration. Set-Aside Procurement
Businesses can hold certifications in multiple programs at once. Status must be documented in SAM.gov, and contracting officers verify it there before making an award.
After Award: Authority, Performance, and Payment
Once a contract is awarded, the Contracting Officer holds the legal authority to administer it, make changes within scope, and enforce its terms.16Acquisition.GOV. 48 CFR 1.602-1 – Authority Only the CO can bind the government. Informal promises from program managers or end users carry no contractual weight, and contractors who rely on verbal assurances from anyone else do so at their own risk.
The government tracks contractor performance through the Contractor Performance Assessment Reporting System, or CPARS, which records assessments of quality, schedule adherence, cost control, and management responsiveness.17Office of the Under Secretary of Defense for Acquisition and Sustainment. Contractor Performance Assessment Reporting System Future source selection teams use CPARS data when deciding whether a contractor can handle new work, so a string of mediocre ratings can effectively lock a company out.18Acquisition.GOV. Subpart 42.15 – Contractor Performance Information
On payment, federal agencies must pay proper invoices within 30 days of either receiving the invoice or accepting the delivered goods or services, whichever comes later.19Acquisition.GOV. 52.232-25 Prompt Payment If the agency misses that deadline, interest accrues automatically without the contractor asking for it. The interest rate is set semiannually by the Treasury Department. These deadlines sound simple, but late payments are common enough that contractors should build invoice tracking into project management. The Prompt Payment Act gives real teeth when agencies drag their feet, but only if the original invoice was “proper,” meaning it included all required information and documentation. A rejected invoice resets the clock.
When Things Go Wrong
Termination
The government holds two very different termination powers, and confusing them can cost a contractor millions.
A termination for convenience lets the government end a contract, in whole or in part, simply because it decides the work is no longer in its interest. No breach is required. The contractor could be performing flawlessly, and the government can still walk away.20Acquisition.GOV. 52.249-2 Termination for Convenience of the Government (Fixed-Price) In exchange, the contractor recovers incurred costs on the terminated portion, a reasonable profit on work already performed, and the costs of settling terminated subcontracts. Anticipated profit on work never done is not recoverable. If the contractor would have lost money had the contract run to completion, the settlement is adjusted downward to reflect that projected loss.
A termination for default, called “termination for cause” on commercial contracts, happens when the contractor fails to perform. The consequences are harsh. The contractor may be liable for the government’s costs of reprocuring the work from someone else, and the termination gets recorded in CPARS and the Federal Awardee Performance and Integrity Information System, where it follows the company into future competitions. Contractors facing a potential default should negotiate hard, because converting a default to a convenience termination dramatically changes the financial outcome.
Debarment and Suspension
The FAR imposes ethical obligations beyond simply performing the work. Contractors with contracts valued at $5.5 million or more, or running longer than 120 days, must maintain a written code of business ethics and an internal control system capable of detecting and preventing violations.
Violations of federal procurement ethics can trigger debarment, which bars a company from receiving any new federal contracts government-wide. Causes for debarment under the FAR include fraud or criminal offenses connected to obtaining or performing a public contract, violations of federal or state antitrust laws, embezzlement, bribery, false statements, tax evasion, and willful failure to perform contract obligations.21Acquisition.GOV. 9.406-2 Causes for Debarment Delinquent federal taxes exceeding $10,000 are also grounds. A company can be debarred based on a preponderance of the evidence, a lower standard than criminal conviction, and the effects extend to principals, affiliates, and subcontractors.
Suspension is a faster action that temporarily blocks a contractor from new awards while an investigation is pending. It requires only “adequate evidence” of a cause. Both actions are framed as protective rather than punitive, meant to ensure the government does business only with responsible contractors, but the effect on revenue can be devastating.
Bid Protests
A contractor that believes an award decision was flawed has three venues, each with different timelines.
The fastest and cheapest option is protesting to the contracting agency. The FAR encourages parties to first try resolving concerns informally with the contracting officer.22eCFR. 48 CFR 33.103 – Protests to the Agency If that fails, a formal agency protest must include a detailed statement of the legal and factual grounds, copies of relevant documents, and a description of how the protester was prejudiced. Protesters can request independent review at a level above the contracting officer.
The Government Accountability Office handles most formal bid protests. You generally must file within 10 days after you knew or should have known the basis for the protest.23eCFR. 4 CFR 21.2 – Time for Filing For protests challenging award decisions after a competitive proposal process where a debriefing was requested, the 10-day clock starts after the debriefing. GAO follows a roughly 100-day timeline: the agency files its report by day 30, the protester submits comments by day 40, and GAO issues its decision by day 100.24U.S. GAO. Bid Protests Missing the 10-day window is fatal, and GAO will not waive the deadline.
The U.S. Court of Federal Claims has jurisdiction over bid protests under the Tucker Act. Unlike GAO, COFC proceedings are full litigation with discovery, motions, and potentially a trial. This venue is more expensive and slower, but it produces binding judicial decisions rather than recommendations. Companies sometimes file at the COFC after an unfavorable GAO decision, or when the factual record is complex enough to benefit from formal discovery.