What Is FAR, and What Industries Are Affected by It?

The U.S. federal government is an enormous customer for private sector companies. In fiscal year 2022, the government committed nearly $700 billion to federal contracts, paying for products and services ranging from military aircraft and nuclear-powered submarines to cybersecurity systems, semiconductors, and information technology. While most people primarily associate federal contractors with the Department of Defense—Lockheed Martin and Northrop Grumman have established themselves as veritable household names—the government also leans on the private sector for food services, infrastructure projects, and operations management. To manage the sweeping levels of procurement it engages in every year, the federal government relies on a collection of rules and regulations referred to as the Federal Acquisition Regulation (FAR). 

What is Federal Acquisition Regulation (FAR)?

FAR has been codified in the first chapter of Title 48 of the Code of Federal Regulations, which concerns U.S. government procurement and acquisition. The regulation was originally formed to establish a uniform system for federal agencies seeking to acquire products or services from private companies. Some of its chief focuses include competition during the acquisition process (more colloquially referred to as bidding); determining and negotiating costs; and special programs imposing requirements for awarding contracts to small businesses and certain underserved groups. The regulation is divided into 53 parts, which are themselves further delineated by subpart, section, and subsection. FAR is jointly administered by the Department of Defense, the General Services Administration, and NASA. 

What Agencies Are Covered Under FAR?

FAR is the primary procurement and acquisition regulation for all executive agencies. There are 15 major executive agencies in the U.S. federal government—which are sometimes also referred to as the executive departments—and all are subject to FAR. 

• Department of Defense
• Department of Agriculture
• Department of Commerce
• Department of Education
• Department of Energy
• Department of Health and Human Services
• Department of Homeland Security
• Department of Housing and Urban Development
• Department of the Interior
• Department of Labor
• Department of State
• Department of Transportation
• Treasury Department 
• Department of Veterans Affairs
• Department of Justice 

In addition to FAR, all of the executive, cabinet-level agencies have issued supplemental regulations that are intended to function as complementary rules for contracting officers. Examples of these supplemental regulations include the Defense Federal Acquisition Regulation Supplement (DFARS), the Department of Health and Human Services Acquisition Regulation (HHSAR), and the Department of Agriculture’s Acquisition Regulation (AGAR), which can be found in Chapters 2, 3, and 4, respectively, of Title 48. 

What Is DFARS?

Of all the supplemental regulations issued by the federal government and its executive agencies, DFARS is probably the one most worth singling out. The U.S. government spent $694 billion on federal contracts in fiscal year 2022, and $415 billion of that funding went to Department of Defense contractors, comprising 60 percent of the total outlay. Many DoD contractors are large firms employing thousands of professionals and delivering tens of billions of dollars in annual revenue. 

DFARS: Subsection 252.204-7012

While DFARS encompasses a dense bundle of compliance requirements, one section in particular has been attracting significant attention in recent years—especially for an obscure block of text buried deep within federal code. Subsection 252.204-7012 went into effect at the end of 2017. Titled “Safeguarding Covered Defense Information and Cyber Incident Reporting,” the subsection outlines a raft of cybersecurity measures that all contractors must comply with in order to work with the Department of Defense. These include sufficiently safeguarding covered defense information (CDI) by implementing specific procedural controls laid out by the National Institute of Standards and Technology; carrying out a comprehensive review of any cybersecurity incident or exposure to malicious software affecting contractor systems or CDI, and reporting the event to the Department of Defense; and flowing down cybersecurity requirements to all subcontractors. 

DFARS 7012, as the subsection is commonly called, has been a major development in the world of defense contractors. While achieving full compliance with the new clause can cost hundreds of thousands of dollars, many companies are more than willing to commit overhead to implementing the new measures if it means remaining competitive in their efforts to secure lucrative DoD contracts.

Industries Affected by FAR 

FAR and the various supplemental chapters that follow it in Title 48 do not necessarily identify specific industries that fall within the scope of regulations. That’s because determining if a company must achieve FAR compliance has less to do with their sector or the types of products and services they provide than with a far simpler question: are they contracted with the federal government? Simply put, companies awarded contracts through the vast majority of agencies within the Executive Branch must comply with FAR and/or its supplements. 

What is Federal Acquisition Regulation Part 52?

If there’s one part of FAR that businesses and aspiring government contractors should familiarize themselves with first, it’s Part 52. Though the part’s title, “Solicitation Provisions and Contract Clauses,” may read like an impenetrable wall of legalese, the section is an invaluable set of guidelines for what must go into requests for proposals (RFPs), acquisitions, and contracts. Much of Part 52 encompasses various terms and conditions for FAR compliance, including those related to approval, fees, payment, and termination. These terms and conditions are provided in the form of clauses that contracting offices are obligated to include in contracts. 

Businesses interested in putting together competitive bid packages for government acquisitions would be well-served to develop a detailed understanding of Part 52 and the wide array of clauses it covers. While the majority of FAR has been written and codified for federal employees and contracting officers, this section provides unique insight for potential contractors into the requirements for all acquisitions under the regulation’s vast purview. 

Part 19: The Section to Know for Small Businesses

More than 99% of all U.S. companies are small businesses, and these organizations generate the majority of new jobs in the country. Part 19 of FAR seeks to give this critical contingent of the American economy a leg up. It does this by outlining compliance obligations contracting officers must follow to provide small businesses with the best possible opportunity to compete for government contracts and benefit from federal acquisitions more broadly. Part 19 details various methods these officers should employ, including planning and developing contracts that small businesses can feasibly execute, and encouraging prime contractors—which are often larger companies—to subcontract with small businesses. In addition, the section lays out something called small business “set asides”: contracts or acquisitions reserved exclusively for small businesses. 

Set-asides are one of FAR’s most prominent strategies for requiring executive agencies to award contracts to small businesses throughout the U.S. Eligible entities, which are detailed in Part 19, include service-disabled veteran-owned small businesses, economically disadvantaged women-owned small businesses, women-owned small businesses more broadly, and HUBZone small businesses, which are organizations based in “historically underutilized business zones” in the U.S. (the Small Business Association provides a map of HUBZones). Set-asides may be total or partial. A total set-aside is a contract or acquisition that is reserved in full for small businesses. Partial set-asides, meanwhile, are contracts that may be divided into smaller parts and distributed between multiple companies that include at least one small business. 

How Companies Can Use FAR to Become More Competitive 

There’s a widely-held belief that lucrative government contracts are monopolized by large, well-heeled corporations with longstanding ties to Washington and special access to its prestigious halls and backrooms. And there’s certainly ample evidence supporting that assumption, given the instantly recognizable large caps and presiding industry players glutting any list of the federal government’s top contractors. But there’s also a huge pie of disbursements to go around, and the agencies administering FAR have gone to significant lengths to build procedures and protocols into the regulation that are intended to carve out opportunities for smaller entities to win contracts. 

For those organizations, FAR can serve as a valuable roadmap for grasping how the government’s executive agencies issue requests for proposals and other solicitations, and the particular guidelines contracting officers must follow when putting out those requests. Specific sections can also provide businesses with frameworks for compiling competitive bid packages that demonstrate compliance and show agencies that the prospective contractor is conversant in their contractual obligations and the full scope of their responsibilities. 

Finally, studying the various supplemental regulations included in many of the chapters that follow FAR in Title 48 can be a crucial strategy for understanding the expectations unique to each agency. These departments are, after all, government bureaucracies, and learning to interpret and navigate their dense tangles of rules and requirements is an integral part of submitting an effective bid and becoming a successful contractor.