FAR Compliance: Why It Matters

FAR compliance is essential if you want to grow and improve your connections with government agencies. Because government purchases use taxpayer funds, you and the agency must follow stringent policies to optimize the budget. You should review all FAR policies, although some requirements may weigh more than others depending on your business type. This article covers everything you should know.

What Is FAR?

The Federal Acquisition Regulation (FAR) contains policies and procedures that government agencies must follow when purchasing goods and services, as well as how you can charge agencies through government contracts. These policies aim to protect public trust and ensure the best use of taxpayers’ money. They also encourage fair competition between businesses, especially those with a track record of successful performance.

FAR was issued by the Department of Defense (DOD), General Services Administration (GSA) and National Aeronautics and Space Administration (NASA) through the Office of Federal Procurement Policy Act of 1974.

Does FAR Apply to All Government Agencies?

FAR only applies to contracts within the executive branch. Legislative branch contracts are governed by several agencies, like the Architect of the Capitol (AOC) and the Government Accountability Office (GAO), while judicial branch contracts are governed by the Guide to Judiciary Policy, Volume 14.

That said, most federal government contracts are governed by FAR. As a government contractor, you’re responsible for reading and understanding each contract before signing an agreement.

FAR clauses can be applicable to you whether you’re a small or established business. Some of these clauses are mandatory and enforceable, even if not included in your contract. This ensures consistent federal contracts and avoids evading mandatory requirements. If you’re a small business, you have a similar chance of being audited as larger government contractors.

Why FAR Compliance Is Important

FAR compliance is essential if you want to maintain your relationships with government agencies and continue to provide the needed products and services. Noncompliance can lead to litigation and harm your business’s integrity. Here are a few other repercussions:

• Contract terminations: Failing to perform your obligations can lead to contract termination, as well as if the termination is in the government’s best interest.
• Payment withholding: The contracting officer may withhold payments if you violate any of the clauses. The withheld amount can equate to the damages or any underpayment.
• Suspension or debarment: You may be suspended or debarred from future contracts if you’ve committed fraud or a criminal offense. Debarment generally doesn’t last more than three years.
• Criminal and civil penalties: You may pay criminal and civil penalties for violations, like kickback violations and using false certifications. Officials are also susceptible to penalties for failing to comply with FAR requirements.

The Contract Disputes Act determines the procedures for contract disputes — as the name suggests. A contracting officer will determine if violations exist. Apart from charging penalties, administrative remedies may also be imposed depending on the violation.

FAR Compliance Requirements

FAR contains 53 parts specifying different requirements, such as competition requirements, required sources, contractor qualifications and market research regulations. That’s a pretty hefty number, so it’d take quite a while for us to unpack them all here. As a government contractor, make sure you review all parts to avoid missing out on the mandatory clauses.

For now, we’ll simply cover the highlights. Pay special attention to these parts:

• Part 3: Improper Business Practices and Personal Conflicts of Interest. Part three discusses how to avoid improper business practices and personal conflicts of interest. It also establishes the government contractors’ code of ethics and conduct requirements, such as prohibitions of kickbacks and independent pricing requirements.
• Part 4: Administrative and Information Matters. Part four talks about the policies and procedures regarding contract execution, distribution, reporting, records retention and management practices. It also contains procurement restrictions regarding certain products and services.
• Part 9: Contract Qualifications. Part nine contains the policies regarding how to determine a qualified contractor, depending on their capability and integrity. It contains procedures on how to qualify products and which actions to take to exclude specific contractors for misconduct. It also covers the rules that mitigate contractors from having an unfair competitive advantage.
• Part 12: Acquisition of Commercial Products and Commercial Services. Part 12 refers to the policies regarding acquiring commercial products and services. Requirements include conducting market research, establishing reasonable prices, appropriate pricing structures, quality assurance systems and certain provisions.
• Part 13: Simplified Acquisition Procedures. Part 13 includes procedures for the acquisition of supplies and services for those not exceeding the simplified acquisition threshold (SAT). The proposed SAT for 2025 is $350,000. This part especially applies to small businesses, aiming to improve their opportunities while reducing the government’s administrative costs. Solicitations aren’t limited to well-known brands and personal preference.
• Part 15: Contracting by Negotiation. Part 15 talks about the policies and procedures for competitive and noncompetitive negotiations, rather than those involving sealed bidding. It contains the proposal, validity, documentation and certification requirements.
• Part 19: Small Business Programs. Part 19 implements the Small Business Act, listing the policies and procedures for Small Business Programs, as well as the rules for participating. It also talks about the role of the Small Business Administration (SBA) in implementing such programs.
• Part 32: Contract Financing. Part 32 talks about the financing options government contractors can use. Additionally, it details the debt administration process, funding limitations and risk management procedures to mitigate the government’s monetary losses.
• Part 52: Solicitation Provisions and Contract Clauses. Part 52 talks about the standard clauses included in contracts, essential for compliance. It contains information on biobased product certification, recovered material certifications, the Buy American Act and subcontracting plans, among other things.

How to Make FAR Compliance Easier

As a government contractor, there’s a lot to consider to become FAR-compliant. A few tips can help:

1. Understand which policy takes priority: Statutes take precedence over regulations, and FAR is considered a regulation. In case of conflict, complying with statutes should be your priority. That said, you should still review all policies covered by the FAR, especially those that apply to your business. If you’re a commercial business, for instance, you must be familiar with Part 12.
2. Schedule regular audits: Regular audits can help you remain compliant, especially with the changing regulations. For instance, FAR parts 20 and 21 are currently “reserved” in the government’s database, meaning the policies for these parts have not yet been established. Performing audits internally also prepares you for external audits, saving you from penalties and liabilities.
3. Seek expert guidance: FAR can be complex, and working with a consultant can make compliance easier. For instance, BOOST is a consulting service for government contractors. It can help you remain FAR-compliant while also providing support training and other services.

Make Your Business FAR-Compliant With BOOST

BOOST offers expert consulting services, especially for government contractors. If you need a FAR compliance review, we can offer that and more to help your business acquire the contracts you prefer. We can help you negotiate for prime and subcontractors, terminate and sunset government contracts, prepare for audits and manage support training as needed.

As a company dedicated to helping government contractors, large and small, you can count on us to get things done without excuses. Schedule an appointment today to learn more.