At a Glance: Recent Developments in Federal Contracting

As we enter 2026, federal agencies are undergoing pivotal transformations that significantly impact contractors, grantees, and recipients of federal funding. The “Revolutionary FAR Overhaul” initiative has ramped up, introducing new compliance expectations and reshaping the funding landscape under the FY 2026 National Defense Authorization Act (NDAA). Let’s delve into the key updates affecting federal contractors and what they mean for the future.

Revolutionary FAR Overhaul Initiative: Implementation Updates

In the final quarter of 2025, the “Revolutionary FAR Overhaul” (RFO) initiative gained traction as federal agencies began issuing mass modifications to existing contracts. While the Federal Acquisition Regulatory Council (FAR Council) had yet to complete its formal notice-and-comment rulemaking, early implementation was evident. On October 17, 2025, the General Services Administration (GSA) announced a mass modification aimed at aligning Multiple Award Schedule (MAS) contracts with the new RFO terms.

Notably, GSA updated various clauses and removed certain nonstatutory requirements, ultimately reiterating its commitment to align with the FAR Council’s revised model deviation texts. Both existing and future contracts are anticipated to integrate these updated provisions, signaling a significant shift in federal procurement policy.

The FAR Council’s revisions not only simplify some compliance processes but also narrow definitions around sustainable products, which now no longer reference specific Environmental Protection Agency (EPA) programs. This development, while seemingly minor, indicates the Council’s intent to reframe numerous FAR parts ahead of formal rulemaking.

Implications for Contractors in 2026

As federal contractors look ahead, the expected formal rulemaking to codify the RFO will be crucial. Given the anticipated condensed comment period, contractors will need to be swift and strategic in their feedback. Further updates to the FAR Companion Guide and class deviations are likely, particularly as integration with the Department of Defense’s Acquisition Transformation Strategy progresses.

Publication of the FAR Companion Guide

In October 2025, the FAR Council released a revamped FAR Companion Guide—an ancillary document designed to provide clarity and support during the transition to the RFO. The Guide consolidates federal acquisition policies, practices, and offers plain-language explanations to assist contracting officers and agencies alike.

While not legally binding, this Guide serves as a critical reference for understanding the nuances of the revised FAR. Additionally, each RFO subpart comes with “practitioner albums” summarizing key changes and implementation practices for easier assimilation.

Defense Industry Updates: DoD Acquisition Updates

In November 2025, the Department of Defense (DoD) revealed an overarching Acquisition Transformation Strategy, disseminating various strategic documents aimed at implementing Executive Order 14265, which focuses on modernizing defense acquisitions. This strategy emphasizes five primary pillars: rebuilding the defense industrial base, empowering the acquisition workforce, maximizing acquisition flexibility, developing high-performance systems, and improving lifecycle risk management.

For defense contractors, the strategy introduces opportunities by emphasizing a “commercial-first” approach to procurement. There will be a shift toward prioritizing direct-to-supplier relationships, potentially allowing nontraditional contractors greater access to federal contracts. The Strategy’s objective is to encourage longer-term engagements and substantial investments from contractors—a sign of the DoD’s pressing need for innovation.

Bid Protest Reforms and Defense Acquisition Reforms

A notable component of the FY 2026 NDAA is the inclusion of bid protest reforms aimed at discouraging unsubstantiated protests. As articulated in Section 875, DoD may now limit payments to incumbent contractors for unjustified GAO protests, altering the risk-reward dynamic of bidding.

Several NDAA sections echo the DoD’s focus on commercial products, including provisions for simplifying the procurement process for nontraditional contractors and increasing thresholds for cost or pricing data submissions—aimed at easing administrative burdens for many.

Cybersecurity Initiatives and Enforcement Updates

The federal government’s renewed focus on cybersecurity compliance is evidenced by increased enforcement of related policies. The NDAA outlines mandates for harmonizing cybersecurity requirements and establishing comprehensive governance policies for AI and machine learning systems used by the DoD.

Coupled with this focus is the Department of Justice’s (DOJ) expanded use of the False Claims Act (FCA) in cybersecurity and diversity, equity, and inclusion (DEI) contexts. Recent investigations target contractors for improper certifications regarding compliance, escalating FCA risks.

Increased Focus on False Claims Act Enforcement

The DOJ’s Civil Cyber-Fraud Initiative aims to ensure federal contractors adhere to stringent cybersecurity standards. This expanding scope represents a significant evolution in FCA enforcement, with serious implications for compliance protocols and documentation accuracy across all federal contracts.

Furthermore, the DOJ began investigating the DEI practices of contractors under its Civil Rights Fraud Initiative, raising the stakes for compliance related to federal civil rights laws. The ripple effects of such enforcement actions are likely to be felt widely, especially as federal contractors gear up for heightened scrutiny on their operational practices.

SBA 8(a) Program Audit and Financial Document Requests

In December 2025, the Small Business Administration (SBA) initiated an extensive eligibility review for all active 8(a) Business Development Program participants, requesting comprehensive financial documentation. This move underscores a broader initiative to combat fraud and enhance oversight within the program, putting small businesses—particularly those owned by women and minorities—under closer scrutiny.

Contractors in the 8(a) Program must proactively ensure compliance with rigorous financial transparency requirements and anticipate follow-up questions from the SBA based on their submissions.

GAO Bid Protest Annual Report

The Government Accountability Office (GAO) published its FY 2025 Bid Protest Annual Report, reflecting a slight decline in protest activity but highlighting persistent challenges in evaluations and decision-making processes. Understanding these trends is critical for contractors looking to navigate the intricacies of federal contracting and bid protests effectively.

What’s Next?

As we move deeper into 2026, the federal contracting landscape is poised for continued evolution. Future developments will likely include formal rulemaking related to the RFO, agency-level deviations, and further implementation steps aligned with the NDAA and DoD’s acquisition reforms.

Contractors must remain vigilant and adaptable, prioritizing compliance across various facets of federal contracting. Regular reviews and strategic planning will be essential for successfully navigating this dynamic regulatory environment. Federal contractors should also stay abreast of continued FCA enforcement and evolving compliance expectations tied to both cybersecurity and civil rights standards.

Together with ongoing tracking of these developments, preparing for renewed scrutiny will ensure contractors position themselves successfully in a competitive federal marketplace.