If you hold a federal contract or you're planning to bid on one this year, the rules you learned are changing underneath you. Not eventually. Not theoretically. Right now.
The federal government is in the middle of something called the Revolutionary FAR Overhaul. That's the official name. The Federal Acquisition Regulation, the rulebook that governs how the government buys everything, is being rewritten from the ground up. The first wave of changes already took effect on February 1, 2026. More are rolling out every few weeks. And the biggest shifts hit by June 30.
This isn't a minor policy tweak. It's the most significant rewrite of federal buying rules in decades. For small businesses, some of these changes are genuinely good news. Others require immediate attention.
Here's what you actually need to know.
In April 2025, the president signed Executive Order 14275 directing agencies to overhaul the FAR to reduce regulatory burden. The goal, according to the Department of War (formerly DoD), is to "right-size the regulatory environment" for both the acquisition workforce and industry.
Translation for contractors: The government decided the FAR had become so complicated that it was slowing down procurement, increasing costs, and discouraging companies from doing business with the federal government. Especially smaller companies that can't afford an army of compliance staff.
The overhaul is happening in two phases. Phase 1 uses "class deviations," which are interim rule changes that take effect immediately while formal rulemaking catches up later. Phase 2 involves the actual notice-and-comment rulemaking process that will make the changes permanent.
What's already happened: On December 19, 2025, the Department of War issued 31 class deviations to the DFARS covering nearly every section of the regulation. These took effect February 1, 2026. A second batch of six more deviations was released on January 24, 2026, also effective February 1. More are coming throughout the year.
What's coming next: The Department of War issued a letter to industry on February 10, 2026, seeking input for Phase 2. They're asking contractors directly what regulations should be revised or eliminated. That's not something that happens often.
The 2026 NDAA included several threshold increases that directly reduce compliance burden for small and mid-size contractors. These changes take effect for contracts awarded after June 30, 2026.
Cost or Pricing Data (TINA threshold): Previously, contractors had to submit certified cost or pricing data on contracts over $2 million. That threshold is increasing to $10 million. If your contracts typically fall under $10 million, this eliminates one of the most burdensome compliance requirements in federal contracting.
Cost Accounting Standards (CAS) full coverage: The threshold for full CAS coverage is increasing from $50 million to $100 million in collective annual contract awards. If you're a growing small business crossing former thresholds, this gives you significantly more room to scale before triggering full CAS compliance.
CAS per-contract trigger: The per-contract level that triggers mandatory CAS application is increasing from $2.5 million to $35 million. This is a massive change. Many small businesses that previously had to maintain CAS-compliant accounting systems will no longer be required to do so on individual contracts under $35 million.
What this means practically: If you're a small business doing defense work in the $2 million to $10 million range, you just got a significant compliance cost reduction. The accounting, documentation, and audit preparation burden that came with certified cost or pricing data requirements drops away for contracts under the new thresholds. That's real money back in your operating budget.
This is a detail that sounds minor but could cause real problems. As part of the overhaul, the government is renumbering FAR and DFARS clauses. For example, the basic safeguarding requirements that used to be at FAR 52.204-21 are now at FAR 52.240-93. DFARS 252.204-7020 became DFARS 252.240-7997.
Why this matters: If your internal compliance systems, proposal templates, or quality management documentation reference specific clause numbers, they may need updating. Solicitations issued under the new deviations will reference the new clause numbers. Contracts issued before February 1 will still reference the old ones. During this transition, you may need to track both versions.
What to do about it: Review your proposal boilerplate and compliance documentation. If you reference specific FAR or DFARS clause numbers anywhere, check whether those clauses have been renumbered under the RFO deviations. The Department of War maintains the current list of class deviations at acq.osd.mil.
One change that's generating significant attention is a new provision allowing contracting officers to withhold up to 5% of payments from incumbent contractors who file a protest with the GAO and lose. This is expected to be implemented through DFARS revisions by June 2026.
What it means for small businesses: If you're an incumbent on a contract and you protest a re-compete, and you lose that protest, you could see 5% of your payments withheld. The intent is to discourage frivolous protests that delay procurement timelines. But for small businesses with thin margins, a 5% withholding is not trivial.
The practical takeaway: If you're considering a bid protest, make sure it's based on genuine procedural errors or evaluation issues, not just disappointment with the outcome. The financial risk of an unsuccessful protest just went up.
Review your compliance systems now. The biggest operational impact is the clause renumbering. If you use standardized templates, checklists, or compliance matrices that reference FAR or DFARS clause numbers, update them. New solicitations are already using the revised numbering.
Recalculate your compliance costs. If your contracts fall under the new TINA threshold ($10 million) or the new CAS per-contract trigger ($35 million), your compliance burden just decreased. Talk to your accounting team or consultant about what requirements you can streamline.
Read the actual deviations that affect your work. Not all 31+ deviations will be relevant to your business. Focus on the DFARS parts that correspond to your contract type. If you do commercial products or services, pay close attention to DFARS Part 212 changes. If you do professional services, look at Part 237.
Participate in Phase 2. The Department of War is actively seeking contractor input on what should change next. This is unusual access. If there's a regulation that costs you time and money without adding value, this is the time to say so. The Office of Federal Procurement Policy also ran a crowdsourcing campaign through IdeaScale for public input.
Don't ignore the cybersecurity clause changes. The cybersecurity-related clauses have been restructured under the overhaul. The underlying CMMC requirements haven't changed, but the clause numbering and structure have. Make sure your cybersecurity compliance documentation reflects the current clause references.
The fundamental rules of federal contracting haven't changed. You still need an active SAM registration. You still need the right NAICS codes and certifications. Competition requirements, set-aside programs, and small business preferences are all still in effect.
The overhaul is about streamlining the process, not eliminating the standards. The government still wants competitive pricing, qualified contractors, and compliant deliverables. They're trying to make the process of getting there less painful for everyone involved.
Major regulatory changes always create two things: confusion and opportunity. The companies that understand what's changing and adapt early will have an advantage over those who are still figuring it out six months from now.
For small businesses, the threshold increases are legitimately helpful. Less compliance overhead means more competitive pricing, faster proposal turnaround, and lower overhead costs. The clause renumbering is an annoyance, but it's manageable with some upfront effort.
The companies that will struggle are the ones that ignore this until a contracting officer points out that their proposal references clauses that no longer exist, or that their accounting system was set up to meet requirements that are no longer applicable at their contract level.
The FAR overhaul is not something to worry about. It's something to prepare for. And the preparation window is now.
Verification note: The threshold changes and deadlines referenced in this article are based on the signed 2026 NDAA (Public Law) and officially published DFARS class deviations as of February 2026. Requirements are evolving as additional deviations are released. Confirm current applicability with your contracting officer or compliance advisor for your specific contract situation.
Speak to a USFCR Registration & Contracting Specialist: (877) 252-2700
What is the Revolutionary FAR Overhaul? The Revolutionary FAR Overhaul is a government-wide initiative to rewrite and simplify the Federal Acquisition Regulation, the rulebook governing how the federal government buys goods and services. It started with Executive Order 14275 in April 2025 and is being implemented in two phases. Phase 1 uses interim class deviations that take effect immediately. Phase 2 involves formal rulemaking to make changes permanent.
When do the new FAR and DFARS changes take effect? The first 31 DFARS class deviations took effect on February 1, 2026. Additional deviations are being released on a rolling basis. The major NDAA threshold changes (TINA, CAS) take effect for contracts awarded after June 30, 2026.
How do the TINA threshold changes affect small businesses? The threshold for submitting certified cost or pricing data increased from $2 million to $10 million. If your defense contracts fall under $10 million, you will no longer need to submit certified cost or pricing data for contracts awarded after June 30, 2026. This reduces accounting and documentation burden significantly.
Do I need to update my proposal templates because of the FAR overhaul? Yes. FAR and DFARS clause numbers are being renumbered as part of the overhaul. If your proposal boilerplate, compliance matrices, or internal documentation reference specific clause numbers, verify that those references still match the current versions. New solicitations are already using revised clause numbers.
Where can I find the current DFARS class deviations? The Department of War maintains the official list of class deviations on the Defense Pricing, Contracting, and Acquisition Policy (DPCAP) website. The DAU (Defense Acquisition University) also publishes comparison documents and summaries of key changes.
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