Federal Acquisition Regulation (FAR) Fundamentals
The Federal Acquisition Regulation (FAR) is the primary set of rules governing all aspects of federal procurement, from how the government solicits and evaluates proposals to how contracts are administered and closed out. As a government contractor, FAR compliance is embedded in virtually every contract clause you’ll encounter.
Key FAR clauses that affect most contractors include: 52.219 (small business provisions), 52.222 (labor standards and equal employment), 52.223 (environmental protection), 52.225 (Buy American requirements), and 52.232 (payment provisions). Your contract will specify which FAR clauses apply.
Agency-specific FAR supplements (DFARS for DoD, GSAM for GSA, etc.) add additional requirements. DoD contractors face the most extensive supplemental requirements, including cybersecurity, supply chain security, and enhanced cost accounting rules.
Cybersecurity and CMMC
The Cybersecurity Maturity Model Certification (CMMC) is the DoD’s framework for ensuring that defense contractors protect sensitive information on their networks. CMMC requires third-party assessment of your cybersecurity practices before you can bid on contracts involving Controlled Unclassified Information (CUI).
CMMC Level 1 requires 17 basic cybersecurity practices based on FAR 52.204-21. Level 2 aligns with NIST SP 800-171 (110 controls) and covers most contracts involving CUI. Level 3 adds additional protections for critical defense programs.
Even if you don’t do DoD work, all federal contractors must comply with basic cybersecurity requirements under FAR 52.204-21. This includes controlling access to systems, training employees, and reporting security incidents. Start building your cybersecurity compliance program now — it takes months to implement properly.
Labor Law Compliance
Federal service contracts are subject to the Service Contract Act (SCA), which establishes minimum wages, fringe benefits, and working conditions for service employees. The Department of Labor issues wage determinations by geographic area that specify the minimum compensation for each labor category.
Construction contracts are governed by the Davis-Bacon Act, which requires payment of locally prevailing wages. Both acts require detailed record-keeping and reporting, and violations can result in contract termination and debarment.
Equal Employment Opportunity (EEO) requirements under Executive Order 11246 apply to most federal contractors with contracts over $10,000. Larger contracts ($50,000+) require written affirmative action programs. These requirements cover hiring, promotion, compensation, and workplace policies.
Accounting System Requirements
Government contracts, especially cost-reimbursement types, require compliant accounting systems that can: segregate direct and indirect costs, maintain accurate timekeeping, allocate indirect costs consistently, and produce reports in formats required by the government. DCAA audits contractor accounting systems to ensure compliance.
For many small businesses, the accounting system requirement is the biggest compliance hurdle. Your commercial accounting software may not natively support the cost segregation and indirect rate calculations required. Consider government contracting-specific software like Deltek Costpoint, Unanet, or JAMIS for larger operations, or ensure your existing system is properly configured for government requirements.
Even for FFP contracts, maintaining a compliant accounting system is important. It demonstrates financial responsibility to evaluators, enables accurate pricing, and prepares you for cost-reimbursement work as your federal business grows.
Ethics and Organizational Conflicts of Interest
Federal contractors must maintain high ethical standards. The Procurement Integrity Act prohibits obtaining or disclosing non-public procurement information, and the False Claims Act imposes severe penalties for submitting false claims to the government. A compliance and ethics program is both a legal requirement and good business practice.
Organizational Conflicts of Interest (OCI) arise when a contractor’s existing relationships or access to information could give it an unfair advantage or impair its objectivity. For example, a company that helped write a solicitation’s requirements cannot then compete for the resulting contract. Identifying and mitigating OCIs proactively is essential.
Consider implementing a formal Code of Business Ethics and Conduct, especially if you pursue contracts over $6 million. FAR 52.203-13 requires large contractors to have compliance programs, but implementing one voluntarily demonstrates maturity and reduces risk.
Compliance Is a Competitive Advantage
Compliance can feel burdensome, but it’s also a competitive advantage. Companies that invest in strong compliance systems win more contracts because they can credibly demonstrate the infrastructure needed to manage government work. Evaluators view compliance readiness as a risk reducer.
Start with the basics: understand the FAR clauses that apply to your contracts, implement appropriate cybersecurity controls, ensure your accounting system meets government requirements, and train your staff on ethics obligations. Build from there as your government portfolio grows.