FAR is the primary set of federal procurement rules governing how federal agencies buy goods and services. Established by Congress and maintained by GSA, DoD, and NASA, FAR contains detailed guidance on contract types, procurement processes, terms and conditions, compliance requirements, and ethical standards. All federal agencies must follow FAR unless specifically authorized exceptions. FAR applies to contracts above $10,000 (roughly). For contractors, FAR defines: how contracts are awarded (competitive, sole-source), what terms are in contracts, compliance obligations, dispute resolution processes, and liability standards. Understanding FAR is fundamental to federal contracting success.
Opening Definition
FAR is the comprehensive federal procurement regulation governing federal agency contracting. FAR defines contract types, procurement processes, terms, compliance requirements, and standards for all federal agencies.
Why It Matters for Tech Companies
FAR is the foundation of federal contracting. Every federal contract is FAR-compliant (or has FAR exceptions). Understanding key FAR concepts improves your federal contracting: contract types (cost-plus, fixed-price, T&M), competition requirements, terms and conditions, compliance obligations, dispute resolution. You don't need to memorize FAR, but you should understand: (1) how procurement processes work (competitive, sole-source, direct, etc.), (2) common contract types and their implications (cost-plus means you bill actual costs; fixed-price means you have cost risk), (3) compliance requirements you'll face (cost accounting, DCAA audits, property management, etc.). For tech companies, knowing FAR basics prevents surprises and helps you price contracts properly.
How It Works in Practice
Key FAR Concepts: Contract Types: FAR defines contract types: Fixed-Price (you establish price upfront, bear cost risk), Cost-Plus (government reimburses actual costs plus profit), Time & Materials (you bill hourly rates + materials). Competition Rules: FAR requires competitive procurement except when sole-source justified. Compliance Requirements: FAR includes compliance obligations: cost accounting standards (tracking labor/materials), DCAA audit requirements, conflicts of interest policies. Terms and Conditions: FAR defines standard contract terms: government right to terminate for convenience, inspection/acceptance rights, warranty obligations, indemnification, liability limits. Disputes Process: FAR defines process for contract disputes: contractor files claim, CO responds, escalation to dispute resolution. Example: You bid $2M fixed-price IT services contract. You've committed to fixed price—if you incur $2.5M in costs, you absorb $500K loss. This is the cost risk in fixed-price contracts. You bid $2M cost-plus contract at same scope. You bill actual costs (say $1.8M) plus 10% profit ($180K) = $1.98M total. Cost-plus reduces your risk.
Common Mistakes to Avoid
- Not understanding contract type risk: Fixed-price puts cost risk on you. Cost-plus puts it on government. T&M is hybrid. Understand your contract type and price accordingly.
- Ignoring compliance requirements: FAR requires compliance (cost accounting, audits, property management, etc.). Non-compliance results in audit findings, contract issues, or debarment.
- Not reading contract terms carefully: Government contracts often include standard FAR terms. Some are harsh (liability limits favor government, termination for convenience allows government to cancel anytime, etc.).
- Assuming FAR doesn't apply to your contract: Some contracts are exempt (firm-fixed-price below $150K, commercial items, etc.) but most contracts must comply with FAR.
- Not escalating disputes within FAR timeline: FAR disputes have timing requirements. If you don't file claim within specified timeframe, you lose rights.
Key Facts and Numbers
- FAR applies to federal contracts above ~$10,000
- Maintained by GSA, DoD, NASA (FAR Councils)
- Contains 53 parts covering all procurement aspects
- Supplements like DFARS add agency-specific requirements
- Competition mandatory except sole-source justified
- Disputes must be filed within 6-year statute of limitations
Related Terms
DFARS • Contracting Officer • SAM.gov
Related Guides
FAR Compliance for Federal Contractors • Understanding Government Contract Terms
Frequently Asked Questions
Does FAR apply to all federal contracts?
Mostly. Most contracts above $10K must follow FAR. Some exceptions: commercial item purchases, certain contracts under $150K. Assume FAR applies unless specifically exempted.
What's the difference between FAR and DFARS?
FAR is government-wide regulation. DFARS is DoD-specific supplement adding DoD requirements. DFARS supplements FAR for DoD contracts.
Can I negotiate FAR terms?
Most FAR-mandated terms cannot be negotiated. Some standard terms might have minimal flexibility, but FAR compliance requirements are non-negotiable.
Where do I find FAR to read it?
FAR is published at acquisition.gov. Also available through commercial publishers. FAR is lengthy (~2,000 pages)—start with specific sections relevant to your contracts.