The Federal Acquisition Regulatory Council's (FAR Council's) September 18 proposed rule will reorganize and rewrite FAR Parts 16, 17 and 35 into “plain language” and continue implementing the Revolutionary FAR Overhaul (RFO).

Contractors supporting defense agencies and those providing civilian IT, cloud services, research and development and professional services are expected to be the most significantly affected by these changes.

Comments are due October 19, 2026.

FAR Part 16, Types of Contracts

Major changes to Part 16 would:

• Establish fixed-price contracts with performance-based considerations as the preferred mechanism but permit agencies to use alternative contract types not explicitly mentioned in the FAR to encourage commercial practices. Contracting officers must submit explicit justification and approval documentation showing the benefit to the government for other-than-fixed-price contracts.
• Allow agencies to purchase supplies and services that can be billed on actual usage as fixed-priced contracts. This includes metered services such as cloud computing.
• Distinguish between the ordering periods, periods of performance, and the effective contract period for task-order contracts and delivery-order contracts.
• Add policies and procedures for adding and removing contractors (on-ramps and off-ramps) from multiple award contracts.
• Allow agencies to use Blanket Purchase Agreements (BPAs) under multiple-award contracts (MACs) for recurring requirements instead of through separate procurements.
• Distinguish between post-award ordering procedures for task-order and delivery-order contracts and MACs at or below the micro-purchase threshold ($15k).
• Require contracting officers to provide a written explanation as to why an unsuccessful bidder did not receive an award on a task-order or delivery-order contract exceeding the Simplified Acquisition Threshold ($350K), but less than $7.5M.
• Reduce the number of items required in an indirect cost proposal by limiting subcontracting information to subcontracts exceeding the award thresholds for certifying cost or pricing data. The revision would also require only summary information for time-and-materials and labor-hour and labor-rate costs rather than detailed line-item elements and relocate requirements for contracts expected to close during a specified fiscal year.

Part 17, Special Contracting Methods

Streamlining efforts in Part 17 would:

• Replace the non-statutory five-year contract periods of performance, allowing contracting officers to recompete a contract based on mission demands versus strictly option-based periods of performance procurement.
• Allow contracting officers to include potential service and supply requirement surges at the procurement/competition level instead of negotiating a sole-source modification at the time of need.
• Allow contracting officers to extend non-service contracts (i.e., indefinite delivery contracts for critical supplies) for up to six months at the offeror’s existing rate, preventing the need for a recompete or sole-source bridge contract.
• Allow contracting officers to delay exercising a contracting option up to 30 days after a government shutdown if the period to exercise that option ends during the shutdown to avoid lapses in supplies and services and prevent the need for an early recompete.
• Remove the requirement for agencies to provide written documentation that an interagency procurement is the best alternative solution, but still require contracting officers to justify the interagency purchase.  
• Remove non-statutory language about competition and contractor performance reviews for management and operating contracts. This defines procedures for the award, renewal, and extension of these contracts and sets the required reviews to a minimum of five-year intervals while allowing the government to conduct more frequent reviews if necessary.
• Prohibit use of reverse auctions for complex, specialized, or substantial design and construction services under 89 FR 70157.

Part 35, Research and Development (R&D) Contracting

Part 35 revisions would remove language for R&D contracts that allows limiting procurements based on “a reasonable number of responsible sources” and/or “well-established” firms. Instead of depending on the same 'familiar' pool of providers, the revision would open doors for nontraditional vendors, startup companies, academic organizations, and emerging technology firms.

Contractor Implications:

• Contractors will face increased pressure to propose fixed-price contracts. Those willing to adapt pricing strategies and assume associated risks can expect increased opportunities. Those dependent upon cost-based structures may propose alternative contract types if they can justify the benefits and statutory compliance but can expect fewer opportunities.
• Fixed-price billing for consumption-based solutions will increase opportunities for firms providing cloud, software as a service, data solutions, artificial intelligence, some R&D services, and those offering manufacturing supplies and utility-based services, especially those supporting defense programs.
• Established procedures for on- and off-ramp solicitations will provide more opportunities for firms to compete under the larger GWACs and preferred contracting vehicles but will also increase pressure to maintain strong performance.
• BPA under MACs could increase ordering opportunities and reduce proposal costs for contractors holding these vehicles, especially for firms providing IT, professional services, and recurring operational support. This would also reduce government procurement costs by allowing agencies to meet requirements through existing contracts. Firms not holding a MAC should carefully monitor procurement portals for on-ramp opportunities.
• Separate post-award ordering procedures for task-order and delivery-order contracts and for MAC orders under specific thresholds will reinforce contracting officer discretion for ordering and clarify the processes for the government and contractor.
• Revised cost and accounting requirements will reduce accounting, auditing and compliance costs for contractors holding cost-based contracts.
• Clarified language under Part 35, particularly the preference for “well-established entities,” will increase opportunities, especially for small innovative start-up firms, but still allow contracting officers flexibility depending on the type and complexity of the requirement.

Overall, the changes are expected to speed up acquisition cycles, reduce cost and compliance burdens, increase competition and opportunities for federal contractors as the government seeks to align more with private-sector business models.