FAR Out! How the Federal Acquisition Regulation Overhaul Will Require Contractors to Rethink Compliance Management

The Federal Acquisition Regulation (FAR) is moving away from highly prescriptive, checklist-driven rules toward a more principles-based framework that emphasizes judgment and discretion and necessitates well-developed internal controls. The FAR overhaul’s stated goal is to streamline acquisitions, reduce non-statutory burdens, and expand competition, especially for smaller vendors. For contractors, this shift places greater importance on disciplined risk management—and the most resilient approach is a proactive compliance framework that integrates procurement, employment, and operational practices to manage regulatory exposure holistically.

Quick Hits

• The FAR overhaul is shifting federal procurement from prescriptive regulatory procedures to a principles-based framework that relies more heavily on contractor judgment and internal controls.
• Compliance risk will increasingly turn on how contractors interpret statutory requirements and document their decision processes, rather than whether they followed a detailed FAR checklist.
• Contractors should strengthen internal compliance processes, particularly in areas such as wage determinations, labor classifications, and sourcing, to ensure decisions are reasoned, documented, and defensible.

From Procedural Compliance to Outcome-Based Accountability: The Importance of Internal Controls in Mitigating Risk

The FAR’s changing compliance landscape from prescriptive rules to judgment-based compliance requires contractors to develop integrated and robust internal decision-making controls.

The changes to the FAR provisions governing wage determinations under the Davis-Bacon Act (DBA) highlight the risks posed by the FAR overhaul. The FAR’s new framework will tie DBA wage determinations more directly to U.S. Department of Labor (DOL) guidance and contracting officer judgment, rather than to codified checklists and procedures. Currently spanning seven sections and thirty-one clauses, FAR Subpart 22.4, “Labor Standards for Contracts Involving Construction,” contains detailed procedural instructions directing contracting officers on how to select and apply construction wage determinations to contracts. These provisions walk contracting officers through step-by-step processes, such as selecting the appropriate wage determination type (i.e., building, residential, highway, or heavy construction), determining whether to use a general wage determination or a project wage determination, correcting an incorrect wage determination before award, and handling unknown places of performance.

Much of this procedural material is being removed from the regulatory text. The current revision of FAR Subpart 22.4 announced at FAR Overhaul – Part 22 | Acquisition.GOV shows the subpart reduced to four sections and seven clauses. In those few provisions, wage determination responsibility moves to the DOL’s regulations (29 C.F.R. Parts 1 and 5) and to guidance implementing the DBA, such as SAM.gov wage determination tools, the DOL’s electronic e98 request system, and Strategic Acquisition Guidance/buying guides published on Acquisition.gov.

Under this streamlined structure, the FAR itself will retain only core statutory requirements, while contracting officers are expected to apply the DOL’s Wage and Hour Division guidance and tools to determine how to select the appropriate determination.

For example, under the current subpart, contracting officers are instructed to either use a wage determination posted on SAM.gov or request that the DOL issue a new determination, and the subpart provides guidance on selecting the appropriate wage determination. (See FAR 22.402-2 and 22.402-3.)

Under the proposed revision to 22.402-3, contracting officers must use a wage determination posted on SAM.gov, are not provided guidance on selecting the appropriate determination, and may seek DOL assistance only if no wage determination has been issued for the contract work. (See Revised 22.402-3, “Construction Wage Rate Requirements statute.”) The change may appear subtle; however, instructing contracting officers not to seek the DOL’s assistance unless a wage determination is unavailable on SAM.gov could result in more contracting officers selecting wage determinations for contracts that may not clearly be correct, rather than seeking needed clarifications from the DOL regarding applicability.

For contractors, this difference matters because it underscores the importance of understanding DOL wage determination rules and requirements directly, as simply following the FAR’s procedural road map is no longer an available compliance approach. Contractors will need to independently evaluate prevailing wage determinations, labor category mapping, and reclassification requests through structured internal methodologies to mitigate risks posed by a judgment-based compliance regime.

Proactive Compliance Structuring as a Best Practice

Contractors that have depended on FAR procedural scaffolding, particularly those focused solely on federal work, should consider internal process modernization to mitigate the new risk landscape. Risk is shifting from technical noncompliance to judgment calls about substantive legal requirements that must withstand scrutiny by auditors, inspectors general, and enforcement agencies. In addition to wage determinations, the FAR overhaul presents compliance risk in areas such as labor category alignment, pricing and cost allowability, domestic sourcing analyses, and equal employment opportunity program design. All of these are important to consider holistically when assessing the strength of internal controls in this changing regulatory environment. In addition, deference to agency determinations is narrowing under evolving administrative law and shifting compliance away from reliance on contracting officer directions. Repeatable, auditable decision-making processes that address compliance questions in real time will likely be a best practice.

Next Steps

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance, Government Contracting and Reporting, and Workforce Analytics and Compliance practice groups will continue to monitor developments and provide updates on the Diversity, Equity, and Inclusion Compliance, Government Contracting and Reporting, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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