Revamping the FAR and Its Impact on Construction Contracting

The federal government is initiating and implementing significant modifications to the Federal Acquisition Regulation (FAR) that influence construction contracts. These adjustments are part of a comprehensive overhaul rather than isolated changes specific to construction. The majority of these reforms are associated with the "Revolutionary FAR Overhaul" (RFO), which was introduced under an executive order in 2025 aiming to streamline the FAR to its statutory core and simplify acquisition regulations.

As part of the RFO, agencies are currently using class deviations to make extensive revisions to FAR Part 36, which governs construction and architect-engineer contracts, until formal rulemaking occurs. The updates include:

Structural and Policy Updates

• Part 36 has been completely reorganized to match the acquisition lifecycle (pre-solicitation, evaluation/award, post-award), replacing its previous topic-by-topic structure.
• The core requirements have been clarified and consolidated, making the document easier to understand and apply.

Removal of Outdated or Redundant Provisions - A number of clauses and requirements have been eliminated from Part 36, such as:

• Performance-of-work requirements (the 12% rule) and related clauses like FAR 52.236-1.
• Physical data and organization/direction of work provisions (FAR 52.236-4, 52.236-19).
• Preconstruction conference requirements and site visit clauses (FAR 52.236-26, 52.236-27, 52.236-28).

Requirements Still Retained - Some statutory requirements remain intact because they are either mandated by law or considered essential, including:

• Design-Build selection procedures (10 U.S.C. § 3241 and 41 U.S.C. § 3309)
• Change order administration (15 U.S.C. § 644(w))
• The Brooks Act for architect-engineer selection (Pub. L. 92‑582)

These continue to be central elements of construction procurement policy under the updated structure.

Simplification & Removal of Non-Statutory Language - Throughout the FAR, including Part 36, the revisions seek to:

• Eliminate language not required by statute
• Remove redundant or outdated text
• Use clearer, plain language
• Focus on the essential statutory rules governing construction

For construction, this means agencies and contractors will no longer encounter procedural clauses that don't reflect statutory requirements, particularly those not tied directly to law or critical procurement practices.

Threshold & Related Acquisition Changes That Affect Construction - While not exclusive to construction, new acquisition threshold adjustments affect how these procurements are managed:

• The simplified acquisition threshold (SAT) for many purchases increased from $250K to $350K.
• Subcontracting plan thresholds, including for construction, rose from $1.5M to $2M.

Higher thresholds reduce compliance obligations for smaller construction contracts and change when full FAR requirements come into play.

Context: Broader FAR Reform - These reforms for construction are part of a wider effort to rewrite much of the FAR with a focus on plain language and statutory clarity. The FAR Council and Office of Federal Procurement Policy are issuing rolling “model deviation” texts that agencies use ahead of formal rulemaking. This process will continue through 2026 and may involve legislative proposals to Congress for permanent authorization of these changes.

What This Means for Federal Construction Contracts

Contractors and agencies should anticipate:

• A cleaner, reorganized FAR Part 36 focused exclusively on statutory requirements
• Fewer procedural clauses and outdated provisions
• More streamlined construction acquisition rules, reducing bureaucracy and easing compliance
• Higher acquisition thresholds affecting the applicability of full FAR requirements

Implications for Construction Subcontractors

• Protection Clauses - FAR now prioritizes payment protection for subcontractors on federal projects. Prime contractors maintain payment responsibilities but simplified FAR language clarifies subcontractor rights without extra procedural hurdles.
• Subcontracting Plans - The threshold before requiring a formal subcontracting plan is now raised from $1.5M to $2M. Smaller and mid-sized subcontractors may benefit from fewer administrative delays during onboarding.
• Less Red Tape - Much of the repetitive reporting (such as daily logs, excess certifications, and minor schedule adjustment reports) has been eliminated. Subcontractors now collaborate with primes under a more flexible and cooperative FAR system, lessening compliance demands.
• Bonding & Risk Allocation - Subcontractors continue to rely on prime contractor bonds for security. The FAR update makes statutory requirements clear, ensuring that prime contractors cannot transfer statutory obligations to subs using obsolete FAR clauses.

Topic	Prime Contractor	Subcontractor
Procedural Compliance	Fewer mandatory FAR clauses; more discretion	Less administrative burden; relies on prime for statutory compliance
Change Orders	Streamlined FAR guidance; still responsible for approvals	Benefit from clearer rules and documentation from prime
Subcontracting Plans	Required only above $2M threshold	Fewer delays in engagement for smaller subs
Payment & Performance Bonds	Must maintain statutory bonds	Protected through prime’s bond; rights clarified
Preconstruction / Site Visits	No longer prescriptive	Fewer mandatory meetings; coordination still required
Simplified Acquisition Thresholds	Fewer small projects require full FAR compliance	Projects under thresholds have less bureaucracy

The FAR intends to help construction subcontractors by having them experience lessadministrative overhead, clearer payment protections, and simplified subcontracting processes.  FAR overhaul is to cut unnecessary bureaucracy while keeping statutory protections for subs and prime contractors intact.