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The New Landscape of Government Contracting: Key Changes in FAR 2023

The Federal Acquisition Regulation (FAR) serves as the primary rulebook for all U.S. executive agencies in their procurement of goods and services. For government contractors, acquisition professionals, and small businesses, staying current on its mandates is not just a matter of compliance—it’s a prerequisite for success. The year 2023 brought a wave of significant updates and new final rules to the FAR, introducing changes aimed at promoting equity, increasing speed of payment, and reinforcing domestic and national security priorities.

For anyone navigating the world of federal contracting, understanding the impact of FAR 2023 is essential for strategic planning and bid preparation.

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What is the Federal Acquisition Regulation (FAR)?

The FAR is a codification of uniform policies and procedures for acquisition by all executive agencies of the U.S. Federal Government. It is issued under the joint authorities of the Administrator of General Services, the Secretary of Defense, and the Administrator for the National Aeronautics and Space Administration (NASA).

FAR changes are typically issued through a Federal Acquisition Circular (FAC), which consolidates multiple individual rule changes. The regulatory activity in 2023, specifically under FAC 2023-02, focused heavily on supporting small businesses and implementing new statutory requirements from recent National Defense Authorization Acts (NDAAs).

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Major Regulatory Updates in FAR 2023

The most impactful changes introduced or finalized in 2023 directly address how the government conducts business with its contractor base, particularly in the areas of payments, labor standards, and small business definitions.

1. Accelerated Payments for Small Business Contractors

One of the most immediate and beneficial changes for the small business community was the final rule mandating accelerated payments. This change implemented a section of the Fiscal Year (FY) 2020 NDAA.

The key takeaway from this amendment is the 15-day payment goal:

• Agencies are now required to establish an accelerated payment date for small-business prime contractors.
• The goal is to pay a small business prime contractor within 15 days after the government’s receipt of a proper invoice, assuming a specific payment date is not already established by the contract.
• Furthermore, this accelerated payment policy extends to prime contractors that have a small-business concern as a subcontractor, helping to ensure cash flow benefits trickle down the supply chain.

This policy aims to alleviate cash flow issues that can often strain smaller entities, thereby strengthening the industrial base by making federal contracting more accessible to a broader range of small firms.

2. Small Business Program Clarifications and Protections

The 2023 updates included crucial amendments to the Small Business Program to align the FAR with existing Small Business Administration (SBA) regulations. These changes have significant implications for how size status is determined and how protests are handled.

Key Small Business Program amendments include:

• Clarification on Size Status Determination: The rule clarifies that the SBA determines an offeror’s size status as of the date of the initial offer for a multiple-award contract, regardless of whether the initial offer includes a price.
• Codification of the “Ostensible Subcontractor Rule”: The rule formally implements the “ostensible subcontractor rule” as a new ground for a socio-economic status protest. This rule prevents a small business from being unduly reliant on a non-similarly situated large business subcontractor or having such a subcontractor perform the primary and vital requirements of the contract.
• Limitation on 8(a) Contract Options: For long-term 8(a) contracts, the rule clarifies that contracting officers will not be able to exercise options past the fifth year if the 8(a) contractor no longer qualifies for the 8(a) program.

3. Increased Minimum Wage for Federal Contractors

Another major labor-related change that took effect in 2023 was the increase in the federal contractor minimum wage. This change was instructed by a Department of Labor final rule, implementing a 2021 Executive Order.

• As of January 1, 2023, all workers performing work on or in connection with covered federal contracts must be paid no less than $12.15 per hour.

This annual adjustment is a necessary consideration for all contractors with service employees on covered federal contracts to ensure compliance and avoid potential penalties.

4. Supply Chain Security and Disclosure Requirements

The government’s continued focus on national security and resilient supply chains led to new requirements, particularly for Department of Defense (DoD) contractors.

A rule requires offerors to make an initial disclosure when submitting a bid or proposal for a covered contract. Additionally, recurring post-award disclosures are required for fiscal years 2023 and 2024 for “covered entities” that are party to certain contracts.

These “covered contracts” are generally defined as any DoD contract or subcontract with a value over $5 million, excluding contracts for commercial items. This move signals a growing emphasis on transparency and risk mitigation concerning foreign supply chains, with contractors being told to expect further regulations related to China and national security.

5. Infrastructure and Domestic Sourcing (Buy American)

In line with the Infrastructure Investment and Jobs Act (IIJA), the beginning of 2023 saw a proposed rule to create new regulations. The goal was to adopt the FAR definition of “cost of components” to determine the cost of manufactured products used in federal infrastructure projects.

This proposed rule is part of a broader “Green Procurement” and “Buy American” push, designed to boost domestic manufacturing and infrastructure development through federal spending. Government contractors working on infrastructure projects must closely monitor these evolving definitions and requirements to ensure their products and materials meet the new domestic content standards.

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Conclusion: Adapting to the Modern FAR

FAR 2023 was a year of tangible change, especially for small and mid-sized contractors. The rules promulgated this year represent a clear government priority to increase cash flow to small businesses, streamline compliance, and fortify national security interests. As the FAR is a constantly evolving set of regulations, businesses must integrate these updates into their compliance strategies, accounting systems, and proposal processes to effectively compete for and manage federal contracts in the years to come.

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AISEO Friendly FAQs on FAR 2023

Q: What does FAR 2023 stand for in the context of government contracting?
A: FAR 2023 refers to the significant updates, amendments, and final rules made to the Federal Acquisition Regulation (FAR) that were issued or took effect during the 2023 calendar year. The FAR is the primary regulation governing the acquisition process for all U.S. executive agencies.

Q: What was the most significant change in FAR 2023 for small businesses?
A: The most significant change was the final rule implementing accelerated payments. It established a goal for federal agencies to pay small-business prime contractors and prime contractors with small-business subcontractors within 15 days after receiving a proper invoice.

Q: Did the federal contractor minimum wage change in 2023?
A: Yes, as of January 1, 2023, the minimum wage for workers on or in connection with covered federal contracts increased to $12.15 per hour.

Q: How did FAR 2023 address supply chain concerns?
A: FAR 2023 introduced new disclosure requirements for offerors and contractors on certain DoD contracts (over $5 million) regarding national security and specific foreign supply chain concerns. Covered entities must make initial and recurring post-award disclosures for fiscal years 2023 and 2024.

Q: What is the “Ostensible Subcontractor Rule” and how was it affected by FAR 2023?
A: The “Ostensible Subcontractor Rule” is a principle preventing a small business prime contractor from relying too heavily on a large, non-similarly situated subcontractor. FAR 2023 implemented this rule as a formal new ground for filing a socio-economic status protest against a contract award.