This guide explains what the FAR is, how FAR compliance works, and which FAR Parts and DFARS rules matter most.
Why it matters: Misreading a single FAR clause can mean disallowed costs, contract penalties, or losing eligibility to bid on federal work.
Key Takeaways
- FAR governs what you can bill the government: It defines allowable and unallowable costs under every federal Executive agency contract.
- DFARS adds extra rules for defense contracts: Contractors working with the DoD must follow DFARS on top of FAR, including NIST SP 800-171 cybersecurity requirements.
- Purpose-built ERP like Deltek Costpoint helps with audit-readiness: Costpoint builds FAR and CAS cost controls, audit trails, and indirect rate structures directly into daily operations.
If you’re a federal contractor, you will eventually need to understand—and comply with—the Federal Acquisition Regulation (FAR).
In this guide, you’ll learn the basics of what the FAR is and get an understanding of a few of the most important parts of the regulation.
What Is FAR?
The Federal Acquisition Regulation (FAR) is the primary rulebook that federal Executive branch agencies use to buy goods and services. FAR governs allowability: it sets out what contractors can charge to a government contract, and what they cannot. Federal contractors, subcontractors, and anyone bidding on federal work must understand and follow it to win, price, and deliver government contracts compliantly.
According to GSA.gov, FAR is “the primary regulation for use by all Federal Executive agencies in their acquisition of supplies and services with appropriated funds.”
The purpose of FAR is to provide a set of consistent, uniform policies and procedures within the federal acquisition process. It defines when, and to what extent, costs can be recovered under a federal government contract.
The FAR also includes standard solicitation provisions and contract clauses, as well as supplements like the Defense Federal Acquisition Regulation Supplement (DFARS).
Who Creates the Federal Acquisition Regulation?
The FAR was issued more than 40 years ago through the Office of Federal Procurement Policy Act of 1974. It lives on today as the standard federal agencies must follow when buying goods and services.
It's jointly issued and maintained by the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Guide
Find Out if FAR & CAS Apply to Your Business
This free guide breaks down FAR and CAS exemptions, standards, and disclosures, so the compliance puzzle finally makes sense.
What is the Purpose of the Federal Acquisition Regulation?
The purpose of the Federal Acquisition Regulation is to provide a published standard set of policies and procedures to be used by federal agencies during the procurement process.
Part of the vision of the FAR is to deliver the best-value product or service while maintaining the public's trust and meeting public policy objectives.
As defined by section 1.102, the Federal Acquisition System will:
- Satisfy the customer in terms of cost, quality, and timeliness of the delivered product or service, for example, by maximizing the use of commercial products and services, using contractors with a track record of successful past performance, and promoting competition
- Minimize administrative operating costs
- Conduct business with integrity, fairness, and openness
- Fulfill public policy objectives
What is FAR Compliance?
FAR compliance is a process federal government contractors must follow to provide goods or services to federal agencies.
FAR is one of the major differences between contracting with the federal government and contracting with a commercial entity. One of the most common questions contractors have relating to FAR is: “Does FAR apply to all government agencies?” The answer is: No.
FAR only governs contracts with agencies of the Executive branch. Contracts with the Legislative and judicial branches are subject to separate regulations.
Contracts with the Legislative branch (i.e., Congress) are governed by the Congressional Budget Office (CBO). Contracts with the judicial branch are governed by the Judiciary Policy – Volume 14 (Procurement).
FAR is not the same as the Code of Federal Regulations (CFR), though the two are related. The CFR codifies every federal regulation, and FAR sits inside it as Title 48. FAR is the specific procurement rulebook contractors must follow. The CFR is the broader legal framework it belongs to.
That said, most contracts with the federal government are governed by the FAR, and each contract will contain specific FAR clauses applicable to it.
It is the contractor’s responsibility to read each contract and understand the FAR clauses referenced in it prior to signing a binding agreement. Specifically, FAR is applicable to solicitations (IFB, RFP, RFQ, RFI), federal prime contracts, and subcontracts under federal prime contracts.
According to Deltek’s 2026 Clarity GovCon Report, the audit and compliance burden on contractors is growing fast:
- Contractors now face an average of 26 audits a year across financial, cybersecurity, quality management, contract, and information security domains.
- Finance teams spend an average of 81 to 120 hours a year preparing for and supporting government audits.
- 96% of contractors expect compliance costs to stay the same or increase.
For many contractors, FAR compliance starts with the accounting system.
Aaron Solar, CFO and CIO at Adaptic, a government contracting firm supporting the Intelligence Community, said his team’s top priority when choosing new financial software was working seamlessly with DCAA requirements:
“Our main goal was to invest in an accounting system that worked seamlessly with the DCAA (Defense Contract Audit Agency). We also wanted to expand to other agencies and have the ability for unlimited cost pools.”
— Aaron Solar, CFO and CIO, Adaptic
Definition of FAR Parts
Contractors are not only responsible for reading each contract, but also for understanding all FAR clause references prior to signing a bid agreement. This can be a bit of a challenge, as there are 8 subchapters totaling 53 parts. Each part breaks down further into subparts and sections, which is where most of the specific, actionable guidance lives.
The subchapters and parts cover everything from competition and acquisition planning and socioeconomic programs to general contracting requirements, special categories of contracting, and contract management.
However, two of the most relevant parts are FAR Parts 31 and 52, which contain guidance on Cost Principles and Contract Clauses.
Let’s take a closer look at each of these, along with other key Parts.
FAR Part 31
Generally, FAR Part 31 details contract cost principles and procedures. More specifically, FAR Part 31 breaks down to:
- FAR Part 31.201-3: determining reasonableness
- FAR Part 31.201-4: determining allocability
- FAR Part 31.201-6: accounting for unallowable costs
What can be even trickier for contractors with FAR Part 31.201-6 is that some unallowable costs are always unallowable, and others are usually unallowable.
A list of these unallowable costs is included in Deltek's guide: Understanding the Basics of FAR & CAS.
FAR Part 52
On the other side of the coin, FAR Part 52 details allowable costs and payments.
For example: direct labor, direct travel, supplies, and services, including information on invoicing, reimbursement, billing rates, and payments. One of the most important points in this section is the list of Reimbursable Costs.
Reimbursable costs include:
- Direct Labor
- Direct Travel
- Materials Issued from Inventory
- Supplies
- Services
- Indirect Expenses
Other important billing and payment information in FAR Part 52.216-7 can be found in these sections:
- 52.216-7(d): Submission of Final Indirect Cost Rate Proposal
- 52.216-7(e): Indirect Expense Rates for Billing Purposes
- 52.216-7(g): Audit of Interim Billings
- 52.216-7(h): Stipulates Requirements for Final Payment
FAR Part 17
FAR Part 17 covers special contracting methods, including multi-year contracting, options, and leader company contracting.
Multi-year contracting is encouraged to lower costs, reduce the administrative burden of contracts, maintain production continuity, and stabilize contractor workforces, among other reasons. One area of clarification in Part 17 is the different requirements for DoD, NASA, and the Coast Guard when entering into a multi-year contract.
As defined in Part 17.105-1, for DoD, NASA, and the Coast Guard, the head of the agency may enter into a multi-year contract for supplies if:
- The use of such a contract will result in significant savings of the total estimated costs of carrying out the program through annual contracts
- The minimum needed to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities
- There is a stable design for the supplies to be acquired, and the technical risks associated with such supplies are not excessive
- There is a reasonable expectation that, throughout the contemplated contract period, the head of the agency will request funding for the contract at a level to avoid contract cancellation
- The estimates of both the cost of the contract and the cost avoidance through the use of a multi-year contract are realistic
The multi-year contracting method may be used for the acquisition of supplies or services.
If funds are not appropriated to support the succeeding years’ requirements, the agency must cancel the contract.
FAR Part 19
FAR Part 19 is dedicated to Small Business programs. The scope of this part covers many elements, including participation by 8(a) participants, HUBZone, service-disabled veteran-owned, economically disadvantaged women-owned small business (EDWOSB), and women-owned small business (WOSB).
Concerns and policies related to these small business participants are defined and described in detail in FAR Part 19. Contracting officers use FAR Part 19 to apply small business preferences and set-asides when awarding contracts.
FAR Part 19.202-1 focuses on ways to encourage small business participation in acquisitions and to ensure small businesses have an equal opportunity to compete for all contracts.
FAR vs DFARS
In addition to complying with the FAR, many government contractors must also comply with DFARS regulations. We’ll outline the differences between the two below.
What is DFARS?
The Defense Federal Acquisition Regulation Supplement (DFARS) is a supplement to the FAR and applies to the Defense Industrial Base (DIB).
Government contractors working with the DoD supply chain must adhere to DFARS requirements, which are in addition to FAR requirements. Those working with defense agencies can risk losing their contracts if they are not in compliance.
One of the key clauses in the DFARS is related to cybersecurity standards outlined in NIST SP800-171.
NIST SP800-171 is a standardized set of requirements that the government has agreed upon for DoD contracts under DFARS clause 252.204-7012. This guidance establishes the framework government contractors must follow, including the Cybersecurity Maturity Model Certification (CMMC), to maintain compliance with DoD contracts.
How does FAR differ from DFARS?
While these acronyms look similar, they serve different purposes. Any company with a federal contract must be FAR compliant, but those that “store, process, or transmit Controlled Unclassified Information, or CUI” are also required to comply with the DFARS. This often applies to DoD contractors or subcontractors. The FAR is the umbrella regulation under which the DFARS lives.
As a government contractor, you’ll be expected to understand the clauses in both the FAR and DFARS that are relevant to your work.
Staying up to date with any changes is important to ensure you stay in compliance and continue to win contracts. Failing to comply with either regulation puts your business at risk of having its contracts canceled.
Navigating the ins and outs of these regulations can be a challenge, especially when there are 53 parts to be familiar with, not including those in the DFARS. However, preparing early and getting the right team and systems in place will help you create processes that set you up for success.
What’s Changing in the 2026 FAR Overhaul?
FAR is in the middle of one of its biggest shakeups in decades. Deltek’s 2026 Clarity GovCon Report names the FAR overhaul as one of several reforms reshaping how contractors compete, price, and prove compliance, alongside GSA consolidation and CMMC implementation.
Proposed updates are expected to touch several FAR Parts, including Parts 12, 15, and 19. Contractors should treat the overhaul as a moving target: track official guidance from Acquisition.gov and revisit internal compliance processes as specific rule changes take effect.
Watch the webinar: Overhauling the FAR — Critical Changes to GovCon in 2026
How Deltek Supports Government Contractors with FAR & CAS Compliance
A government contracting firm’s business processes play a pivotal role in meeting FAR and CAS compliance requirements and standards. Successfully managing those processes from beginning to end is innately part of the DNA of the Deltek Costpoint solution.
“Costpoint makes audits easier, especially if you have consistent, articulate processes and procedures, which we always do.”
— Monica Hart, Senior Vice President of Accounting, ASRC Federal
Designed with FAR and CAS in mind, key functionalities of Deltek Costpoint allow for:
- A logical and consistent method for the allocation of indirect costs to intermediate and final cost objectives
- Accumulation of costs under general ledger control
- Proper segregation of direct costs from indirect costs
- Exclusion from costs charged to government contracts of amounts which are not allowable in terms of FAR 31, Contract Cost Principles and Procedures, or other contract provisions
- Identification of costs by contract line item and by units based on a contract’s requirements
Frequently Asked Questions About FAR
FAR is the primary rulebook federal Executive branch agencies use when buying goods and services with taxpayer money. It sets the policies, procedures, and cost rules that both agencies and contractors must follow. Any company doing business directly with a federal Executive agency needs to understand it.
FAR compliance means following the cost, billing, and contracting rules the FAR requires of federal contractors. In practice, that includes separating allowable from unallowable costs, following the clauses named in each contract, and keeping records that hold up under a government audit. Non-compliance can put contract payments and eligibility at risk.
No. The Code of Federal Regulations (CFR) is the complete codification of every federal regulation, across every agency. FAR is one specific part of that larger body, published as Title 48 of the CFR, and focused only on federal procurement.
FAR is the umbrella regulation that applies to all federal Executive agency contracts. DFARS is a supplement that adds extra requirements specifically for contractors working with the Department of Defense, including cybersecurity rules under NIST SP 800-171. A company can be subject to both at once if it holds DoD contracts.
The current federal acquisition reform, also known as the FAR overhaul, is expected to affect several FAR Parts, including Parts 12, 15, and 19. Specific changes are still moving through the rulemaking process, so contractors should track official guidance rather than plan around early proposals. Deltek’s webinar on the FAR overhaul walks through what’s known so far.
