Deep Dive: Understanding the FAR Overhaul's Real-World Impact on Your Small Business
The ongoing overhaul of the Federal Acquisition Regulation (FAR) is more than a bureaucratic exercise. It represents a fundamental shift in how the federal government does business—a shift that systematically disadvantages small businesses. This guide explains what has changed and, most importantly, what it means for you.
Last Updated: June 20, 2025
This analysis is based on our live tracking of regulatory changes. View the Deviation Tracker →
A Closer Look at the Key Changes
FAR Part 1: The Foundation of Secrecy
What Happened: The rules requiring public notice and comment for changes to the FAR were eliminated. So were the rules requiring agencies to publicly post and justify their deviations from the main regulations.
Impact on Your Business: This is the most critical structural change. It means the federal marketplace can now operate with a "shadow rulebook." The government can alter procurement rules without your input or even your knowledge, creating an unstable and unpredictable business environment. The fairness and transparency you rely on to plan and compete are being dismantled at the foundational level.
FAR Part 10: Disabling the Rule of Two
What Happened: The mandate for contracting officers to use market research specifically to identify small business capabilities was deleted. Vague "principles" have replaced specific, enforceable procedures.
Impact on Your Business: This is a direct assault on the "Rule of Two." Previously, the government had to look for you first. Now, it doesn't. This allows an agency to build a new requirement around a large company's solution from day one. By the time you see an opportunity, it may already be tailored for a competitor, making it impossible for the Rule of Two to be applied in a meaningful way. It cuts you out of the competition before it even begins.
FAR Parts 34 & 39: Locking You Out of Major Programs
What Happened: Rules encouraging the government to break down large, long-term projects and major IT acquisitions into smaller pieces (modules) were removed.
Impact on Your Business: This is a direct blow to small businesses, especially in the technology and systems integration sectors. Instead of competing for a manageable contract as a prime, you are now pushed further down the supply chain into less stable and less profitable subcontracting roles. These changes make it easier for agencies to award massive, multi-billion-dollar "all-in-one" contracts, effectively locking in large incumbents for years, or even decades.
FAR Parts 11 & 43: Designing You Out and Counting You Out
What Happened: Rules are being changed to give agencies more discretion in how they describe their needs and what constitutes an "in-scope" modification to an existing contract.
Impact on Your Business: These subtle changes have a powerful effect. Looser rules for describing needs (Part 11) allow agencies to write requirements that only a large business can meet. Looser rules for contract modifications (Part 43) encourage "scope creep," where agencies add new work to a large company's existing contract instead of competing it as a new opportunity that your business could win.
FAR Part 52: Removing Your Recourse
What Happened: Specific clauses that give small businesses legally enforceable rights within a contract are being removed or rewritten.
Impact on Your Business: This may be the most dangerous change of all. It's the final step. Even if you win a contract, the removal of these clauses makes it much harder and more expensive for you to protest or enforce your rights if an agency or prime contractor fails to follow the law on issues like subcontracting or prompt payment. Your legal protections are being turned into mere suggestions.
The Bigger Picture: A Coordinated Strategy
Viewed individually, these changes are concerning. Viewed together, they reveal a coordinated strategy that fundamentally reshapes the federal marketplace to the detriment of small businesses. Three clear themes emerge:
The federal marketplace is becoming less of a merit-based competition and more of an insider's game.
- The Systemic Erosion of the Rule of Two: The administration is not deleting the Rule of Two directly. Instead, it is gutting the very processes—like market research—that make its application possible.
- The Rise of Secret, Inconsistent Rules: By removing transparency requirements and instructing agencies to use class deviations, the government has created a confusing "hodge-podge" of policies.
- Raising the Barriers to Entry: The cumulative effect is to favor the largest, most entrenched contractors. The government is being given the tools to write requirements that small businesses can't meet, on a scale they can't handle, with legal protections so vague they can't be enforced.
A Look Ahead
The trajectory of these changes provides a clear warning about what may be coming next. Key FAR parts that have not yet been overhauled, like FAR Part 19 (Small Business Programs), are now in the crosshairs. Given the pattern, we can anticipate future changes that could weaken set-aside requirements and undermine subcontracting plans.
The damage from these future changes will be worse because the foundation of transparency and fair market research has already been eroded. A small change to FAR Part 19, for example, will have a much more catastrophic effect now that the safeguards in FAR Part 10 are gone. For small businesses, the imperative is clear: understand these changes, document their impact, and engage in advocacy now.