Understanding FAR and DFARS: A comprehensive guide for government contractors

Navigating government contracts can be complex, especially when it comes to understanding the regulations that govern them. Two key sets of rules that contractors working with federal agencies need to be familiar with are the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS).  

Whether you're a seasoned government contractor or just starting, understanding these regulations is crucial for compliance and successful contract management. 

What are FAR and DFARS? 

The Federal Acquisition Regulation (FAR) is the primary set of rules governing federal procurement processes. It applies across all federal agencies and outlines the regulations and guidelines contractors must follow when providing goods or services to the government. For more on the role of FAR in compliance, check out Unanet's DCAA Compliance Guide. 

DFARS, on the other hand, is a supplement to the FAR, specifically applicable to the Department of Defense (DoD). It adds additional requirements and clauses that pertain to defense contractors, particularly in areas like cybersecurity and national security. 

Key differences between FAR and DFARS 

While both FAR and DFARS aim to regulate government procurement, there are important distinctions: 

1. Scope: FAR is broader and applies to all federal agencies while DFARS is specific to defense contracts​. 

1. Clauses: DFARS includes clauses that address national defense priorities, such as safeguarding Controlled Unclassified Information (CUI) and requirements for domestic manufacturing​​. 

1. Unique requirements: DFARS requires contractors working with the DoD to meet higher cybersecurity standards, like those outlined in DFARS 252.204-7012​. 

These differentiators are particularly critical for contractors working in the defense sector, as failing to meet DFARS requirements can result in penalties or loss of contracts. If you’re managing contracts under DFARS, check out our article on Contractor Purchasing System Review (CPSR) Compliance for tips on CPSR requirements as they relate to DFARS.  

Compliance requirements for FAR and DFARS 

Compliance with FAR is a must for all government contractors, while DFARS is essential for all defense contractors. Compliance requires an understanding of the specific clauses that apply to your contract, as well as implementing best practices for contract management. Below is a brief summary of what you’ll need to know about both. 

• For FAR: They are very extensive with over 2300 pages of detailed requirements. Contractors must maintain accurate records, follow procurement procedures, and adhere to specific clauses that ensure transparency and fairness in federal contracting. Specific examples include allocating direct and indirect costs, submitting timesheets within 24 hours, segregating allowable costs, and much more. You can learn more about managing costs under FAR by reviewing our guide on Allowable vs. Unallowable Costs​.

• For DFARS: There are additional compliance requirements, particularly around cybersecurity. Contractors must demonstrate that they can protect Covered Defense Information (CDI) and meet the DOD’s stringent security requirements​​. 

Failure to comply with these regulations can result in audits, penalties, and potential disqualification from future contracts.  

How FAR and DFARS impact small businesses 

FAR and DFARS can pose unique challenges for small businesses, especially those that lack the resources of larger organizations. However, government agencies recognize the importance of small business participation in federal contracts and have established resources to support them.  

Both FAR and DFARS include provisions to ensure that small businesses have access to federal contracts, including set-asides for small business participation​. 

Small businesses often struggle with the administrative burden of compliance, managing audits, and maintaining cybersecurity. Government programs like the Small Business Administration (SBA) offer guidance and support for these companies​. 

There are plenty of other tips small businesses can adhere to when participating in government contracts – check out our article on The Basics of Government Contracts for more. 

Best practices for staying updated  

FAR and DFARS are updated regularly, with new clauses and requirements being added to address evolving priorities, such as cybersecurity and national security. To stay compliant, government contracting companies should: 

• Regularly check official websites: Websites like Acquisition.gov provide regular updates on FAR and DFARS clauses​. 

• Subscribe to newsletters: Many industry organizations and compliance groups offer newsletters that highlight changes in government contracting regulations. 

• Use compliance tools: Leveraging tools like Unanet GovCon ERP can help contractors manage compliance requirements efficiently, keeping track of updates, documentation, and auditing processes​​. 

Understanding and complying with regulations such as FAR and DFARS is essential for any contractor working with federal agencies. While these two specific regulations are important in their own way in certain scenarios, they aren’t the only ones.  

By staying informed about changes in regulations, using best practices for compliance, and utilizing resources designed to support government contractors, businesses can ensure they remain competitive and avoid the risks of non-compliance. 

If you’re looking to streamline your FAR and DFARS compliance processes, Unanet’s software solutions offer the tools and support you need to manage government contracts effectively. 

Looking to make business easy while freeing up more time to do the work that matters? Learn how Unanet can help. Schedule a demo today.