What You Need to Know

On November 29, 2024, the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) proposed a rule to update acquisition-related thresholds under the Federal Acquisition Regulation (FAR). These adjustments, mandated by law every five years, reflect inflation's impact on contracting, subcontracts, and other acquisition actions.

This proposed update is significant for federal contractors, small businesses, and government agencies alike, as it ensures acquisition processes remain efficient and aligned with current economic realities.

What Changes Are Being Proposed?

The proposed rule includes several important threshold adjustments, affecting a wide range of acquisition activities. Key changes include:

FAR Micro-Purchase Threshold:

• Current: $10,000
• Proposed: $15,000

This change will simplify purchasing processes for low-cost items, reducing the administrative burden for federal buyers.

Simplified Acquisition Threshold (SAT):

• Current: $250,000
• Proposed: $350,000

The simplified acquisition threshold increase could encourage more streamlined procurement processes for mid-sized contracts, benefiting both agencies and contractors.

Reporting and Justifications Thresholds:

• First-tier subcontract reporting (FAR subpart 4.14): From $30,000 to $40,000.
• Justification for competition limits for eligible 8(a) awards: From $25 million to $30 million.

These changes are designed to reduce reporting burdens while maintaining transparency and competition.

Cost or Pricing Data Requirements:

• Current: $2 million
• Proposed: $2.5 million

Raising this threshold reduces the need for cost or pricing data on lower-value contracts, speeding up the negotiation process.

Simplified Procedures for Commercial Products and Services:

• Ceiling: From $7.5 million to $9.5 million; higher ceilings for certain acquisitions: From $15 million to $20 million.

This change could enhance flexibility and efficiency for procuring commercial items.

Prime Contractor Subcontracting Plan Thresholds:

• Floor: From $750,000 to $950,000
• Construction: From $1.5 million to $2 million

These adjustments provide relief to contractors by increasing the dollar limits that trigger subcontracting requirements.

For a full list of proposed changes, refer to the Federal Register's published rule here.

Why Do These Changes to Simplified Acquistion Threshold Matter?

The inflation adjustments to acquisition thresholds are more than just administrative updates; they have broad implications:

• Streamlined Procurement Processes:

Higher thresholds reduce administrative burdens on both federal agencies and contractors, particularly for low-value and mid-range acquisitions.

• Enhanced Efficiency:

Agencies can use simplified procedures for higher-value purchases, accelerating the procurement timeline.

• Alignment with Economic Trends:

By accounting for inflation, these changes ensure federal spending power reflects current market conditions, maintaining the integrity of government acquisition.

• Opportunities for Small Businesses:

Small businesses may find it easier to compete for contracts under higher thresholds that alleviate complex reporting and justification requirements.

How Will This Affect Contractors?

Federal contractors should prepare for the potential impacts of these changes by:

• Reviewing current contracts to assess how adjustments might affect reporting or compliance obligations.
• Updating internal systems and processes to align with the new thresholds.
• Staying informed about the final rule to ensure seamless adaptation to the updated FAR requirements.

Next Steps and Public Comment

The proposed rule is open for public comment until January 28, 2025. Stakeholders are encouraged to review the changes and provide feedback via the Federal Register to help shape the final rule.

By actively participating in the comment period, contractors and other stakeholders can ensure their voices are heard and contribute to a fair and effective regulatory process.

Proposed Simplified Acquistion Threshold Adjustments Takeaway:

The proposed inflation adjustments to acquisition-related thresholds are an important step toward streamlining federal acquisition processes. These updates promise to improve efficiency, reduce administrative burdens, and better align contracting practices with today's economic landscape.

To learn more or submit comments on the proposed rule, visit the Federal Register.