Contributors

Related

Zoe Waldman, Intern, contributed to this client alert.

What Changed and Why? The FAR Council Issues a Rule to Amend FAR Thresholds for Inflation Every Five Years Pursuant to a Statute.

Effective October 1, 2025, the Federal Acquisition Regulation (FAR) Council issued a final rule to amend FAR thresholds applied in federal procurements. By statute, these thresholds are required to be updated for inflation every five years, using the Consumer Price Index. The threshold changes do not apply to the Construction Wage Rate Requirements statute, the Service Contract Labor Standards statute, performance and payment bonds, and trade agreements thresholds.

What Are the Key Changes? 

1. Micro-Purchase Threshold (MPT): The MPT is the threshold below which government purchases can be made without soliciting competitive bids, simplifying procurement procedures to expedite small transactions.

  • Standard MPT: Increased from $10,000 → $15,000
  • Contingency Operations: 
    • U.S.: $20,000 → $25,000
    • Outside U.S.: $35,000 → $40,000
  • Impact: Provides agencies with a higher threshold to make fast and small purchases without competition. 

2. Simplified Acquisition Threshold (SAT): The SAT is the monetary limit under which federal agencies can use simplified acquisition procedures to streamline the procurement process, making it easier and faster to acquire goods and services.

  • Standard SAT: Increased from $250,000 → $350,000
  • Contingency Operations: 
    • U.S.: $800,000 → $1,000,000
    • Outside U.S.: $1,500,000 → $2,000,000
  • Impact: More procurements qualify for streamlined procedures, reducing administrative work and speeding up awards. 

3. Cost or Pricing Data Threshold: This is the threshold at which contractors may be required to submit certified cost or pricing data to establish fair and reasonable pricing. This type of data is often burdensome to prepare and is accompanied by exposure to defective pricing claims under the Truthful Cost or Pricing Data statute (formerly TINA).

  • Contracts After July 1, 2018: $2,000,000 → $2,500,000
  • Contracts Before July 1, 2018: $750,000 → $950,000
  • Impact: Fewer contracts meet the threshold for certified cost and pricing data, reducing burden and exposure to defective pricing issues.

4. Subcontracting Plan Thresholds: This is the threshold at which federal contractors are required to submit a subcontracting plan, detailing how they will provide opportunities for small businesses to participate in the contract.

  • Supplies/Services: $750,000 → $900,000
  • Construction: $1,500,000 → $2,000,000
  • Impact: Fewer primes will need formal subcontracting plans. 

5. 8(a) Competition Limitation Threshold: This is the threshold beneath which federal agencies may issue awards to 8(a) firms on a sole-source basis.  Above this threshold, the contract must be competitively awarded among eligible 8(a) participants.

  • General Ceiling: $25,000,000 → $30,000,000
  • Manufacturing Ceiling: $7,000,000 → $8,500,000
  • Impact: Agencies and 8(a) contractors have easier access to sole-source awards. 

6. Simplified Procedures: Commercial Products/Services Threshold:

•    Ceiling: $7,500,000 → $9,000,000
•    Impact: Provides a higher threshold for agencies to purchase commercial items using streamlined procedures, making commercial items more accessible and easing the regulatory burden of selling commercial items to the government.

The new FAR thresholds help mitigate the impact of inflation and provide agencies with more ability to use streamlined procedures to make smaller purchases with less regulatory burden.  With the current Administration’s recent emphasis on procurement of commercial items, the increased threshold for streamlined commercial acquisitions will be helpful to contactors who are seeking to offer commercial products and services to the government.

The new thresholds will also increase opportunities for small businesses and 8(a) contractors. From FY 2022 to 2024, the government awarded more than, approximately, 560,000 awards valued at or below the MPT of $10,000. With the heightened threshold, the government estimates a nine percent increase in the number of MPT awards. Additionally, from FY 2022 to 2024, the government awarded approximately 235,000 contract actions above the current MPT but at or below the current SAT to more than, approximately, 48,000 different contractors. The government estimates that, with the increased SAT threshold, another 5,150 contract actions (two percent) could be awarded to approximately 3,580 different entities via contracts at or below the SAT.  

If you have any questions about this alert, please contact the authors or the Womble Bond Dickinson attorneys with whom you normally work.

Zoe Waldman is a J.D. Candidate at The George Washington University Law School and currently is interning with Womble Bond Dickinson.
 

Recommended