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On April 15, 2025, President Donald Trump issued Executive Order (EO) 14275, Restoring Common Sense to Federal Procurement, “to create the most agile, effective, and efficient procurement system possible.” EO 14275 explained that the Federal Acquisition Regulation (FAR) “has swelled to more than 2,000 pages of regulations, evolving into an excessive and overcomplicated regulatory framework and resulting in an onerous bureaucracy.” The EO’s policy focus is “[r]emoving undue barriers, such as unnecessary regulations, while simultaneously allowing for the expansion of the national and defense industrial bases is paramount.” EO 14275 directed the FAR Council and Office of Management and Budget (OMB) to create an efficient set of procurement regulations that contain only provisions required by statute or essential to sound acquisition strategies.
On June 23, 2026, as part of the Revolutionary FAR Overhaul (RFO) process, the FAR Council issued four separate proposed rules to amend various parts of the FAR to implement EO 14275. One of the proposed rules is titled “Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 3 and 49,” FAR Case 2026-007.
In our first GT Alert concerning the RFO Rulemaking, we discussed the proposed FAR CUI Rule, contained in RFO Part 40. In our second GT Alert concerning the RFO Rulemaking, we discussed the proposed changes to the deadlines in FAR Part 49, concerning termination settlement proposals. In our third GT Alert, we discussed the proposed changes to FAR Part 33, which governs the bid protest process.
This GT Alert details the proposed changes to FAR Part 3, which governs improper business practices and personal conflicts of interest.
Key Proposed Changes to FAR Part 3
FAR Part 3 prescribes policies and procedures for avoiding improper business practices and personal conflicts of interest and for addressing their apparent or actual occurrence.
The proposed RFO rule retains the statutory backbone of Part 3, including procurement integrity requirements, revolving-door restrictions, conflicts-of-interest rules, anti-kickback restrictions, restrictions on gratuities and contingent fees, whistleblower protections, and requirements for contractor codes of business ethics and conduct. The FAR Council, however, notably proposed several administrative changes to the operative text of the FAR Part 3. For example, the proposed rule would remove references to superseded Executive Order 11222 (Prescribing Standard of Ethical Conduct for Government Officers and Employees), delete informational or guidance-like provisions such as current FAR 3.301 (Standards of Conduct) and 3.406 (Records), streamline Subpart 3.7 (Voiding and Rescinding Contracts), remove obsolete American Recovery and Reinvestment Act of 2009 whistleblower language, and codify the preponderance-of-the-evidence standard when an agency considers rescission of a contract based on a suspected Procurement Integrity Act violation.
Proposed FAR 3.104-4(d): Contractor Markings and Procurement Integrity
The most substantive FAR Part 3 revision is the proposed rewrite of FAR 3.104-4(d). The current FAR provision generally cross-references the technical-data procedures in FAR Part 27 relevant to when the government challenges a contractor’s proprietary marking on technical data. FAR Part 27 concerns rights in patents, data, and copyrights — including, in relevant part, restrictive legends and technical-data deliverables. FAR 27.404-5 includes a procedure for the government to return or ignore delivered technical data containing unauthorized markings, permitting the contractor an opportunity to justify its marking of data.
The proposed rule would replace the cross-reference to FAR 27.404-5 with a process focused on procurement integrity determinations for “contractor bid or proposal information” and source-selection information. “Contractor bid or proposal information” is defined under FAR 3.104-1 as:
Any of the following information submitted to a Federal agency as part of or in connection with a bid or proposal to enter into a Federal agency procurement contract, if that information has not been previously made available to the public or disclosed publicly:
(1) Cost or pricing data (as defined by 10 U.S.C. 3701(1) with respect to procurements subject to that section, and 41 U.S.C. 3501(a)(1), with respect to procurements subject to that section.
(2) Indirect costs and direct labor rates.
(3) Proprietary information about manufacturing processes, operations, or techniques marked by the contractor in accordance with applicable law or regulation.
(4) Information marked by the contractor as “contractor bid or proposal information” in accordance with applicable law or regulation.
(5) Information marked in accordance with 52.215-1(e).
The proposed revisions to FAR 3.104-4(d) concern procurement integrity information in the acquisition process, including proposal information and source-selection information. Practically, the question would not be whether the contractor granted the government a particular technical-data license, but whether the information is properly protected during the acquisition process and before disclosure to third parties. The proposed FAR Part 3 process would give the offeror or contractor a justification opportunity tailored to the procurement, while avoiding a technical-data-rights mechanism that may not be applicable to the situation:
- First, the proposed FAR 3.104-4(d) would require that if the contracting officer believes a marking is improper, the agency must notify the offeror or contractor in writing. The agency would also be required to provide up to 60 days for the offeror or contractor to respond and justify the marking before the agency disregards or removes it.
- Second, the failure to respond or provide a written justification would allow the government to cancel or ignore the markings.
- Third, if the offeror or contractor provides a written justification substantiating the markings, the contracting officer would be required to consider the justification.
Upon consideration, the contracting officer may agree that the marking is proper and would then be required to notify the contractor in writing. However, if the contracting officer were to decide that the markings are not authorized, the contracting officer would be required to “obtain concurrence at one level above the contracting officer [] and provide the offeror or contractor a written determination regarding the appropriateness of the markings.” This “determination must state that the Government will cancel or ignore the markings and that the information will no longer be subject to disclosure prohibitions, unless the offeror or contractor seeks relief through applicable remedies[.]” The government would not be able to “cancel or ignore the markings until final resolution of the matter through these processes.”
FAR Part 52 Conforming Changes Tied to Part 3
The proposed rule would also standardize clause prescriptions, which would allow contracting officers to more easily identify which Part 3 clauses apply to acquisitions for commercial products, commercial services, and commercially available off-the-shelf (COTS) items, as shown in the following table.
The FAR Council also clarified which clauses would be required to flow down to subcontractors:
Takeaways
Contractors may wish to consider:
- Updating proposal-marking templates and internal escalation procedures so they are available if a contracting officer challenges a proprietary marking.
- Making proposal markings precise and defensible and tying them to the protected categories in the procurement integrity framework, rather than labeling broad sections of materials as proprietary.
- Using solicitation questions to confirm marking instructions and raising any conflict between the solicitation and FAR-protected proposal information.
- Responding promptly to an agency if it notifies the contractor that a marking appears improper and providing a focused written justification tying each marking to the statutory categories of contractor bid/proposal information or other protected information. If the proposed rule takes effect, stakeholders would need to meet the established timeframe for a response.
- Engaging with experienced counsel if the agency decides to disclose or use proprietary information in a way that affects an ongoing or future procurement.
- Being mindful that if a dispute concerns contract administration or any contractual nondisclosure/marking obligations, it may fall within the disputes procedure.
- Participating in the submitter-notice FOIA process, preserving objections, and preparing to seek judicial relief if the agency proposes disclosure to a third party’s FOIA request.