Gordon Rees Scully Mansukhani’s Government Contracts Practice Group highlights the key developments from the past month and their implications for federal contractors. Our team tracks significant decisions, regulatory changes, and practical updates to help contractors stay compliant in a rapidly changing environment.
Tune in to Episode 24 of The Essential GovCon Brief podcast on Spotify or YouTube for a discussion on the issues highlighted below.
FAR Overhaul Enters Formal Rulemaking
On June 23, 2026, the Federal Acquisition Regulation (FAR) Council published the first package of proposed rules under the Revolutionary FAR Overhaul (RFO), marking the beginning of the formal rulemaking process for what could become the most significant restructuring of the Federal Acquisition Regulation in more than 40 years. The proposed rules implement Executive Order 14275, Restoring Common Sense to Federal Procurement, and represent the second phase of the Administration’s effort to streamline the FAR by removing unnecessary regulatory requirements, simplifying acquisition procedures, and relocating non-statutory guidance to online buying resources.
The initial package proposes revisions to 18 FAR Parts governing acquisition planning, competition, market research, information technology, agency protests, publicizing contract actions, contract forms and clauses, and other administrative requirements—specifically Parts 1, 2, 4, 5, 6, 7, 10, 18, 24, 26, 29, 33, 37, 39, 40, 41, 52, and 53. Because awards made under the class deviations and legacy FAR will remain governed by those versions, contractors may need to track obligations under multiple regulatory frameworks simultaneously.
Among the more notable proposed changes are:
- Simplified acquisition planning: The proposal would significantly streamline acquisition planning requirements by replacing lengthy written acquisition plans with a more flexible approach that permits concise documentation and, where appropriate, oral planning.
- Creation of new FAR Part 40: Cybersecurity, information security, and supply chain security requirements currently dispersed throughout the FAR would be consolidated into a dedicated part, making security-related requirements easier to locate and apply.
- Streamlined market research: Market research requirements would be integrated into the acquisition planning process to reduce duplication and simplify pre-award planning.
- Periodic review of FAR requirements: The proposals would establish a recurring review process designed to identify outdated or unnecessary regulations and help prevent continued expansion of the FAR.
- Potential clause renumbering: The FAR Council is also seeking public comment on whether solicitation provisions and contract clauses should be renumbered to clearly distinguish revised clauses issued under the RFO from legacy FAR provisions.
Notably, the initial package does not include revisions to FAR Part 19 (Small Business Programs), which is expected to be addressed in a subsequent rulemaking.
Although many of the proposed revisions are intended to reorganize and simplify existing requirements rather than impose new substantive obligations, they represent the first formal rulemaking step toward a comprehensive restructuring of the FAR. Contractors should expect additional proposed rules throughout 2026 and should closely monitor future revisions to determine how the evolving framework may affect their procurement and compliance practices.
GSA Proposes AI Data Safeguarding Rule for LLM Contractors
On June 17, 2026, the General Services Administration (GSA) published a proposed General Services Acquisition Regulation (GSAR) rule that would establish baseline contractual data safeguarding requirements for contractors providing large language model (LLM) artificial intelligence systems that process government data. The proposed rule would add new GSAR clause 552.239-7001, “Basic Safeguarding of Data within Large Language Model Artificial Intelligence Systems (LLMs),” for use in GSA acquisitions involving LLM technologies, including the Federal Supply Schedules, Governmentwide Acquisition Contracts (GWACs), and OASIS+.
Among the proposal’s key requirements are:
- Scope and applicability: The proposed clause would apply when contractors use LLMs to process government data, subject to limited exceptions for LLM functionality embedded in common commercial products or where AI capabilities are merely incidental to the primary products or services being provided.
- Government data ownership and prohibited uses: The Government would retain ownership of all government data, including outputs generated from that data. Contractors would be prohibited from using government data to train or improve LLMs, support marketing or other business operations, or disclose such data except as authorized under the contract.
- Supply chain responsibilities and subcontractor flowdown: The proposed rule establishes defined roles for LLM Developers, LLM System Operators, LLM System Integrators, and LLM Service Providers, while requiring contractors to flow applicable safeguarding requirements down to subcontractors performing those functions.
- Restrictions on foreign involvement: Core LLM components could not be developed or operated by entities subject to the control or influence of adversary foreign governments. However, the proposal recognizes that certain foreign-developed components, such as open-source software, may be permissible where they do not present unacceptable security risks.
- Protection of contractor intellectual property: The proposed clause includes protections for contractors’ preexisting proprietary information, or “Background Data,” helping ensure that proprietary reference materials, knowledge bases, and other intellectual property remain protected when incorporated into LLM-enabled services.
GSA held a public listening session on July 14, 2026, and comments on the proposed rule are due August 3, 2026.
Although the proposed clause would initially apply only to GSA acquisitions, it may serve as a model for future AI procurement requirements across the federal government. Contractors developing, integrating, or deploying AI-enabled products and services should closely review the proposed requirements, as they would establish significant new obligations governing data safeguarding, supply chain oversight, subcontractor management, and the permissible use of government data.
SBA Proposes New Standards for Demonstrating Social Disadvantage Under the 8(a) Program
On June 11, 2026, the U.S. Small Business Administration (SBA) published a proposed rule that would significantly revise the eligibility requirements for individually owned participants in the 8(a) Business Development Program. The proposal would eliminate the longstanding rebuttable presumption that members of certain designated racial and ethnic groups are socially disadvantaged and instead require all individually owned applicants to establish social disadvantage through individualized, objective evidence.
Under the proposed rule:
- Individualized evidence required. All individually owned 8(a) applicants would be required to demonstrate social disadvantage by submitting verifiable, fact-based evidence of discrimination or bias, regardless of race or ethnicity.
- No changes for entity-owned firms. The proposal expressly does not affect eligibility requirements for businesses owned by Indian tribes, Alaska Native Corporations (ANCs), Native Hawaiian Organizations (NHOs), or Community Development Corporations (CDCs).
- Objective supporting evidence. Applicants would need to support claims of social disadvantage with evidence demonstrating that government or private-sector policies, practices, or actions disadvantaged their group or favored others. The proposed rule provides examples of acceptable supporting documentation, including government records, corporate policies, court decisions, and administrative findings.
The proposed rule is intended to align SBA’s regulations with the 2023 Ultima Services Corp. v. U.S. Department of Agriculture decision, which held that SBA’s prior rebuttable presumption of social disadvantage violated the Equal Protection Clause. By formally removing that presumption from its regulations, SBA seeks to establish a single evidentiary standard for all individually owned applicants while leaving the statutory eligibility framework for entity-owned participants unchanged.
The proposal would apply prospectively to individually owned applicants seeking admission to the 8(a) Program. Current 8(a) participants would not be required to re-establish their eligibility. However, applicants with pending applications should closely monitor the rulemaking process, as the evidentiary requirements applicable to their applications could depend on the timing of any final rule.
If finalized, the rule would significantly change the application process for individually owned businesses seeking admission into the 8(a) Program. Prospective applicants should evaluate whether they have sufficient documentation to support claims of social disadvantage under the proposed evidentiary standard.
GRSM Government Contracts Practice Group
GRSM’s Government Contracts team supports contractors throughout the entire procurement lifecycle, providing both proactive counseling and representation in disputes.
Our attorneys advise on compliance, small business programs, cost and pricing requirements, cybersecurity, subcontracting, and other regulatory issues, while also litigating bid protests, claims, and agency matters nationwide.
Please contact Patrick Burns, Meredith Thielbahr, or Jeremy Camacho with any questions or for additional information.