Navigating the new government contracting landscape

Federal procurement reform, the FAR overhaul, and shifting DCAA audit priorities are fundamentally changing how government contractors compete, price, and perform. Contractors that treat compliance as a strategic advantage will be better positioned to win and retain business.

Key takeaways 

• A strong control environment reduces audit scope, accelerates resolution, and signals organizational maturity to contracting officers and auditors.

• Contractors on cost-reimbursable work need year-round ICS management, including monthly cost monitoring, early identification of unallowable costs, and documentation standards that support a clean submission from day one.

• From audit readiness assessments and indirect rate strategy to incurred cost submissions and internal control design, Highspring helps contractors at every scale build the operational foundation to compete effectively.

Regulatory reform and evolving audit priorities are reshaping what it takes to compete

Federal procurement is changing in ways that will reshape how government contractors compete, price, and perform. A sweeping overhaul of the Federal Acquisition Regulation (FAR), evolving Defense Contract Audit Agency (DCAA) audit priorities, and a shifting statutory landscape together signal a structural reset.

In this blog, we examine what these shifts mean for contractors in Government Contracting Advisory Services (GCAS) and Aerospace and Defense (A&D), and how contractors at every scale can build the operational foundation to compete effectively.

A landscape in transition

Procurement reform, a FAR overhaul, and a sharper DCAA audit process are arriving simultaneously, changing the rules of engagement across the contract lifecycle. Large primes face growing scrutiny on pricing systems and cost accounting, while mid-sized and emerging contractors must now build compliance infrastructure that was once optional at their scale.

The central question is how quickly contractors can turn compliance obligations into competitive advantages. Those that treat these shifts as strategic opportunities will be better positioned to win and retain business.

A commercial-forward reset

The goal of the FAR overhaul is faster acquisitions, greater competition, and better results. This structural shift toward a commercial procurement model changes how products and services are acquired, and non-traditional, innovation-led firms are gaining influence over acquisition pathways.

Contractors operating under outdated assumptions face real risks: misaligned pricing structures, contract vehicles that no longer reflect current policy, and reduced competitiveness against nimbler entrants. The practical response is to assess exposure now, reviewing pricing structures, contract vehicles, and internal policies tied to provisions that may no longer exist.

The increasing importance of audit readiness

Auditors are increasingly positioned closer to the programs they review, so program-level narratives, pricing assumptions, and documentation matter more than ever. One of the most important factors in audit readiness is the strength of the control environment.

Auditors evaluate both inherent risk and control risk. While inherent risk is largely driven by contract type and structure, control risk is directly influenced by how well an organization operates. Clear policies, defined processes, and consistent documentation all signal maturity. When those elements are in place, audit scope often narrows, and testing becomes more targeted.

The entrance conference and walkthrough phases are especially important. They set the tone for how auditors assess risk and determine the depth of testing that follows. Strong preparation in these early stages often translates into a more efficient audit process overall.

Incurred cost discipline, year-round

For contractors on cost-reimbursable work, incurred cost submissions (ICS) demonstrate that claimed costs are allowable, allocable, and reasonable. The most common challenge is treating ICS preparation as a year-end sprint rather than a continuous effort. Late or inaccurate submissions create financial exposure, trigger heightened scrutiny, and erode credibility with contracting officers.

A proactive approach includes:

• Monthly or quarterly cost monitoring cycles

• Close alignment between accounting systems and contract requirements

• Early identification of unallowable or questionable costs

• Documentation standards that support a clean submission from day one

Contractors who manage ICS as an ongoing process see narrower audit scope, faster resolution, and fewer surprises.

Control environments that signal maturity

With DCAA leaning on data analytics, weak systems and inconsistent data patterns are easier to detect and harder to explain. A mature control environment starts every audit interaction from a position of credibility.

That maturity includes clear, consistently applied cost accounting policies, defined processes for labor charging and indirect cost pools, reliable timekeeping and purchasing systems, and regular internal reviews. Large primes typically maintain and defend existing environments, while mid-sized contractors must build them deliberately. In both cases, the payoff extends beyond audits: faster resolution, fewer findings, and stronger pricing credibility.

How Highspring helps

Highspring positions contractors by fueling growth, protecting and sustaining organizational value, and creating sustainable strategies. This helps address complex regulatory compliance, achieve cost efficiencies, and optimize processes and technology. Our GCAS team works across the full spectrum of compliance and operational challenges:

• Audit readiness assessments and preparation, so contractors know where they stand before DCAA does

• Cost visibility and indirect rate strategy, to keep rates defensible and aligned with actual performance

• Incurred cost submission support, from system alignment through final submission

• Internal control design and documentation, tailored to size, contract portfolio, and risk profile

• Process optimization and compliance program development aligned to FAR and DCAA requirements

Highspring’s Aerospace and Defense capabilities span accounting advisory, business transformation, digital, enterprise applications, executive search, governance, risk and compliance, and transaction advisory. That breadth matters because pricing credibility, system adequacy, organizational structure, and technology are all interconnected.

Approached strategically, regulatory change is an opportunity. Working with an experienced partner who understands both the regulations and operational realities of government contracting speeds up the transition and drives lasting results.

Connect with Highspring’s GCAS team or explore our Aerospace and Defense capabilities to assess your readiness and build a strategy that positions your organization to compete and grow.