The Federal Acquisition Regulation faces its most significant overhaul in years, with new proposed rules that would dramatically compress deadlines for government contractors handling terminated contracts.
The Revolutionary FAR Overhaul, known as RFO, includes a proposed rule under FAR Case 2026-007 that would reduce the time contractors have to submit termination settlement proposals from one year to just 90 days.
The proposed changes stem directly from Executive Order 14275, signed by President Donald Trump on April 15, 2025, titled Restoring Common Sense to Federal Procurement.
The order declared that the 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.”
On June 23, 2026, the FAR Council issued four separate proposed rules to amend various parts of the FAR in order to implement the executive order’s directives.
Beyond the headline deadline reduction for settlement proposals, the proposed rule would also cut the window for submitting inventory disposal schedules from 120 days to just 60 days following termination.
Contractors seeking extensions on inventory schedules would face an even tighter constraint, with requests needing to be filed within 30 days of termination rather than the current 120-day window.
The stakes of missing these deadlines are significant, as failure to submit a termination settlement proposal or extension request on time would result in the contracting officer issuing a unilateral determination, with the contractor losing all appeal rights.
A second major change would shift audits of termination settlement proposals from mandatory to risk-based, requiring the Termination Contracting Officer to assess whether an audit is needed rather than automatically referring proposals above the certified cost or pricing data threshold for review.
The proposed rule would also revise termination clauses across FAR sections 52.249-2, 52.249-3, 52.249-5, and 52.249-6 to ensure the tighter deadlines are embedded directly into the contract clauses incorporated into active contracts.
Greenberg Traurig attorneys Joselino Morales Lopez and Jeffery M. Chiow advise that contractors should consider updating termination playbooks so that accounting, program, supply chain, contract, and legal teams are aware of the proposed 90-day, 60-day, and 30-day milestones.
They further recommend that contractors develop extension-request templates ready for rapid deployment when a termination is complex, involves many subcontractors, or requires extended inventory reconciliation.
Preserving contemporaneous cost records and segregating termination-related costs at the outset of any termination will become even more critical if the compressed timeline becomes law.
The public comment window on these proposed changes closes on July 23, 2026, and contractors operating in complex supply-chain or subcontract environments are encouraged to weigh in on whether the proposed timing is workable.