Raising the Bar: FAR Council Finalizes 2025 Inflation Adjustments to Acquisition Thresholds

The Federal Acquisition Regulatory Council—OFPP/OMB, DoD, GSA, and NASA—has issued Federal Acquisition Circular (FAC) 2025–06, finalizing the quinquennial inflation adjustments to acquisition-related thresholds across the FAR. The rule implements 41 U.S.C. 1908, which directs updates every five years using the Consumer Price Index for All Urban Consumers (CPI-U), and expressly excludes the Davis-Bacon Act, Service Contract Labor Standards, performance and payment bonds, and trade agreements thresholds. The agencies also apply the same methodology to selected non-statutory thresholds to preserve the status quo in real terms.

Most practitioners will feel the impact first in everyday buying. The micro-purchase threshold rises from $10,000 to $15,000, with contingency/defense thresholds moving to $25,000 (inside the U.S.) and $40,000 (outside the U.S.). The simplified acquisition threshold jumps from $250,000 to $350,000, with contingency thresholds moving to $1 million domestically and $2 million overseas, and the humanitarian/peacekeeping level to $650,000. These changes collectively widen the use of streamlined procedures for low-risk, lower-dollar actions.

Several adjacent levers also move. First-tier subcontract reporting (including executive compensation) increases to $40,000. The ceiling for simplified procedures for certain commercial products and services under FAR 13.5 climbs to $9 million, though the special $15 million ceiling in 13.500(c) does not change. Pre- and post-award publicizing thresholds in FAR part 5 remain at $25,000 because of trade agreements.

Competition and pricing thresholds are recalibrated as well. A separate justification is now required when awarding an 8(a) sole-source contract over $30 million (up from $25 million). Approval levels for other than full and open competition step up to $900,000, $20 million, and $90 million (with a $150 million tier for DoD, NASA, and Coast Guard). The cost or pricing data threshold rises to $2.5 million for contracts awarded on or after July 1, 2018, and to $950,000 for pre-July 2018 awards. Prime contractor subcontracting plan thresholds increase to $900,000 generally and $2 million for construction.

Behind the scenes, the Councils adjusted their CPI anchor. While the proposed rule estimated March 2025 CPI, the final rule uses the April 2025 CPI-U of 320.795 because it was available and more accurately reflected inflation at the time of finalization. This recalculation changed a handful of published proposals, including various justification approval thresholds and commercial item procedure ceilings.

Timing matters for planning. FAC 2025–06 is published August 27, 2025, with FAR Case 2024-001 effective October 1, 2025; otherwise, FAC content is effective August 27. Agencies underscore that the net effect is to maintain consistency over time by offsetting inflation rather than imposing new requirements.

For context, this is the fifth comprehensive adjustment since Congress enacted the mechanism in 2004, with the last cycle finalized in October 2020. The 2025 update follows a proposed rule issued November 29, 2024, and a comment process drawing 33 responses, several of which the Councils addressed in the preamble.

Credit is due to the issuing bodies and signatories stewarding the update on behalf of the FAR Council, including William F. Clark, Director of Government-wide Acquisition Policy (GSA/OGP), and senior procurement leadership across OMB, DoD, GSA, and NASA identified in the notice.

Disclaimer: This post summarizes a Federal Register final rule and is provided for general information only, not legal or contracting advice. Always consult the official notice and agency guidance before making decisions or relying on threshold applicability.