Government Contracting in 2026: Key Legal & Compliance Risks

By Aron C. Beezley and Gabrielle A. Sprio of Bradley Arant Boult Cummings LLP
Originally published January 26, 2026

As federal agencies continue to navigate budget constraints, geopolitical uncertainty, workforce shortages, and rapid technological change, government contractors entering 2026 face an increasingly complex legal and enforcement environment. Recent case law, agency guidance, and enforcement activity reflect a clear trend: Contractors are being held to higher standards of documentation, transparency, and internal controls across the procurement lifecycle.

Below are six legal issues government contractors should be actively monitoring—and preparing for—in 2026.

1. Heightened Scrutiny of Responsibility Determinations and Contractor Integrity

Agencies are paying closer attention to contractor “responsibility,” particularly with respect to ethics, compliance systems, financial viability, and past performance. Responsibility determinations—long considered largely discretionary—are increasingly shaped by issues that extend well beyond the instant procurement.

Recent litigation has highlighted that agencies must meaningfully consider responsibility before award, and that failures in this process can create protest risk, particularly where agencies rely on conclusory or undocumented determinations. Contractors have increasingly challenged responsibility determinations at the U.S. Court of Federal Claims where agencies allegedly failed to address known adverse information or improperly delegated responsibility analysis.

Agency-specific insight:

DoD contracting officers are increasingly coordinating responsibility reviews with suspension and debarment officials, even in the absence of a formal exclusion action. They are also using AI to conduct these reviews.
Civilian agencies, particularly those with large professional services portfolios, are more frequently relying on CPARS trends and external compliance issues to inform responsibility judgments.

Practical takeaway: Contractors should assume that compliance failures, negative press, labor issues, or cybersecurity incidents may surface during responsibility reviews—even if they did not arise under the specific contract at issue—and should be prepared to address them proactively in proposals and discussions.

2. Cybersecurity Compliance and the Continued Rise of FCA Exposure

Cybersecurity remains one of the most significant legal risks for government contractors in 2026, particularly as agencies continue to enforce contractual and regulatory safeguards for controlled unclassified information (CUI).

Recent False Claims Act (FCA) cases have demonstrated the government’s willingness to pursue FCA liability based on allegedly inaccurate cybersecurity representations, even where there is no evidence of a data breach or actual harm. Courts have shown increasing receptiveness to theories premised on “implied certification” and material misrepresentations regarding compliance with cybersecurity requirements.

Agency-specific insight:

DoD continues to focus on enforcement tied to representations regarding cybersecurity maturity and incident reporting.
Civilian agencies are increasingly scrutinizing cybersecurity compliance in responsibility determinations and during contract administration, not just at award.

Practical takeaway: Contractors should ensure that cybersecurity representations in proposals, system security plans, and certifications are fully supported in practice. Gaps between policy and implementation remain a primary driver of enforcement risk.

3. Labor and Employment Compliance as a Gateway Enforcement Issue

Labor compliance under the Service Contract Act (SCA) and Davis-Bacon Act (DBA) remains a major enforcement priority, particularly as agencies and the Department of Labor continue to focus on worker misclassification and fringe benefit compliance.

Recent enforcement actions underscore that even technical violations — such as improper fringe benefit calculations, failure to flow down wage determinations, or misclassification of workers as independent contractors — can lead to substantial back-pay liability and collateral consequences.

Agency-specific insight:

DOL audits increasingly focus on subcontractor practices, with prime contractors facing downstream exposure.
Contracting officers are more frequently considering unresolved labor violations in responsibility determinations and CPARS evaluations.

Practical takeaway: Contractors should periodically audit labor classifications and wage determinations, particularly where independent contractors or hybrid workforces are involved, and ensure that subcontractor compliance is actively monitored.

4. Aggressive Use of the FCA and Parallel Proceedings

The Department of Justice continues to deploy the FCA as a central enforcement tool against government contractors, often alongside agency investigations and administrative remedies.

Recent Supreme Court and appellate decisions have clarified aspects of scienter and materiality but have not meaningfully slowed FCA enforcement. Contractors increasingly face parallel proceedings, where a single alleged compliance failure triggers:

An FCA investigation,
An inspector general inquiry, and/or
Suspension or debarment consideration.

Agency-specific insight:

DOJ is increasingly willing to pursue FCA theories based on regulatory or contractual noncompliance, not just billing irregularities.
Suspension and debarment officials often rely on the existence of an FCA investigation — rather than its merits — to justify interim administrative action.

Practical takeaway: Early strategic assessment of potential FCA exposure is critical, particularly where compliance issues could be framed as false certifications or misleading representations.

5. Protest Risk After Corrective Action and Evolving Litigation Strategies

Bid protests have grown significantly in importance as the government procurement environment has become more complex and closely scrutinized. With tighter budgets, expanded use of technology and AI in evaluation processes, and heightened regulatory expectations, both filing protests and strategically intervening in protests are tools that are more critical than ever for protecting competitive integrity and ensuring fair outcomes. Contractors that smartly and proactively engage in the protest process — whether challenging award decisions or defending bids as intervenors — can influence procurement fairness, manage risk, and preserve valuable contractual opportunities in a crowded marketplace.

Agency-specific insight:

The GAO remains the primary forum for bid protests, with protesters continuing to obtain some form of relief in roughly half of the cases filed.
The Court of Federal Claims has experienced a steady increase in bid protest filings in recent years and is poised to play an increasingly influential role in the procurement landscape in 2026.

Practical takeaway: Contractors should carefully evaluate protest strategy early, including whether challenges to responsibility determinations, organizational conflicts of interest, or solicitation terms present more viable avenues for relief. Contractors should also consider intervening in bid protests where their contract award is potentially at risk.

6. Payment Delays, Funding Uncertainty, and Contract Disputes

Funding gaps, continuing resolutions, and administrative delays continue to result in late payments and contract administration disputes, particularly for cost-type and time-and-materials contracts.

Recent Contract Disputes Act (CDA) litigation reflects increased disputes over:

Allowability and allocability of costs,
Incremental funding obligations,
Nonpayment by the government, and
Government delays and constructive changes.

Agency-specific insight:

Civilian agencies have increasingly delayed payment while conducting post-invoice audits.
DoD contracting officers are generally scrutinizing cost documentation more aggressively, even for long-running contracts.

Practical takeaway: Contractors should document performance contemporaneously, monitor funding closely, and consider early assertion of CDA rights where payment delays threaten financial or operational stability.

Conclusion

The government contracting legal landscape in 2026 is defined by increased enforcement, closer scrutiny of contractor integrity, and greater willingness by agencies and DOJ to pursue compliance-based theories of liability. Contractors that approach compliance as a strategic, enterprise-wide function—rather than a reactive obligation—will be best positioned to compete and perform successfully.

Proactive audits, careful documentation, and informed litigation strategy remain among the most effective tools that contractors have to manage risk in an increasingly demanding federal marketplace.

Aron C. Beezley is the co-leader of Bradley’s nationally ranked Government Contracts Practice Group. Beezley’s experience includes representation of government contractors in numerous industries and in all aspects of the government-contracting process, including negotiation, award, performance, and termination. He can be reached at abeezley@bradley.com or 202.719.8254.

Gabrielle A. Sprio is an Associate in Bradley’s Construction Practice Group. Her practice focuses primarily on government contracts law. She can be reached at gsprio@bradley.com or 615.252.2257.