The federal government's return-to-office mandates generated major headlines, but many contractors misunderstood what those policies mean for their businesses. Federal employee telework policies and contractor place-of-performance requirements are governed by entirely different rules. Understanding the distinction is critical for pricing, staffing, and compliance.
Federal Employees vs. Federal Contractors: Different Rules
The return-to-office directives that began in January 2025 apply to federal civilian employees. As of early 2026, OPM reports that approximately 90% of federal employees are now working on-site full-time. The DoD alone has returned over 92% of its 780,000 civilian employees to in-person work. GSA, IRS, and most civilian agencies have followed suit, though union arbitration rulings at HHS and HUD have created pockets of ongoing legal disputes over telework protections in existing labor agreements.
Federal contractors, however, are not federal employees. Your work arrangements are governed by the terms of your contract, not by agency telework policies. In fact, FAR 7.108 states that agencies "shall generally not discourage a contractor from allowing its employees to telecommute" unless the contracting officer determines that agency or security requirements cannot be met remotely.
Each contract specifies a place of performance, which may be on-site at a government facility, at the contractor's own facility, remote, or hybrid. A contracting officer cannot unilaterally change your place of performance to match a new agency telework policy. Any change requires a formal contract modification.
That said, there is a significant spillover effect. With the vast majority of federal employees now back in offices, agencies are culturally and operationally favoring on-site contractor presence—especially for roles that require daily collaboration with government staff or access to CUI and classified systems. New solicitations are increasingly specifying on-site performance requirements where they previously allowed flexibility.
How Place of Performance Works in Federal Contracts
When an agency issues a solicitation, the place of performance is typically specified in the Statement of Work (SOW) or Performance Work Statement (PWS). This requirement is part of the contract's terms and affects several factors in your proposal.
Pricing. On-site work at a government facility in Washington, D.C., requires different labor rates than remote work performed from your office in a lower-cost area. Your proposed rates should reflect the actual cost of performing the work where specified.
Staffing. On-site requirements limit your candidate pool to employees who can commute to the specified location or who are willing to relocate. Remote-eligible contracts expand your hiring reach significantly.
Security. For contracts involving Controlled Unclassified Information (CUI) or classified data, the place of performance has direct security implications. Work performed at a government facility benefits from the agency's physical and network security infrastructure. Remote work with CUI requires your company to maintain compliant IT systems, access controls, and physical safeguards at each work location.
Facility clearances. Some contracts require a facility security clearance, which ties to a specific physical location. Remote work arrangements can complicate these requirements if employees are accessing classified or controlled systems from non-cleared facilities.
Cybersecurity Requirements for Remote Contract Work
The cybersecurity requirements for federal contract work do not relax because work is performed remotely. If anything, remote work increases the security burden on contractors.
CMMC compliance. The CMMC 2.0 final rule took effect in November 2025, and contracting officers are already requiring self-assessed CMMC status in new solicitations. If you are a DoD contractor handling CUI, your certification requirements apply to every system and location where CUI is processed, stored, or transmitted—including a remote employee's home office. Third-party certification assessments become mandatory for many Level 2 contracts starting November 2026.
NIST 800-171. The 110 security controls in NIST SP 800-171 apply to your information systems regardless of where they are physically located. Remote work environments must meet the same encryption, access control, audit logging, and incident response standards as your primary office.
FedRAMP. Cloud services used for federal work must meet FedRAMP authorization requirements. The FedRAMP 20x program launched in 2025 is shifting toward continuous, machine-readable security validation—a major overhaul of the authorization process. This applies whether your team accesses cloud services from a government facility, your corporate office, or a home office.
Endpoint security. Company-issued devices with managed security configurations are essential for remote federal work. Personal devices accessing federal systems or CUI create compliance gaps that can result in contract termination.
What Contractors Should Do
Read your contracts carefully. Review the place-of-performance clauses in every active contract and pending solicitation. Know exactly what is required and what flexibility exists.
Do not assume remote work is the default. Even if your previous task order allowed remote work, the next one under the same vehicle may require on-site presence. Evaluate each opportunity individually.
Build your cybersecurity infrastructure for distributed work. Whether or not your current contracts allow remote work, the trend toward hybrid arrangements means your security posture needs to support employees working from multiple locations. Invest in endpoint management, VPN infrastructure, multi-factor authentication, and data loss prevention tools.
Price accurately for the work location. If a contract specifies on-site work in a high-cost metro area, your labor rates need to reflect that. If remote work is allowed, you may have a competitive pricing advantage by leveraging talent in lower-cost regions. Either way, your pricing must align with the actual place of performance.
Monitor contract modifications. As agencies adjust their own operations, some may issue modifications to change place-of-performance requirements on existing contracts. Track these changes and assess the cost and staffing implications before agreeing to modifications.
Looking Ahead
The landscape is more complicated than simple "everyone is back in the office" headlines suggest. The government is simultaneously pushing return-to-office mandates while reducing its physical office footprint—GSA has terminated hundreds of federal leases as part of efficiency initiatives, and the USE IT Act (effective January 2026) requires agencies to demonstrate 60% building utilization or submit consolidation plans. This tension between mandating in-person work and shrinking available workspace creates uncertainty that will take time to resolve.
For contractors, the strategic advantage lies in flexibility. Agencies that want to require on-site contractor presence must specify it in their solicitations and contracts. Those comfortable with remote or hybrid contractor work will continue to offer that flexibility where the mission allows. The contractors best positioned to win are those who can perform effectively in any configuration—maintaining the cybersecurity infrastructure, staffing models, and security posture to support on-site, remote, or hybrid work as each contract requires.
If you have questions about how place-of-performance requirements affect your federal contracting strategy, FEDCON's advisors can help you evaluate your current contracts and position for upcoming opportunities. Call our Help Desk at 1-855-233-3266.