The clause that no longer tells you what to do

Open FAR clause 52.222-17 today and it reads, in full: [Reserved]. For years that clause told recompete winners what to do with the incumbent workforce they inherit, and the federal right of first refusal it enforced is gone with it. Win a recompete in 2026 and the largest bulk-hiring event in government contracting still lands on your desk at once: a proven, already-cleared workforce doing the exact job you underbid to take over. What changed is that keeping them is now entirely your call. What did not change is the reason to want them, and it beats any mandate. Cleared incumbents start billing faster than anyone you hire from scratch, because their clearances transfer under reciprocity with no new investigation.

Is there still a right of first refusal in 2026?

Short answer: No. The federal nondisplacement mandate is gone. Executive Order 14148 revoked EO 14055 on January 20, 2025, the Department of Labor rescinded the implementing regulations in a rule published December 22, 2025, and FAR clause 52.222-17 and FAR subpart 22.12 both now read [Reserved].

The rule had a specific shape while it lasted, and knowing it explains what you are no longer bound by. Under the former FAR 52.222-17, the departing contractor had to furnish a certified list of its service employees not less than 30 days before it finished performance, and the winning contractor’s job offers had to give each employee at least 10 days to accept. Miss the mechanics and the Department of Labor could order back pay or reinstatement. That machinery no longer runs against a recompete winner.

Executive Order 14055 had stated the theory plainly: when a follow-on contract is awarded for the same or similar services, the government’s procurement interest in economy and efficiency is best served when the successor hires the predecessor’s employees. The clause has come and gone with administrations, and this time it came out. A recompete winner in 2026 may hire none of the incumbents, all of them, or any subset it wants, with no obligation of first refusal and no certified-list deadline ticking against the loser. The decision is a business call again, which is where clearance economics take over the argument.

Why re-badge incumbents if you are not required to?

Short answer: Because a person who already holds a current clearance can be reused without a new investigation, while a net-new hire waits in DCSA’s queue. Incumbent capture in 2026 is a speed play. The incumbents are pre-vetted, contract-fluent, and billable almost immediately, which protects revenue during the transition-in.

The math is about time-to-billing, and it is stark. A person you sponsor for a brand-new clearance enters an investigation pipeline that DCSA is still working down. The agency’s case inventory fell 24 percent between September 2024 and April 2025, from 291,200 investigations to 222,700, which is real progress and still a backlog measured in the hundreds of thousands. Every day that hire sits unadjudicated is a day of unbilled labor against a wrap rate you already committed to in your bid.

An incumbent already cleared for the work carries no such wait. There is no new investigation to open, because the government already ran one. That is the entire advantage, and it converts directly into billable hours in the first month of performance, which is worth more to a transition-in than any mandate ever was. The pool is deep. Roughly a million cleared people work in the National Industrial Security Program on a FY2022 count, and a recompete concentrates the exact ones trained on your contract in one place, including anyone a competitor’s layoff just put on the market.

How does clearance reciprocity make a re-badge fast?

Short answer: Reciprocity lets one agency’s clearance determination carry to a new employer without redoing it. Under 32 CFR 117.10(h), a prior adequate-scope investigation is used without further investigation or adjudication unless new derogatory information surfaces. SEAD 7 makes reciprocal acceptance government-wide policy, and GAO confirms agencies are generally required to honor it.

Reciprocity is the legal engine under a re-badge, and it is still fully in force. The NISPOM rule at 32 CFR 117.10(h) is explicit: a current eligibility determination built on an adequate-scope investigation feeds a new eligibility determination, and the prior investigation “will be used without further investigation or adjudication unless the CSA becomes aware of significant derogatory information that was not previously adjudicated.” In plain terms, your new hire’s existing clearance transfers, and you are not buying a fresh one. This is the everyday reality of clearance crossover between contractors, recorded in the systems that track eligibility, Scattered Castles and DISS.

Above the NISPOM rule sits Security Executive Agent Directive 7, the ODNI policy in force since November 9, 2018, which requires reciprocal acceptance of background investigations and national-security adjudications across the executive branch. The Government Accountability Office put a floor under it in January 2024: agencies “are generally required to accept personnel vetting determinations that other agencies have previously made,” a reciprocity that “can promote personnel mobility and help reduce skills gaps.” For a recompete winner staffing an entire inherited team at once, that mobility is the whole game.

Re-badge versus sponsoring a net-new clearance: the time-to-billing math

Short answer: Re-badging reuses an existing clearance under reciprocity, so an adequate-scope incumbent can be granted access without a new investigation. A net-new hire enters DCSA’s investigation queue. The table sets the two paths side by side on the levers that decide when a seat starts billing.

Where does reciprocity break down?

Short answer: Reciprocity is required but not frictionless. GAO found that 28 of 31 agencies it surveyed said their IT systems sometimes lacked the information needed to make reciprocity determinations, and contractors were not always told when a determination stalled. Build slack into the transition schedule for the cases that hang.

The January 2024 GAO report is the honest counterweight to the reciprocity story. GAO surveyed 31 agencies and 600 contractors, of which 293 responded, and made eight recommendations to ODNI and OPM. The finding that matters for your schedule is blunt: 28 of the 31 agencies said their information-technology systems at times did not hold the complete information needed to make a reciprocity determination. Contractors, meanwhile, reported that they were not told when reciprocity was delayed, so a re-badge that should clear in days can sit without anyone flagging it (GAO-24-105669).

One rule closes a trap inside all of this. A returning employee is not automatically re-eligible. Under 32 CFR 117.10(j), a contractor may not grant access to someone who was previously eligible but had a break in employment that resulted in a loss of eligibility, not without a new determination by the CSA. Check the break-in-access status and the reactivation clock before you promise a start date, because an incumbent who has been on the bench since a layoff may or may not still be inside the window. When a full clearance cannot be reciprocated in time, an interim clearance is the fallback lever for getting a seat billable.

What has to happen contractually: the novation and the FCL?

Short answer: When you take over an incumbent contract by acquiring the predecessor’s assets, the government recognizes the transfer through a novation under FAR 42.1204, a process that explicitly requires evidence that security-clearance requirements have been met. That ties the personnel side to the facility clearance the new performer must hold.

Re-badging people is one layer; moving the contract is another. FAR 42.1204 governs the novation agreement, under which the government “may, when in its interest, recognize a third party as the successor in interest to a Government contract.” The documents the transferor must supply include, at 42.1204(f)(7), “evidence that any security clearance requirements have been met.” A recompete you win outright by fresh award runs a different path than an asset transfer, but where a novation applies, the clearance evidence is not optional paperwork you can send later.

This is where the facility clearance and the FSO earn their keep. The people transfer under reciprocity, the contract transfers under novation, and the facility clearance has to cover the work before anyone touches classified material. Your FSO owns the DISS in-processing, the badge, and the paperwork that turns a reciprocity determination into an actual access grant. Line those three tracks up in parallel, not in sequence, and a 30-day target is realistic. Run them one after another and the same work slips a quarter.

Your 30-day re-badge playbook

Short answer: Treat the transition-in as a hiring sprint with a security-processing critical path. The cleared incumbents are your fastest-billing hires. Identify them, extend offers early, and run reciprocity, novation, and FCL confirmation on parallel tracks so no single approval blocks the rest.

1. Week 1, identify and offer. Map the incumbent seats, confirm which staff hold current adequate-scope clearances, and extend offers early. The 30-day certified-list deadline no longer runs, so nothing forces the losing contractor to hand you the roster. Source it from your own capture intelligence and from the people themselves.
2. Weeks 1 to 2, open reciprocity. Have your FSO initiate reciprocity determinations under 32 CFR 117.10(h) as offers are accepted, so the prior investigation carries over without a new one. Do not wait for the last acceptance to start the first determination.
3. Weeks 2 to 3, verify break-in-access. For anyone off-contract since a layoff, check 117.10(j): a break in employment that cost eligibility means a new determination is required before access. Flag those names early rather than discovering them at badging.
4. Weeks 2 to 4, close the contractual side. Where the takeover runs through a novation, assemble the FAR 42.1204 package, including the 42.1204(f)(7) security-clearance evidence, and confirm your facility clearance covers the scope of the work.
5. Week 4, badge and bill. Convert each cleared determination into a DISS in-processing and a badge, and put the person on the seat you already priced. The goal is a workforce billing in the first month of performance, not the second.

The mandate that once framed incumbent capture is gone, and its absence changes the tactic more than the strategy. Through 2026 the recompete winners who move fastest will not be the ones citing a rule that no longer exists. They will be the ones who treat every already-cleared incumbent as a seat that bills in week one and staff the reciprocity paperwork the day the offer is accepted. Win the recompete, then win the 30 days that follow it.

Frequently Asked Questions

Is a successor contractor still required to hire the incumbent workforce in 2026?

No. Executive Order 14148 revoked EO 14055 on January 20, 2025, the Department of Labor rescinded the nondisplacement regulations in a rule published December 22, 2025, and FAR clause 52.222-17 now reads [Reserved]. Hiring the incumbents is a business decision, not a legal obligation, and there is no right of first refusal to satisfy.

Does an incumbent’s clearance transfer to my company automatically?

The eligibility carries under reciprocity, but access is not automatic. 32 CFR 117.10(h) reuses the prior adequate-scope investigation without a new one, yet your FSO still has to run the reciprocity determination and in-process the person in DISS before granting access to classified information.

How long does re-badging a cleared incumbent take versus sponsoring a new clearance?

A re-badge under reciprocity needs no new investigation, so access can follow in days once the determination is made. A net-new clearance enters DCSA’s queue, which held 222,700 cases as of April 2025. Interim eligibility averaged about 7 days in DCSA’s FY2022 industry data, but a full new determination takes far longer than a reciprocity transfer.

What if an incumbent has been laid off and off-contract for a while?

Check the break-in-access rule. Under 32 CFR 117.10(j), if a break in employment resulted in a loss of eligibility, you need a new determination by the CSA before access. Someone recently displaced may still be inside the window, so verify the status before promising a start date rather than assuming the clearance is live.

Do I need a novation to take over the contract’s cleared work?

Only when you acquire the predecessor’s assets rather than winning a fresh award. Where a novation applies, FAR 42.1204 requires evidence that security-clearance requirements have been met, at 42.1204(f)(7), which ties the personnel reciprocity to your facility clearance. A clean recompete award follows a different path.