Federal cost accounting thresholds take effect, lifting CAS burden on contractors

Overview

Updated Oct 19

Contractors now need $35 million in awards before Cost Accounting Standards apply, up from $2.5 million, after the rule took effect October 1. Full coverage and Disclosure Statement filings start at $100 million, double the old threshold.

The Pentagon is pushing further. A September 14 memo from Deputy Defense Secretary Steven Feinberg told defense components to stop using 'shadow CAS' within 30 days and to let an independent accounting firm's GAAP certification stand in for a government business-system review. It also asks the CAS Board to make the standards the exception rather than the rule.

Why it matters

Contractors bidding under $35 million now skip CAS accounting rules entirely, and mid-size firms under $100 million face far lighter compliance — changing who can compete for federal work.

Questions about this story

Free account needed to ask — your question is kept and asked for you right after sign-up. Answers are public.

No questions yet — be the first to ask.

Key Indicators

$35M

Basic CAS applicability threshold

Up from $2.5 million, a fourteen-fold increase effective October 1, 2026.

$100M

Full CAS coverage threshold

Doubles from $50 million; the rule also raises agency waiver authority.

60%

Reduction in CAS-covered business segments

CAS Board estimate based on FY 2020-2024 FPDS data analysis.

90%

Share of current CAS dollars retained

The Board projects over 90% of covered dollars stay under CAS despite the higher thresholds.

30%

Reduction in entities subject to full coverage

From 773 entities to an estimated 564 based on FY 2020-2024 data.

Voices

Curated perspectives — historical figures and your fellow readers.

Organizations Involved

Cost Accounting Standards Board

Federal regulatory board within OMB

Final rules took effect October 1, 2026; the Pentagon has asked the board to make CAS the exception rather than the rule

The board sets uniform cost accounting standards for federal contractors and subcontractors.

Office of Management and Budget (OIRA)

White House budget office

Hosts the CAS Board; transmitted the reform proposal to Congress

Developed the legislative proposal that became Section 1806 of the FY 2026 NDAA.

Timeline

June 2025 October 2026

5 events Latest: October 1st, 2026 · 1 month ago

Tap a bar to jump to that date

October 2026
CAS threshold increases take effect
Latest Effective date

Basic applicability rises to $35 million; full coverage and Disclosure Statement thresholds double to $100 million; the $7.5 million trigger contract is eliminated. The rule also drops the exemption at CAS 9903.202-1(c)(ii), which had excused a Disclosure Statement when a segment's CAS-covered awards fell below set sales and dollar levels.
October 1st, 2026
September 2026
Pentagon memo directs a shift from CAS to GAAP
Policy directive

Deputy Defense Secretary Steven Feinberg's 'Fostering One Strong Industrial Base' memo gives components 30 days to stop using shadow CAS and 60 days to publish criteria letting an independent accounting firm's GAAP certification replace a government business-system review. It also asks the CAS Board to make the standards the exception rather than the rule.
September 14th, 2026
CAS Board publishes two final rules
Rulemaking

Final rules raise thresholds, rescind CAS 407, and set new IDC task-order coverage rules. Published at 91 FR 56056 and 91 FR 56061.
September 1st, 2026
March 2026
CAS Board publishes proposed rule
Rulemaking

Notice of Proposed Rulemaking outlines higher thresholds, elimination of the $7.5 million trigger contract, and IDC changes.
March 20th, 2026
June 2025
OMB sends CAS reform proposal to Congress
Legislative proposal

OMB proposed decoupling the CAS threshold from the Truthful Cost or Pricing Data statute and raising it to $35 million.
June 2025

Scenarios

Hundreds of contractors exit full CAS coverage

Likely Resolves by Oct 1, 2027

Discussed by: Congressional analysis

The CAS Board estimates 209 of 773 entities currently under full coverage will drop to modified coverage or below as business units with awards under $100 million transition at the start of their next fiscal year, provided they have no unresolved CAS noncompliances. Federal Procurement Data System (FPDS) data will show whether the projection holds.

GAAP certification replaces government business-system reviews

Likely Resolves by Q2 2027

Discussed by: Deputy Defense Secretary Steven Feinberg's September 14 memo

The memo set a 60-day window, ending in mid-November, for components to publish criteria under which a registered independent public accounting firm's GAAP certification stands in for a government business-system review. A published DFARS or component-level policy accepting that certification would count as the shift arriving.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

August 1970

Cost Accounting Standards created (1970)

Congress passed Public Law 91-379 creating the Cost Accounting Standards Board to standardize how defense contractors allocate costs, after Vietnam-era cost overruns exposed wide variations in accounting practices. The first standards took effect in 1972, requiring Disclosure Statements and compliance for contractors above set dollar thresholds.

Then

Defense contractors faced uniform cost accounting rules, with full compliance required on larger awards.

Now

The framework governed federal cost accounting for over five decades, with thresholds rising periodically but the core structure remaining intact.

Why this matters now

The 1970 law built the regulatory apparatus the 2026 rule now dismantles at the margins. Today's changes preserve the framework's core while raising entry points dramatically.

February 2018

Bipartisan Budget Act of 2018

Congress renamed the Truth in Negotiations Act (TINA) to the Truthful Cost or Pricing Data statute and raised the threshold for certified cost or pricing data from $700,000 to $2 million, then to $2.5 million for contracts awarded after June 2019. The CAS applicability threshold moved in tandem, since it was tied to the TINA threshold.

Then

Contractors below the higher threshold no longer needed certified cost data or CAS compliance.

Now

The decoupling precedent set in 2018 paved the way for today's larger increase and outright separation of the CAS threshold from TINA.

Why this matters now

The 2018 change raised the entry point but kept CAS and TINA thresholds locked together. The 2026 rule breaks that coupling entirely, setting an independent $35 million CAS threshold.