The FY2026 National Defense Authorization Act (NDAA) became law on December 18, 2025, enacting a tidal wave of the Trump administration’s priorities with respect to Department of Defense (DoD) procurement. One key priority reflected in the NDAA is reducing compliance burdens so that (i) established DoD contractors are incentivized to pursue awards and (ii) more companies opt in to being a DoD contractor to grow the industrial base. Importantly, Section 1804 and Section 1806 of the NDAA take action on this priority by raising the dollar thresholds for complex domains of government contracting: the Cost Accounting Standards (CAS) and submission of certified cost or pricing data. While these changes are welcome developments, companies should be cognizant that a steady stream of compliance requirements remains even with these increased thresholds.

Thresholds for CAS Coverage

As contractors who swim in CAS waters know, CAS-covered contracts are subject to either “full” or “modified” coverage. Full coverage requires that the covered business unit comply with all CAS and currently applies to contractor business units that (1) receive a single CAS-covered contract award of $50 million or more or (2) received $50 million or more in net CAS-covered awards during their preceding cost accounting period. 48 CFR 9903.201-2(a). Modified CAS coverage requires contractors to comply with CAS 401 (Consistency in Estimating, Accumulating, and Reporting Costs), CAS 402 (Consistency in Allocating Costs Incurred for the Same Purpose), CAS 405 (Accounting for Unallowable Costs), and CAS 406 (Cost Accounting Standard – Cost Accounting Period). 48 CFR 9903.201-2(b).

Section 1806(a) raises the threshold for full CAS coverage from $50 million to $100 million, subject to adjustments for inflation. Section 1806(a) also directs the government to update the thresholds at 48 CFR 9903.201-2 and the Defense Federal Acquisition Regulation Supplement (DFARS) to reflect this increase within 180 and 120 days, respectively (or June 16 and April 17 of this year). Given the compliance burden of full CAS coverage from the current 19 standards (which will eventually be reduced to 15 as the government seeks to align CAS with Generally Accepted Accounting Principles (GAAP) as discussed here) and the desire of some contractors to avoid hitting the threshold for full coverage and the corresponding compliance burden, an increase to $100 million should go a long way toward achieving the goal of increasing and diversifying the defense industrial base. Contractors should note, however, that a reprieve from full CAS coverage does not remove the requirements of modified CAS coverage, and they should therefore verify that their accounting systems contain robust controls to ensure continued compliance with CAS 401, 402, 405, and 406.

Section 1806(d) increases the threshold for mandatory CAS applicability on a contract basis from $2.5 million to $35 million. The practical effect of this change is the increase in the threshold for modified CAS coverage, which will apply to contracts at the level of $35 million to $100 million. Like the increase in the threshold for full CAS coverage, this increased threshold should make doing business with the government more attractive to companies that have not engaged in this type of contracting out of a desire to avoid CAS coverage altogether.

Section 1806(d) also expands exemptions from CAS by excluding portions of contracts and subcontracts from CAS that are for commercial products or services, have a price set by law or regulation, or have firm fixed prices. Presumably, this would be done at the Contract Line Item Number (CLIN) level. For instance, a prime contract with a commercial product CLIN that may be provided by a subcontractor would escape CAS coverage. As with the other changes discussed above, this is an effort to reduce compliance burdens for an expanded defense industrial base.

Increased Threshold for the Submission of Certified Cost or Pricing Data

In addition to adjusting the thresholds for CAS applicability, the NDAA increases the threshold for the required disclosure of certified cost or pricing data by defense contractors from $2.5 million to $10 million. Specifically, Section 1804(c) applies the new $10 million threshold to defense contracts entered into after June 30, 2026. This provision relates to the Truthful Cost or Pricing Data Act, formerly known as the Truth in Negotiations Act (TINA), which imposes hefty compliance burdens on contractors. Inaccurate certified cost or pricing data may reduce contract price, trigger penalties, and even expose companies to False Claims Act liability. Given the interval of time since the last adjustment to this threshold and annual inflation, a raise to $10 million is a practical solution to lessen compliance burdens for contractors.

Changes That Open the Floodgates for an Expanded and Diversified Defense Industrial Base

These increased thresholds and exemptions, coupled with the Revolutionary FAR Overhaul and other efforts to broaden the industrial base, clearly indicate that the administration is seeking to create a less burdensome acquisition framework for defense contractors. Contractors should prepare for these increased thresholds and exemptions, and consider whether these changes might mean that broader engagement with the DoD is a more attractive business strategy. However, even though these increased thresholds will decrease compliance burdens for contractors both new to and experienced with DoD contracting, the CAS and cost or pricing data requirements are not going away. Therefore, contractors should ensure that they have robust compliance systems in place where necessary to address the requirements that still apply notwithstanding the increased thresholds, and prepare to implement enhanced systems when approaching the compliance obligations triggered by these increased thresholds.