Every driver knows the sound a missed exit makes. Silence, then 14 minutes of profane commentary. It is worse in October, when the ridgeline is on fire with color and the next turnaround is 11 miles out.

On September 1, 2026, the Cost Accounting Standards (CAS) Board (Board) published two final rules, 91 Fed. Reg. 56056 and 91 Fed. Reg. 56061. Both take effect October 1, 2026, and together they build contractors an off-ramp out of CAS. It is unmarked, and for existing contracts it does not open until your next full cost accounting period. Is your blinker on? Should it be?

At a Glance

  • The numbers are the easy part. Higher thresholds create an off-ramp for some business units under full CAS coverage, but existing contracts wait until the start of the next full cost accounting period.
  • The off-ramp is not automatic. A business unit moving to modified coverage must have no unresolved CAS noncompliances, and a practice change related to the transition would be unilateral and subject to the applicable price adjustment requirements.
  • The Disclosure Statement test moved down a level. The new test reaches “any business unit or segment,” eliminating company-wide aggregation and the old segment exemption.
  • Your subcontract template did not read the Federal Register. An exempt subcontract does not become CAS-covered because a prime’s standard form includes a CAS clause. Indefinite delivery contracts can cut the other way: single-award IDCs are tested against the vehicle’s ceiling.

The rules put larger federal projects within reach of commercial and nontraditional contractors, so midsize companies long outside CAS may find themselves near it. The headline numbers are familiar.

  • Negotiated contracts and subcontracts not more than $35 million are exempt, up from $2.5 million. The change also eliminates the $7.5 million trigger contract and decouples applicability from the certified cost or pricing data threshold.
  • Full coverage and Disclosure Statement obligations begin at $100 million rather than $50 million.
  • Agency heads may waive CAS up to $100 million, up from $15 million, implementing, at long last, Section 820 of the FY 2017 National Defense Authorization Act (NDAA).
  • CAS 407 is rescinded, with a narrow set of standard cost and variance requirements relocated into CAS 418.

The numbers are the easy part.

Two dates, doing two different jobs

Higher thresholds create an immediate problem for contractors already under full CAS. A business unit that became fully covered on a $50 million award might never approach $100 million now, and without a transition mechanism, it would stay covered while a new competitor chasing identical work qualified for modified coverage.

The Board fixed that at 9903.201-2(b)(4) and (5). A business unit under full coverage because of the old threshold that would not meet the new $100 million criteria and has no unresolved CAS noncompliances may move its affected contracts to modified coverage. Existing contracts transition at the start of the unit’s next full cost accounting period beginning on or after October 1, 2026, or January 1, 2027, for a calendar-year contractor. New solicitations are different. Beginning October 1, 2026, an eligible contractor may use modified coverage status in certifying eligibility for new work. New work can move first—in other words, while existing work waits out the season.

Check your eligibility before you signal

The off-ramp is not automatic. Paragraph (b)(4) conditions the transition on a business unit having “no unresolved CAS noncompliances,” and the rule neither says every open audit issue is one nor defines when an issue crosses that line. If your business unit has an open CAS matter, characterize it now and decide whether it bears on modified coverage in October.

Nor is the move an invitation to change how you account for costs. The Board stated in response to comments that any practice change related to the transition would be unilateral and subject to the applicable price adjustment requirements. That position sits in the preamble at 91 Fed. Reg. 56057, not the amendatory text, which is worth knowing if you have to argue it.

The Disclosure Statement test moved down a level

The $100 million figure is the visible change, but the Board also rewrote who does the counting. Old 9903.202-1(b)(2) applied the threshold to “any company which, together with its segments,” met it. The new text reaches “any business unit or segment.” Company-wide aggregation is gone. The Board also removed and reserved 9903.202-1(c), taking with it the old exemption for segments whose CAS-covered awards ran under 30 percent of segment sales and under $10 million. For a multi-segment contractor filing because the corporate total crossed $50 million, that matters more than the threshold increase.

Subcontractors should read the flow-down package

A negotiated subcontract not more than $35 million is exempt, which alone pulls a great deal of work out of coverage. Section 1806(d) of the FY 2026 NDAA went further, extending three statutory exemptions to portions of contracts and subcontracts at 9903.201-1(b)(5), (6), and (8). Prices set by law or regulation, commercial products and services, and qualifying competitively awarded firm-fixed-price work are now exempt at the portion-of-contract level. A commercial portion structured as its own CLIN may be exempt while other portions remain covered.

For subcontractors, the practical problem is the paper in front of them. Your subcontract template did not read the Federal Register. An otherwise exempt subcontract does not become CAS-covered because a prime’s standard form includes a CAS clause. But parties can separately agree to accounting, disclosure, and consistency obligations that look a great deal like CAS and bind just as tightly. When the October package lands, check the value, the nature of the work, and whether an exemption reaches all of the subcontract or only part. Then read what the prime is asking you to sign.

Indefinite delivery contracts can cut the other way

Not every change expands an exemption. New 9903.201-1(c) tests a single-award indefinite delivery contract when the IDC is awarded and, for the $35 million exemption, uses the vehicle’s ceiling. A single-award IDC with a $40 million ceiling therefore clears the exemption on day one and may be covered from the outset, absent another exemption, even if the Government orders far less. Multiple-award vehicles run the other way, tested at the task or delivery order level against the individual order’s ceiling.

Other exemptions survive a large ceiling. Under 9903.201-1(c)(2), a single-award IDC is exempt in full if it only provides for ordering commercial products or services, or only for firm-fixed-price ordering awarded on adequate price competition without certified cost or pricing data. Small business status still exempts the vehicle. One wrinkle bears watching. Paragraph (c) speaks of “indefinite delivery contracts,” while the exemptions it administers address subcontracts too, and the text sidesteps whether an indefinite delivery subcontract is one.

If you use standard costs, the address changed

CAS 407 is removed and reserved. The Board kept the handful of requirements it concluded generally accepted accounting principles do not reach, all tied to the production unit, and moved them into CAS 418. The new home is 9904.418-50(h), which carries the labor-rate standard conditions and the variance disposition rules, with the production unit defined at 9904.418-30(a)(5). The Board found no instance in which rescinding CAS 407 would change a disclosed practice, and said any change a contractor makes would be unilateral under 9903.201-6(b)(2). Confirm your Disclosure Statement still tracks the new paragraph.

Expect the paperwork to lag the rule

October will be messy for a mundane reason too. Several sets of text are in circulation this fall, and they do not agree. Codified FAR 30.201-4(b)(1) still prescribes FAR 52.230-3 for contracts over $2.5 million but less than $50 million, as does the text that replaced it at most agencies. Under the Revolutionary FAR Overhaul, agencies have pointed their workforces by class deviation to the FAR Council’s model Part 30, which repeats those figures at RFO 30.205(b)(1) and still conditions the agency head waiver on a value “less than 15 million” at RFO 30.202(b)(1). DoD directed its contracting officers by Class Deviation 2026-O0006 to that model plus a revised DFARS Part 230 and PGI 230.

The final rule’s own preamble is not immune. It repeatedly attributes the transition mechanism and the IDC framework to 9903.202-1, when the amendatory text places them at 9903.201-2(b)(4) and (5) and at 9903.201-1(c). Cite the amendatory text, and do not assume a solicitation wins the argument because someone copied an old number into it.

Five key takeaways for contractors

  1. Run your eligibility now, not in December. Confirm whether your business unit qualifies for modified coverage under 9903.201-2(b)(4) and whether anything in your files is an unresolved noncompliance. That governs what you certify in October.
  2. Keep October and January straight. New solicitations may use modified coverage status beginning October 1, 2026. Existing contracts transition only at the start of the next full cost accounting period, January 1, 2027, for calendar-year filers.
  3. Rerun the Disclosure Statement test at the business unit level. Company-wide aggregation is gone, and the old segment exemption went with it.
  4. Read the flow-down package instead of trusting it. A prime’s template cannot make an exempt subcontract CAS-covered, but a subcontract you sign can impose CAS-like obligations by agreement.
  5. Treat indefinite delivery vehicles as their own analysis. Single-award IDCs are tested at award against the ceiling and can be covered from day one. Multiple-award vehicles are tested order by order.

The Board built the off-ramp. Whether it is yours turns on facts sitting in your own files. Find them before the next solicitation or subcontract lands on your desk, because the leaves come down on schedule and the paperwork does not.