Following a tumultuous start to fiscal year 2026, including a government shutdown that lasted 43 days, the National Defense Authorization Act for fiscal year 2026 (NDAA 2026), Pub. L. 119-60, was passed by Congress and signed into law on December 18, 2025. NDAA 2026 is a critical legislative act, setting acquisition reforms and policies and authorizing appropriations and funding levels for the Department of Defense (DoD). With $900.6 billion in funding for the DoD, NDAA 2026 contains a plethora of acquisition reform provisions and critical updates impacting defense contractors. Title XVIII of NDAA 2026 significantly increased certain acquisition thresholds, including triggers for the Truthful Cost or Pricing Data Act (formerly the Truth in Negotiations Act) and Cost Accounting Standards application, which you can read about here. Additionally, NDAA 2026 increases the thresholds for noncompetitive acquisitions and when information technology requirements qualify as a major system.

Increase in Major System Acquisition Thresholds

In DoD parlance, a major system is “a combination of [hardware, equipment, or software] elements that will function together to produce the capabilities required to fulfill a mission need.” 10 U.S.C. § 3041(a). Currently, a system is designated major when the total monetary expenditure for the research, development, test, and evaluation (RDT&E) of the system is estimated to be more than $115 million or the ultimate total expenditure for the system is estimated to be more than $540 million. See 10 U.S.C. § 3041(c)(1)(A)-(B). Section 1804(a) of NDAA 2026 significantly increases these thresholds so that a system is major when the estimated value exceeds $275 million for the RDT&E of the system and $1.3 billion for the total estimated expenditure of the system. The threshold for major systems for which a civilian agency is responsible maintaining on behalf of the DoD similarly increases from $750,000 to $2 million pursuant to NDAA 2026. This significant increase means that those regulatory requirements specified at Federal Acquisition Regulation (FAR) Part 34 and Defense FAR Supplement, including the requirement that contractors use an earned value management system, will no longer be applicable for a large swath of procurements that previously would have qualified as a major system.

Increase in Thresholds When Procuring Using Other Than Full and Open Competition

Section 1804(b) amends 10 U.S.C. § 3204 to similarly increase the thresholds for when DoD enters into a contract using other than full and open competition. Section 3204 permits agencies in certain instances to use noncompetitive acquisition procedures such as when there is an urgent and compelling need, only one responsible source is available, or if national security would be compromised if the needs were publicized using traditional acquisition means. See 10 U.S.C. § 3204(a)(1)-(2), (6); see also FAR 6.302-1 (only one responsible source), 6.302-2 (unusual and compelling urgency), 6.302-6 (national security). However, noncompetitive procedures must be justified and approved by increasing levels of authority within the DoD based on the estimated dollar value of the contemplated acquisition. See 10 U.S.C. § 3204(e)(1)(B)(i)-(iii).

With passage of NDAA 2026, these thresholds and the applicable approving authority significantly increase. In particular:

  • For contracts with an estimated amount exceeding $500,000 but less than or equal to $10 million, which must be approved by the competition advocate, the threshold will now increase to $100 million.
  • For contracts with an estimated amount exceeding $10 million but less than or equal to $75 million, which must be approved by the head of the contracting activity, the threshold will now increase to $500 million.
  • For contracts with an estimated amount exceeding $75 million, which must be approved by the senior procurement executive without further delegation, the threshold is increased to $500 million.

Key Takeaways for Contractors

NDAA 2026 brings to bear a multitude of acquisition priorities and a host of regulatory and policy changes relating to DoD acquisitions. Increasing the noncompetitive acquisition thresholds at Section 1804 benefits contractors and defense agencies, particularly given the administration’s priorities to speed up acquisitions and eliminate unnecessary regulatory burdens as espoused in Executive Order 14275, Restoring Common Sense to Federal Procurement. See 90 Fed. Reg. 16447 (April 15, 2025). Additionally, contractors should welcome the increased thresholds that trigger a major system designation, carving out a greater swath of contracts from bearing the regulatory burden that accompanies such a designation. Additionally, the increase to these thresholds may provide a more welcoming ecosystem that encourages greater entrance to and participation in the defense industrial base. Defense contractors should take heed and update their corporate policies and acquisition templates to account for these acquisition threshold increases. Updates to internal documents should similarly note these increased thresholds, particularly when a major system designation is applicable.