2026 NDAA Raises CAS Thresholds for Government Contractors

Summary:

• The 2026 NDAA raises the CAS applicability threshold from $2.5 million to $35 million, eliminating the “trigger contract” mechanism that previously pulled smaller contracts into compliance coverage.
• Full CAS coverage now kicks in at $100 million (up from $50 million), and the certified cost or pricing data threshold rises from $2.5 million to $10 million—reducing documentation burdens for mid-market contractors.
• These changes take effect for contracts awarded after June 30, 2026, lowering barriers for firms new to federal contracting and reducing compliance obligations for established government contractors.

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For decades, Cost Accounting Standards (CAS), the federal rules governing how contractors allocate costs to government contracts, have created significant compliance burdens, particularly for mid-market firms, but that is changing.

On December 18, 2025, President Trump signed the Fiscal Year 2026 National Defense Authorization Act (NDAA) into law, and buried within its procurement reform provisions are three significant threshold increases that reshape compliance obligations for government contractors. The changes take effect for contracts awarded after June 30, 2026, so the window to understand and plan for them is narrowing. If your firm pursues government contracts or is considering entering the federal marketplace, these changes likely affect you. Here’s what changed and why it matters.

Understanding the three new CAS thresholds

Cost Accounting Standards contract level

The threshold for CAS applicability increases from $2.5 million to $35 million. This change removes CAS requirements for thousands of smaller negotiated contracts. It also eliminates the historical ‘trigger contract’ mechanism, which created a cascading compliance obligation: once a contractor won a contract of $7.5 million or more, all its other contracts became CAS-covered.

Full CAS coverage

The threshold for “full” CAS coverage doubles from $50 million to $100 million. Why does this matter? Contractors subject to CAS can operate under either modified coverage (a simpler regime) or full coverage (a more burdensome regime). The new threshold means contractors receiving contracts between $35 million and $100 million will now operate under modified coverage only, substantially reducing their compliance lift.

Certified cost or pricing data

Separately, the requirement to submit certified cost or pricing data (detailed cost justifications during contract negotiations) increases from $2.5 million to $10 million. For mid-market contractors, this creates a significant opportunity zone: negotiated contracts between $2.5 million and $10 million no longer require this level of detailed documentation.

How the threshold increase affects your business

If you’re an established government contractor, these changes reduce your compliance obligations and may unlock bidding opportunities. If you’re considering federal contracting, these changes lower barriers to entry by reducing the accounting infrastructure and documentation burden required to compete.

The Department of Defense has released some implementing guidance and will continue to do so. Monitor those updates, as they’ll clarify how these thresholds apply to your specific contracts and business structure.

Nontraditional contractor exemptions under the NDAA

The NDAA also includes exemptions for nontraditional defense contractors (entities that haven’t performed under a full CAS-covered Department of Defense contract in the past year). These exemptions provide additional relief beyond the threshold increases but warrant separate discussion.

Review your contract portfolio against new thresholds

Review your government contract portfolio and proposal pipeline against these new thresholds. If you need clarity on how these changes affect your specific situation, or want to develop a strategy for pursuing government work under the new rules, we can help. Please use the form below to contact us.