$2.5M to $35M: CAS Board final rule narrows cost accounting coverage Oct. 1, sets $100M full-coverage line

The money

What are the new CAS thresholds?

The rule, 91 FR 56056, changes four dollar lines in 48 CFR Part 9903 ^[1]:

• Basic applicability: negotiated contracts and subcontracts “not in excess of $35 million” are exempt from all CAS requirements ^[1]. Until now the line tracked the Truthful Cost or Pricing Data statute at $2.5 million, and a contractor was exempt until it won one CAS-covered contract over $7.5 million, the so-called trigger contract ^[2]. The trigger contract is eliminated ^[1].
• Full coverage: contractors must comply with all 19 standards only above $100 million, up from $50 million ^[1, 2]. Below that, modified coverage requires compliance with four of the standards ^[2].
• Disclosure Statements: the filing threshold also moves to $100 million, and it now applies only to a business unit or segment that meets the threshold on its own ^[1]. The rule removes the company-wide aggregation step and the old exemption for segments with less than $10 million in covered awards and under 30 percent of sales ^[1].
• Agency waivers: an executive agency head can now waive CAS without Board approval on contracts up to $100 million, up from $15 million, a change Congress authorized in Section 820 of the FY2017 NDAA ^[1].

The Board’s estimates put a scale on the change. Using Federal Procurement Data System records for fiscal 2020 through 2024, it counted 773 entities subject to full coverage, holding $1.22 trillion in contract value ^[1]. At $100 million, 564 entities remain and $1.21 trillion stays covered: nearly 30 percent fewer firms, less than 1 percent fewer dollars ^[1]. For the $35 million basic threshold, the Board estimated about 60 percent fewer CAS-covered business segments while keeping more than 90 percent of covered dollars ^[1].

The full-coverage line had not moved since 2000. The Board set it at $10 million in 1977, raised it to $25 million in 1993 and to $50 million in 2000 ^[2]. Adjusted for inflation alone, the 2000 figure would be about $92 million, the Board calculated in March ^[2].

The programs

Who comes out of CAS coverage?

Three groups of contractors are most directly affected.

Firms whose negotiated awards stay under $35 million. These contracts are exempt outright beginning Oct. 1 ^[1]. The Board describes the beneficiaries as nontraditional contractors and “new mid-size entities who no longer qualify for a full exemption from CAS as small businesses” ^[1]. Bradley Arant Boult Cummings attorneys, writing on the proposed rule in May, called that problem a “compliance cliff” for firms that outgrow small-business status ^[5]. Small businesses were already exempt and remain so ^[1].

Segments between $50 million and $100 million. Under the old rule they carried full coverage and a Disclosure Statement; now they can move to modified coverage ^[1]. The final rule added a transition path the March proposal lacked. A business unit may shift existing contracts to modified coverage at the start of its next full cost accounting period beginning on or after Oct. 1, 2026, provided it “has no unresolved CAS noncompliances” and does not meet the $100 million criteria ^[1]. It can then certify modified-coverage eligibility on new solicitations ^[1]. The Board added that any accounting practice changes tied to the move “would be considered unilateral and subject to the contract price adjustment requirements” ^[1].

Holders of indefinite delivery contracts (IDCs). This was the most contested part. For multiple-award vehicles, CAS applicability and every exemption are decided when each task or delivery order is placed, using that order’s ceiling value ^[1]. For single-award vehicles, the test happens once, when the contract is awarded, using the full contract ceiling ^[1]. A single-award IDC is exempt in its entirety only if it orders nothing but commercial products or services, or orders only on a firm-fixed-price basis after adequate price competition without certified cost or pricing data ^[1].

The stakes are large. Orders against single-award IDCs reached $262 billion in fiscal 2024, more than a third of all federal contract obligations ^[1]. In a March analysis of 369 single-award IDCs awarded in fiscal 2020 with the CAS clause, the Board found nearly 65 percent drew orders worth at least 90 percent of their original ceiling ^[2].

What the rule leaves alone

The CAS threshold is now a fixed dollar figure, decoupled from the cost or pricing data statute ^[1]. Certified cost or pricing data requirements are a separate track. Section 1804 of the FY2026 NDAA raised the defense threshold for that data to $10 million for contracts entered into after June 30, 2026 ^[3, 4]. Capture teams pricing a sole-source effort need to run both tests.

The Board published a companion rule the same day rescinding CAS 407, the standard on standard costs for direct material and direct labor, also effective Oct. 1 ^[6]. It moves a handful of retained requirements on production-unit variances into CAS 418, saying the rest is covered by generally accepted accounting principles ^[6].

The politics

The thresholds came from the administration and Congress together. The Office of Management and Budget (OMB) drafted a legislative proposal to set the basic threshold at $35 million and drop the trigger contract, and sent it to Congress in June 2025 for the FY2026 NDAA ^[1]. Section 1806 of that law, Public Law 119-60, signed Dec. 18, 2025, “fully codified” the proposal, in the Board’s words ^[1, 3]. Section 1806 also directed the $100 million full-coverage line, an amount the Advisory Panel on Streamlining Acquisition Regulations, known as the Section 809 Panel, had recommended ^[2, 3]. Covington & Burling attorneys wrote when the NDAA text emerged that the changes “reflect the administration’s goal of expanding the defense industrial base” ^[4].

The idea has a longer Senate pedigree. In the March proposal, the Board quoted a Senate Armed Services Committee report, S. Rept. 114-25: “The committee is concerned that the current cost accounting standards favor incumbent defense contractors and limit competition by serving as a barrier to participation by non-traditional, small business, and commercial contractors” ^[2].

On the thresholds themselves, the record shows little dispute. The Board received nine sets of comments: five from industry associations, two from individual contractors, one from a consulting firm and one from an individual, and it says the comments “strongly supported” the higher thresholds ^[1].

The split came over single-award IDCs. Commenters wanted every IDC tested at the order level. Some argued the Board’s approach created inequity between vehicle types and could pull CAS onto commercial or fixed-price orders that would be exempt elsewhere; several asked the Board to delay and gather more data ^[1]. The Board did not budge. “Single-award IDCs increase the potential for vendor lock-in, further reducing competition and creating risk to the Government,” it wrote, adding that such deals carry “higher risk, not lower risk as some comments suggested” ^[1]. Its concessions were the whole-vehicle exemption for commercial and competitive fixed-price IDCs and the transition path ^[1]. Before the rule, the Bradley attorneys had noted that “CAS applicability in the IDIQ context has long been a source of uncertainty and disputes” ^[5].

Section 1806 also reshapes the Board. It sets five voting members, chaired by the Administrator for Federal Procurement Policy, with one Defense Department representative, one General Services Administration representative and two private-sector members appointed by the OMB Director, plus up to two nonvoting members ^[3]. From Jan. 1, 2028, members of an executive agency audit entity are ineligible to serve ^[3]. The Board must review and eliminate or conform its standards every two years ^[3]. The final rule is signed by Kevin R. Rhodes as Administrator and Board chair, and OMB classifies it as deregulatory under Executive Order 14192 ^[1].

Next milestone

Oct. 1, 2026 is the effective date for both the threshold rule and the CAS 407 rescission ^[1, 6]. Contractors weighing the move to modified coverage need to check two things: when their business unit’s next full cost accounting period begins, and whether any CAS noncompliance is still open ^[1].

One piece of Section 1806 is not in the rule. The law rewrote how the government recovers costs when a contractor changes its accounting practices, limiting recovery to aggregate increased costs and excluding firm-fixed-price work ^[3]. The Board said those “complex issues” require additional notice and comment and are being handled in a separate case it opened after a July 2025 agenda notice ^[1].