Among the most challenging areas of regulatory compliance for federal contractors are cost accounting and cost and pricing data disclosure requirements. Indeed, many companies place guardrails on the nature and scale of their business relationships with the U.S. government precisely to avoid the application of these requirements. In a move that seems consistent with the federal government’s push towards expanding the defense industrial base and working with more commercial companies, Congress recently released the final negotiated language of the FY 2026 National Defense Authorization Act (“NDAA”). The draft text, currently awaiting a full Senate vote, contains impactful changes to reduce the applicability of federal Cost Accounting Standards (“CAS”) and the Truthful Cost or Pricing Data Statute (formerly the Truth in Negotiations Act, commonly referred to as “TINA”).
CAS Threshold Increases & Partial Contract Carveouts
The FY 2026 NDAA contains three significant changes that impact whether contractors must comply with CAS.
First, Section 1806(d) of the NDAA text increases the threshold for the mandatory application of CAS at the contract level. Currently, negotiated prime contracts or subcontracts are subject to CAS if they exceed $2.5 million in total contract value. Section 1806(d) raises this threshold to $35 million. This effectively eliminates the current CAS “trigger” contract mechanism, which requires the contractor to receive at least one CAS-covered contract valued at $7.5 million or more before other contracts can become CAS-covered.
Second, Section 1806(a) doubles the threshold for the application of full CAS coverage. Contractors may be subject to “modified” CAS coverage (in which case they must comply with a subset of the 19 cost standards) or to “full” CAS coverage (in which case they must comply with all 19 standards). Currently, contractors are subject to full CAS if the net amount of CAS-covered awards received in a given cost accounting period is $50 million or above. Section 1806(a) directs relevant regulations to establish a new threshold of $100 million.
Third, Section 1806(d) exempts portions of contracts from CAS. Under this new approach, a portion of a contract may be exempt if it satisfies one of the conditions under 41 U.S.C. § 1502 (b)(1)(C), even if the contract on the whole does not qualify. As an example, 41 U.S.C. § 1502 (b)(1)(C)(i) and (iii) will be altered so that portions of contracts or subcontracts for the acquisition of a commercial item or a firm fixed price award will not lead to application of CAS.
The draft NDAA language directs implementation of these changes no later than 180 days after enactment.
TINA Threshold Increase
Section 1804(c) amends TINA to raise the threshold for requiring disclosure of certified cost or pricing data from contractors and subcontractors. Under the current statute and regulations, TINA applies to contracts expected to exceed $2.5 million. Section 1804(c) raises this threshold to $10 million for contracts entered into after June 30, 2026 (but maintains the $2.5 million standard for contracts entered into on or before June 30, 2026).
Exemptions for Nontraditional Defense Contractors
In addition to these general changes to application of CAS and TINA, the draft NDAA text introduces special exemptions from several cost accounting and pricing data requirements for nontraditional defense contractors. “Nontraditional defense contractor” means an entity that is not currently performing and has not performed, for at least one year before the solicitation, any contract or subcontract for the Department of Defense that is subject to full CAS coverage. Under Section 1826, these contractors are exempt from the following requirements:
- DFARS 252.242–7006 (Accounting System Administration)
- DFARS 252.234–7002 (Earned Value Management System)
- DFARS 252.215–7002 (Cost Estimating System Requirements)
- DFARS 252.242–7004 (Material Management and Accounting System)
- DFARS 252.245–7003 (Contractor Property Management System Administration)
- DFARS 252.244–7001 (Contractor Purchasing System Administration)
- DFARS 252.242–7005 (Contractor Business Systems)
- DFARS Part 215.407 (Special Cost or Pricing Areas)
- 10 U.S.C. 3702 (TINA)
- FAR Part 31 (Contract Cost Principles and Procedures)
These changes reflect the administration’s goal of expanding the defense industrial base by streamlining the federal acquisition process and reducing compliance burdens. We will continue to track how these proposed changes evolve as the NDAA is finalized into law and then implemented by regulation.