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Federal cost accounting thresholds take effect, lifting CAS burden on contractors

Federal cost accounting thresholds take effect, lifting CAS burden on contractors

Rule Changes

Basic CAS applicability jumps from $2.5 million to $35 million; full coverage doubles to $100 million

Today: CAS threshold increases take effect

Overview

Updated 1 hour ago

As of today, federal contractors no longer face Cost Accounting Standards (CAS) compliance until they hold $35 million in awards, up from $2.5 million. The threshold for full CAS coverage and Disclosure Statement filings doubles to $100 million.

The rule, published September 1 by the Office of Management and Budget's Cost Accounting Standards Board, cuts the number of CAS-covered business segments by an estimated 60 percent while keeping over 90 percent of the dollars under CAS oversight.

Why it matters

Contractors bidding under $35 million now skip CAS accounting rules entirely, and mid-size firms under $100 million face far lighter compliance — changing who can compete for federal work.

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Key Indicators

$35M
Basic CAS applicability threshold
Up from $2.5 million, a fourteen-fold increase effective October 1, 2026.
$100M
Full CAS coverage threshold
Doubles from $50 million; also the new agency waiver ceiling, up from $15 million.
60%
Reduction in CAS-covered business segments
CAS Board estimate based on FY 2020-2024 FPDS data analysis.
90%
Share of current CAS dollars retained
The Board projects over 90% of covered dollars stay under CAS despite the higher thresholds.
30%
Reduction in entities subject to full coverage
From 773 entities to an estimated 564 based on FY 2020-2024 data.

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Organizations Involved

CA
Cost Accounting Standards Board
Federal regulatory board within OMB
Promulgated the final rules effective October 1, 2026

The board sets uniform cost accounting standards for federal contractors and subcontractors.
Office of Management and Budget (OIRA)
Office of Management and Budget (OIRA)
White House budget office
Hosts the CAS Board; transmitted the reform proposal to Congress

Developed the legislative proposal that became Section 1806 of the FY 2026 NDAA.

Timeline

June 2025 October 2026

4 events Latest: Today
Tap a bar to jump to that date

  1. CAS threshold increases take effect

    Today Effective date

    Basic applicability rises to $35 million; full coverage threshold doubles to $100 million; $7.5 million trigger contract eliminated.

  2. CAS Board publishes two final rules

    Rulemaking

    Final rules raise thresholds, rescind CAS 407, and set new IDC task-order coverage rules. Published at 91 FR 56056 and 91 FR 56061.

  3. CAS Board publishes proposed rule

    Rulemaking

    Notice of Proposed Rulemaking outlines higher thresholds, elimination of the $7.5 million trigger contract, and IDC changes.

  4. OMB sends CAS reform proposal to Congress

    Legislative proposal

    OMB proposed decoupling the CAS threshold from the Truthful Cost or Pricing Data statute and raising it to $35 million.

Scenarios

1

Hundreds of contractors exit full CAS coverage

Likely Resolves by Oct 1, 2027

Discussed by: Congressional analysis

The CAS Board estimates 209 of 773 entities currently under full coverage will drop to modified coverage or below as business units with awards under $100 million transition at the start of their next fiscal year, provided they have no unresolved CAS noncompliances. Federal Procurement Data System (FPDS) data will show whether the projection holds.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

August 1970

Cost Accounting Standards created (1970)

Congress passed Public Law 91-379 creating the Cost Accounting Standards Board to standardize how defense contractors allocate costs, after Vietnam-era cost overruns exposed wide variations in accounting practices. The first standards took effect in 1972, requiring Disclosure Statements and compliance for contractors above set dollar thresholds.

Then

Defense contractors faced uniform cost accounting rules, with full compliance required on larger awards.

Now

The framework governed federal cost accounting for over five decades, with thresholds rising periodically but the core structure remaining intact.

Why this matters now

The 1970 law built the regulatory apparatus the 2026 rule now dismantles at the margins. Today's changes preserve the framework's core while raising entry points dramatically.

February 2018

Bipartisan Budget Act of 2018

Congress renamed the Truth in Negotiations Act (TINA) to the Truthful Cost or Pricing Data statute and raised the threshold for certified cost or pricing data from $700,000 to $2 million, then to $2.5 million for contracts awarded after June 2019. The CAS applicability threshold moved in tandem, since it was tied to the TINA threshold.

Then

Contractors below the higher threshold no longer needed certified cost data or CAS compliance.

Now

The decoupling precedent set in 2018 paved the way for today's larger increase and outright separation of the CAS threshold from TINA.

Why this matters now

The 2018 change raised the entry point but kept CAS and TINA thresholds locked together. The 2026 rule breaks that coupling entirely, setting an independent $35 million CAS threshold.

Sources

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Federal Register Inside Government Contracts Hunton Andrews Kurth GovCon Source Blog Venable LLP Government Contracts Law Blog Blue Cloud CPA