New $35 Million CAS Threshold: What Government Contractors Need to Know

In Summary:

The fiscal year 2026 National Defense Authorization Act raised the basic Cost Accounting Standards applicability threshold from $2.5 million to $35 million and eliminated the former $7.5 million trigger contract requirement. While these changes may reduce compliance burdens and create growth opportunities for government contractors, CAS exemptions do not eliminate other federal accounting, pricing, and documentation requirements. Contractors should also distinguish the enacted $35 million threshold from proposed increases to the full CAS coverage and Disclosure Statement thresholds, which remain subject to final regulatory action. Careful contract-by-contract reviews and strong accounting practices will help contractors remain compliant as the regulatory framework continues to evolve.

Written by Emily Donaldson, BMSS Supervisor

The fiscal year 2026 National Defense Authorization Act (NDAA) introduced one of the most significant changes to Cost Accounting Standards (CAS) compliance in decades: an increase in the basic CAS applicability threshold from $2.5 million to $35 million.

For many government contractors, the new threshold may reduce compliance burdens and create opportunities to pursue larger federal contracts. However, the change does not eliminate every cost-accounting or pricing requirement. Contractors must still evaluate the type, value, and structure of each award before determining whether an exemption applies.

Understanding the distinction between enacted legislation and pending regulatory updates is also important. While the $35 million threshold and elimination of the former $7.5 million trigger contract were enacted through the FY2026 NDAA, other proposed changes, such as the increase in the full CAS coverage and Disclosure Statement thresholds, are still moving through the regulatory process.

What Changed Under the FY2026 NDAA?

Under the previous framework, the basic threshold for potential CAS applicability was tied to the threshold for certified cost or pricing data, which had increased to $2.5 million. CAS applicability also depended on the contractor having received at least one CAS-covered award exceeding the $7.5 million trigger contract threshold.

Section 1806 of the FY2026 NDAA changed that structure by:

Increasing the basic CAS applicability threshold from $2.5 million to $35 million
Separating the CAS threshold from the threshold for certified cost or pricing data
Eliminating the $7.5 million trigger contract requirement

Here’s what that looks like going forward:

What it is	Old number	New number
CAS kicks in on a contract	$2.5M	$35M
The “trigger contract” rule	$7.5M	Gone
Full CAS coverage	$50M	$100M
Certified cost/pricing data (TINA)	$2.5M	$10M

The Cost Accounting Standards Board estimates that increasing the threshold to $35 million could reduce the number of CAS-covered business segments by approximately 60% while retaining more than 90% of the contract dollars previously subject to CAS coverage.

These changes are intended to lower barriers for contractors entering or expanding within the federal marketplace, particularly growing businesses that no longer qualify for the small-business exemption.

What Does the New CAS Threshold Mean for Contractors?

The most immediate impact is that negotiated contracts and subcontracts valued at $35 million or less may generally be exempt from CAS, provided another exemption or special rule does not change the analysis.

However, contract value is only one part of determining CAS applicability. Contractors should also consider whether the award is:

Made to a small business
A sealed-bid contract
For a commercial product or commercial service
Firm-fixed-price and awarded based on adequate price competition without certified cost or pricing data
Subject to another CAS exemption

Because CAS applicability depends on the circumstances surrounding a particular contract or subcontract, contractors should avoid treating the $35 million threshold as an automatic, universal exemption.

Understanding Modified and Full CAS Coverage

When CAS applies, a contractor may be subject to either modified or full coverage.

Contracts at or Below $35 Million

Negotiated contracts and subcontracts not exceeding $35 million are generally exempt from CAS under the enacted threshold, assuming no unusual circumstances affect the analysis.

For growing government contractors, this may provide more flexibility to pursue larger awards without immediately implementing a CAS-compliant accounting framework.

That does not mean the contractor is free from all federal accounting requirements. FAR cost principles, contract-specific terms, certified pricing requirements, and agency oversight may still apply.

Modified CAS Coverage

Under the CAS Board’s proposed regulatory framework, covered contractors below the proposed $100 million full-coverage threshold would generally remain subject to modified CAS coverage.

Modified coverage currently requires compliance with four standards:

CAS 401: Consistency in estimating, accumulating, and reporting costs
CAS 402: Consistency in allocating costs incurred for the same purpose
CAS 405: Accounting for unallowable costs
CAS 406: Cost accounting period

Modified coverage carries fewer requirements than full CAS coverage, but it still demands disciplined accounting practices. Contractors should have documented policies governing cost classification, indirect-cost allocation, unallowable costs, and accounting periods.

Full CAS Coverage

The CAS Board has proposed increasing the threshold for full CAS coverage from $50 million to $100 million. It has also proposed increasing the related Disclosure Statement threshold to $100 million.

Until a final conforming rule is published, contractors should recognize that these $100 million thresholds are proposed regulatory changes rather than treating them as fully implemented.

Contractors subject to full coverage must comply with all applicable Cost Accounting Standards and may be required to submit and maintain a CAS Disclosure Statement describing their cost-accounting practices.

CAS Applicability and Disclosure Statements Are Different Requirements

One important improvement to the article’s compliance analysis is distinguishing basic CAS applicability from Disclosure Statement requirements.

Historically, crossing the basic CAS applicability threshold did not automatically require a contractor to submit a Disclosure Statement. The existing $50 million threshold generally governs full coverage and Disclosure Statement requirements, subject to the detailed rules governing individual awards, cumulative covered awards, business segments, and applicable exemptions.

The CAS Board’s March 2026 proposed rule would increase both the full-coverage and Disclosure Statement thresholds from $50 million to $100 million.

Government contractors should therefore evaluate three separate questions:

Is the contract exempt from CAS?
If CAS applies, is the contractor subject to modified or full coverage?
Is a Disclosure Statement required for the applicable business segment?

Answering one question does not necessarily answer the others.

The Certified Cost or Pricing Data Gap

The CAS threshold is now separate from the threshold for submitting certified cost or pricing data under the Truthful Cost or Pricing Data statute, commonly associated with the former name Truth in Negotiations Act, or TINA.

The certified cost or pricing data threshold increased to $10 million, while the basic CAS threshold increased to $35 million.

As a result, a contract between $10 million and $35 million may be exempt from CAS but still require certified cost or pricing data if no exception applies.

This distinction is important because contractors sometimes use “CAS-exempt” as shorthand for reduced accounting and pricing obligations. In practice, CAS coverage and certified pricing requirements are separate compliance analyses.

A contractor may need to:

Submit certified cost or pricing data
Provide cost or pricing support other than certified data
Comply with FAR Part 31 cost principles
Maintain adequate estimating and accounting support even when the contract is exempt from CAS.

How the Threshold Applies to IDIQ Contracts

The CAS Board’s proposed rule also addresses indefinite-delivery contracts, including indefinite-delivery, indefinite-quantity (IDIQ) contracts.

Under the proposal:

CAS exemptions for a multiple-award IDIQ would be evaluated when an individual task or delivery order is awarded. The base value and all options for that order would be used in determining whether the monetary threshold is met.
CAS exemptions for a single-award IDIQ would be evaluated when the underlying contract is awarded. The base value and all options for the entire contract would be used in the analysis.

This approach recognizes that the ceiling of a multiple-award vehicle may not reflect the amount any individual contractor will receive. By contrast, a single-award IDIQ creates an ongoing relationship with one contractor, making the total contract value more relevant.

Because these IDIQ provisions are included in the proposed conforming rule, contractors should continue monitoring the final regulatory language before relying on them for a definitive coverage determination.

Current Regulatory Status

The $35 million basic CAS threshold and elimination of the $7.5 million trigger contract were enacted in Section 1806 of the FY2026 NDAA. In March 2026, the CAS Board published a proposed rule to update 48 CFR Part 9903 and align the regulations with those statutory changes.

The proposed rule would also:

Increase the full CAS coverage threshold from $50 million to $100 million
Increase the Disclosure Statement threshold from $50 million to $100 million
Clarify the application of CAS exemptions to indefinite-delivery contracts
Increase the agency-head CAS waiver threshold to $100 million

Comments on the proposed rule closed April 20, 2026, but as of late July 2026, the CAS Board had not published a final rule for these threshold-related regulatory changes.

Contractors should therefore distinguish between the statutory $35 million threshold and the additional regulatory provisions that remain proposed.

A Separate CAS-to-GAAP Rule Takes Effect in August 2026

On July 8, 2026, the CAS Board published a separate final rule addressing the conformance of certain Cost Accounting Standards to Generally Accepted Accounting Principles.

Effective August 7, 2026, the rule:

Rescinds CAS 408 and CAS 411
Rescinds most provisions of CAS 404 and CAS 409
Relocates certain retained asset-accounting and depreciation requirements to CAS 405

This final rule is separate from the proposed threshold rule and should not be confused with it. It also means references to full coverage requiring “all 19 CAS standards” will become outdated once the rule takes effect. Contractors under full coverage will instead be required to comply with all applicable standards remaining in the revised framework.

Steps Government Contractors Should Take Now

Contractors should begin reviewing their federal contract portfolios and accounting practices in light of the new threshold. Recommended steps include:

Review Recent Contract Awards

Identify negotiated contracts and subcontracts awarded on or after the applicable statutory effective date and organize them by total value, contract type, pricing method, and applicable exemptions.

Evaluate CAS Applicability Contract by Contract

Do not rely solely on the award amount. Consider small-business status, commercial-item treatment, adequate price competition, certified pricing requirements, and other relevant exemptions.

Separate CAS and Pricing Reviews

Track CAS applicability independently from certified cost or pricing data requirements. A contract can be exempt from CAS while still requiring certified pricing data.

Reassess Disclosure Statement Obligations

Determine whether a Disclosure Statement is currently required under existing regulations. Continue monitoring the CAS Board’s proposed increase from $50 million to $100 million rather than assuming the new threshold is already final.

Prepare for Growth

Even when CAS does not apply, contractors pursuing larger cost-reimbursement or negotiated awards should maintain accounting systems capable of:

Separating direct and indirect costs
Identifying and excluding unallowable costs
Supporting indirect-cost allocations
Reconciling estimates with recorded costs
Producing reliable cost and pricing data

An accounting system should be designed to support the contractor’s anticipated growth, not merely the minimum requirements of its current contracts.

Monitor Regulatory Developments

Continue monitoring the Federal Register and acquisition regulations for the CAS Board’s final threshold rule and any additional implementation guidance.

How BMSS Can Help

The higher CAS threshold may create meaningful growth opportunities for government contractors, but it also introduces new distinctions among CAS coverage, Disclosure Statement requirements, certified cost or pricing data, and other federal accounting obligations.

BMSS’ Government Contracting team works with emerging and established federal contractors to assess CAS applicability, strengthen accounting systems, prepare Disclosure Statements, evaluate indirect-cost structures, and navigate complex government contract requirements.

If your organization is pursuing larger federal awards or reevaluating its current compliance posture, contact your BMSS advisor to discuss how the new CAS threshold may affect your contracts and accounting practices.

This article provides general information and should not be treated as legal advice or a contract-specific determination. Contractors should review individual awards with qualified legal and government contracting advisors.