Section 1806 of the National Defense Authorization Act for Fiscal Year 2026 fundamentally altered the Cost Accounting Standards (CAS) landscape by raising the statutory threshold for mandatory CAS coverage from $2.5 million to $35 million. On September 1, 2026, the Cost Accounting Standards Board published a Final Rule implementing that congressional change and making several additional revisions to the CAS framework. Effective October 1, 2026, negotiated contracts and subcontracts valued at $35 million or less will be exempt from CAS. The rule also doubles the threshold for full CAS coverage and disclosure statements from $50 million to $100 million.

At first glance, this may sound like a routine threshold adjustment. It is not. The current basic CAS threshold is $2.5 million, accompanied by a separate $7.5 million “trigger contract” test. By increasing the threshold to $35 million, Congress and the CASB have removed a substantial category of mid-sized contracts and subcontracts from CAS coverage altogether.

The board estimates that the new threshold will reduce the number of CAS-covered business segments by approximately 60%, while retaining more than 90% of the dollars currently subject to CAS. The rule is particularly important for mid-sized contractors that have outgrown the CAS exemption available to small businesses but have not historically competed for the largest federal awards.

The Basic CAS Threshold Will Be $35 Million

Under the old CAS rules, contracts over $2.5 million generally became subject to CAS unless an exemption applied. There was also a separate rule for contracts under $7.5 million. A contractor could use that exemption only if its business unit was not already performing a CAS-covered contract worth $7.5 million or more.

In practice, once a contractor won a CAS-covered contract valued at $7.5 million or more, many later contracts that were much smaller could also become subject to CAS. As a result, CAS applicability often depended not only on the size of the contract being awarded, but also on the contractor’s existing portfolio of CAS-covered work.

The FY 2026 NDAA and the CAS Board’s Final Rule replace that framework with a much simpler standard. Beginning October 1, 2026, negotiated contracts and subcontracts valued at $35 million or less are exempt from CAS. The rule does not affect the longstanding exemption for small businesses, which remain exempt from CAS regardless of contract value. As a result, the change will primarily benefit mid-sized and other-than-small contractors, particularly those that recently graduated from small business status.

The Basic CAS Threshold and the Certified Cost or Pricing Data Threshold Are Now Separate Questions

One important caution: The new CAS rule does not increase the threshold for certified cost or pricing data to $35 million.

Although CAS applicability previously tracked a $2.5 million threshold, Congress and the CAS Board have now separated the two requirements. Beginning October 1, 2026, the CAS threshold generally will be $35 million, while the threshold for certified cost or pricing data remains $2.5 million unless an exception applies.

As a result, a negotiated $20 million sole-source contract may be exempt from CAS but still require certified cost or pricing data. Likewise, a contractor may remain subject to cost allowability requirements, audit rights, record-access obligations, and other cost-based compliance requirements even though the contract is not CAS-covered.

Full CAS Coverage and Disclosure Statements Move to $100 Million

The new $35 million threshold is the basic monetary gateway for CAS applicability, subject to the other CAS exemptions. For non-exempt contracts above that threshold, the next question is whether modified or full CAS coverage applies. Under the final rule, the threshold for full CAS coverage doubles from $50 million to $100 million.

As a result, a contractor that receives a $60 million CAS-covered contract after October 1, 2026, may still be subject to CAS, but may qualify for modified coverage rather than full coverage if it does not otherwise meet the new $100 million test.

The rule also increases the threshold for filing a CAS disclosure statement from $50 million to $100 million. In addition, the CAS Board clarified that the threshold is applied at the individual business-unit or segment level, rather than by first aggregating CAS-covered awards across the entire company. For companies operating through multiple business units, that change may significantly reduce compliance obligations.

Multiple-Award and Single-Award IDIQs Will Be Treated Differently

The Final Rule creates an important distinction in how CAS applies to indefinite-delivery contracts (IDCs). Most importantly, the CAS analysis now differs depending on whether the vehicle is multiple award or single award.

For multiple-award IDIQs, the Final Rule “make[s] clear that application of CAS to multiple-award IDCs including all exemptions is determined at the task or delivery order level.” As a result, an order valued at $35 million or less may be exempt from CAS even if it is issued under a vehicle with a much larger overall ceiling.

For single-award IDIQs, the Final Rule “make[s] clear that application of CAS applicability to single-award IDCs is determined at the time of award of the IDC using the ceiling value to assess if the monetary threshold has been met.” As a result, a single-award IDIQ may be CAS-covered based on the value of the vehicle even if the government ultimately places only relatively small orders under the contract.

The practical takeaway is simple: The same $35 million threshold may apply very differently depending on whether the vehicle is single award or multiple award. Contractors should understand the vehicle structure before assessing potential CAS obligations.

Practical Takeaways for Government Contractors

Determine whether CAS still applies at all. Beginning October 1, many contracts and subcontracts valued at $35 million or less will be exempt from CAS. Contractors should review upcoming awards and update any internal CAS applicability analyses that still rely on the prior $2.5 million and $7.5 million framework.

Do not confuse CAS coverage with certified cost or pricing data requirements. The new $35 million threshold applies to CAS, not to certified cost or pricing data. A contract may be exempt from CAS and still require certified cost or pricing data. Proposal teams, contracts personnel, and accounting personnel should evaluate the two requirements separately.

Reassess full CAS coverage and disclosure statement obligations. The threshold for full CAS coverage and disclosure statements increases from $50 million to $100 million and is applied at the business-unit or segment level. Contractors should determine whether individual business units still meet the new threshold rather than relying solely on company-wide totals.

Pay close attention to contract structure. The Final Rule treats multiple-award and single-award IDIQs differently and permits certain exemptions to apply to portions of a contract rather than the entire award. Contractors should carefully review vehicle structure, contract line items, contract types, and exemption assumptions before making CAS representations or assessing compliance obligations.

Bottom Line

Beginning October 1, 2026, CAS applicability will look very different. Negotiated contracts and subcontracts valued at $35 million or less generally will be exempt from CAS, while the thresholds for full CAS coverage and disclosure statement requirements will increase to $100 million.

For many mid-sized contractors, the changes will reduce compliance costs and make it easier to compete for larger federal opportunities without immediately triggering extensive CAS obligations. At the same time, the greatest challenges may arise not from the new thresholds themselves, but from applying them correctly. Questions involving existing CAS-covered contracts, transitions between full and modified coverage, certified cost or pricing data requirements, business-unit calculations, hybrid contracts, and IDIQ structures will require careful analysis.

If you have any questions about the foregoing or require assistance, please do not hesitate to contact Steven Herrera, Aron Beezley, or Nathaniel Greeson.