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Major Regulatory Relief: How the FY26 NDAA is Reshaping Compliance for Defense Contractors

Regulatory compliance requirements, particularly related to cost accounting and pricing data disclosure, are often cited as the most challenging areas for federal contractors. These compliance burdens are significant enough that many companies intentionally limit their business relationships with the U.S. government to avoid their application. However, a significant shift is coming.

In a move aligning with the federal government’s strategy to expand the defense industrial base and collaborate with more commercial entities, the final negotiated language of the FY 2026 National Defense Authorization Act (NDAA) includes impactful changes designed to reduce the applicability of the federal Cost Accounting Standards (CAS) and the Truthful Cost or Pricing Data Statute (commonly known as TINA). These changes reflect the administration’s overall goal of streamlining the federal acquisition process and reducing regulatory burdens.

Sweeping Changes to CAS Applicability

The FY 2026 NDAA introduces three major adjustments to how contractors must comply with CAS.

First, the dollar threshold for the mandatory application of CAS at the contract level is dramatically increased. Currently, CAS applies to negotiated prime contracts or subcontracts exceeding $2.5 million. The NDAA raises this threshold to a substantial $35 million. This change effectively eliminates the current mechanism requiring a contractor to receive at least one CAS-covered contract valued at $7.5 million or more before other contracts become covered.

Second, the threshold for contractors required to comply with full CAS coverage is doubled. Contractors may be subject to “modified” CAS (a subset of the 19 cost standards) or “full” CAS (all 19 standards). Previously, full CAS coverage was triggered if the net amount of CAS-covered awards received in a given cost accounting period was $50 million or above. The new regulations will establish this threshold at $100 million.

Finally, the NDAA introduces the ability to exempt portions of contracts from CAS. Under this new approach, a segment of a contract may be exempt if it satisfies specific conditions, even if the contract as a whole does not qualify. For example, portions of contracts or subcontracts for the acquisition of a commercial item or a firm fixed price award will no longer trigger the application of CAS. Implementation of these CAS changes is directed to occur no later than 180 days after enactment of the NDAA.

Raising the TINA Disclosure Bar

Beyond CAS, the NDAA also amends TINA (Truthful Cost or Pricing Data Statute) by raising the dollar amount that triggers the requirement for contractors and subcontractors to disclose certified cost or pricing data.

The current statute applies TINA to contracts expected to exceed $2.5 million. Section 1804(c) of the NDAA raises this critical threshold to $10 million. It is important to note that this $10 million standard will apply to contracts entered into after June 30, 2026, while the $2.5 million standard will be maintained for contracts entered into on or before that date.

New Exemptions for Nontraditional Defense Contractors

In addition to these general increases in monetary thresholds, the draft NDAA text introduces specific exemptions for “nontraditional defense contractors.” A nontraditional defense contractor is defined as 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.

These nontraditional defense contractors will be exempt from a comprehensive list of requirements, including:

• TINA (10 U.S.C. 3702)
• FAR Part 31 (Contract Cost Principles and Procedures)
• 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)

These proposed changes represent a significant step toward making federal contracting more accessible and less burdensome, especially for companies seeking to engage in the defense industrial base without being immediately subjected to highly complex cost and accounting regulations.

Tags: NDAA, CAS, TINA, defense contractors, government contracts, cost accounting standards, regulatory compliance, commercial companies, contract thresholds, marketus