Summary
This article breaks down DoW’s memo raising the Cost Accounting Standards threshold to $100 million, covering what’s changing, what isn’t, and why cost visibility still matters for contractors either way.
Why It Matters: A higher CAS threshold sounds like less oversight, but audit activity keeps rising. Contractors who understand the real shift can turn it into an advantage instead of a blind spot.
Key Takeaways
- CAS threshold rises, audit scrutiny doesn’t: Full CAS coverage now starts at $100 million, but DCAA audit activity has doubled since 2024.
- GAAP replaces government-unique accounting: DoW now relies on GAAP, the standard most commercial companies already use, easing the path in.
- Cost visibility still pays off either way: Costpoint, ProPricer, TIP Technologies, and GovWin IQ help contractors stay audit-ready and price-defensible regardless of CAS status.
I spent five years at a small, defense-adjacent government contractor before it was acquired, a good outcome, and the kind of exit a lot of small GovCons are working toward. During those years, I watched a talented team wear more hats than any org chart should require: writing a proposal in the morning, on a compliance call by lunch, closing out a program review by four that same afternoon. That's the operating reality for most small government contractors. It's also exactly the reality the Department of War's newest memo is trying to make a little more approachable.
On September 14, 2026, the Department of War took a real step toward closing that gap. A memorandum from Deputy Secretary of War Steve Feinberg, "Fostering One Strong Industrial Base", substantially raises the threshold for who has to comply with Cost Accounting Standards (CAS), one of the requirements that made defense work feel out of reach for companies used to commercial accounting. The memo builds on Section 1806 of the FY2026 NDAA, which calls for strengthening the defense industrial base, and on Executive Order 14402's push toward fixed-price contracting by default.
It's the latest in a run of 2026 actions built around a consistent idea: make it easier for companies to sell to the government without becoming a different kind of company to do it. A spring executive order pushed fixed-price contracting by default. A FAR overhaul got underway. CMMC Phase 2 third-party certification was paused. An August memo focused on cost and pricing transparency. Now CAS. Read together, they point toward a real, if gradual, lowering of the barrier to entry, particularly for the commercial manufacturers and technology firms the Department is trying to bring into the industrial base.
That's worth taking seriously as an opportunity. It's also worth understanding accurately, because relief on paper and relief in practice aren't automatically the same thing.
What Changed
The memo raises two thresholds that determine who owes formal CAS compliance in the first place. Full CAS coverage, previously triggered at $50 million in covered contracts, now kicks in at $100 million. The contract-level applicability trigger jumps from $2.5 million to $35 million, eliminating the old $7.5 million "trigger contract" mechanism. A much larger population of companies can now compete for defense work without building the government-unique accounting infrastructure that used to be table stakes.
A few other changes work in the same direction:
- DoW is directed to rely on GAAP, the standard every commercial company already uses, instead of requiring a separate government-specific system.
- Commercial product and service determinations, which used to take months, now carry a 15-business-day deadline.
- DoW has said any cost data it collects will be used only for authorized government purposes and will not be made available to other companies, a reassurance worth knowing if data-sharing concerns were part of why this felt risky before.
- A new profit policy bases negotiated margins on value delivered, risk carried, and private capital invested, not just cost incurred.
The memo itself took effect the moment it was signed, but that doesn't mean every change is enforceable yet. The memo directs the CAS Board to propose exemptions and directs future FAR/DFARS rulemaking; actual contract terms change once that rulemaking and any class deviations are issued. It's a clear signal of direction, and a reasonable one to plan around, but it isn't law today.
The Part Worth Understanding Clearly
Cost-based, non-competed development work, the kind that shows up on major weapons systems programs, explicitly keeps full CAS coverage under this memo. And it arrives paired with DoW's August 2026 Cost & Pricing Transparency memo, which asks for more cost and pricing data sharing, not less. So this isn't compliance loosening across the board; it's a specific rule narrowing for a specific population, alongside a specific new ask elsewhere.
There's also a pricing wrinkle worth watching: by speeding up commercial product and service determinations, the memo opens the door for more current offerings to get reclassified as commercial items or services down the line. That can work in a contractor's favor by simplifying pricing requirements, but it changes how a product or service gets priced going forward, and it's worth reviewing rather than assuming it works out automatically in your direction.
I lived a version of this tension myself, just under a different rule. Near the end of my time at that small business, we were pricing a fixed-price, multi-year bid, a different kind of relief than this CAS memo offers, but the same instinct showed up in the room. Someone on the leadership side said, once we win this, the price is locked, so we can stop tracking against it so tightly. I stopped the meeting. It was exactly the opposite: under a fixed price, every dollar of variance comes straight out of margin. Cost accounting matters more when the government asks less of you directly, not less. I don't think everyone in that room believed me at the time, but it's the same principle at stake in this memo. A higher CAS threshold doesn't mean cost visibility stops mattering. It means you have to choose to keep it, instead of being required to.
Why "Smarter Audits" Is Genuinely Good News, If You're Ready for It
I sat in on my first real DCAA audit at that same small business, and I remember the specific feeling of watching the auditor pull one thread and realizing the whole documentation trail unraveled behind it: timekeeping records that didn't quite tie to labor distributions, indirect rate calculations that lived on someone's desktop, a purchase order approved by an email that had since been deleted. Nothing malicious. Nobody hiding anything. Just a system built one workaround at a time, and an auditor who could see all of it, one thread at a time.
Deltek's 2026 Clarity Government Contracting Industry Study shows DCAA's audit activity has doubled since 2024, but that growth comes from smarter targeting, not blanket scrutiny: the agency is automating routine reviews and directing more attention toward companies that carry more risk. That's the flip side of the story I just told. A company that can show its cost thread clearly, start to finish, reads as lower risk today in a way it wouldn't have when I was pulling records out of file folders by hand. The tools to avoid that unraveling moment barely existed for a small business back then. They do now.
If You've Been Considering Government Work
The lower barrier to entry is real, and it's a good reason to take another look if compliance concerns were what kept you out. It doesn't mean showing up with no cost discipline at all. It means the discipline you need at the start is smaller and more achievable than it used to be.
Costpoint Essentials: Built for This Moment
That's exactly the gap Costpoint Essentials is built to close. It's a purpose-built GovCon ERP for small and growing contractors, not a scaled-down version of enterprise software.
It brings audit-ready governance and cybersecurity compliance support, including FedRAMP Moderate Equivalency through Costpoint GCCM. It also brings integrated financials, projects, and contracts, all in one system built to go live in 60 days or less.
Since its launch, it's helped a growing number of smaller government contractors get the compliance infrastructure they need. They get that without taking on the added complexity that typically comes with a full enterprise resource planning tool.
Dela, Costpoint's AI Orchestrator, is built into Essentials from the start: it monitors time entries and expenses for anomalies, flags incomplete documentation, and answers questions like "summarize this project's labor, expenses, and approvals" in the time it takes to ask, instead of the days it used to take to pull records by hand. Time entry through Microsoft Teams and Outlook cuts timesheet submission by roughly 75%, which matters more than it sounds like it should: timekeeping remains the single most common DCAA audit finding, regardless of company size. One customer, Adaptic, cut monthly billing time by 96% after making the switch, without adding headcount to do it.
ProPricer: Price With Confidence in a More Competitive Market
As DoW relies more on competition, comparable sales and commercial price history to establish fair pricing, contractors need to understand not only what their work costs, but how to turn that intelligence into a competitive and well-supported price. ProPricer brings cost models, rates, assumptions and basis-of-estimate documentation into one governed environment, helping teams evaluate pricing scenarios, understand margin and risk, and maintain a clear record of how a price was developed. As government-specific barriers decrease and more companies enter the defense market, that pricing discipline can help contractors compete confidently without sacrificing traceability or control.
TIP Technologies: Traceability Across the Supply Chain
As DoW expands participation across the defense industrial base and leans more on commercial practices, historical performance, and transparency across every tier of the supply chain, primes and subs need confidence in the operational data behind their numbers. TIP Technologies helps manufacturers maintain the quality events, rework, and production history that explain those cost and performance drivers, and produce it quickly when a customer, auditor, or program stakeholder asks.
GovWin IQ: Find the Right Opportunities to Pursue
As DoW lowers barriers to entry and expands participation in the defense industrial base, knowing where to compete becomes even more important. GovWin IQ helps contractors identify and qualify the right opportunities with visibility into agency priorities, spending and award history, and the competitive landscape, so teams can focus limited time and resources on pursuits that best align with their capabilities and growth strategy.
If You're Already in Government Contracting
For established contractors, especially those on cost-type, non-competed work, this memo mostly doesn't change your day-to-day. What's worth noting is that the same automation helping new entrants get started can cut real time off your own audit prep; Deltek's 2026 research puts that at 81 to 120 hours a year industry-wide. The relief this memo offers newer entrants doesn't cost you anything, but the tools making that relief usable are available to you too.
Where This Leaves Things
This memo won't be the last policy shift this year, and its details are still being worked out. The realistic takeaway is a fairly simple one: the specific rule is genuinely getting easier to meet for a larger group of companies, the underlying expectation of cost visibility and audit readiness isn't going anywhere, and the tools to meet that expectation without a heavy compliance build-out are more available now than they've ever been.
Looking back at that small business now, the thing I'd tell that team, if I could, isn't that they should have done anything differently to get acquired; that was always the goal, and it was the right outcome. It's that the investments we kept postponing because we were too small for that, rate architecture, integrated cost systems, continuous compliance, were the same investments that would have made the firm more valuable the whole time we were growing into it. That's the real opportunity in a memo like this one: the barrier to starting that discipline is lower than it's ever been, so a company doesn't have to wait until it's forced to start.
As with any policy still working through rulemaking, the specifics matter for your situation. Treat this as a strong signal to start preparing, and loop in legal or contracts counsel before making decisions based on the memo alone.
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