The Cost Accounting Standards threshold for mandatory coverage has surged dramatically, reshaping the compliance landscape for thousands of federal contractors across the United States.
Section 1806 of the National Defense Authorization Act for Fiscal Year 2026 fundamentally altered the Cost Accounting Standards landscape by raising the statutory threshold from $2.5 million to $35 million.
The Cost Accounting Standards Board published a Final Rule on September 1, 2026, implementing the congressional change and introducing several additional revisions to the existing CAS framework.
Effective October 1, 2026, negotiated contracts and subcontracts valued at $35 million or less will be fully exempt from CAS compliance requirements.
The rule also doubles the threshold for full CAS coverage and mandatory disclosure statements, lifting that ceiling from $50 million to $100 million.
Experts caution that despite appearances, this is far from a routine regulatory adjustment to existing thresholds.
The previous framework required contractors to navigate a $2.5 million basic threshold alongside a separate $7.5 million trigger contract test, creating a complex compliance structure.
By raising the threshold to $35 million, Congress and the Cost Accounting Standards Board have effectively removed a substantial category of mid-sized contracts and subcontracts from mandatory coverage.
The FY 2026 NDAA and the CASB Final Rule replace that two-part framework with a considerably simpler and more straightforward standard for contractors to follow.
The rule does not disturb the longstanding exemption for small businesses, which remain exempt from CAS obligations regardless of the value of any individual contract.
As a result, the sweeping change is expected to primarily benefit mid-sized and other-than-small contractors, particularly those that have recently graduated from small business status.
Contractors that previously found themselves caught between small business exemptions and large contractor requirements will now have far greater operational and accounting flexibility under the revised rules.
The changes mark one of the most significant overhauls to federal cost accounting compliance standards in decades, with the new framework taking effect at the start of October 2026.