On September 1, 2026, the Cost Accounting Standards (“CAS”) Board published two final rules implementing seismic changes to cost accounting requirements for federal government contractors. The most significant change implements a requirement in last year’s National Defense Authorization Act (“NDAA”), doubling the dollar value threshold for full coverage under CAS. These changes take effect on October 1.
CAS Coverage Threshold Increase
The first in the pair of final rules doubles the threshold triggering full CAS coverage from $50 million to $100 million. It will also increase the basic CAS coverage threshold for negotiated contracts from $2.5 million to $35 million, thereby essentially eliminating the CAS “trigger” framework, which currently requires at least one CAS-covered contract valued at $7.5 million or higher before a contractor’s other awards are CAS-covered. These changes both simplify CAS applicability and will reduce the number of contractors subject to CAS. Indeed, in the prior March 20, 2026 Notice of Proposed Rulemaking, the CAS Board suggested that the first change would relieve more than 200 entities of the obligation to comply with full CAS.
As we covered in a prior blog post, these revisions were directed by Sections 1806(a) and (d) of the FY 2026 NDAA, the same authority that directed the increase of the threshold governing disclosure under the Truthful Cost or Pricing Data Statute (formerly known as the Truth in Negotiations Act, or “TINA”) from $2.5 million to $10 million.
In addition to these threshold increases, the final rule makes an important change concerning CAS applicability to indefinite delivery contracts (“IDCs”). The final rule amends 48 C.F.R. § 9903.202-1 to clarify that CAS applicability for multiple-award IDCs is determined at the task order level. By contrast, CAS applicability for single-award IDCs will be determined based upon the ceiling value at the time of award. So while the overall impact of the rule may be to reduce CAS applicability, single-award IDCs may see the opposite effect.
Rescission of CAS 407
The second final rule largely rescinds CAS 407, which provided criteria under which standard costs may be used for estimating, accumulating, and reporting costs of direct material and direct labor. As the rule explains, the CAS Board “concluded that nearly all of the content in CAS 407 has become unnecessary because the Government interests addressed by that content are adequately protected through reliance on GAAP, and existing requirements in other CAS standards.”
The CAS Board retained certain requirements related to standard cost and related variances at the production unit level, moving those requirements to CAS 418, “Allocation of direct and indirect costs.”
The recission of CAS 407 represents the latest step in the long-running process of conforming CAS to GAAP. These changes were directed by Congress in the 2017 NDAA, and in 2019 the Board selected seven standards (including CAS 407) as most suitable for a potential conformance. The Board has significantly accelerated its work in this area in recent years; on July 8, the Board published a final rule that rescinded CAS 404, 408, 409, and 411 while moving any remaining requirements deemed necessary to protect the Government’s interest into CAS 405. Thus, of the seven standards initially targeted for conformance, only CAS 415 and 416 remain unchanged (and both are on the Board’s agenda for this year).
These two final rules reinforce the CAS Board’s focus on simplifying the CAS rules in an effort to reduce regulatory burden and thereby attract more companies to grow the defense industrial base.