CAS is Moving to GAAP. Here's What That Means for Defense Contractor Pricing.
For decades, defense contractor pricing and defense contractors doing significant business with the government have maintained two parallel accounting systems. GAAP: the Generally Accepted Accounting Principles that govern financial reporting for every American company. And CAS: the Cost Accounting Standards the government developed to ensure consistency in how defense contractors allocate costs across contracts.
Maintaining both has been one of the most persistent overhead burdens in defense contracting. Separate methodologies, separate documentation, separate audit regimes running alongside what the contractor’s own auditors already examine under GAAP.
On September 14, 2026, Deputy Secretary Feinberg’s “Fostering One Strong Industrial Base” memo directed the Department of Defense to pursue an end to that dual system, committing to GAAP as the accounting baseline and directing proposals to the Cost Accounting Standards Board within 60 days to make CAS exemption the default.
This is significant. It is also more complex than the headlines suggest.
What the memo actually directs
Four things are moving, at different speeds.
CAS threshold increases from the FY2026 NDAA are in effect now: basic threshold from $2.5M to $35M, full coverage from $50M to $100M. No CASB action required.
The CAS-to-GAAP transition requires formal CASB rulemaking. The Department can propose and advocate, but cannot override the CASB by memo alone. This piece moves on a longer timeline.
Shadow CAS is banned outright. Contracting officers cannot impose CAS-equivalent requirements under a different label. Self-executing, effective immediately.
DCAA and DCMA are directed to draw on contractors’ existing GAAP-audited financials rather than conducting duplicate reviews. Forward pricing rate agreements will use data maintained in the ordinary course of business.
What this means for established primes
The directional shift is welcome. Rules attaching to individual contracts rather than entire business units reduces the risk that one covered award pulls a whole division under full CAS coverage. The shadow CAS ban closes a real loophole that some contracting offices had been exploiting. And reduced duplicative DCAA review overhead addresses one of the most consistent frustrations in the defense industrial base.
The threshold increases and shadow CAS ban take effect quickly. The full CAS-to-GAAP transition will take longer.
What the memo does not change
The Feinberg memo reduces formal compliance overhead on a wide band of contracts. It does not reduce the obligation to price accurately. FAR 15.404 requires a fair and reasonable price on every negotiated contract, with no dollar threshold and no CAS exception.
The memo’s language on forward pricing rate agreements is telling. DCAA and DCMA are directed to draw on data maintained in the ordinary course of business. That is not a request for less cost data. It is a request for cost data that is genuine, current, and embedded in how contractors actually run projects, rather than manufactured separately to satisfy a government-unique requirement.
For contractors whose cost data flows automatically from their ERP and is traceable across the project lifecycle, this is straightforward. For contractors whose data lives in spreadsheets and disconnected systems, the compliance relief does not make this easier. It makes the underlying data problem more visible.
The TINA dimension
The TINA threshold increase from $2.5M to $10M follows the same pattern: a formal requirement reduced, an underlying obligation unchanged. FAR 15.404 still applies. The government still expects a fair and reasonable price. What changes is the formal proof mechanism, not the standard of defensibility behind the number.
iPE is specifically designed for this environment. It helps contractors create fair and reasonable costs with TINA regulations built into the estimating process, and gives you full traceability of where every cost came from across the entire project lifecycle. The audit trail is not something you reconstruct after the fact. It is a byproduct of building the estimate.
What good looks like under the new guidelines
Data maintained in the ordinary course of business means cost information that exists because of how you run projects, not because you built a separate compliance system to generate it. Actuals captured at the project level after every delivery. Cost element frameworks that structure estimates consistently across the business. A system that connects the estimate at bid to the actuals at delivery, so every program improves the accuracy of the next one.
That is a description of ERP-native, closed-loop estimating. It is not a description of a spreadsheet.
The bottom line
The CAS-to-GAAP transition is real and directional, and the pieces already in effect such as: higher thresholds, shadow CAS ban, reformed audit posture, are meaningful relief for contractors who have carried the overhead of dual compliance systems for decades.
But the relief only tells half the story. The other half is fixed-price risk. As compliance overhead lightens, the mandate to price on a fixed-price basis is tightening. That combination puts everything on the accuracy of the cost estimate at bid. Contractors who do not have a clear, structured picture of their costs going in will absorb overruns on delivery. Those overruns erode margin, strain program performance, and for public companies, create the kind of earnings pressure that moves stock prices. The consequences are not theoretical. They show up in quarterly results.
The firms that come out ahead are not the ones who treated CAS compliance as the reason to maintain rigorous cost data. They are the ones who maintained it because their business demanded it, and who now have the foundation to move fast on fixed-price work without gambling on the estimate. That foundation is what Twenty5 iPE provides: structured cost estimating from first principles, full traceability across the project lifecycle, and a closed loop between delivery actuals and future bids. When every cost is grounded in evidence and traceable to its source, the fixed-price mandate stops being a risk and starts being a competitive advantage.
