Effective October 1, 2026, the CAS final rule uses the contract ceiling to assess the monetary exemption for single award Indefinite-Delivery Indefinite-Quantity (IDIQ) contracts and the individual order ceiling for multiple award IDIQs. Before signing, government contractors should consider whether full CAS coverage could affect their nontraditional defense contractor status and related exemptions.
What is an IDIQ Contract?
First, what is an Indefinite-Delivery Indefinite-Quantity (IDIQ) type of contract? Federal Acquisition Regulation (FAR) Subpart 16.5 provides what an IDIQ type contract means to the Government. FAR 16.501-1 provides two definitions:
- Delivery-order contract means a contract for property [supplies] that does not procure or specify a firm quantity of property (other than a minimum or maximum quantity) and that provides for the issuance of orders for the delivery of supplies during the period of the contract.
- Task-order contract means a contract for services that does not procure or specify a firm quantity of services (other than a minimum or maximum quantity) and that provides for the issuance of orders for the performance of tasks during the period of the contract.
There are two ways an IDIQ contract can be awarded:
- A single award where only one contractor is awarded the contract and will receive all the orders placed; or
- A multiple award where the contract is awarded to more than one contractor and the contractors can compete for the orders placed.
What Changed to Create Risk
Effective October 1, 2026, Cost Accounting Standards (CAS) 9903.201-1(c) was added to implement the CAS Board’s position relating to IDIQ contracts. CAS coverage on a single award IDIQ contract will be based on the ceiling value (i.e., maximum value). The CAS Board was adamant that these are high-risk contracting vehicles to the Government and need to be CAS covered. For a multiple award IDIQ contract, however, CAS coverage will be determined at the order level.
It is important to remember that a single award IDIQ contract can still be exempt from CAS coverage if it meets one of the exemptions in CAS 9903.201-1(b). For example, an award to a small business, an award for a commercial product or service, or a fixed-price award based on adequate price competition.
While most other sections of the CAS (e.g., 9903.201-1(b)) state “contract or subcontract,” CAS 9903.201-1(c) only uses the term “contract.” We discuss the impact on subcontracts more below.
Is an IDIQ Type of Contract Worth the Risk?
The short answer is it depends. If you are a large contractor, you likely already have numerous other fully CAS covered contracts and subcontracts. So, no risk there. If you are a small business, your small business status will protect you from the potential impact of an IDIQ maximum value triggering CAS coverage. So, no risk there. However, if you are one of the many mid-size contractors, a Department of War (DoW) IDIQ contract can significantly increase the risk of you losing your recently gained Non-Traditional Defense Contractor (NTDC) status and the benefits it has brought you.
What are the Benefits of Being a Non-Traditional Defense Contractor?
Based on the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2026, Section 1826, all Department of War contracts and subcontracts awarded to NTDCs are exempt from:
- Defense Federal Acquisition Regulation Supplement (DFARS), Business System Requirements;
- DFARS 215.407, Special Cost or Pricing Areas;
- 10 U.S.C. § 3702, Truthful Cost or Pricing Data Act (aka, Truth in Negotiations Act); and
- FAR Part 31, Contract Cost Principles and Procedures.
An NTDC is “…an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section.”
The DoW is implementing the statutory requirements into the DFARS using class deviations as part of the Revolutionary FAR Overhaul process.
Are There Any Specific Risks for a Small Business?
The answer to this question, as with most government contract regulatory questions, is a hard maybe.
If you are awarded a single award IDIQ, the contract CAS coverage does not change if you happen to grow out of small business status during the period of performance. If you are a small business, a single award IDIQ contract is the gift that keeps on giving. However, if you are awarded a multiple award IDIQ contract and you happen to outgrow your small business status during the period of performance, future orders may be CAS covered unless one of the other exemptions to CAS coverage applies (e.g., competitively awarded fixed price order). CAS 9903.201-1(c)(1) now states “exemptions … shall be determined at the time of award of any individual task or delivery order…” If you outgrow your small business status during the period of performance of a multiple award contract, that exemption will no longer apply.
What is the Risk for Mid-Size Contractors?
The DoW shows up at your door looking for you to sign a single award contract to lock in pricing over the next five years. We understand it could be for a period much greater than five years. The plan is to place orders annually for between $20M and $25M, well below the new CAS threshold of $35M. The single award contract has a minimum of $10,000, but the maximum value (i.e., ceiling value) is $125M. You have a contract that the Government will require to be fully CAS covered, unless another CAS exemption applies. Your NTDC status and its exemptions are gone for:
- The period of performance of the contract you signed;
- Plus, the period of performance of any future DoW contracts over the $35M CAS threshold awarded during the period of performance of the first contract; and
- Let us not forget the one-year waiting period after the last fully CAS covered contract period of performance runs out.
What Should You Do?
Push back. Do not agree to the contract if it could result in you losing your NTDC status.
There is a possible option. Request that the Government issue a basic agreement or basic ordering agreement using the procedures in FAR Subpart 16.7. FAR 16.702-1(b) and FAR 16.703-1(b) make it clear that these agreements are not contracts.
With IDIQ minimum values being so low (i.e., $10,000), having no minimum in an agreement may not present a material issue. FAR 16.703-1(a)(3) and FAR 16.703-3(b)(1) addressing basic ordering agreements both provide that the agreement must address the method for determining prices to be paid to the contractor for the supplies or services. This would appear to support the establishment of fixed prices by product or service with adjustments in out-years (i.e., escalation or economic price adjustments). Really the only thing you leave on the table is the required minimum by using a basic ordering agreement vs. an IDIQ contract.
You could also request that the minimum value be increased. If the DoW wants you to invest the resources to manage a bunch of fully CAS covered orders and lose your NTDC exemptions for an extended period, they should make it worthwhile.
We understand no company wants to push back too hard and risk losing significant new business. However, you do not want the auditors to come in after the fact and apply FAR requirements you believed you were exempt from.
What about Subcontracts?
Remember, CAS 9903.201-1(c) does not include the word “subcontract.” However, it is clear that CAS coverage flows down to subcontracts. It is also clear that the CAS Board left the word “subcontracts” out of this new section of CAS applicability.
When it comes to a subcontract, you may see IDIQ-type subcontracts called a Master Services Agreement, a Supply Agreement, or a Purchase Agreement. The higher-tier contractor puts the agreement in place and then issues orders under it. We are going to have to wait and see. The CAS Board’s clarification as to how to handle IDIQ contracting vehicles appears to have created possibly more confusion.
In the meantime, we suggest you make sure any Master Services Agreements, Supply Agreements, or Purchase Agreements with higher-tier contractors clearly state they are agreements and not subcontracts before you sign them. Our friends at the Defense Contract Audit Agency (DCAA) are going to be looking for any opportunity to push you into having a fully CAS covered DoW subcontract so they can apply the FAR requirements an NTDC is exempt from, more work for them.
Assessing CAS Risk Before You Sign
Before signing an IDIQ contract, government contractors should consider how the award structure and ceiling value could affect their Cost Accounting Standards coverage and eligibility for nontraditional defense contractor exemptions. Redstone GCI assists government contractors with reviewing proposed contracts and subcontracts, evaluating CAS applicability and exemptions, and identifying which requirements could apply after award. We also assist with updating policies and procedures and training the teams responsible for meeting those requirements. As the DoW looks to put longer-term acquisitions in place, such as the Army’s $9.8 billion PAC-3 production award to Lockheed Martin, contact our team to discuss what the terms of your next award could mean for your business.
