DoD Issues Class Deviation to Raise Full Cost Accounting Standards (CAS) Threshold to $100 million

DoD’s July 30, 2026, class deviation raises the Full CAS and Disclosure Statement thresholds to $100 million, changing how CAS coverage may apply to certain defense contracts. Government contractors should reassess CAS applicability, pending proposals, Disclosure Statement requirements, and ongoing audit activity to determine how the new thresholds affect current obligations.

On July 30, 2026, the Office of Defense Pricing, Contracting, and Acquisition Policy (DPCAP) issued a much anticipated DFARS Class Deviation 2026-O0006, Revision 1, updating the long‑standing CAS applicability threshold. This new class deviation officially aligns the Defense Federal Acquisition Regulation Supplement (DFARS) Part 230 with the statutory mandates of Section 1806 of the National Defense Authorization Act (NDAA) for Fiscal Year 2026 (see our article, How the March 2026 CAS Threshold and Related Changes Affect Government Contractors).

Effective immediately, Contracting Officers must use the revised FAR part 30, Cost Accounting Standards Administration on the Revolutionary FAR Overhaul website, along with DFARS part 230, Cost Accounting Standards and DFARS Procedures, Guidance and Information (PGI) 230, as modified by the deviation. This deviation applies exclusively to DoD contracts.

Changes to Full CAS and Disclosure Thresholds

The most significant impact of the class deviation is the immediate increase of both the Full Cost Accounting Standards (CAS) threshold and the Disclosure Statement threshold from $50 million to $100 million.

Previously, an individual contract award of $50 million, or cumulative contract awards of $50 million in a prior accounting period, triggered full CAS compliance. Under the new deviation:

• Full CAS Coverage Threshold: Applies only to contractors receiving a single award of $100 million or more, or those whose total CAS-covered awards in the preceding cost accounting period exceed $100 million.
• Disclosure Statements: The threshold to submit a formal Disclosure Statement detailing accounting practices is also increased to $100 million.

Full CAS coverage previously required contractors to comply with all 19 cost accounting standards. However, on July 8, 2026, the CAS Board issued a final rule rescinding CAS 408, CAS 411 and most provisions of CAS 404 and CAS 409, effective August 7, 2026, because the CAS requirements are addressed in Generally Accepted Accounting Principles (GAAP). (See our article, Cost Accounting Standards Board (CASB) Makes Progress on Conforming CAS to GAAP)

Modified CAS Coverage

For business units performing DoD‑only contracts, the class deviation states instead of FAR 30.201(b) and 48 CFR 9903.201-2(b), modified CAS coverage applies when contractors or subcontractors:

• Receive a single CAS-covered contract award valued below $100 million.
• Received CAS-covered contracts during its preceding cost accounting period with a net value of less than $100 million.

For contractors that have a mix of DoD and other Federal (civilian) contracts or subcontracts, the class deviation states that FAR 30.201(b) continues to apply. This ensures alignment with 48 CFR 9903.201-2 and the $50 million modified CAS threshold for civilian agency contracts.

The $35 million modified CAS threshold is a statutory mandate originating from Section 1806(d)(1) of the FY 2026 NDAA for DoD contracts. The DPCAP class deviation did not specifically call out the $35 million modified CAS threshold, because the threshold is linked to the TINA threshold and therefore must be addressed through formal rulemaking, which is in process (See Notice of Proposed Rulemaking (NPRM) Increase of Monetary Thresholds and Other Matters Related to Cost Accounting Standards Program Requirements).

CAS Waiver Threshold

The class deviation significantly increased the threshold for reporting CAS waivers to the CAS Board and Congress from $15 million to $100 million or more, which will reduce administrative barriers for unique or critical acquisitions.

Why This Matters for Government Contractors

This deviation is part of the broader, ongoing Revolutionary FAR Overhaul (see our article Revolutionary FAR Overhaul (RFO) initiative). It was designed to remove compliance barriers for non-traditional defense contractors and encourage commercial industrial base participation. The increase in the CAS thresholds will reduce regulatory and administrative oversight burdens imposed on mid-size and some larger contractors.

The class deviation will remain in effect until it is formally rescinded or fully incorporated in the FAR, DFARS and DFARS PGI.

DCAA Audit Alert on Increase to CAS Thresholds

DCAA issued an Audit Alert on the Increase to Cost Accounting Standards (CAS) Monetary Thresholds dated August 19, 2026, addressing the DPCAP Class Deviation and Section 1806 of the FY 2026 NDAA. The alert states the $7.5 million trigger contract for Modified CAS is eliminated, and unless an exemption applies, contracts and subcontracts greater than $35 million are subject to modified CAS. Full CAS coverage will apply to awards of $100 million or more.

The memo continues that auditors should coordinate with their Cognizant Federal Acquisition Official (CFAO) to determine the need to continue CAS audits. Although CAS coverage of prior awards does not change, the requirement for an initial Disclosure Statement audit may change. Before accepting a Disclosure Statement engagement or a comprehensive CAS compliance audit, auditors must verify that the business unit or segment meets the new threshold requirement. Auditors are to continue working on existing material CAS non-compliances.

Takeaways

Contractors should immediately review all active DoD solicitations and upcoming proposals. Since the class deviation is effective immediately, ensure pending proposals reflect the correct clauses and flow-down requirements.

Contractors preparing proposals valued between $35 million and $100 million should reference the statutory language of the NDAA at 41 U.S.C. 1502 during DCAA proposal audits and when negotiating with prime contractors or Contracting Officers.

Contractors should reassess CAS applicability across their business units in light of the new thresholds, evaluating whether segments previously subject to Modified or Full CAS coverage may now fall below the requirements. Contractors should verify whether an initial Disclosure Statement review is still necessary and coordinate early with their CFAO or ACO to confirm whether ongoing or planned audits should continue. Contractors will need to continue working with the ACO on existing material CAS non-compliances.

Reassessing CAS Obligations Under the New Thresholds

Redstone GCI assists government contractors in determining CAS applicability and the appropriate level of coverage as regulatory requirements and thresholds change. Our team of experts helps government contractors evaluate CAS implementation requirements, prepare or revise Disclosure Statements, and review and update CAS-specific accounting and estimating policies and procedures. We also assist with evaluating changes in cost accounting practices, preparing Cost Impact and General Dollar Magnitude proposals, supporting CAS-related audits and compliance matters, and providing CAS-specific training for leadership and employees. We help government contractors understand how changes in CAS requirements affect their existing practices and determine what actions may be necessary to remain compliant.