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.

Highlights

• Full CAS Threshold. On July 30, 2026, DPCAP issued a DoD class deviation that increased the Full CAS coverage threshold from $50 million to $100 million for applicable DoD contracts.
• Disclosure Statements. The threshold for required Disclosure Statements also increases to $100 million, changing when certain business units must submit or maintain formal disclosure requirements.
• Modified CAS Coverage. The $7.5 million trigger contract has been eliminated, and contracts and subcontracts greater than $35 million are subject to Modified CAS unless an exemption applies, based on statutory changes enacted in the FY 2026 NDAA.
• Civilian Contract Considerations. The class deviation directs business units with a mix of DoD and civilian agency contracts or subcontracts to continue applying FAR 30.201(b), while 41 U.S.C. 1502 now establishes a $35 million statutory CAS threshold for negotiated Federal prime contracts and subcontracts, subject to applicable exemptions. Contractors should carefully review solicitation and subcontract terms where CAS requirements appear inconsistent with the current statutory threshold.
• Audit Implications. DCAA’s August 19, 2026, audit alert directs auditors to verify that current threshold requirements are met before proceeding with certain Disclosure Statement and comprehensive CAS audits, while existing material CAS non-compliances remain subject to review.

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 certain statutory mandates of Section 1806 of the National Defense Authorization Act (NDAA) for Fiscal Year 2026 (read our article, How the March 2026 CAS Threshold and Related Changes Affect Government Contractors).

The FY 2026 NDAA also directed the Administrator for Federal Procurement Policy to issue regulations necessary to implement the statutory CAS amendments within 180 days. While DoD has addressed portions of the changes through its class deviation, further governmentwide regulatory action is expected to align the FAR and CAS regulatory text with the amended statute.

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) (read 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 establishes the criteria for Modified CAS coverage based on the new $100 million Full CAS threshold. In addition, Section 1806 of the FY 2026 NDAA amended 41 U.S.C. 1502 to establish a $35 million statutory threshold for CAS applicability.

DCAA’s August 19, 2026, Audit Alert states that, unless an exemption applies, contracts and subcontracts greater than $35 million are CAS covered. Modified CAS coverage applies to contracts and subcontracts greater than $35 million but less than $100 million when the contractor’s prior-year net CAS-covered awards were less than $100 million.

For contractors that have a mix of DoD and other Federal, or civilian, contracts or subcontracts, the class deviation states that FAR 30.201(b) continues to apply. This creates an implementation issue because the amended statutory language establishes a $35 million CAS threshold for negotiated Federal prime contracts and subcontracts, subject to applicable exemptions, while the existing FAR and CAS regulatory framework has not yet been fully aligned with that change.

Contractors with mixed DoD and civilian portfolios should carefully evaluate solicitation, prime contract, and subcontract language and raise questions with the Contracting Officer or higher-tier contractor when CAS clauses or coverage requirements appear inconsistent with the applicable statutory threshold.

The $35 million CAS threshold originates from Section 1806(d)(1) of the FY 2026 NDAA, which amended 41 U.S.C. 1502. The statutory change also eliminated the previous $7.5 million trigger contract exemption. DCAA has incorporated these changes into its audit guidance and states that contracts and subcontracts greater than $35 million are CAS covered when no exemption applies. Further rulemaking is expected to provide additional clarification and align the governmentwide regulatory text with the statutory changes.

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 active DoD solicitations and upcoming proposals to ensure pending awards reflect the correct CAS clauses and flow-down requirements. Contractors should not assume that the new thresholds remove CAS coverage from previously awarded contracts. DCAA specifically states that Full or Modified CAS coverage of prior awards will not change.

Contractors should reference the statutory language of the FY 2026 NDAA and 41 U.S.C. 1502 when negotiating with prime contractors or Contracting Officers, particularly when solicitation, contract, or subcontract language appears inconsistent with the current CAS thresholds.

Contractors should reassess CAS applicability across their business units in light of the new thresholds and determine whether an initial Disclosure Statement review is still necessary. Contractors should also coordinate with their CFAO or ACO regarding ongoing or planned audits. Existing material CAS non-compliances remain subject to resolution, and contractors will need to continue working with the ACO on those matters.

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.

Frequently Asked Questions

• What is Full CAS coverage? Full CAS coverage requires a government contractor to follow all applicable Cost Accounting Standards for covered contracts. Under the DoD class deviation, the Full CAS threshold increases from $50 million to $100 million.
• When does the new $100 million Full CAS threshold apply? For applicable DoD contracts, Full CAS coverage generally applies when a contractor receives a single CAS-covered award of $100 million or more, or when its CAS-covered awards in the preceding cost accounting period exceed $100 million.
• What changed for Disclosure Statements? The threshold for submitting a required Disclosure Statement also increases from $50 million to $100 million for applicable DoD contracts. Government contractors should reassess whether a Disclosure Statement is still required under the new threshold.
• What is Modified CAS coverage under the new rules? The previous $7.5 million trigger contract has been eliminated. Unless an exemption applies, DCAA states that contracts and subcontracts greater than $35 million are CAS covered, with Modified CAS generally applying below the $100 million Full CAS threshold when the applicable prior-period award criteria are met.
• Do the new DoD thresholds apply to civilian agency contracts? The DoD class deviation applies specifically to DoD contracts and directs mixed DoD and civilian business units to continue applying FAR 30.201(b). However, the FY 2026 NDAA amended the underlying statute to establish a $35 million CAS threshold for negotiated Federal prime contracts and subcontracts, subject to exemptions, so contractors should carefully evaluate the requirements applicable to their civilian contracts as governmentwide implementation continues.
• What happens to existing CAS audits and non-compliances? DCAA has directed auditors to confirm that current threshold requirements are met before proceeding with certain Disclosure Statement and comprehensive CAS audits. CAS coverage of prior awards does not change, and existing material CAS non-compliances remain subject to review and resolution.