Government contractors are entering a new compliance environment in 2026. The FY2026 National Defense Authorization Act (NDAA), signed December 18, 2025, raises several long-standing thresholds. The DCAA has reorganized its audit structure, and CMMC implementation continues to evolve.
While these updates reduce administrative requirements for qualifying contractors, accounting practices, indirect rate support, and incurred cost reporting remain under close review. Understanding the latest DCAA compliance changes can help your organization make informed decisions before your next proposal or audit.
| In This Article: Several 2026 regulatory updates may change which requirements apply to your contracts and proposals. Reviewing the new thresholds, DCAA audit focus areas, and current compliance requirements will help contractors identify both available relief and areas that still require preparation. |
Higher Thresholds Offer Relief for Many Contractors
Several of the most significant DCAA regulation changes in 2026 stem from the FY2026 NDAA. Under Section 1804, for negotiated prime contracts entered into after June 30, 2026, the threshold for certified cost or pricing data increases from $2.5 million to $10 million. Existing contracts entered into before that date remain subject to the previous threshold, unless otherwise modified.
Many small and mid-sized contractors will benefit from this change because fewer acquisitions will require certified cost or pricing data. Contracting officers must still determine that proposed prices are fair and reasonable, so supporting estimates, historical cost information, and pricing documentation remain valuable throughout the procurement process.
Cost Accounting Standards (CAS) requirements also changed under Section 1806. The legislation raises the contract-level CAS applicability threshold from $2.5 million to $35 million and increases the full CAS coverage threshold from $50 million to $100 million. Section 1806 also eliminates the previous $7.5 million “trigger contract” mechanism that pulled a contractor’s other awards into CAS coverage once one qualifying contract was received.
These revisions reflect the FY2026 NDAA’s broader effort to reduce administrative burdens for defense contractors while maintaining oversight of higher-value acquisitions.
DCAA Audit Changes Focus on Higher-Risk Reviews
Several 2026 DCAA audit changes involve organizational restructuring rather than reduced oversight. Effective October 2025, the DCAA replaced its legacy regions with three mission-focused directorates: Air, Land, and Sea. The agency also established a Centralized Audit Function (CAF) to manage complex, high-risk, and enterprise-level engagements.
Recent agency data illustrates why these audits remain significant. In FY2025, the DCAA examined over $302.8 billion in incurred costs and identified approximately $1.01 billion in incurred cost audit exceptions. Contractors voluntarily removed another $3.8 billion in unallowable costs before audits began.
Audit attention continues to concentrate on accounting accuracy, cost allowability, and reliable financial records.
Indirect Rates and Incurred Cost Submissions Still Require Close Attention
Higher statutory thresholds do not eliminate long-standing compliance responsibilities. Companies performing cost-reimbursement work remain responsible for preparing accurate indirect rates, maintaining consistent accounting practices, and submitting timely incurred cost proposals.
For contractors operating under FAR 52.216-7 with a December 31 fiscal year-end, the incurred cost submission is due June 30 of the following year. The DCAA continues to recommend using its ICE Model to prepare the required schedules, though responsibility for a complete and accurate submission always remains with the contractor.
Strong indirect rate compliance depends on properly classifying direct and indirect costs, identifying expressly unallowable expenses, maintaining accurate timesheets, and retaining supporting documentation throughout the contract period.
Non-Traditional Contractors Gain New Opportunities
Several FY2026 NDAA provisions affecting non-traditional defense contractor (NDC) exemptions may encourage new companies to enter the defense marketplace. Qualifying organizations receive exemptions from certain contractor business system requirements.
Government agencies retain authority to require those systems when doing so serves the government’s interest, so careful contract review remains necessary before assuming an exemption applies.
Cybersecurity requirements continue to evolve. Ongoing CMMC harmonization efforts are working to align program requirements across Department of Defense contracts, while existing contractual cybersecurity obligations remain in effect throughout the transition.
Preparing for DCAA Compliance in 2026
Successful DCAA compliance in 2026 depends on understanding which regulatory changes apply to your contracts while maintaining the disciplined accounting practices required for government contracting. Threshold increases create relief for many organizations, but accurate indirect rates, complete incurred cost submissions, reliable pricing support, and organized financial records continue to receive significant government scrutiny.
Diener & Associates has helped government contractors strengthen compliance programs since 1989. Our team provides government contract consulting, outsourced accounting, DCAA compliance support, and advisory services aligned with FAR, CAS, DFARS, and current regulatory requirements.
A consultation can help you understand what the DCAA compliance changes mean for your company and where preparation is needed. During the consultation, we will review your contracts, accounting practices, and compliance obligations so you are prepared for the opportunities and responsibilities ahead.