The 2026 FAR overhaul reached your accounting system on February 1, when 37 DFARS class deviations took effect under the Revolutionary FAR Overhaul (RFO). They rewrite how government contractors track costs, structure indirect rates, and document compliance. Four of them reach your books hardest: the CAS and TINA thresholds, the clause renumbering, the small business set-aside changes, and the wider discretion now sitting with your contracting officer.
Most coverage of the FAR rewrite focuses on procurement and legal angles. Lawyers explain what contracting officers will do differently. Procurement consultants explain how solicitations will change. Nobody translates the overhaul into accounting impact: what changes in your general ledger, your indirect rate structure, your proposal templates, and your audit file.
That translation matters now. Phase 1 class deviations are not proposed rules waiting for comment periods. They took effect February 1. DoD contracting officers are already issuing solicitations under the new framework. If your accounting system still references old clause numbers, old CAS thresholds, or old cost documentation requirements, you are out of compliance today.
What Does the 2026 FAR Overhaul Actually Change?
The Revolutionary FAR Overhaul replaces the prescriptive, rule-by-rule structure of the Federal Acquisition Regulation with a principle-based, outcome-oriented framework. Phase 1 uses class deviations (interim rules with immediate effect) to implement changes while formal rulemaking proceeds in Phase 2. The DoD released 31 initial deviations on December 19, 2025, followed by six more on January 24, 2026 [DFARS RFO Class Deviations].
The shift from prescriptive to principle-based regulation sounds abstract until you see the accounting implications. Prescriptive rules told you exactly which cost elements to document, which thresholds triggered additional requirements, and which clause numbers to reference. Principle-based rules give contracting officers discretion. That discretion increases your documentation burden, not decreases it.
Contractors who assume “fewer rules” means “less work” will get burned. The opposite is true. When a contracting officer has discretion to ask for additional cost transparency, your accounting system must produce it on demand. The floor for compliance dropped. The ceiling for what you might need to prove went up.
CAS and TINA Threshold Shifts: The Biggest Accounting Impact
The FY2026 NDAA moved three of the thresholds that decide how much cost accounting infrastructure a government contractor must maintain. It moved them by two different mechanisms, and that difference decides which ones bind today [FY2026 NDAA CAS/TINA Updates].
One is clean. Section 1804(c) amended 10 U.S.C. 3702(a) directly, setting the DoD certified cost or pricing data threshold at $10 million for prime contracts entered after June 30, 2026. That date sits inside the statute itself rather than in an implementation note, and Section 1804 orders no rulemaking at all. Civilian agencies were not part of the amendment and stay at $2.5 million.
One is in the law but waiting on a rule. Section 1806(d)(1) amended 41 U.S.C. 1502(b)(1)(B) directly, so the statute now sets contract-level CAS applicability at $35 million in place of the old cross-reference to the Truth in Negotiations Act threshold. Read two lines further, though. Paragraph (3) of that same subsection gave the Administrator for Federal Procurement Policy 180 days to issue the regulations needed to implement the amendment, and that deadline passed in June 2026 with nothing issued. This is the detail most commentary skips, and it is why the figure is worth knowing but not worth acting on alone.
The third is not law yet. Full CAS coverage did not move. Section 1806(a) directs the Administrator for Federal Procurement Policy to raise it from $50 million to $100 million, and that takes a rulemaking. The 180-day deadline ran out in June 2026. The only document filed under RIN 0348-AB85 is the proposed rule of March 20, 2026, so 48 CFR 9903.201-2 still reads $50 million and the Disclosure Statement trigger at 9903.202-1 still follows it.
The practical upshot is the same for all three. FAR 15.403-4 still states $2.5 million, and 48 CFR 9903.201-1 still describes CAS applicability by pointing at the TINA threshold. Contracting officers work from those regulations. Read both layers before you act on either, and get your status confirmed in writing.
Take a small GovCon firm billing $8 million a year across three DoD contracts. The math changes, though less than the headline numbers suggest. A single $3 million contract did sit above the old $2.5 million line, though 48 CFR 9903.201-1(b)(7) also exempted contracts under $7.5 million where the business unit was not performing a CAS-covered contract of $7.5 million or more.
That second exemption is on its way out: Section 1806(d)(1)(B)(iv) struck it from 41 U.S.C. 1502, and it survives in the CFR only because the implementing rule is overdue. It makes no practical difference, because a $35 million floor swallows a $7.5 million carve-out whole. And if the firm is a small business, none of it applies anyway, because 48 CFR 9903.201-1(b)(3) exempts small businesses from all CAS requirements at any value.
On the pricing side, none of those contracts approach $10 million, so a DoD award entered after June 30, 2026 would not carry a certified cost or pricing data requirement.
| Threshold | Before | FY2026 NDAA figure | Status as of August 2026 |
|---|---|---|---|
| CAS applicability, per contract | $2.5M, the TINA threshold it cross-referenced | $35M | In the statute since December 2025, but Section 1806(d)(3) ordered implementing rules within 180 days and none issued. 48 CFR 9903.201-1 unrevised. |
| TINA, DoD prime contracts | $2.5M | $10M | In force by statute for contracts entered after June 30, 2026, and in force in practice for DoD under a class deviation. |
| TINA, civilian agencies | $2.5M | Not amended | Still $2.5M per FAR 15.403-4. |
| Full CAS coverage and DS-1 | $50M | $100M | Not in force. Needs an OFPP rule. The deadline was missed and only the March 2026 proposed rule exists. |
| Trigger-contract exemption | $7.5M | Repealed | Struck from the statute by Section 1806(d)(1)(B)(iv). Still printed at 48 CFR 9903.201-1(b)(7) pending the rule, and moot under a $35M floor. |
| Small business exemption | Any value | Not amended | Unchanged at 48 CFR 9903.201-1(b)(3). Small businesses are exempt from all CAS requirements. Run this test first. |
The DoD row needs the detail the table cannot hold. DoD is operating under class deviation 2026-O0048, issued 5 March 2026 and superseded by Revision 1 signed 22 July 2026, which supplies a deviated DFARS 215.403-3(a): obtain certified cost or pricing data when a prime contract is expected to exceed $10 million and is awarded after June 30, 2026.
The codified FAR 15.403-4 is unrevised, so the codified page and the rule a DoD contracting officer applies now disagree. The same memo sends officers to the deviated FAR 15.403-3(a) for the threshold and FAR 15.403-2 for the exceptions, neither of which is where the codified FAR keeps them. See the TINA compliance threshold guide.
Here is the catch. The threshold increase does not mean you should dismantle your cost accounting infrastructure. DCAA still audits incurred costs on any cost-reimbursement contract regardless of CAS applicability. Your indirect rate calculations still need to withstand audit scrutiny. The thresholds change when certain formal requirements apply. They do not change the standard of evidence a DCAA auditor expects when reviewing your books.
Clause Renumbering: The Operational Headache Nobody Warned You About
The FAR overhaul renumbers hundreds of contract clauses across FAR Part 52 and DFARS Part 252. The basic safeguarding clause moved from FAR 52.204-21 to FAR 52.240-93. The DFARS assessment clause at 252.204-7020 became 252.240-7997. The provision at DFARS 252.204-7019 no longer exists at all [DFARS Renumbering and CMMC].
This is not a legal detail. This is an accounting operations problem. Every reference to a FAR or DFARS clause in your firm touches your books somewhere. Proposal templates reference clause numbers in cost narratives. Subcontract flowdown matrices list clause requirements by number. Internal policies cite specific FAR sections. Timekeeping system configurations tie labor categories to contract clause requirements. Even your DCAA compliance documentation references specific clauses when describing how your accounting system meets government requirements.
The renumbering creates a dual-numbering period. Existing contracts retain old clause numbers. New solicitations use new clause numbers. Your team will work with both numbering systems simultaneously for months, possibly years. A proposal prepared against a new solicitation that references old clause numbers signals to the contracting officer that your firm has not updated its systems. That is not a good signal during source selection.
Clause Reference Audit: Where to Look in Your Books
- Proposal cost volume templates referencing FAR 52.2xx clauses
- Subcontract flowdown checklists and prime/sub agreements
- Accounting system documentation submitted during DCAA audits
- Indirect rate proposal narratives citing cost allowability rules
- Employee handbooks and timekeeping policies referencing FAR requirements
- QuickBooks or ERP chart of accounts notes tied to regulatory references
Small Business Set-Aside and 8(a) Program Changes: Revenue Planning Impact
The FAR rewrite restructures how contracting officers prioritize small business set-asides, changing the competitive calculus that drives revenue for HUBZone, SDVOSB, WOSB, and 8(a) firms. The Rule of Two survives, but the socioeconomic set-aside hierarchy is gone. Contracting officers no longer must consider socioeconomic set-asides before general small business set-asides [PilieroMazza: FAR Part 6 Rewrite].
For 8(a) firms, the change is sharper. Contracting officers must now attempt competitive 8(a) orders using SBA-approved government-wide contracts before proceeding to sole-source 8(a) awards [PilieroMazza: FAR Part 19 Release]. Follow-on 8(a) contracts can transition to other socioeconomic set-asides (HUBZone, SDVOSB, WOSB) without SBA approval. Size and status determinations lock in at the contract level, not the order level.
Translate this to your financial projections. If your firm depends on sole-source 8(a) awards for a significant share of revenue, your pipeline assumptions need recalibration. Competitive 8(a) awards require different pricing strategies, different indirect rate structures, and different proposal cost volumes than sole-source work. The accounting is different because the competitive posture is different. Firms pricing sole-source work with comfortable margins will lose competitive 8(a) bids to firms with tighter rate structures and more aggressive pricing models.
How Does the FAR Overhaul Change Contracting Officer Discretion?
The principle-based framework gives contracting officers wider latitude in evaluating cost proposals, determining price reasonableness, and assessing accounting system adequacy. Under the old rules, a contracting officer followed a checklist. Under the new framework, a contracting officer exercises professional judgment. That judgment is harder to predict and harder to prepare for [Wolters Kluwer: FAR Overhaul].
Your audit file must now serve two masters. DCAA auditors still follow the Contract Audit Manual (DCAM). Contracting officers operate under the new principle-based framework. A cost element that satisfies DCAA might face additional questions from a contracting officer exercising discretion under the RFO. The practical response: document more, not less.
Three specific areas where increased discretion affects your accounting:
- Price reasonableness determinations. Contracting officers have more latitude to request cost breakdowns even on contracts below the TINA threshold. Maintain detailed cost buildup documentation for every proposal, regardless of contract size.
- Accounting system adequacy. The standard for what constitutes an “adequate” accounting system shifts from a fixed DFARS checklist [DFARS 252.242-7006] to a judgment call. Exceed the minimum requirements.
- Indirect rate acceptability. Your provisional billing rates face more scrutiny when a contracting officer decides to look deeper. Keep your rate calculations current, reconciled, and supported by auditable source data.
Preparing Your Accounting System for the FAR Overhaul 2026
Government contractor accounting changes under the RFO require a structured response. Waiting until a contracting officer flags a problem during source selection or a DCAA auditor questions your clause references is the most expensive way to comply. Here is a five-step action plan. Run it now rather than against a date: the DoD TINA change already applies to contracts entered after June 30, 2026, and the CAS changes are waiting on rules that have missed their deadlines.
1. Update Every Clause Reference in Your Documentation
Audit every proposal template, subcontract agreement, flowdown matrix, and accounting policy for FAR and DFARS clause references. Create a crosswalk document mapping old clause numbers to new ones. Assign one person to own this crosswalk and update it as Phase 2 rulemaking releases new deviations.
2. Reassess Your CAS and TINA Obligations
Run your contract portfolio against the new thresholds. Identify which contracts no longer trigger CAS or TINA requirements, and check the small business exemption at 48 CFR 9903.201-1(b)(3) first, because it settles the question outright for a small business. Do not reduce your accounting infrastructure. Instead, reclassify the effort: the documentation that was “mandatory compliance” becomes “competitive advantage.” Firms that maintain CAS-grade accounting on contracts below the threshold win more awards because contracting officers trust their numbers.
3. Rebuild Revenue Projections for Set-Aside Changes
If you hold 8(a), HUBZone, SDVOSB, or WOSB status, model the impact of the set-aside hierarchy elimination. Stress-test your pipeline against a scenario where 30% of previously sole-source opportunities become competitive. Adjust your indirect rates and pricing models accordingly.
4. Strengthen Your Cost Documentation Posture
Contracting officer discretion rewards contractors who over-document, not those who do the minimum. Build cost narratives that explain what a cost is, why it is reasonable, and how it was estimated. Use your compliance readiness check as a starting point for identifying documentation gaps.
5. Train Your Team on Dual Clause Numbering
Every person who touches proposals, incurred cost submissions, or subcontract administration needs to understand the old-to-new clause crosswalk. A proposal that cites the wrong clause number is not a typo. It is a compliance finding.
Frequently Asked Questions
What does the 2026 FAR overhaul change in my accounting system?
The 2026 FAR overhaul raises CAS and TINA thresholds, renumbers contract clauses across FAR Part 52 and DFARS Part 252, and widens contracting officer discretion over cost proposal evaluation. Your clause references, proposal templates, and indirect rate documentation all need updating, and the first of those dates has already passed.
Do the new CAS thresholds mean I no longer need a compliant accounting system?
No. The statute now sets contract-level CAS applicability at $35 million, up from $2.5 million rather than the $2 million figure often quoted, but the implementing regulation Congress ordered with it is overdue and 48 CFR 9903.201-1 is unrevised. Full CAS coverage did not change and stays at $50 million. Either way, DCAA still audits incurred costs on any cost-reimbursement contract. A CAS-grade accounting system remains the standard for winning awards and surviving audits, even when formal CAS applicability no longer triggers at your contract level.
When do the FAR overhaul class deviations take effect?
Phase 1 DFARS class deviations took effect on February 1, 2026. The two threshold changes run on different clocks. The DoD TINA increase applies to prime contracts entered after June 30, 2026. The CAS applicability increase carries no contract-date condition, but Section 1806(d)(3) ordered implementing regulations for it within 180 days and that deadline passed unmet, so it sits in the statute without a rule behind it. The full CAS coverage increase never changed any number and is waiting on the same overdue rulemaking. Phase 2 formal rulemaking is ongoing, with DoD soliciting industry input through 2026.
How does clause renumbering affect my existing contracts?
Existing contracts retain their original clause numbers. New solicitations use the renumbered clauses. Your firm will work with both numbering systems simultaneously during the transition. Internal documents, proposal templates, and subcontract flowdowns referencing old clause numbers need updating for new awards.
What happens to 8(a) sole-source awards under the FAR rewrite?
Contracting officers must first attempt competitive 8(a) orders through SBA-approved government-wide contracts before issuing sole-source 8(a) awards. This shifts the competitive environment for 8(a) firms and requires adjusted pricing strategies, tighter indirect rate structures, and revised revenue projections.
Should small contractors reduce compliance efforts under the higher thresholds?
Reducing compliance is a mistake. Higher thresholds reduce formal requirements, but increased contracting officer discretion means your cost documentation may face deeper scrutiny. Firms maintaining CAS-grade systems on sub-threshold contracts gain a competitive advantage in source selection and audit outcomes.
Key Takeaways
- The CAS and TINA threshold increases are the largest accounting compliance shift in a decade. Reclassify your documentation effort as competitive advantage, not wasted overhead. Firms that maintain high standards below the new thresholds win more business.
- Clause renumbering is an operational problem, not a legal one. Every proposal template, subcontract flowdown, and accounting policy referencing FAR or DFARS clause numbers needs a crosswalk update before your next solicitation response.
- Contracting officer discretion increases your documentation burden. Principle-based regulation rewards over-documentation. Build cost narratives that answer questions a contracting officer has not asked yet.
- 8(a) and socioeconomic set-aside changes require revenue projection updates. Model competitive scenarios for work that was previously sole-source. Adjust indirect rates and pricing strategies accordingly.
- There is no single deadline, which is the part most summaries get wrong. June 30, 2026 governs the DoD TINA threshold only, and it has passed. The CAS changes have no contract date and are waiting on overdue rulemaking. Update your accounting system, clause references, and compliance documentation now.
The FAR overhaul rewards contractors who prepare and punishes those who wait. Your accounting system is either ready for the new framework or it is a liability in your next proposal and audit. If you are unsure where your firm stands, take the free Compliance Readiness Check or review Amerifusion’s DCAA compliance services to close the gaps now.
