The FAR overhaul 2026 accounting changes are live. On February 1, 2026, 37 DFARS class deviations took effect under the Revolutionary FAR Overhaul (RFO), rewriting how government contractors track costs, structure indirect rates, and document compliance. Amerifusion Bookkeeping has reviewed every deviation and identified the four changes that hit your books hardest.
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 the Revolutionary FAR Overhaul Actually Changes
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 raised the two thresholds that determine how much cost accounting infrastructure a government contractor must maintain. Full CAS coverage now triggers at $100 million in annual contract awards, up from $50 million. The per-contract CAS applicability threshold jumps from $2.5 million to $35 million. The TINA threshold for certified cost or pricing data rises from $2.5 million to $10 million [FY2026 NDAA CAS/TINA Updates]. These changes take effect for contracts awarded after June 30, 2026.
For a small GovCon firm billing $8 million annually across three DoD contracts, the math changes dramatically. Under the old thresholds, a single $3 million contract triggered CAS applicability. Under the new thresholds, none of those contracts require CAS compliance individually. And the TINA threshold increase means none of those contracts require certified cost or pricing data.
| Threshold | Previous | New (Post-June 2026) | Accounting Impact |
|---|---|---|---|
| Full CAS Coverage | $50M annual awards | $100M annual awards | Fewer firms need CAS Disclosure Statements |
| Per-Contract CAS | $2.5M per contract | $35M per contract | Most small biz contracts exempt from CAS |
| TINA (Certified Cost Data) | $2.5M per contract | $10M per contract | Reduced cost documentation for mid-size awards |
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.
Contracting Officer Discretion and What It Means for Your Audit File
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 your firm should execute before June 30, 2026, when the TINA and CAS threshold changes formalize.
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 after June 30. 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 not only what a cost is, but 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 FAR overhaul 2026 change in my accounting system?
The FAR overhaul 2026 accounting changes include raised CAS and TINA thresholds, renumbered contract clauses across FAR Part 52 and DFARS Part 252, and increased contracting officer discretion over cost proposal evaluation. Your clause references, proposal templates, and indirect rate documentation all require updates before June 30, 2026.
Do the new CAS thresholds mean I no longer need a compliant accounting system?
No. The per-contract CAS threshold rose from $2.5 million to $35 million, but 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 CAS and TINA threshold increases from the FY2026 NDAA apply to contracts awarded after June 30, 2026. 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.
- June 30, 2026 is the hard deadline. Threshold changes formalize for new awards after that date. Update your accounting system, clause references, and compliance documentation before then.
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 before June 30.
