Federal procurement reform usually arrives with more requirements.
A new review. A new clause. A new reporting process. Another layer of oversight contractors must build into their operations.
The Department of War’s latest acquisition policy is trying to move in the opposite direction.
In a memorandum dated September 14, 2026, Deputy Secretary of War Steve Feinberg directed the Department to begin restructuring how it evaluates contractor pricing, accounting systems, audits, and business practices. The memorandum, Fostering One Strong Industrial Base, is intended to make it easier for commercial companies, growing contractors, and traditional defense suppliers to compete for government work without rebuilding their entire organizations around government-specific processes. Defense Media
The goal is straightforward:
Buy faster, attract more competition, and reserve the most burdensome oversight requirements for the contracts that genuinely require them.
For government contractors, however, reduced administrative burden does not necessarily mean reduced responsibility. In several areas, the reforms could place more responsibility on contractors to price work accurately, define scope clearly, manage risk, and demonstrate reliable execution.
Moving Away from a Separate Government Accounting Environment
One of the memorandum’s most significant objectives is to reduce the government’s reliance on Cost Accounting Standards, commonly known as CAS.
CAS was designed to create consistency in how certain contractors measure, allocate, and report costs. Over time, however, CAS coverage and related government reviews have created a significant barrier for companies that otherwise have the capability to support defense programs.
The new policy directs the Department toward greater reliance on Generally Accepted Accounting Principles, or GAAP, which companies already use for commercial financial reporting. It also calls for CAS requirements to be attached to the contracts that require them rather than automatically affecting an entire business unit or company.
Within 60 days, the Department is expected to submit proposals to the Cost Accounting Standards Board that would make CAS exemption the default and generally reserve remaining CAS coverage for areas such as sole-source, cost-based development, and incentive-fee procurement. The memorandum also seeks to prevent agencies from recreating CAS-like requirements through local policies, supplemental checklists, or other processes sometimes described as “shadow CAS.” Defense Media
This does not mean that financial accountability is going away.
Contractors may still need to segregate contract costs, maintain supporting documentation, demonstrate cost allowability, follow applicable contract clauses, and provide cost or pricing information when market data is insufficient. The intended change is that companies should be able to satisfy more of these requirements through the financial systems and records they already maintain rather than creating an entirely separate accounting environment for government work.
An Important Distinction for Small Businesses
Small businesses are already generally exempt from CAS under current federal acquisition rules.
That means the immediate benefit for small business contractors may not come from receiving a new CAS exemption. Instead, the larger opportunity could come from changes in how prime contractors structure their supplier requirements, evaluate subcontractors, and build teams for federal opportunities.
If broader CAS and business-system requirements become more contract-specific, primes may have greater flexibility to incorporate commercial firms, specialized providers, and growing small businesses without extending unnecessary enterprise-level requirements throughout the supply chain.
The impact could be particularly meaningful for companies approaching the point where growth, acquisition activity, or a change in contract mix would otherwise increase their exposure to government-specific accounting requirements. Acquisition.gov
Fixed-Price Contracting Is Becoming the Starting Point
The cost and pricing memorandum also builds on Executive Order 14402, issued on April 30, 2026, which established fixed-price contracting as the federal government’s default and preferred procurement method.
Under that direction, cost-reimbursement, time-and-material, labor-hour, and other non-fixed-price arrangements require additional justification. Exceptions remain available for work where uncertainty makes fixed pricing impractical, including certain research and development, preproduction development, emergency, disaster, and contingency requirements. GovInfo
For contractors, this change creates both opportunity and risk.
A well-structured fixed-price contract gives the government greater cost predictability and gives the contractor an opportunity to benefit from efficient performance. But it also moves more cost risk to the company performing the work.
That makes several capabilities increasingly important:
- Accurate estimating
- Clearly defined scope and deliverables
- Realistic labor and material assumptions
- Strong subcontractor pricing
- Effective schedule and project controls
- Disciplined change management
- Early identification of execution risk
Under a cost-reimbursement structure, some cost growth may be recoverable when it is allowable and properly documented. Under a fixed-price structure, a contractor that underestimates labor, mobilization, materials, schedule duration, or subcontractor costs may have to absorb the difference.
The quality of the estimate becomes inseparable from the quality of execution.
Contractors Can Retain the Benefits of Efficiency
The memorandum also addresses an issue that has caused concern among fixed-price contractors: whether the government might later attempt to recover savings when a contractor completes the work more efficiently than expected.
The policy directs the Department to establish an enforcement position under which a contractor that bears the cost risk and becomes more efficient against a fairly negotiated fixed price keeps the resulting savings for that contract.
The government may consider those efficiencies prospectively during the next negotiation, but the intent is not to retroactively reduce the price of successfully completed fixed-price work simply because the contractor performed efficiently. This principle does not apply in the same way to cost-reimbursement arrangements, where the government retains more of the underlying cost risk. Defense Media
That distinction matters.
A contractor that invests in better planning, technology, workforce deployment, procurement practices, or project controls should have a reason to make those investments. Allowing contractors to retain fixed-price savings creates a stronger connection between operational performance and financial results.
It also raises the stakes for contractors that enter fixed-price work without fully understanding the scope.
Efficiency can improve margins. Poor assumptions can eliminate them.
Business-System Reviews and Audits Are Being Simplified
Another major focus of the memorandum is the number of overlapping reviews contractors may face.
Accounting systems, purchasing systems, earned value management, property management, forward pricing, and other business processes have traditionally been evaluated through separate government reviews. In some cases, multiple agencies or offices may examine similar information for different purposes.
The new policy calls for more risk-based oversight, greater coordination among government reviewers, and increased reliance on the controls and audits companies already maintain.
The Department has been directed to develop commercial-aligned business-system criteria and, where permitted, allow certification by a registered independent public accounting firm to satisfy review requirements instead of conducting a separate government examination. The memorandum also seeks to consolidate overlapping business-system reviews, raise the threshold for certain purchasing-system reviews, and avoid repeatedly auditing the same work without a specific reason. Defense Media
For contractors, this could reduce the administrative cost of maintaining multiple review processes.
It could also make audit readiness more focused. Instead of preparing for a broad review simply because of the company’s participation in the defense market, a contractor may be able to concentrate its controls and documentation on the actual risks and requirements of the contract being performed.
The Policy Direction Is Immediate. Full Implementation Is Not.
Contractors should be careful not to interpret the memorandum as an immediate cancellation of every existing CAS, audit, pricing, or business-system requirement.
Some provisions became effective when the memorandum was signed. Others require:
- Cost Accounting Standards Board action
- Class deviations
- Revised departmental guidance
- DFARS rulemaking
- New review criteria
- Updates to solicitations and contract clauses
Until those actions occur, the requirements contained in an existing solicitation or contract remain important.
The practical question for contractors is not simply, “What did the memorandum announce?”
It is:
Which parts of the new policy have reached this specific acquisition, solicitation, contract, or subcontract?
Contractors should continue reviewing the clauses, representations, flow-down requirements, accounting expectations, and contract type associated with each opportunity rather than assuming that a department-wide announcement has already changed every procurement. Defense Media
What Contractors Should Be Doing Now
The transition creates a good opportunity for contractors to examine how they pursue and execute government work.
Review the Contract Portfolio by Contract Type
Companies should identify which opportunities and existing contracts are fixed-price, cost-reimbursement, time-and-material, or hybrid.
The analysis should go beyond the contract label. Contractors should understand where cost risk sits, which assumptions drive profitability, and which parts of the scope remain uncertain.
Stress-Test Fixed-Price Assumptions
Labor availability, wage escalation, material pricing, travel, mobilization, subcontractor capacity, insurance, bonding, and schedule duration can materially change the economics of a fixed-price project.
Those risks should be evaluated before the proposal is submitted, not after the work begins.
Strengthen Scope and Change Management
Fixed-price success depends heavily on knowing what is included and what is not.
Contractors need disciplined processes for documenting assumptions, clarifying ambiguities, identifying changed conditions, managing requests outside the original scope, and preserving the records needed to support contract modifications.
Maintain Strong Financial Documentation
A shift toward GAAP does not eliminate the need for reliable records.
Contractors should still be able to trace project costs, support invoices, document labor, evaluate subcontractor charges, separate allowable and unallowable expenses where required, and provide information requested under applicable contract clauses.
The objective should be to simplify duplicate processes without weakening financial control.
Revisit Prime and Subcontractor Requirements
Prime contractors should evaluate whether their supplier onboarding and flow-down requirements are tied to an actual contract requirement or are simply inherited practices.
Subcontractors should ask the same question when a prime requests a particular accounting system, audit, certification, or reporting format.
Clearer alignment between contract risk and supplier requirements could make teaming arrangements more efficient without compromising accountability.
What This Means for Prime Contractors and Their Partners
The Department’s broader objective is to create a larger, more competitive industrial base.
That will require more than changing accounting rules.
Prime contractors will still need partners that can:
- Support proposals with credible staffing and pricing
- Mobilize qualified personnel quickly
- Operate within federal compliance requirements
- Maintain accurate project and field documentation
- Adapt as scopes, schedules, and mission requirements evolve
- Execute without creating additional administrative risk
As fixed-price contracting becomes more common, the reliability of the delivery team becomes even more important. A proposal may be competitively priced, but that price only works if the contractor can secure the people, suppliers, systems, and operational support required to perform.
The ability to build the right team early can protect both project performance and contract margin.
How Certis Government Services Can Help
Certis Government Services supports prime contractors and government programs across the full acquisition lifecycle, from proposal and pre-award planning through mobilization, execution, compliance, and contract closeout.
As a certified small business with nationwide and OCONUS capabilities, CGS provides mission-ready resources across construction, engineering, environmental services, energy, emergency management, project controls, safety, quality, and contract administration.
That support can help prime contractors:
- Develop realistic staffing and mobilization plans
- Strengthen proposal execution strategies
- Scale specialized teams around project requirements
- Respond to changing scopes and schedule demands
- Maintain compliance-driven project delivery
- Reduce the operational risk carried under fixed-price work
CGS does not simply provide resources after an award. We work alongside our partners to help ensure that proposal commitments can be translated into executable plans and reliable field performance.
Looking Ahead
The Department of War’s cost and pricing overhaul represents a meaningful change in direction.
The Department is attempting to lower barriers, expand competition, reduce duplicate oversight, and make government contracting operate more like the commercial economy.
But greater flexibility will not eliminate the need for discipline.
In many cases, it will make disciplined estimating, clear scope definition, strong project controls, reliable documentation, and execution-ready teams even more important.
The contractors best positioned for the new environment will not be those that simply wait for fewer rules.
They will be the ones that use the changing rules to build better proposals, stronger partnerships, and more reliable delivery models.
Certis Government Services helps agencies and prime contractors build mission-ready teams and execute government programs with speed, accountability, and confidence.