The CAS-to-GAAP Memo Is Signed. One Rule Binds Immediately: No New Full CAS Coverage Without USW(A&S) Approval.

What changed

The Deputy Secretary of War signed a memorandum dated 14 September 2026, "Fostering One Strong Industrial Base," addressed to senior Pentagon leadership, the combatant commands, and Defense Agency and DoW field activity directors. It is effective on signature and carries an appendix of implementation actions with dated deadlines. Its stated purpose is to "completely transform and modernize our contract cost and pricing ruleset."

The direction is to move from government-unique Cost Accounting Standards to Generally Accepted Accounting Principles. The memorandum states that the Department "will accept GAAP-based accounting across all contracts to the maximum extent the law permits" and will pursue CAS-to-GAAP conformance through the Cost Accounting Standards Board.

Within 60 days the Department will submit proposals to the CASB to make CAS exemption the default, confine remaining CAS coverage to sole-source cost-based development or incentive-fee procurement, and ensure CAS applies only to relevant contracts rather than to companies as a whole. The Under Secretary of War (Comptroller) is directed to transmit four specific proposals: a class exemption making exemption the default, with coverage limited to cost-based development contracts of major scale awarded without adequate price competition; coverage that attaches to the covered contract and the indirect-cost pools material to it, with no entity, segment or flowdown attachment; completion of the CAS-to-GAAP conformance the memorandum says began with a final rule of 8 July 2026; and a modernized Disclosure Statement.

The part that binds today

Most of the memorandum is a set of clocks. One provision is not. Until the Board acts, no DoW solicitation that could bring a business unit not previously subject to CAS under full CAS coverage may be issued unless the Under Secretary of War for Acquisition and Sustainment has approved the acquisition strategy in writing. The appendix adds the mechanics: the request must assess competition, commercial acquisition, competed fixed-price structures, exemptions and existing waiver authority, and explain why none can meet the requirement without new full CAS coverage. The Under Secretary decides within 15 business days or elevates to the Deputy Secretary.

The memorandum is careful about what that approval is not. It concerns the acquisition strategy only; it does not determine CAS applicability, grant any exemption or waiver, or authorize omission of a required provision or clause.

Why it matters for estimating and pricing

For a growing contractor approaching the full CAS coverage threshold, the practical effect is that the government now has a reason to structure around bringing you under coverage rather than through it. That is a change in the shape of the opportunity, not just in the compliance bill, and it argues for raising CAS status early in capture rather than at proposal.

Two guardrails are worth reading closely because they cut against the direction of travel. First, the memorandum states plainly that asking for information does not, by itself, create a cost-reimbursement contract or CAS coverage, and does not alter the thresholds or exceptions for certified cost or pricing data. Second, within 30 days Components are to be prohibited from imposing on exempt awards and other transactions the equivalent of CAS coverage, disclosure, business-system review or practice-change governance under another name — the memorandum's term is "shadow CAS." Cost data from exempt performers is to be requested as already maintained in their books and records.

Nothing here repeals CAS. The CASB is an independent body and the memorandum is a request to it, not a rule. Until the Board acts, CAS applicability and the coverage thresholds are what they are, and a basis of estimate should still be built on them. What has changed today is the approval gate on new full coverage and the Department's declared posture toward exempt performers.

Primary source

Deputy Secretary of War memorandum, "Fostering One Strong Industrial Base," 14 September 2026, with Appendix: Implementation Actions, six pages. The memorandum also references the Deputy Secretary's 18 August 2026 memorandum, "Supplier Cost and Pricing Transparency," Executive Order 14402, and section 1806 of the National Defense Authorization Act for Fiscal Year 2026.