“Selling to the Department of War should be a line of business, not a corporate identity.” That sentence sits in a memo Deputy Defense Secretary Steve Feinberg signed on a Monday in mid-September 2026, and it explains most of what follows.
The directive tells the Pentagon to stop leaning on government-unique Cost Accounting Standards, known as CAS, and to treat Generally Accepted Accounting Principles, or GAAP, as the baseline for contractor accounting. Federal News Network reported it after the memo came out on Tuesday. Feinberg wrote that the department will move to the “accounting every American company already uses and push those benefits to every tier of the supply chain.”
What the memo orders
Inside Defense, which reported on the memo the same week, laid out the mechanics. Within 60 days the Pentagon comptroller, working with the acquisition and sustainment undersecretary, is to send the Cost Accounting Standards Board proposals that would make exemption from CAS the default. What remains covered would shrink to large cost-based development contracts awarded without adequate price competition. Within the same 60 days the department must set a CAS waiver policy for new entrants, mostly commercial companies and firms that have outgrown small-business status.
Pricing changes too. “Where there is a market — competition, comparable sales, reliable price history — the market sets the price,” the memo says. Where none exists, as with major sole-source development, officials are told to use cost data from a company’s existing records “rather than invasive oversight.” Rulemaking to revise profit policy has to start within 90 days, and commercial benchmarks will inform those negotiations without acting as profit caps.
Audits get trimmed as well. Government auditors must consider a contractor’s audited GAAP statements and internal control attestations before doing more work. No office should ask for an audit of something already audited, or reopen closed years, unless there are signs of fraud or mismanagement. Commerciality determinations are to be finished within 15 business days of a complete request. Components are warned against “shadow CAS”, meaning CAS-style requirements reimposed under another name.
A memo that argues with another memo
The new directive sits awkwardly beside Feinberg’s August 18 memo on supplier cost and pricing transparency, which suggested the Pentagon could put its own software into company data systems “to pull cost information directly.” Industry pushed back on that one. The September memo says no new accounting systems or special data formats will be required, that the department may not gain automated access to contractor systems without express contractual authorization, and that any data provided will be used only for authorized government purposes.
David Berteau, a former DoD executive and procurement expert, told Federal News Network he could not see how both could be followed. “You cannot produce the kind of cost and pricing data that DoD wants and currently can require through GAAP,” he said. “I don’t know how they are going to reconcile these two memos.”
Berteau still called the new one “a huge step,” then added: “it’s going to be a long journey between this memo and actually implementing it in contracts.” Rich Brady, chief executive of the Society of Defense Financial Management, took the opposite view of CAS itself. It has “created an onerous, costly and burdensome accounting regime that is unique to government contracting,” he said, while GAAP is what “auditors, creditors, investors and the markets already rely on.”
The Pentagon will track results each quarter, including government-unique requirements eliminated and business units under full CAS coverage. The department also has 30 days to review how the military services are carrying out requirements reform.
Sources
- DoD moves to replace government-unique accounting standards with GAAP – Federal News Network
- | InsideDefense.com
