Pentagon Memo Targets CAS Relief and Faster Portfolio-Level Acquisition Decisions

On September 14, Deputy Secretary of War Stephen Feinberg issued a memorandum and accompanying appendix aimed at strengthening the defense industrial base by making acquisition more commercially oriented and less dependent on government-specific accounting and oversight. The directives cover Cost Accounting Standards (CAS), commercial product and service acquisition, and the authorities of portfolio acquisition executives. The source reports no formal comment period, but identifies a limited opportunity for industry feedback before implementation. Contractors should treat that opportunity, along with forthcoming standards-board action and component implementation plans, as near-term monitoring priorities.

A central proposal is for the Department of War (DoW) to shift away from CAS and increase reliance on Generally Accepted Accounting Principles (GAAP). The memorandum directs DoW to submit proposals to the Cost Accounting Standards Board (CAS Board) within 60 days. As quoted in the source, DoW will propose making “CAS exemption the default,” limiting remaining CAS coverage to “sole-source, cost-based development or incentive-fee procurement,” and ensuring CAS applies to relevant contracts rather than companies as a whole. The source notes that CAS already applies at the contract level, not at the company level. The consequential change would therefore be the proposed default exemption and narrower set of covered contracts, if the board accepts and implements the proposal. The CAS Board promulgates CAS regulations and can issue class-based waivers, so its response will shape the practical scope and timing of any relief.

The appendix also directs the Pentagon to apply increased CAS thresholds, standardize contract-level waivers, and prevent components from imposing “shadow CAS” requirements on awards that are otherwise exempt. It would require approval from the undersecretary of war for acquisition and sustainment before issuing a solicitation that could bring a previously exempt business unit under full standards coverage. These provisions could affect contractor accounting systems, bid decisions, contract administration, and how teams evaluate the cost of pursuing work. The directives are not themselves evidence that every proposed change has already taken effect; their implementation depends on board action and agency procedures. Companies should distinguish current contractual obligations from reforms that remain proposals or require implementation.

The portfolio acquisition executive authorities addendum is another significant element. It makes recommended authorities the default for the military departments and requires each component’s implementation plan to delegate those authorities within 120 days, subject to narrow exceptions. This moves decisions toward portfolio-level executives and could alter where and how quickly program choices affecting contractors are made. The appendix also seeks to speed commercial acquisition: commerciality determinations would be required within 15 business days after receipt of a complete request, and prior determinations would remain effective for later procurements unless reversed in writing. Requests for cost information in commercial acquisitions would be limited to cases where available price, market, and sales data do not support a fair and reasonable price determination. Together, the directives aim to reduce acquisition friction, but the practical effect will depend on the board’s proposals and each component’s implementation plan.

• CAS Board proposal deadline: DoW is directed to submit CAS reform proposals within 60 days of the September 14 memorandum.
• Proposed CAS default: The department will seek to make exemption the default and retain coverage for a narrower set of sole-source, cost-based development or incentive-fee procurements.
• Contract-level safeguards: The appendix directs increased CAS thresholds, standardized contract-level waivers, and a bar on “shadow CAS” requirements for otherwise exempt awards.
• Escalation before expanded coverage: Approval from the undersecretary of war for acquisition and sustainment would be required before a solicitation could bring a previously exempt business unit under full CAS coverage.
• Portfolio authority delegation: Components must submit implementation plans delegating recommended portfolio acquisition executive authorities within 120 days, subject to narrow exceptions.
• Commerciality timelines: A complete commerciality request would require a determination within 15 business days; prior determinations would remain effective for subsequent procurements unless reversed in writing.
• Commercial cost-data requests: Cost information would be limited to situations where available price, market, and sales data are insufficient to support a fair and reasonable price determination.
• Contractor action: Map CAS exposure by contract, review compliance processes and portfolio-level decision points, and use the limited pre-implementation feedback opportunity identified in the source.
• Implementation watchpoints: Track CAS Board action and agency plans before assuming that proposed exemptions, waiver standards, or decision-authority changes are operational.