DoD Wants Commercial Accounting and Deeper Cost Transparency—Can Contractors Realistically Deliver Both?

The Department of Defense is attempting to remove one of the longstanding barriers separating traditional defense contractors from the broader commercial economy: government-unique cost accounting. But the effort arrives only weeks after DoD called for substantially greater visibility into contractor and supplier costs.

Reconciling those objectives may prove difficult.

On September 15, 2026, DoD announced Deputy Defense Secretary Steve Feinberg’s memorandum, Fostering One Strong Industrial Base. The directive seeks to reduce accounting, audit, and compliance barriers to defense-market participation, confine government-unique cost accounting requirements to circumstances where they are genuinely necessary, and rely more heavily on financial controls and audits that companies already maintain.

A central element is a movement away from Cost Accounting Standards, or CAS, as the default and toward Generally Accepted Accounting Principles, or GAAP—the accounting framework widely used throughout the commercial economy. The policy is not an instantaneous repeal of CAS; implementation will require additional regulatory and contractual action. But the direction is significant.

For commercial companies, the rationale is compelling. Maintaining a government-specific accounting infrastructure can require specialized systems, personnel, policies, audits, and compliance processes. Those costs can discourage companies from entering the defense market, particularly where government business represents only a modest portion of total revenue.

The harder question is how this policy interacts with DoD’s August initiative on supplier cost and pricing transparency.

That earlier directive sought much deeper visibility into contractor and supplier cost structures, including information below the prime-contract level. As Federal News Network reported, former DoD executive David Berteau has questioned whether ordinary GAAP accounting can produce the granular information contemplated by the cost-transparency initiative. GAAP is designed principally for reliable financial reporting; government cost-accounting systems are designed to identify and allocate costs at a much more detailed contractual level.

That distinction matters.

A commercial manufacturer may know its overall production costs and maintain audited financial statements without maintaining systems capable of tracing every labor hour, indirect allocation, component cost, and expense to the level traditionally expected in negotiated government contracting. Asking that company to adopt GAAP while simultaneously producing government-style cost detail risks recreating the compliance burden through another mechanism.

Industry reaction reflects the same tension. The Aerospace Industries Association welcomed efforts to lower entry barriers and move toward GAAP, while cautioning that extensive cost and pricing demands could undermine the objective of attracting more companies and capital into the defense industrial base.

For contractors, the appropriate response is not yet wholesale accounting-system redesign. Implementation details remain unresolved. Companies should instead identify which contracts and business units currently depend on CAS, understand what information their commercial accounting systems can actually produce, and follow closely how DoD defines the circumstances in which additional cost information remains necessary.

The policy objective is ambitious: make defense contracting look more like commercial business without sacrificing the Government’s ability to evaluate price.

Whether DoD can accomplish both may become one of the most consequential acquisition-reform questions of the coming year.

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The GovCon BoE Blueprint™ helps contractors build traceable pricing assumptions and document labor, escalation, indirect costs, productivity, subcontracting, and other pricing inputs. As DoD changes the relationship between commercial accounting and government pricing support, disciplined bases of estimate may become even more important.

Disclaimer:
This article is provided for general informational and educational purposes only and does not constitute legal, accounting, audit, or government-contracting advice. The DoD initiative remains subject to implementation through regulatory, policy, and contractual changes. Contractors should evaluate applicable CAS coverage, FAR and DFARS requirements, contract terms, accounting practices, and agency guidance before changing compliance systems.