The National Defense Authorization Act for Fiscal Year 2026 represents one of the most consequential shifts in federal defense strategy, acquisition policy and industrial base expectations in more than a decade. Instead of functioning as a routine budgetary measure, this year’s NDAA serves as a wide-ranging modernization package that signals a significant realignment in how the U.S. government intends to engage with private industry, develop advanced technologies and sustain a resilient defense posture.
With more than $900B (~$8B above the administration’s request) directed toward national defense, Congress and the administration have established expectations for a defense marketplace that moves faster, leverages commercial capability, encourages innovation, strengthens supply chains and promotes transparency in compliance.
1. Modernized, Commercial-first Acquisition System
The NDAA directs agencies to prioritize commercial solutions, reduce acquisition barriers and accelerate capability transition from prototype to production. Key shifts include:
- Federal Acquisition Regulation (FAR) Part 12 streamlines commercial buying, reducing clauses and admin burden
- Increased use of commercial past performance and technology demonstrations
- Expanded opportunity for firms with commercially viable or dual use technologies
- Redefines best value to include speed and delivery
- Streamlined acquisition pathways
- Faster movement from research to full rate production
This represents a structural move toward a more agile, market‑driven acquisition posture. It further signals Congress’s intent to shift the Department of Defense (DoD) toward faster capability adoption by elevating commercially proven solutions as the default starting point rather than the exception.
Agencies are now expected to leverage demonstrations, data and prototype performance to make quicker award decisions, reducing reliance on traditional, paperwork‑heavy evaluation models. The result is an acquisition environment designed to shorten development timelines, broaden competition from small and non‑traditional vendors, and ensure emerging technologies can be fielded at the speed operational demands require.
2. Major Threshold Increases Reduce Pre-award Burden
Significant threshold increases ease compliance requirements for many contractors:
- Cost or pricing data threshold increased from $2.5M to $10M, resulting in:
- Huge reduction in contracts that require Cost Accounting Standards (CAS) coverage
- Many mid‑market contractors who previously triggered CAS will now be fully exempt on most work
- Significant drop in DCAA cost‑impact analysis workload
- CAS applicability increased from $2.5M to $35M; full CAS increased from $50M to $100M. This will result in:
- Fewer business units will require Disclosure Statements
- More firms remain under modified CAS, and many drop out of CAS entirely
- Simplified acquisition threshold increased to $500K, enabling expanded use of simplified procedures
- Non-traditional defense contractors (NDCs) are exempt from FAR Part 31, Truthful Cost or Pricing Data, and Defense Federal Acquisition Regulation Supplement (DFARS) business system and cost or pricing rules. What this means for NDCs:
- NDCs do not need to structure their accounting or cost buildup to comply with FAR Part 31 requirements
- They avoid government scrutiny of indirect rates, cost pools and cost‑allocation systems
- They can propose using commercial pricing, market-based rates or catalog pricing without restructuring their accounting practices
- These changes widen access for small businesses and commercial entrants while shifting oversight to post-award phases
3. Supply Chain Security and Industrial Base Resilience
The NDAA reinforces government focus on supply chain visibility and risk mitigation. Contractors should prepare for:
- Mandates programs to encourage contractors to adopt supply chain risk monitoring
- More visibility into who the suppliers are and where materials come from
- Expanded cybersecurity and provenance requirements
- More attention to overseas dependencies and production choke points
Simultaneously, Congress boosts investment in critical capabilities, such as unmanned systems, hypersonics, next-generation aircraft, space systems, missile defense and digital engineering.
4. Expanded Research and Development (R&D) Opportunities
The NDAA increases federal investment in AI and other critical technologies to strengthen national security and modernize defense capabilities. Funding focuses on technologies that make systems smarter, more resilient and more autonomous across missions:
- Autonomous Systems: More investment in unmanned vehicles, robotics, counter-unmanned aircraft systems (UAS) tools and AI-enabled threat detection to improve multi-domain operations
- Microelectronics: Growth in R&D to produce secure, next-generation chips needed for advanced sensors, embedded systems and AI computing
- Cyber Defense: Expanded federal efforts to harden cyber defenses and unify cybersecurity standards across the defense industrial base (DIB), reducing duplicative compliance
- Advanced Materials and Sensing: Funding supports new materials and high-precision sensors that enhance survivability, manufacturing efficiency and integration into modern platforms
- Energy Resilience: Increased investment in distributed energy, improved storage and hardened infrastructure to ensure reliable power for mission-critical systems
- Innovation Ecosystem Expansion: The NDAA opens more doors for startups and nontraditional vendors, emphasizing faster transitions from research to fielded capabilities — especially in AI, autonomy, and next-gen tech
The NDAA opens earlier entry points for startups, commercial technology firms, universities and dual-use innovators, while raising expectations for:
- Transition planning
- Scalability
- Integration into legacy systems
5. Workforce, Mission Support and Security Priorities
Contractor demand is expected to grow for:
- Training and operational support
- Installation and facility management
- Quality of life service delivery
- Counter unmanned aircraft system detection, tracking, and analytics
Strategic priorities include Indo-Pacific deterrence, nuclear modernization, and border and domestic security missions.
6. Cybersecurity Harmonization
Section 866 directs the DoD to advance a unified and consistent cybersecurity framework across the DIB by June 1, 2026. The goal is to reduce the long-standing patchwork of duplicative, inconsistent, and contract-specific cybersecurity requirements by better aligning the Cybersecurity Maturity Model Certification Program (CMMC), DFARS cybersecurity clauses, and related DoD programs into a more coherent baseline. This effort is intended to streamline compliance expectations, improve clarity, and reinforce a common security posture for protecting controlled unclassified information (CUI) and other sensitive defense information.
For contractors, this reinforces CMMC as a central organizing framework, even as broader harmonization occurs. While compliance may become more predictable, expectations around validation, assessment readiness and ongoing governance are likely to increase. Organizations that align early with CMMC-aligned controls, maintain strong documentation, and adopt repeatable compliance processes, such as those outlined in Cherry Bekaert’s CMMC thought leadership and readiness guidance, will be best positioned as DoD transitions toward a more uniform and enforceable cybersecurity model across the industry.
7. Penalties for Frivolous Incumbent Protests
The FY 2026 NDAA introduces a new consequence for incumbent contractors who file protests that are deemed baseless. If the Government Accountability Office dismisses an incumbent’s protest for lacking a reasonable foundation, contracting officers may withhold up to 5% of the contractor’s payments.
This measure is designed to discourage incumbents from submitting protests aimed primarily at delaying award transitions or disrupting competitive procurements. The change reflects a broader effort to maintain timely acquisition processes and ensure that challenges brought forward are grounded in legitimate concerns rather than tactical positioning.
What Government Contractors Should Prioritize
Government contractors should focus on sharpening their competitive posture and strengthening internal discipline. As the market shifts toward innovation and rapid deployment, organizations must ensure their offerings align with high‑priority capability areas while maintaining strong internal controls and audit readiness.
With less documentation required before award, agencies are placing greater scrutiny on post‑award activity, including estimating practices, indirect rates, subcontract pricing and cost allocation. At the same time, contractors should modernize supply‑chain oversight by improving visibility into vendor networks and reinforcing monitoring safeguards. Success will depend on clear documentation, transparent pricing practices and governance structures that can withstand evolving oversight expectations.
Your Guide Forward
The $900B FY 2026 NDAA is a transformational policy shift that accelerates commercial integration, increases innovation adoption, strengthens supply chain security and reshapes compliance expectations. Contractors that invest early in stronger internal controls, supply chain visibility, commercial readiness and technology modernization will be best positioned for competitive success.
If you have any questions regarding the FY 2026 NDAA, Cherry Bekaert’s Government Contracting advisors are available to discuss your situation with you.
