Pentagon Memo Recasts Cost Accounting Around GAAP, Away from "Invasive Oversight" of CAS – FEDweek

Pentagon Memo Recasts Cost Accounting Around GAAP, Away from “Invasive Oversight” of CAS  FEDweek

Deputy Defense Secretary Steve Feinberg's memo, "Fostering One Strong Industrial Base," marks the most significant move in years to shift the Defense Deputy Defense Secretary Steve Feinberg’s memo, “Fostering One Strong Industrial Base,” marks the most significant move in years to shift the Defense Department away from government‑unique Cost Accounting Standards (CAS) and toward the Generally Accepted Accounting Principles (GAAP) used across the private sector. For acquisition personnel, the change is more than an accounting adjustment. CAS has long required parallel systems, duplicative audits, and compliance obligations that attach to entire companies rather than individual contracts. Feinberg calls that structure “invasive oversight” and directs leaders to make CAS the exception, limiting it to high‑risk, cost‑based development awarded without adequate competition.

Under the memo, the department will rely on GAAP “to the maximum extent the law permits,” using independent audits companies already maintain and reserving government‑unique reviews for situations where no market exists. This means GAAP will be used unless a specific statute requires the department to obtain cost data instead. The memo builds on earlier actions. Executive Order 14402 made fixed‑price contracting the federal default, reserving cost‑reimbursement for basic research and major system development. Feinberg’s August 18, 2026 memo on supplier transparency gave contracting officers authority to “see through the prime” to lower‑tier suppliers and connect them to tools such