Back in December, the President signed the National Defense Authorization Act (NDAA) for Fiscal Year 2026 into law. The NDAA often includes provisions related to small business contractors, and this year’s bill is no exception. Here, then, are the key small business-related sections in the FY 2026 NDAA and their implications for government contractors.

Section 824 - Expanded Past Performance Evaluation

This section requires the Department of Defense (DOD) to issue guidance 1) allowing commercial contract past performance to be considered for defense contracts; 2) permitting alternative evaluation methods when contract requirements have little precedent; and 3) recognition of commercial marketplace achievements and their applicability to government-related work.

Contractor Implications:

• Levels the playing field for small businesses without extensive DOD history.
• Small companies can leverage previous commercial success to win defense contracts, particularly non-traditional defense contractors.
• Reduces "incumbent advantage" in competitive bidding

Section 1806 - Cost Accounting Standards (CAS) Threshold Changes

This section makes two major changes to CAS requirements: It increases the full CAS coverage threshold from $50M to $100M and it raises contract-level CAS applicability from $2.5M to $35M.

Contractor Implications:

• Raising the coverage threshold means most small businesses will avoid CAS compliance entirely, because most small business awards have ceiling values lower than $100M.
• A higher threshold gives smaller companies the chance to grow before they face complex cost accounting requirements,
• The CAS revision reduces the barriers to entry for commercial companies.

Section 1826 – Non-Traditional Defense Contractor (NDC) Exemptions

This section exempts NDCs from Truth in Negotiations Act (TINA) cost or pricing data requirements (TINA), as well as from FAR Part 31 cost principles. Business entities that haven't performed on DOD contracts for at least one year before solicitation are eligible for the exemption.

Contractor Implications:

• Reduces the barriers for new entrants to the defense market.
• Enables startups and innovative companies to compete without heavy compliance requirements.
• Waivers require head of contracting activity approval and congressional notice suggesting exemptions will become the norm, not the exception.
• Encourages commercial innovation in defense sector.

Summing up, these NDAA sections:

• Reduce compliance costs by applying CAS and complex accounting requirements to fewer contracts.
• Count commercial credibility by allowing past performance to matter in proposal evaluations.
• Make non-traditional contractor status valuable by giving companies new to the DOD significant regulatory relief.