Cost Accounting Standards (CAS) Explained — When CAS Triggers and What It Means for Small Contractors

Cost Accounting Standards (CAS) are the 19 federally mandated rules at 48 CFR Chapter 99 that govern how government contractors measure, assign, and allocate costs to flexibly priced federal contracts above $7.5 million. FieldLedger helps small federal contractors stay CAS-exempt as long as legally possible — and produces the FAR Part 31 cost-principle workpapers DCAA expects below the threshold — by running a consistent, documented allocation methodology that mirrors the CAS disclosure statement contractors must file the moment they cross into modified coverage.

CAS is what you graduate into. It's the federal cost-accounting framework that kicks in when your covered contracts cross $7.5M. Most small contractors are CAS-exempt and don't realize it. Most growing contractors don't realize they're approaching CAS until they trigger it. This is the practical guide.

The trigger threshold

CAS coverage triggers when a single CAS-covered contract or subcontract exceeds $7.5 million AND your company doesn't qualify for an exemption.

Once triggered:

• Modified CAS coverage applies if the trigger contract is between $7.5M and $50M (4 standards)
• Full CAS coverage applies if the trigger contract is $50M+, OR if you have $50M+ in CAS-covered awards in the prior cost-accounting period (19 standards)

Practical reads:

• Sub-$7.5M contractors: not subject to CAS, FAR Part 31 cost principles only
• $7.5M–$50M contractors: Modified CAS (4 standards), often manageable with disciplined accounting
• $50M+ contractors: Full CAS (19 standards), real compliance program required

Exemptions that matter

Even contractors above $7.5M can be exempt:

1. Small business exemption. Small businesses (per SBA size standard for the NAICS code) are exempt from CAS for all contracts under $50M.
2. Sealed-bid contracts. Contracts awarded via sealed-bid procurement are exempt.
3. Firm-fixed-price contracts awarded based on adequate price competition are generally exempt.
4. Foreign concerns are exempt for some standards.
5. Educational institutions have a separate CAS regime (CAS 9905).

The small-business exemption is the big one. If you're an SBA-defined small business in your NAICS code and your largest CAS-covered contract is under $50M, you're CAS-exempt regardless of total revenue.

Modified vs Full coverage

Modified CAS coverage (4 standards):

Standard	What it covers
CAS 401	Consistency in estimating, accumulating, and reporting costs
CAS 402	Consistency in allocating costs incurred for the same purpose
CAS 405	Accounting for unallowable costs
CAS 406	Cost accounting period

Full CAS coverage (19 standards):

All four above, plus 15 more covering:

• Indirect cost allocation (CAS 403, 410, 418, 420)
• Asset and depreciation accounting (CAS 404, 409)
• Compensation accounting (CAS 408, 415)
• Pension cost accounting (CAS 412, 413)
• Cost of money (CAS 414, 417)
• Material cost (CAS 411)
• Standard costing (CAS 407)
• Insurance and self-insurance (CAS 416)

The 19-standard list compounds quickly. Implementation typically requires a dedicated CAS-trained accountant or CFO and specific accounting-system functionality.

What CAS-compliant accounting actually requires

Beyond the standards themselves, CAS-covered contractors must:

1. Maintain a Disclosure Statement (CASB DS-1) — a detailed document describing every cost-accounting practice. Filed with DCAA and updated when practices change.
2. Apply standards consistently — once you've described a practice in DS-1, you must follow it consistently. Changes require notification, sometimes pre-approval.
3. Document cost-accounting changes — any change to a cost-accounting practice (e.g., changing your indirect rate structure) requires advance notification and may trigger a price adjustment if it affects existing contracts.
4. Submit incurred-cost proposals annually — CAS-covered contractors file incurred-cost submissions covering the entire cost-accounting period within 6 months of fiscal year-end.

Where small contractors get tripped up

1. Crossing $7.5M without preparation. The first CAS-covered contract is a major operational shift. Plan for it 6–12 months ahead.

2. Misunderstanding the small-business exemption. Some contractors assume "I'm too small for CAS" and don't actually qualify under the SBA size standard. Confirm your size status under the specific NAICS code.

3. Inconsistent practices on Modified CAS contracts. CAS 401 requires consistency. If you estimate fringe rate one way for the proposal and accumulate it differently in actuals, you've violated 401 — even on a Modified-coverage contract.

4. Treating Disclosure Statement as a one-time filing. DS-1 must be updated when practices change. Stale DS-1 + actual practice diverging = audit finding.

5. Misapplying unallowable costs. CAS 405 requires segregation of unallowable costs (entertainment, lobbying, certain executive compensation, etc.). Easier to do this in real-time than to backfill at year-end.

How CAS interacts with FAR Part 31

FAR Part 31 contains the cost principles for federal contracts — what's allowable, what's allocable, what's reasonable. Every federal contractor follows FAR 31, regardless of CAS coverage.

CAS sits on top of FAR 31:

• FAR 31 says "allocable costs" — CAS 410, 418, 420 specify HOW you allocate
• FAR 31 says "consistent treatment" — CAS 401, 402 specify the consistency standard
• FAR 31 says "unallowable costs are excluded" — CAS 405 specifies the segregation method

Sub-CAS contractors apply FAR 31 with general "best practices." CAS-covered contractors apply FAR 31 with specific standardized practices defined by CAS.

What changes when you trigger CAS

The first CAS-covered contract triggers a cascade of operational changes:

Area	Pre-CAS	CAS-covered
Disclosure Statement	Not required	Required (DS-1)
Practice consistency	Best practice	Mandatory, documented in DS-1
Indirect cost rate structure	Whatever works	Documented and consistent across all contracts
Unallowable cost segregation	Recommended	Mandatory under CAS 405
Cost-accounting period	Calendar year typical	Documented in DS-1 (CAS 406)
DCAA audit frequency	Periodic	Routine, often annual
Accounting-system requirements	DCAA-acceptable	DCAA-acceptable + CAS-specific functionality
Internal staff requirements	Bookkeeper + CPA	CAS-trained CFO or controller

This isn't a software change. It's an organizational maturity change.

What FieldLedger covers

FieldLedger is built for sub-CAS federal contractors — those operating under FAR Part 31 cost principles without CAS overlay. Our indirect rate engine, federal invoicing, and DCAA-compliant timekeeping all assume FAR 31 compliance, not CAS-specific implementation.

If you're CAS-covered today, you likely need a more complex accounting platform. Costpoint, Unanet, or PROCAS are designed for that complexity. FieldLedger is the right pick if you're sub-$7.5M today and want a low-overhead path.

If you're growing toward CAS coverage, the practical pattern is:

• Build proper FAR 31 discipline now with FieldLedger
• Migrate to Costpoint/Unanet 6–12 months before crossing $7.5M
• Don't attempt CAS implementation in a non-CAS-aware system

What to do if you're approaching the trigger

1. Forecast your largest contract revenue 18 months out. Are any single contracts likely to cross $7.5M?
2. Verify your small-business size status under the relevant NAICS code. The exemption may apply.
3. Engage a CAS consultant if you're 12 months from triggering. The Disclosure Statement work alone takes 3–6 months.
4. Plan an accounting-system migration timeline. Don't wait until you've triggered to switch.
5. Hire or contract a CAS-trained CFO. This is a real role at $50M+ revenue.

What to do if you've already triggered

1. File DS-1 with DCAA within the required window after award.
2. Document every cost-accounting practice. This is the SSP equivalent for CAS.
3. Implement unallowable-cost segregation in real-time. Don't backfill.
4. Schedule annual incurred-cost submission preparation. It's a 60–120 hour effort.
5. Engage DCAA early. They prefer collaborative engagement over surprise audits.

Related reading

• Cost-plus-fixed-fee vs time-and-materials contracts
• Contractor billing software comparison
• DCAA-compliant timekeeping software under $200/month
• NIST 800-171 compliance for small government contractors