On December 18, 2025, President Trump signed into law the Fiscal Year 2026 National Defense Authorization Act (FY26 NDAA). The FY26 NDAA delivers significant insight into the policy priorities of the U.S. Department of Defense (DoD). Key provisions for government contractors are summarized below.

Enhances Clarity in Contracting Documentation

To prevent disputes and reduce ambiguity in the federal procurement process, Section 802 requires that DoD contract documents specify their current version and indicate if they were updated after the solicitation was issued.

Shifts Competition Standards for DoD Schedule Buys

Section 812 of the FY 2026 NDAA amends 10 U.S.C. § 3012(3)(B) to change the statutory standard for DoD purchases under the GSA Multiple Award Schedule (MAS) program from “lowest overall cost alternative” to “best value.” While this shift marks a significant change in DoD competitive procedures, it does not apply to civilian agency MAS acquisitions, which still prioritize lower overall cost.

Increases Competition for Small Businesses and Nontraditional Defense Contractors

The FY26 NDAA aims to increase participation in defense procurements by small businesses and nontraditional defense contractors by easing past performance requirements that have historically created barriers to contracting with the DoD. To accomplish this, Section 824 requires the Secretary of Defense to issue guidance on 1) allowing past performance from commercial or other non-government projects, 2) how to validate non-government past performance references, and 3) using  other methods of evaluation other than past performance when appropriate. Furthermore, the Defense Acquisition Regulations Council is required to seek input from the public to identify and correct procurement policies and regulations that are obsolete, overly burdensome or restrictive, not adequately harmonized, or that unnecessarily increase bid and proposal costs.

Incentivizes Supply Chain Transparency

To incentivize supply chain transparency, Section 833 rewards contractors that promptly disclose discovery of noncompliant items in their supply chain with eligibility for international security waivers from the Secretary of Defense. However, receipt of such waivers require contractors to develop and implement a corrective action plan for future compliance, and demonstrate that their noncompliance was neither willful nor knowing.

Discourages Frivolous Bid Protests at GAO

Incumbent contractors filing bid protests at the U.S. Government Accountability Office (GAO) in an effort to extend their incumbent contract pending the protest will be penalized moving forward if the GAO dismisses the protest “based on a lack of any reasonable legal or factual basis.” Section 875 of FY26 NDAA requires the Secretary of Defense to revise the Defense Federal Acquisition Regulation Supplement to establish procedures permitting contracting officers to withhold up to 5% of the amount earned by an incumbent DoD contractor as a result of a stay prohibiting award of the contract. The incumbent contractor would then forfeit the withheld amount if the GAO dismisses the protest after finding the protest has no reasonable legal or factual grounds to be filed in the first place.

Raises Thresholds

Section 1804 raises the threshold for certified cost and pricing data from $2 million to $10 million while simultaneously increasing the approval limit for sole-source awards from $10 million to $100 million. In line with these changes, Section 1806 raises the Cost Accounting Standards (CAS) applicability trigger from $2 million to $35 million while doubling the full compliance threshold to $100 million. Consequently, a contractor remaining below the $100 million full-coverage threshold will not be subject to CAS for any individual contract valued under $35 million.

Prioritizes Commercial Contracting

Consistent with the Trump Administration’s efforts to streamline the federal acquisition process, Section 1822 directs contractors, subcontractors, and officials to prioritize commercial products, commercial services, and non-developmental items to the maximum extent practicable. Section 1824 follows suit by authorizing the Secretary of Defense to limit the flow-down of clauses in commercial subcontracts, except for those flow-downs required by 10 U.S.C. § 3452.

For further guidance on the impacts of the FY26 NDAA for federal contractors, please contact a member of Taft’s Government Contracts team.