Federal Board Proposes Major Changes to Accounting Standards for Contractors

By Carl Oliveri and Robert E. Grote of Grassi
Originally published September 19, 2025

On September 10, the White House announced that the Office of Management and Budget’s (OMB) Cost Accounting Standards (CAS) Board published a package of two rulemaking actions that would eliminate more than 60 accounting requirements for federal contractors. The proposals aim to reduce duplication between CAS and Generally Accepted Accounting Principles (GAAP), the framework used in private-sector financial reporting.

Under the proposed rules, federal contractors would increasingly apply GAAP in place of certain CAS requirements. The CAS Board cited the growing rigor of GAAP, driven by shareholder demands for corporate accountability, as a key reason for the shift.

Who Is a Federal Contractor?

Federal contractors include businesses that enter negotiated contracts with U.S. government agencies, typically exceeding $2 million in value. CAS requirements apply on a contract-by-contract basis, not to the contractor as a whole, and are especially relevant for firms in infrastructure, defense, energy and space sectors.

What This Means for Construction & M&D Firms

If finalized, the proposed rules could simplify compliance for construction and manufacturing firms currently navigating both CAS and GAAP.

Potential benefits include:

• Reduced administrative burden by eliminating duplicative accounting requirements
• More efficient project execution and financial reporting
• Resources freed for other operational priorities

In New York City, where major federally funded infrastructure initiatives such as the Gateway Program, East Side Access and Penn Station Access are underway, these changes may influence how costs are tracked and reported.

Next Steps

The CAS Board expects to finalize rulemaking by early 2026 and plans to accelerate additional efforts to align CAS with GAAP. Grassi’s Construction and Manufacturing & Distribution advisors are closely monitoring these developments.

Tailored Guidance for Regulatory Change

If your business relies on federal contracts or is preparing to bid on upcoming projects, now is the time to assess how these changes could affect your accounting systems, compliance obligations and strategic planning.

Frequently Asked Questions

What are the proposed CAS changes for federal contractors? The CAS Board has proposed eliminating over 60 accounting requirements to reduce overlap with Generally Accepted Accounting Principles (GAAP). If adopted, federal contractors would rely more on GAAP.

Who is considered a federal contractor? Federal contractors are businesses with negotiated contracts over $2 million with U.S. government agencies. CAS applies to individual contracts, not the entire company.

How could the proposed CAS changes impact construction and manufacturing firms? If finalized, the changes could reduce administrative burden and simplify financial reporting for construction and manufacturing firms working on federal contracts.

What should businesses do to prepare for potential CAS updates? Companies bidding on or managing federal contracts should assess how the proposed rules might affect their accounting systems and compliance processes.

Carl Oliveri is a Partner and Construction Practice Leader at Grassi. He has over 25 years of experience advising owners and executives in the Construction industry, particularly in project-centric and companywide financial modeling, operational strategy development, financial statement accounting services, and income tax method analysis. He is a participant on the NASBP CPA Advisory Council. Oliveri can be reached at coliveri@grassiadvisors.com or 212.223.5047.

Robert E. Grote is a Partner and leader of Grassi’s Manufacturing & Distribution Practice. With over 30 years of experience in public accounting, tax planning, and management consulting services for the M&D industry, Rob has grown the practice to become the second-largest industry group within the firm. He can be reached at rgrote@grassiadvisors.com or 516.336.2468.