Nontraditional DefenseContractor
Is your company, or the partner you plan to team with, a nontraditional defense contractor? Check the public record in seconds: the SAM.gov registration, the SBA profile, and Department of War awards and subcontracts screened against full Cost Accounting Standards coverage. Then read what Section 1826 exempts, what DCAA will check, and how NDC status opens prototype other transactions.
Full CAS coverage line
FROM OCTOBER 1, 2026
Look-back
BEFORE THE SOLICITATION
Section 1826 exemptions
PUBLIC LAW 119-60
Prototype OTs on NDC participation
DOW, FY2017 TO FY2026
Check a company's NDC status
Enter a company name, as USAspending.gov records it, or a UEI. The check reads the public record and returns a verdict with the counts behind it: prime awards performed in the last year, subcontracts primes reported, and any award at the full coverage line with no exemption on record. No account is needed.
NDC Quick Check
What the public record says about a company's CAS coverage
Your own company, or a teaming partner or subcontractor you plan to rely on
The check reads the SAM.gov registration and the SBA directory profile this platform holds, and, live on USAspending.gov, Department of War prime awards and the first-tier subcontracts primes have reported under them. Search by company name, as USAspending.gov records it, or enter the UEI.
A screening tool, not a determination. It reports what public records signal about CAS coverage. It does not decide whether any company is a nontraditional defense contractor, it is not legal or accounting advice, and it cannot see unreported or lower-tier subcontracts, business units or the CAS clause. Nontraditional status is the company's own statement, made to a contracting officer who may test it against the company's books.
What is a nontraditional defense contractor?
The definition is in 10 U.S.C. 3014. DCAA's audit alert quotes it in full:
“an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards”
The test turns on full coverage under the Cost Accounting Standards. From October 1, 2026, full coverage applies to a business unit with $100 million or more in CAS-covered awards, and negotiated awards of $35 million or less are not CAS-covered at all (48 CFR 9903.201-1, 9903.201-2; CAS Board final rule 91 FR 56056). DCAA's guidance on that rule notes work that “was subject to full CAS coverage under the prior $50 million threshold”, so the line that matters depends on when the work was performed.
The same definition governs other transactions: the prototype OT guide's glossary refers its NDC entry to 10 U.S.C. 3014.
Never full-coverage work
CAS does not apply at all to these awards, among others:
Contracts and subcontracts with small businesses.
Contracts and subcontracts (or the portion of a contract or subcontract) for the acquisition of commercial products or commercial services.
Firm-fixed-price contracts or subcontracts (or the portion of a contract or subcontract) awarded on the basis of adequate price competition without submission of certified cost or pricing data.
Sealed bid contracts.
Modified coverage is not full coverage
Modified CAS coverage requires only that the contractor comply with Standard 9904.401. 48 CFR 9903.201-2
How to tell whether you qualify
Four questions, in order. The NDC Quick Check reads the public record against the same steps.
The four questions, as a flowchart
Did you perform, or were you performing, any Department of War contract or subcontract in the year before the solicitation?
Nontraditional defense contractor
Nontraditional defense contractor
Are all of them exempt from CAS?
48 CFR 9903.201-1(b) exempts a contract or subcontract that is:
- (b)(1)Sealed bid contracts
- (b)(2)Negotiated awards at or below $35 million
- (b)(3)Small businesses
- (b)(4)Foreign governments, and foreign concerns for every standard but 401 and 402
- (b)(5)Prices set by law or regulation
- (b)(6)Commercial products or services
- (b)(7)NATO PHM Ship program subcontracts performed abroad by a foreign concern
- (b)(8)Firm fixed price, competed, without certified cost or pricing data
Nontraditional defense contractor
Nontraditional defense contractor
Did any CAS-covered contract put the business unit under full coverage?
Full coverage arrives either way: a single award of $100 million or more, or $100 million or more in net CAS-covered awards in the prior cost accounting period (48 CFR 9903.201-2).
A subcontract carries the coverage a prime contract to the same business unit would. Modified coverage does not count.
Traditional defense contractor
Traditional defense contractor
Nontraditional defense contractor
Keep the analysis behind it: the contracting officer may examine your books and records before award. Start with the NDC Quick Check above, which reads your Department of War prime awards and reported subcontracts from the public record.
The NDC Quick Check above answers 01 for prime awards and for the first-tier subcontracts primes reported, reads the small business, commercial, firm-fixed-price and dollar-floor exemptions off each prime award, and values 03 the way the CAS rules do. Lower-tier subcontracts, business units, the CAS clause and the other exemptions are yours to confirm in the contract files.
The registration
The SAM.gov registration and the SBA small business directory profile: legal name, size under each NAICS code, and the certifications on record.
The prime awards
Department of War prime awards performed in the last year, read live from USAspending.gov and valued the way the CAS rules value them.
The subcontracts
First-tier subcontracts primes have reported under Department of War awards, each screened on the amount its prime reported.
The CAS screen
Each award against the exemptions its record shows and the lines in force when it was signed: the $35 million floor and the $100 million full coverage line from October 1, 2026.
The ten Section 1826 NDC exemptions
The National Defense Authorization Act for Fiscal Year 2026, enacted December 18, 2025, exempts NDCs from business system and cost requirements. Five DFARS class deviations implement seven of them; three still wait for one (DARS class deviation index).
| # | Requirement | Where it is | Implemented by |
|---|---|---|---|
| 1 | Accounting System Administration | DFARS 252.242-7006 | Awaiting a class deviation |
| 2 | Earned Value Management System | DFARS 252.234-7002 | 2026-O0011 Rev 1, August 5, 2026 |
| 3 | Cost Estimating System Requirements | DFARS 252.215-7002 | 2026-O0048 Rev 1, July 22, 2026 |
| 4 | Material Management and Accounting System | DFARS 252.242-7004 | Awaiting a class deviation |
| 5 | Contractor Property Management System Administration | DFARS 252.245-7003 | 2026-O0046 Rev 1, September 9, 2026 |
| 6 | Contractor Purchasing System Administration | DFARS 252.244-7001 | 2026-O0015 Rev 1, July 29, 2026 |
| 7 | Contractor Business Systems | DFARS 252.242-7005 | Awaiting a class deviation |
| 8 | Special Cost or Pricing Areas / Defective Pricing | DFARS 215.407 | 2026-O0048 Rev 1, July 22, 2026 |
| 9 | Truthful Cost or Pricing Data / Truth in Negotiations | 10 U.S.C. 3702 | 2026-O0048 Rev 1, July 22, 2026 |
| 10 | Contract Cost Principles and Procedures | FAR Part 31 | 2026-O0032 Rev 1, August 4, 2026 |
The exemptions are not absolute
Any of them may be waived or modified with respect to a product or service with a written determination approved by the head of the relevant contracting activity, and that authority may only be delegated to a senior contracting official for the relevant contracting activity or a more senior official. Congress hears of each waiver within 60 days.
Claiming the status in a proposal
Under the Part 215 deviation's new provision, an offeror seeking the exception provides “a statement that the entity is not currently performing and has not performed, for at least the 1-year period preceding the solicitation of sources by DoD for the procurement or transaction, any contract or subcontract for DoD that is subject to full coverage under the cost accounting standards” (Class Deviation 2026-O0048, Revision 1). The same deviation lets an NDC's supplies and services be treated as commercial, which does not require a commercial product or commercial service determination and does not mean the supplies or services are commercial.
DCAA will check NDC status
On October 6, 2026 DCAA issued MRD 26-CCLD-010(R), Audit Alert on NDC Exemptions under Section 1826 of the FY 2026 NDAA. The memo points to establishing a process to monitor and track contractors claiming NDC status, and it is plain that evaluation approaches for NDCs will differ from traditional defense contractors.
The status does not end the government's access to data: NDCs must still comply with reasonable data requests. When they are refused, auditors should pursue formal data denial procedures. And price analysis still happens: Contracting officers retain final responsibility for determining fair and reasonable prices and may request actual cost information at both prime and supplier levels.
Self-certification puts the statement in your hands, so check the record before you make it.
“Determine whether a contractor meets the statutory definition of a nontraditional defense contractor”
NDCs in other transactions
Under 10 U.S.C. 4022, a prototype other transaction needs at least one of four conditions, and NDC participation is the one agencies use most. An OT sits outside Federal Acquisition Regulation (FAR) and agency supplements, Competition in Contracting Act (CICA), Cost Accounting Standards (CAS), Truth in Negotiations Act (TINA).
Significant extent of NDC participation
The glossary of the October 14, 2026 prototype OT guide:
Significant Extent. In determining the significance of expected NDC/nonprofit research institution participation, pursuant to 10 U.S.C. § 4022(d)(1)(A), and in the judgment of the AO, is any unique contribution material to the prototype project, without percentage-of-workshare or dollar thresholds as eligibility tests. Input from relevant technical advisors (legal, engineering, program management, pricing, logistics, etc.) in assessing the totality of the circumstances for each proposed prototype project before making an independent judgment as to the significance of expected NDC or nonprofit research institution participation. (See the 14 September 2026 “Fostering One Strong Industrial Base” memorandum).
The AO should generally consider, by way of illustration and not limitation, whether the NDC/nonprofit research institution will supply a new key technology, product, or process; supply a novel application or approach to an existing technology, product, or process; provide a material increase in the performance, efficiency, quality, or versatility of a key technology, product, or process; accomplish a significant amount of the prototype project; cause a material reduction in the cost or schedule of the prototype project; or, provide for a material increase in performance of the prototype project.
AOs should not establish blanket rules or thresholds for determination of significance, and agencies must not establish local policies that infringe on the AO’s judgment in making such determinations. An example would be blanket policies that say expected NDC/nonprofit research institution participation must represent a predetermined percentage of total project value, or total labor dollars, to be considered “significant.” Such arbitrary policies infringe upon the AO’s responsibility to make a reasoned, prudent, and independent determination for each individual prototype project.
The four conditions
- 01At least one non-traditional defense contractor participates to a significant extent.
- 02All significant participants are small businesses or non-traditional defense contractors.
- 03At least one third of the total cost is provided by sources other than the government, where there is no non-traditional defense contractor participation.
- 04The Agency Senior Procurement Executive determines that the circumstances justify a transaction providing for innovative business arrangements not feasible or appropriate under a contract, or an opportunity to expand the defense supply base that is not practical or feasible under a contract.
Which condition agencies recordDOW PROTOTYPE OTS, FY2017 TO FY2026
Of 4,815 Department of War prototype agreements and agreement vehicles in the federal procurement record for fiscal 2017 through 2026, signed through September 25, 2026.
What the new prototype OT guide says
The Guide to Prototype Other Transactions (10 U.S.C. § 4022 and § 2808a), issued October 14, 2026, sets the test for significant NDC participation in its glossary, shown above: no workshare percentage and no dollar threshold, only a unique contribution material to the prototype.
Where the July 2023 guide said AOs should validate and document an NDC's status prior to OT award, the new one points to relying where lawful on offeror self-certification against standard representations and conducting additional verification by exception.
It also says the requirement for an adequate accounting system does not apply to an OT agreement but may apply to a follow-on production contract or other future FAR-based contracts. Read what changed in the guide.
Pending in the FY2027 NDAA
H.R. 8800, section 823 (amendment to other transaction authority), passed by the House on July 22, 2026 (latest action September 14, 2026: Received in the Senate.), would replace the list with conditions the agency may use such authority upon determining any one of the following conditions, including significant participation by one or more nontraditional defense contractors (as defined in section 3014 of this title) or small business concerns.
Building an OT team?
Under the new guide the agency may rely on the offeror's self-certification. Check each NDC on your team against the public record first.
Run the NDC checkNontraditional defense contractor questions
What is a nontraditional defense contractor?
Under 10 U.S.C. 3014, a nontraditional defense contractor (NDC) is "an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards." The test turns on full coverage under the Cost Accounting Standards, which from October 1, 2026 applies to a business unit with $100 million or more in CAS-covered awards.
How do I know if my company, or a teaming partner, is an NDC?
Ask whether the business unit performed any Department of War contract or subcontract in the year before the solicitation, whether each of those awards was exempt from CAS, and whether any covered award put the unit under full CAS coverage. The NDC Quick Check on this page reads the public record against those steps by company name or UEI. It is a screening tool, not a determination: nontraditional status is the company's own statement, made to a contracting officer who may test it.
What does Section 1826 of the FY2026 NDAA exempt NDCs from?
Section 1826 of Public Law 119-60, enacted December 18, 2025, lists ten requirements an NDC is exempt from, including Accounting System Administration, Earned Value Management System, Cost Estimating System Requirements, Material Management and Accounting System. Five DFARS class deviations implement seven of them; three still wait for one.
Will DCAA check NDC status?
Yes. DCAA MRD 26-CCLD-010(R), October 6, 2026, "Audit Alert on NDC Exemptions under Section 1826 of the FY 2026 NDAA," tells auditors to "Determine whether a contractor meets the statutory definition of a nontraditional defense contractor." It also notes that "NDCs must still comply with reasonable data requests."
Do I need to be an NDC to win a prototype other transaction?
No, but NDC participation is the most common basis. Under 10 U.S.C. 4022 a prototype OT needs at least one of four conditions, the first being that "At least one non-traditional defense contractor participates to a significant extent." Across 4,815 Department of War prototype agreements and agreement vehicles in the federal procurement record for fiscal 2017 through 2026, 91.3% rest on nontraditional significant participation.
What counts as a significant extent of NDC participation in a prototype OT?
The October 14, 2026 Guide to Prototype Other Transactions defines it in its glossary as any unique contribution material to the prototype project, without percentage-of-workshare or dollar thresholds as eligibility tests, judged by the agreements officer on the totality of the circumstances for each proposed prototype project with input from technical advisors. Illustrations include supplying a new key technology, product, or process, or causing a material reduction in the cost or schedule of the prototype project, and the guide says agencies must not set blanket percentage or dollar thresholds.
Authoritative sources
10 U.S.C. 3014
The statutory definition of a nontraditional defense contractor, in the Office of the Law Revision Counsel's U.S. Code.
Public Law 119-60, section 1826
National Defense Authorization Act for Fiscal Year 2026: exemptions for nontraditional defense contractors, enacted December 18, 2025.
DCAA MRD 26-CCLD-010(R)
Audit Alert on NDC Exemptions under Section 1826 of the FY 2026 NDAA, October 6, 2026.
10 U.S.C. 4022
Authority of the Department to carry out prototype projects through other transactions, and the conditions each one must meet.
Guide to Prototype Other Transactions, Glossary
Appendix A of the October 14, 2026 guide, where the NDC entry refers to the definition at 10 U.S.C. 3014.
48 CFR 9903.201-1 and 9903.201-2
CAS applicability, the exemptions from it, and the types of CAS coverage, full and modified.
DARS class deviation index
The DFARS class deviations in effect, including those implementing the Section 1826 exemptions.
Are You a Nontraditional Defense Contractor? DCAA Will Now Check.
GovConDash blog, October 9, 2026: the exemptions, where each stands, and what DCAA will check.
The New Prototype OT Guide. Here Is What Changed.
GovConDash blog, October 15, 2026: what the reissued prototype OT guide changed, NDC significance included.
