FPS Pulse Newsletter - Fall 2026

Anthony: I actually started teaching with FPS about 15 years ago, so I've had the opportunity to watch the government contracting environment evolve through several different cycles.

One of the most significant changes I saw occurred around 2010 with the implementation of the DoD Business Systems Rule and the corresponding evolution of DCAA's audit approach. Prior to that, DCAA relied heavily on its Internal Control Audit Planning Summary, or ICAPS, and maintained audit programs covering numerous areas of contractor system compliance. There was also considerable debate around DCAA's role in determining whether a contractor's business systems were adequate.

The DFARS Business Systems framework changed that environment significantly. It established much clearer criteria around the major contractor business systems and, importantly, created contractual consequences, including payment withholds for significant deficiencies. It also helped clarify the respective roles of DCAA, DCMA, contracting officers, and contractors in the system-review process.

Now, more than 15 years later, we are going through another potentially significant transformation. The FAR and DFARS are being modernized, and DoW (Department of War) has been considering substantial changes to the business-systems framework, including streamlining system criteria and rethinking how systems such as Accounting, Estimating, and MMAS are evaluated. The potential for greater use of independent CPA examinations could also materially change how the government obtains assurance over contractor business systems.

CAS is another great example. The Cost Accounting Standards framework went for decades without this level of attention. Today, we are seeing significant efforts to modernize CAS, including changes involving applicability, cost impacts, and proposals affecting individual standards. To me, that modernization has been overdue.

What is interesting, though, is what hasn't changed. Contractors still need sound accounting practices, reliable data, disciplined internal controls, and people who understand the rules well enough to apply them to the business. The regulations, terminology, and audit approaches may evolve, but the fundamentals of good government contracting remain remarkably consistent.

So, after 17 years with FPS, that is probably my biggest takeaway: the rules will continue to change, but contractors that maintain strong systems, good controls, reliable data, and a culture of compliance will always be better positioned to adapt.

Anthony: Before joining CACI, I spent more than 20 years as a consultant, so consulting has really been the foundation of my career. My time at CACI as Vice President of Government Compliance gave me a completely different perspective, though, because for the first time I was truly sitting on the industry side of the table.

CACI was a wonderful place to work, and I learned a tremendous amount there. I approached my role almost as if CACI were my client. I was constantly looking at problems, identifying risk, working across functions, and trying to develop practical solutions. But being inside the organization gave me a much deeper appreciation for what contractors actually deal with every day. Compliance is important, but companies are also managing growth, operations, customers, employees, technology, profitability, and competing business priorities. That experience changed the way I advise clients.

Highspring had been talking with me for quite some time, and what ultimately attracted me was the opportunity to return to consulting while also building and leading a Government Contract Advisory Services practice with the backing of a much broader organization. As the former MorganFranklin organization evolved into Highspring and consolidated its service offerings, I saw an opportunity to build something that could bring government contracting expertise together with broader capabilities across the firm.

What has been particularly rewarding is seeing the commitments and conversations we had before I joined actually come to fruition. I have tremendous support from our people, our partners, our back-office teams, and our leadership. There is a genuine sense that we are invested in each other's success and in growing this practice.

I sometimes joke that I was probably born a consultant and eventually reverted back to my natural state. But I came back as a different consultant. My experience at CACI gave me an insider's perspective into what companies really go through on a day-to-day basis. Today, I can combine that industry perspective with more than two decades of consulting experience, and I think that makes me much more focused on practical solutions that support not only compliance, but also the broader business."

Anthony: It depends, which is probably the typical consultant's answer. But I really do think that's the right answer here because these regulatory and acquisition changes are going to affect contractors very differently depending on their size, contract portfolio, and current compliance requirements.

For large contractors, I would be looking very closely at changes to CAS applicability and thresholds, cost-impact requirements, the evolving DFARS Business Systems framework, and the broader movement toward greater use of fixed-price contracting. These companies already have mature compliance infrastructures, so even changes intended to streamline requirements can have significant implications for existing policies, systems, cost structures, and contracting strategies.

For mid-sized contractors, I think many of these changes could ultimately be very beneficial. But there is also a potential trap. Reduced regulatory burden doesn't mean no regulatory burden. These contractors need absolute clarity regarding which requirements apply to them, which no longer apply, and what controls they still need to maintain. That applicability analysis is going to become extremely important.

Business systems are a good example. The current DFARS framework still recognizes six contractor business systems, and recent changes have already moved the standard toward concepts such as `material weakness.' At the same time, additional reforms under discussion contemplate further consolidation and greater alignment with commercial and GAAP-based practices. So contractors need to distinguish between what is in effect today and what may be coming next.

For small businesses, nontraditional defense contractors, and new entrants, I think the direction of travel is particularly interesting. The broader acquisition reform effort is clearly focused on reducing government-unique barriers and making it easier for the government to access commercial capabilities. That creates opportunity, but those companies still have to understand the requirements that attach once they enter the federal marketplace.

Ultimately, I think the objective behind many of these reforms is pretty straightforward: enable the government to acquire better goods and services faster, with fewer unnecessary barriers and at better value. But for contractors, simplification does not eliminate the need to understand the rules. In some ways, understanding exactly which rules apply, and which no longer apply, becomes even more important during a period of transition.

Anthony: I see three areas that could be particularly impactful for contractors.

1. "Fixed-Price First"

The first is the government's increased preference for fixed-price contracting. Under the new framework, fixed-price is the default and preferred contract type, and non-fixed-price arrangements will face greater scrutiny. For certain larger awards, agency-head approval will be required.

For contractors, that shifts more performance and cost risk to the contractor. It makes understanding your cost structure, estimating assumptions, indirect rates, and margin sensitivity increasingly important. Contractors also need to think strategically about how they can demonstrate that a proposed price is fair and reasonable without necessarily relying on detailed cost information when certified cost or pricing data are not required.

There is also an interesting question emerging around the Department of War's evolving approach to supplier cost and pricing transparency and profit. If the government intends to evaluate whether profit is reasonable, what information will it use to make that determination when certified cost or pricing data are not required? Our recent Highspring materials identify both the development of revised profit policy and the government's maintenance and use of data on "normal profits" as unresolved implementation questions.

That is an area I would watch very closely because the implementation details could materially affect pricing strategy.

2. Commercial-First Acquisition

The second major opportunity is the government's stronger preference for acquiring commercial products and commercial services.

The fundamental question is increasingly: "If the requirement can be satisfied commercially, why wouldn't we use a commercial acquisition pathway?"

The proposed FAR Part 12 revision is part of a broader effort to streamline commercial acquisition. The proposal was published September 18, 2026 under FAR Case 2026-003, covering Parts 8, 12, 13, 15, 38, 44, 51, and 52. The current RFO Part 12 framework expressly describes its purpose as streamlining the acquisition of commercial products and services.

That creates a significant opportunity for contractors that can position their offerings as commercial and substantiate that position with strong market, sales, and pricing evidence. Your internal analysis similarly emphasizes maintaining pricing, market-research, and prior-sales documentation to support commerciality.

At the same time, greater contracting-officer discretion creates uncertainty. Companies should not assume that "commercial-first" automatically means that commerciality determinations or price support will become effortless.

3. CAS Administration

The third area is Cost Accounting Standards administration, and this is especially important for larger contractors with CAS-covered contracts.

Eliminating Fix-Price Contracts from CAS cost-impact analyses could give contractors greater flexibility when evaluating accounting practice changes. Strategically, that matters because companies have historically had to consider the potential cost-impact consequences across a broad contract portfolio before implementing a change.

This creates an opportunity to become more proactive about their cost accounting structure, allocation methodologies, indirect-rate design, and accounting practice changes, rather than viewing CAS solely as a compliance exercise.

Anthony: I think contractors need to recognize that the government is shifting more risk and accountability to industry. Fixed-price contracting puts greater pressure on contractors to understand their costs before they bid and manage those costs throughout performance. At the same time, cybersecurity and compliance requirements increasingly require contractors to demonstrate that their controls actually operate, not simply that policies exist. The companies that will be best positioned are those investing now in integrated business systems, disciplined estimating and forecasting, strong cybersecurity controls, and real-time visibility into program performance. The goal should no longer be just preparing for the next audit. It should be building an organization that is continuously ready to demonstrate that its costs are accurate, its systems are reliable, its data is protected, and management understands where performance and margin risk exist.

Anthony: Looking ahead, I think the contractors that successfully adapt and grow will be the ones that can turn change into a competitive advantage. We're moving into an environment where companies have to be faster and more commercially minded, but at the same time remain disciplined around cost, cybersecurity, contract performance, and accountability.

One of the biggest differentiators will be the quality and integration of their business systems and data. Contractors need timely visibility into labor, cost, indirect rates, forecasting, program performance, and profitability. If finance, contracts, operations, estimating, and program management are working from different information, it becomes very difficult to make good decisions quickly.

Second, I think technology and AI will become increasingly important, but simply investing in technology won't be enough. The companies that benefit most will be those that apply automation and AI to real business processes, such as estimating, pricing, forecasting, contract administration, compliance monitoring, and program management, while maintaining appropriate controls and human oversight.

Third, contractors will need a workforce that understands both the regulatory environment and the commercial realities of the business. The most valuable professionals won't just understand FAR, DFARS, CAS, DCAA, or DCMA requirements. They'll understand how those requirements affect pricing, margins, cash flow, operational decisions, and ultimately the ability to compete.

And finally, I think organizational agility will matter tremendously. The acquisition environment is changing quickly. Successful contractors will need leaders and teams that can interpret those changes, assess the business impact, and adjust their processes, systems, and strategies without waiting for a compliance issue or an audit to force the conversation.

So, to me, the winners will be the companies that bring together strong systems, trusted data, technology, regulatory expertise, and commercially minded talent. Compliance will remain important, but increasingly it will be the foundation for better business performance rather than simply an obligation.