NDAA: Massive expansion of commercial solutions openings and other key takeaways for defense contractors

The 2026 National Defense Authorization Act continues the push to accelerate defense acquisition, expand the industrial base, and reduce barriers for commercial entrants. The 2026 NDAA signals a decisive shift as the Department of Defense makes acquisition faster and decidedly more commercial. Below are the changes that are most consequential for industry. 

Expanded use of commercial solutions openings

Section 1823 of the NDAA may prompt a monumental shift in defense acquisition. Revisions to 10 U.S.C. § 3458 allow DOD and the military departments to use commercial solutions openings to acquire products and services. This is a notable expansion; previously CSOs were limited to “innovative” commercial solutions. With the removal of this qualifier, CSOs can now be used as a general commercial acquisition tool. 

Furthermore, the revisions allow the government to award a follow-on production contract from such a CSO on a sole source basis. Thus, as long as the CSO was openly competed, the awardee of a CSO for a commercial product or service would be eligible for a sole-source follow-on production contract. Making this option even more attractive to industry is the fact that the awarded contracts can be Other Transaction Authority Agreements, or OTAs, rather than traditional procurement contracts. OTAs are not subject to the Federal Acquisition Regulation and awardees can negotiate a wide variety of provisions, including IP and data rights. These changes are yet another reason why commercial companies, both Fortune 100 titans and small tech startups, should begin looking at opportunities in the defense space.

Reduced compliance burden: Raising the threshold for cost accounting standards and truthful cost and pricing data

Section 1806 of the NDAA eliminates a major compliance burden for many contractors by dramatically reducing the number of contracts covered by the cost accounting standards. The coverage thresholds have been adjusted in two ways. First, all contracts and subcontracts are exempt from CAS entirely if valued below $35 million, formerly $2.5 million, effectively eliminating the CAS “trigger” mechanism, which requires a contractor to receive at least one CAS-covered contract valued at $7.5 million or more before other contracts can become CAS-covered. Second, it doubles the threshold for full CAS coverage from $50 million to $100 million, though contractors may still be subject to “modified” CAS coverage under that amount in certain situations.

Furthermore, portions of contracts may be exempt from CAS if it meets one of the conditions under 41 U.S.C. § 1502 (b)(1)(C), even if the entire contract is not exempt. For instance, portions of contracts or subcontracts that are firm fixed price or for the acquisition of a commercial item will be exempt from CAS.

Similarly, Section 1804 raises the existing Truthful Cost and Pricing Data Act — often referred to as TINA — threshold for the submission of certified cost or pricing data from $2 million to $10 million. The subcontract threshold for certified cost or pricing data is increased to $10 million for prime contracts entered into after June 30, 2026. 

Miscellaneous changes: PAEs, Israeli cooperation and bid protests

Section 1802 creates the position of portfolio acquisition executive, a senior official to whom program managers report directly. This provision transitions program executive officers into PAEs, shifting DOD acquisition from a program‑by‑program basis to portfolio-level oversight. This will be a welcome change for those who have criticized the prior compartmentalized approach. It may also help prevent situations where contracting officials are not aligned with the government customers they serve. 

Section 864 establishes the U.S.-Israel Defense Industrial Base Working Group to study deeper integration and potential inclusion of Israel in the national technology and industrial base. This could lead to significant opportunity for Israeli firms, as current industrial base opportunities are often limited to U.S., Canadian and British companies. 

Due to the perception that the protest process is being abused by incumbents, Section 875 allows the Defense Department to withhold up to 5% of payments to an incumbent contractor that is awarded an extension or bridge contract because of a protest filed at the Government Accountability Office, but only if the protest is ultimately dismissed “based on a lack of any reasonable legal or factual basis.” 

This is a relatively slight change in light of several “loser pay” proposals that had been floated, and is unlikely to have much impact as credible protest allegations can typically survive dismissal. A DFARS rule implementing this change will come within 180 days. 

Section 1822 also establishes a preference for commercial products and services, and requires that commercial products, commercial services and non-developmental items are used to the maximum extent practicable. 

What was not changed

Notably, funding for the Small Business Innovation Research and Small Business Technology Transfer programs was omitted from the final bill. These programs provide competitive federal funding to small firms with cutting-edge R&D. Historically, SBIR/STTR reauthorizations have been included in the NDAA, but there is an ongoing legislative fight over how best to reauthorize the SBIR and STTR, including debate over imposing more restrictions on companies that win multiple awards year after year. Congressional authority for these programs expired as of September 30, 2025 and their future remains unclear.

The 2026 NDAA also omitted a bipartisan “right to repair,” which would have required contractors to provide to the government the necessary technical data for the military to repair equipment on its own. Instead, Section 805 of the Act requires the development of a digital system to track and assess “covered data,” and ensure that contractors comply with related contractual obligations. 

The 2026 NDAA continues the push towards commercial-first acquisition and eliminates multiple compliance hurdles and barriers to entry. Its changes should prompt commercial companies to consider future defense opportunities. 

Jeremy Burkhart is a partner at Holland & Knight and a member of the firm’s National Security and Defense Group. He focuses his practice on litigation, counseling, federal leasing and helping companies of all sizes enter the defense industry. Prior to joining Holland & Knight, Mr. Burkhart served on active duty in the U.S. Army as a judge advocate for nine years.