Over the past year, government contractors have faced major changes – including rollout of stricter cybersecurity requirements, sweeping FAR and other regulatory revisions, rising Buy American thresholds affecting supply chains, and continued budget volatility driven by shutdown-related delays and shifting defense-versus-civilian spending priorities – fundamentally altering how companies operate, manage their workforce, and plan strategically for government customers. 

We outline a five-point inspection for government contractors to consider to remain successful in the changing landscape of the 2026 fiscal year. These five points cover the lifecycle of a government award and will give contractors critical considerations to keep in mind as they continually redefine their approach to how they serve their customers.

What programs do I want to pursue? 

Organizations pursuing government contracts should first consider their bid and proposal strategies. There are many instances where companies will attempt to bid on several opportunities at one time in hopes of winning that “one big award” which changes the future of their business. With that, as a company grows, so does the business plan. The company’s strategic plan should mirror its business plan, and both should be routinely monitored and updated to reflect the most up-to-date business strategy plans. Government contractors should consider asking themselves:

•  How achievable is our capture strategy?
• What is the competitive landscape? 
• Are we pursuing contracts that will help further our business objectives?
• Have we assessed risk and appropriately priced it into our proposals? 
• What is our value proposition and what differentiates us from our competition? 
• What contract types are we equipped to perform on?
• How is the government currently procuring goods and services?

To provide context to these questions, government contractors can obtain the following information: 

• Spending history in various agencies
• Government program data
• Customer buying history
• Independent Government Cost estimate data

By obtaining this data, a Government Contractor can start to solidify the overall pricing strategy for now and into the future. 

In this contracting environment, commercial positioning, early visibility into requirements, and constant business system readiness are emerging as key competitive differentiators. Contractors must maintain audit-ready systems, flexible rate structures, and evidence-driven CMMC controls as oversight and scrutiny continue to intensify. These factors are increasingly central to strategic planning as contractors balance growth, compliance, and an expanding opportunity pipeline.

What types of requirements will apply? 

Compliance with cost regulation is arguably one of the most important areas for consideration for all Government Contractors. Government Contractors should be prepared in several key areas including, Cost Accounting Practices, Provisional Bill / Forward Pricing Rates, Incurred Cost Submission (ICS) Readiness, and other considerations.

Cost Accounting Practices. At fiscal/calendar year-end, this is a great opportunity to assess the actual indirect rate structure, and accounting policy and procedures to help ensure alignment with applicable criteria such as Federal Acquisition Regulations (FAR), Defense Federal Acquisition Regulation Supplement (DFARS), Cost Accounting Standards (CAS), Uniform Guidance (2 CFR 200), and other required criteria. The questions that should be asked in this instance would be:

• Is the company cost structure scalable for future growth? 
• Is the company recovering all costs that are allowable or leaving allowable cost on the table? 
• Are my actual processes in line with my written policies and procedures?
• Are there any weaknesses or deficiencies in the contractor’s internal control matrix?

Provisional Bill / Forward Pricing Rates. Establish Provisional Billing Rates to approximate the contractor’s final year-end rates, as adjusted for any unallowable costs. These rates are used for interim purposes until settlement is reached on the final indirect rates for the Contractor’s fiscal year. December is a great time to finalize the overall company budget and move these figures into a provisional rate proposal and submit to the government. Another area to consider as part of your budgeting and estimating procedures is to update the forward pricing rates which are long-term projected cost rates used to price multi-year contracts. The company will want to evaluate both the near- and long-term business strategy to understand what is needed to remain competitive and understand that growth comes with additional challenges. Also, this will allow the assessment of headcount and what is needed to meet the scope of work in the future to reach certain revenue targets. 

Incurred Cost Submission. Government Contractors should begin to prepare elements of their incurred cost submissions, prior to year-end when the clause at FAR 52.216-7 Allowable Cost and Payment is present for Cost-Reimbursement Contracts. This allows for significant lead time for necessary reviews and internal adequacy determinations to take place, prior to the annual deadline. A final verification will need to be done once the accounting books and records have been closed and finalized with no additional adjustments needed. 

Other considerations. Subsequently, Government Contractors should begin to evaluate or further develop areas that may now become applicable to the Contractor due to the SBD graduation or revised strategy business plans to go after certain contracts with cost compliance provisions. Contractors will need to start considering areas, such as:

• CAS triggers (i.e., no longer exempt from CAS due to SBD graduation)
• Requirements for Disclosure Statements of Cost Accounting Practices (as applicable)
• Other regulatory reporting requirements, such as SCA, 2 CFR 200

Subcontract Monitoring: Government Contractors, who have requirements to do so in their contracts, should have adequate subcontractor monitoring policies and procedures to reduce the subcontract monitoring risk

What types of business systems and processes will I need?  

The government views contractor business systems as vital in the delivery of accurate data for monitoring and enforcement. Government Contractors are subject to business system requirements when the applicable CFR 252.242-7005 clauses are present in contracts and are otherwise not subject to any Cost Accounting Standards (CAS) exemptions. 

There are six different business systems that Government Contractors may need to understand as they become applicable to them. Below is a description of the six different types of business systems: 

• Accounting
• Earned Value Management (EVM)
• Estimating
• Material Management Accounting
• Property
• Purchasing

Business systems, and the compliance therein, extend beyond just a physical software “system”. The “system” includes several areas:

Policies and Procedures: Well-documented policies and procedures are imperative to the success of a compliant business system. Government Contractors should ask themselves: “Do the current policies and procedures cover the requisite level of details that is expected from Government Auditors?” 

Training: Generally, training should be performed on an annual basis and should be based, and/or targeted, on the individual’s roles and responsibilities (R&Rs) within the organization. 

Files and Documentation: The files, and the process to review the files, is part of the artifact capture within the business system. The files should demonstrate

• Compliance with current policies and procedures; and 
• The knowledge and capability of personnel who are performing tasks applicable to their role and responsibilities

Internal Reviews: Finally, Contractors are expected to perform self-assessments to ensure compliance with their own policies and procedures, and that files and/or documentation support are accurate, complete, and following policy. 

So, keeping up with these standards, regardless of the actual requirement, strongly benefit the Contractor. Contractors should be ready for the assessments and start planning now. In order to prepare for 2023, Contactors can begin now by:

• Reviewing policies and procedures, and ensuring they are updated, accurate, and complete with current practices
•  Implementing effective training based on individuals’ R&R’s within the organization
• Performing mock audits (i.e., accounting, purchasing, estimating, floor check, etc.), documenting the outcome, preparing recommendations for improvement against the related business system criteria, and implementing those improvements immediately

How should I secure my data? 

As we move into 2026, one important topic will be cybersecurity compliance – particularly the Cybersecurity Maturity Model Certification (CMMC). CMMC is no longer a future-state consideration; it is now an active DoD contracting requirement. Phase 1 implementation began on Nov. 10, 2025, introducing Level 1 and Level 2 self-assessments into new solicitations and making a contractor’s Supplier Performance Risk System (SPRS) status a direct eligibility factor for award decisions. Phase 2, effective Nov. 10, 2026, will significantly raise the bar by requiring third-party C3PAO assessments for many contracts involving Controlled Unclassified Information (CUI), shifting contractors away from historical NIST SP 800171 self-attestation and towards documented, evidence-based compliance.

As CMMC now appears clause-by-clause in solicitations, contractors must clearly determine whether their scope involves Federal Contract Information (FCI) or CUI, as that determination drives the applicable CMMC level and whether self-assessment or third-party assessment applies. A practical starting point is gaining a clear understanding of cybersecurity scoping, control expectations, and evidence requirements – areas that are increasingly scrutinized during evaluations and audits. 

Therefore, Government Contactors should then begin to prepare for the oversight obligations (i.e. CMMC), by taking the following actions:

• Confirm that IT policies, standards, and procedures are up-to-date and meet the CMMC requirements
• Confirm that their System Security Plan (SSP) is up-to-date and documents all 110 controls
• Confirm that all assets are known and categorized correctly either as:
• Controlled Unclassified Information (CUI) Assets
• Security Protection Assets
• Contractor Risk Managed Assets
• Specialized Assets
• Conduct a self-assessment and calculate their risk score using the Supplier Performance Risk System (SPRS) scoring mechanism 
• Remediate any issues by implementing compliant with regulation practices 
• Deploy technical solutions where needed

By reviewing applicable frameworks, and completing these verifications before mandatory clauses are incorporated, the company will be set up for not only compliance, but also success in safeguarding the data and information within the organization. 

Will I be audited? 

Contractors should conduct a thorough review of contracts to identify applicable audit requirements and clauses. This will allow Contractors to understand the oversight which will be applied to their contracts and allow them to best prepare for the types of audits and reviews they are likely to experience. Should they be audited, following the inspection points noted above will help Government Contractors be better prepared and help result in limited to no issues noted by the auditors.

For example, in business systems, Government Contractors should be prepared that the system criteria outlined in the DFARS are often used as a standard for government audits of contractor business systems even if the DFARS does not expressly apply. Given the DOD’s work to establish guidelines for systems accuracy and integrity, many agencies consider the DFARS criteria a reasonable standard; therefore, Government Contractors should consider these standards to help ensure acceptance and regularly verify compliance even if they are not contracting with the DOD.

 Positioning GovCons for Resilience, Compliance, and Growth

The government contracting environment in 2026 remains resilient as agencies continue to modernize acquisition practices and recalibrate priorities across technology, compliance, and procurement strategy. Federal policy momentum toward a commercial‑first approach is accelerating, driving increased reliance on commercially available solutions. At the same time, contractors are navigating a set of defining themes for 2026 – heightened cybersecurity requirements, growing emphasis on supply‑chain resilience, and sustained pressure to operate efficiently amid fluctuating budgets and intensifying competition. As these shifts gain speed, now is an ideal time for government contractors to conduct a “Five Point Inspection” and position their organizations to:

• Successfully execute growth and strategy changes
• Update their policies and procedures to match their growth and strategy changes
• Prepare themselves for new and exciting contract vehicles, regulations, and changes in the Government Contracting arena

It is never too early to get started, and it's always a good idea to stay ahead of the curve to prepare your business for success.