By Unanet’s Katie MacDonald
Government contractors have heard plenty about acquisition reform focused on speed, commercial practices, and reducing administrative burden. The Department of War’s August 18 memorandum on Supplier Cost and Pricing Transparency adds another priority to that conversation: the Department wants much better visibility into what its suppliers actually cost.
For contractors, the most important takeaway is not that every company suddenly has a new data submission requirement. Several pieces of the memorandum still require implementation work, and some of the most significant ideas, including automated connections to contractor financial systems, are explicitly being explored rather than imposed today. But the direction is hard to miss.
DoW wants deeper cost visibility across the supply chain, more timely cost reporting, and a stronger basis for deciding whether the prices and profit levels it negotiates are reasonable. Contractors that can produce reliable cost data, explain how their prices are built, and trace information through their ERP and subcontractor network will be in a much stronger position than those that have to reconstruct the story every time the government asks.
What the August 18 Memo Changes
The memorandum establishes a broader expectation for supplier cost and pricing transparency, including throughout the subcontractor chain. It specifically calls for transparency supporting negotiations for products and services valued at $10 million or more, even when certified cost or pricing data is not required. That distinction matters.
Federal law now generally sets the Truthful Cost or Pricing Data threshold at $10 million for applicable prime contracts entered into after June 30, 2026. But certified cost or pricing data is only one part of the government’s pricing toolkit.
FAR 15.402 already allows contracting officers to request other data necessary to determine whether a price is fair and reasonable when certified data is not required. At the same time, FAR instructs contracting officers not to request more information than necessary because excessive requests add cost and extend acquisition timelines. The new memo appears to push DoW toward using that authority more consistently and more deeply.
For contractors, the practical shift looks something like this:
| Historically | Where DoW Is Signaling Greater Focus |
| Is the proposed price supportable? | Can we see the cost basis behind the price? |
| Does the prime have adequate data? | Can relevant data be traced through lower tiers? |
| Were required reports submitted? | Are cost reports timely, reliable, and usable? |
| Can the contractor provide the information when asked? | Can the data eventually be exchanged more efficiently and systematically? |
That raises the bar on the quality of the data behind the proposal, not just the final number submitted.
The $10 Million Number Should Not Be Misread
One thing contractors should be careful about is assuming the memorandum turns every $10 million procurement into a certified cost or pricing data exercise. It does not.
The statutory requirements and exceptions governing certified cost or pricing data still matter. The important change is the Department’s expectation around transparency, including situations where certification is not required.
Current DoW pricing guidance already makes clear that when certified cost or pricing data is not required and the government lacks enough information to determine price reasonableness, contracting officers can seek additional information from the offeror. For sole-source commercial acquisitions, that can include sales information and, when necessary, cost data supporting the proposed price.
So the compliance question is not simply: “Are we above the certified data threshold?”
Contractors should increasingly be asking:
- What information supports this price?
- Can we produce it quickly?
- Can we reconcile it with our accounting and estimating systems?
- Do we have enough visibility into material subcontractor costs?
- Will the underlying data withstand government scrutiny?
That is a much broader readiness question.
The Supply Chain Piece Could Be Significant
The memorandum’s emphasis on transparency across contractor and subcontractor tiers deserves particular attention.
A prime can have excellent internal pricing discipline and still struggle if a major subcontractor cannot provide timely, reliable support for its proposed costs. For complex defense programs, that can create delays during proposal development and negotiation because the prime is responsible for assembling a defensible overall position.
Recent DoW changes to Cost and Software Data Reporting reinforce that focus. August 2026 DFARS deviation language requires contractors subject to CSDR to maintain processes that generate reliable actual cost data, complete a CSDR readiness review, and identify certain major subcontractors.
For primes, subcontractor management therefore needs to include more than schedule and performance. It increasingly includes data readiness.
Contractors should know which suppliers could materially affect a negotiation, what cost information is available, how quickly it can be obtained, and whether subcontractor data can be reconciled with the prime’s own pricing assumptions.
DoW Is Also Putting Pressure on Late Cost Reporting
The memorandum calls attention to thousands of delinquent Cost and Software Data Reporting submissions and directs the acquisition organization to address that backlog.
CSDR is not new. It is already used to collect contractor cost and software information to support government cost analysis and estimating. Current DFARS policy makes CSDR mandatory for applicable major defense acquisition programs, and DoW uses government-approved reporting plans to define required information. The more interesting signal is how DoW wants to use that information.
The memorandum ties better cost reporting to understanding which programs are providing value and which may need intervention. It also directs greater use of the data to evaluate sole-source contracting outcomes over time.
That means late or inconsistent reporting is not simply an administrative issue. Cost data is increasingly becoming part of how the Department wants to evaluate program performance and acquisition value.
Profit Is Clearly Part of the Conversation
The memo also directs acquisition leadership to establish fair and reasonable contract profit margins using commercial practices tailored to different product and service lines. That language will understandably get contractors’ attention.
It does not mean DoW has announced a universal cap on contractor profit. Current DFARS policy already uses structured approaches, including the weighted guidelines method, to establish prenegotiation profit or fee objectives when certified cost or pricing data is obtained. Those approaches account for factors such as performance risk and other characteristics of the acquisition.
The memorandum also recognizes that contractors that create efficiencies after negotiating from a realistic baseline should be able to benefit from those efficiencies.
Still, contractors should expect more focus on the relationship between: Cost basis → negotiated price → risk → efficiency → profit. If your pricing model cannot explain that relationship clearly, negotiations may get harder.
The ERP Connection May Be the Most Important Long-Term Signal
One of the most consequential ideas in the memorandum is not a new clause or reporting form. It is the direction to explore automated access to supplier cost information through application programming interfaces connected to contractor ERP or other financial systems.
To be clear, this is not currently a blanket requirement for contractors to give DoW direct access to their ERP systems. The memorandum directs Acquisition and Sustainment to explore an automated approach intended to reduce manual reporting burden. But contractors should pay attention to the direction.
Today, a typical cost-data workflow may look like: ERP → export → spreadsheet → manual reconciliation → government submission
The future state DoW is considering moves closer to: ERP → standardized data exchange → government analysis
That has major implications for data governance.
If this direction progresses, contractors will need confidence that the data flowing from project accounting, labor, indirect costs, purchasing, subcontract management, and estimating is structured, current, controlled, and explainable. You cannot automate your way around poor underlying data.
What Contractors Should Be Doing Now
There is no reason to build an API to the Pentagon tomorrow. There is every reason to evaluate whether your underlying systems could support a more transparent environment.
I would focus on five areas:
- Test your pricing traceability. Can you move from a proposal number back to the labor, materials, indirect rates, assumptions, and subcontractor data behind it?
- Review subcontractor visibility. Identify where major supplier pricing still depends on email, spreadsheets, or difficult-to-obtain support.
- Clean up CSDR processes where applicable. Timeliness and reliable actual-cost reporting are clearly getting more attention.
- Connect estimating and actual performance. Historical project data should help make future estimates more defensible, not sit isolated in the ERP after contract close.
- Evaluate your data architecture. Understand whether your ERP and related financial systems can securely support standardized exports or API-based exchange without creating another manual reconciliation process.
The goal is not more reporting for reporting’s sake. It is being able to produce trusted information without disrupting the business every time the government asks for it.
The Bigger Shift Is From Reporting to Data Readiness
The August 18 memorandum should not be read as an isolated pricing directive. It fits a broader acquisition environment where DoW is placing more value on usable data, faster analysis, stronger accountability, and better visibility across the program lifecycle. For contractors, that changes the strategic value of the systems underneath the business.
Project accounting cannot only produce an invoice. Estimating cannot live separately from actual performance. Subcontractor information cannot disappear into spreadsheets. Pricing teams cannot spend weeks reconstructing data that already exists somewhere else in the organization.
The contractors that adapt best will not necessarily be the ones that provide the government with the most data. They will be the ones that can provide the right data quickly, accurately, securely, and with a clear connection between what they proposed, what the work costs, and what they ultimately delivered.
That is a stronger position for government scrutiny, but it is also simply a stronger way to run the business.
