As the defense contracting landscape continues to evolve, one recent legislative change is expected to have a significant impact on procurement teams across the industry. The FY2026 National Defense Authorization Act (NDAA) introduced statutory exemptions for qualifying Nontraditional Defense Contractors (NDCs), creating new opportunities for commercial suppliers while shifting additional responsibilities onto prime contractors.
For Contracts and Procurement departments, this means preparing for an increasing number of suppliers asserting NDC status during the procurement process. While these exemptions can streamline negotiations and reduce administrative burden, they also require organizations to implement consistent, compliant procedures for evaluating and documenting supplier assertions.
Companies that establish repeatable processes now will be better positioned to accelerate procurement while reducing downstream compliance risk.
The FY2026 NDAA may simplify compliance for qualifying Nontraditional Defense Contractors (NDCs), but it places new responsibilities squarely on prime contractors. As more suppliers begin asserting NDC status, Contracts and Procurement departments will become the first line of defense for ensuring those assertions are reviewed consistently, documented properly, and administered in compliance with evolving regulations.
What Is a Nontraditional Defense Contractor?
A Nontraditional Defense Contractor is generally defined as an entity that has not performed under a fully CAS-covered Department of Defense contract for at least one year before the solicitation.
This definition includes many organizations that primarily serve commercial markets, including:
- Technology companies
- Software developers
- Commercial manufacturers
- Engineering firms
- Innovative startups
- Commercial service providers
Historically, many of these companies avoided defense contracts because of the significant compliance requirements associated with traditional government contracts. Congress designed the NDC exemptions to encourage greater commercial participation in the defense industrial base by lowering those barriers.
For qualifying Department of Defense contracts, the FY2026 NDAA provides statutory exemptions from certain requirements related to:
- Truthful Cost or Pricing Data (formerly TINA)
- FAR Part 31 Cost Principles
- DFARS Business Systems
Although these statutory changes are effective, regulatory implementation within the DFARS remains ongoing, making proper internal administration especially important.
Why Procurement Teams Should Expect More NDC Assertions
The new statutory exemptions create meaningful incentives for suppliers to identify themselves as Nontraditional Defense Contractors.
From a supplier's perspective, qualifying as an NDC can significantly reduce the amount of documentation and administrative effort required during negotiations. Less cost information may be required, compliance obligations are reduced, and contract administration becomes more efficient.
As awareness of these benefits grows throughout the defense industry, procurement professionals should expect suppliers to begin proactively asserting NDC status during subcontract negotiations.
This creates new challenges for prime contractors.
Instead of simply accepting or rejecting supplier assertions, procurement personnel must determine whether:
- The supplier appears to qualify under the statutory definition.
- Appropriate supporting documentation has been obtained.
- Internal approvals have been completed.
- Procurement files adequately support the decision.
- Future audits can demonstrate a consistent review process.
Without standardized procedures, organizations may find different buyers handling identical situations differently, increasing compliance risk and creating inconsistencies across programs.
The Opportunity for Prime Contractors
While the influx of NDC assertions introduces additional responsibilities, it also presents meaningful opportunities to improve procurement efficiency.
Organizations that establish a structured review process can realize several important benefits.
Accelerated Procurement Cycles
Reducing unnecessary cost analysis allows buyers to move negotiations forward more quickly, helping organizations meet aggressive acquisition schedules without sacrificing compliance.
Reduced Administrative Burden
When suppliers legitimately qualify for statutory exemptions, procurement professionals spend less time requesting, reviewing, and documenting detailed cost information.
This allows Contracts and Procurement teams to focus on higher-value acquisition activities rather than unnecessary administrative work.
Greater Supplier Participation
Commercial companies that once viewed defense contracting as overly burdensome may now be more willing to pursue government work.
This broader supplier base can increase competition, encourage innovation, and improve access to emerging technologies that benefit Department of Defense programs.
Improved Procurement Efficiency
Organizations with clearly defined review procedures can process supplier assertions consistently, reducing delays while maintaining confidence that procurement decisions are fully documented.
The Compliance Risks of an Informal Process
Although the exemptions simplify portions of the procurement process, they do not eliminate the need for sound internal controls.
One of the greatest risks organizations faces is inconsistent administration.
For example, one buyer may require extensive documentation before accepting an assertion, while another may approve similar assertions with minimal review. Over time, these inconsistencies can create unnecessary exposure during internal audits, customer reviews, or government oversight.
Potential compliance risks include:
- Accepting unsupported NDC assertions
- Applying exemptions inconsistently across business units
- Inadequate documentation within procurement files
- Insufficient internal approval processes
- Difficulty defending procurement decisions during future reviews
The objective is not simply to approve supplier assertions faster—it is to establish a repeatable process that produces consistent, well-supported decisions every time.
Building a Sustainable NDC Review Process
As more suppliers begin asserting NDC status, organizations should develop standardized procedures that guide procurement personnel through each review.
An effective process often includes several key components.
Standardized Supplier Certifications
Develop a consistent questionnaire or certification form that suppliers complete when asserting Nontraditional Defense Contractor status.
This creates consistency across procurement activities while documenting the supplier's representation.
Defined Documentation Requirements
Determine exactly what supporting documentation procurement personnel should request before accepting an assertion.
Establishing clear requirements prevents unnecessary variation between buyers.
Internal Review and Approval Workflows
Identify who is responsible for evaluating assertions, approving exemptions, and escalating complex situations to Contracts, Legal, or Compliance personnel when appropriate.
Clear accountability improves consistency across the organization.
Procurement Team Training
Buyers, subcontract administrators, contracts managers, and pricing analysts should understand:
- What qualifies as an NDC
- When statutory exemptions may apply
- Required documentation
- Internal approval procedures
- Record retention expectations
Training helps ensure every procurement professional applies to the same standards.
Documentation and Record Retention
Organizations should maintain procurement files that clearly demonstrate how each assertion was evaluated and approved.
Proper documentation supports future audits while reducing questions about procurement decisions months or even years later.
Preparing Before Supplier Assertions Become Routine
Many procurement organizations have not yet updated their policies or procedures to address the expected increase in NDC assertions.
Waiting until suppliers begin regularly requesting exemptions places unnecessary pressure on acquisition teams already managing tight schedules and evolving regulatory requirements.
Instead, organizations should begin preparing now by:
- Reviewing procurement policies
- Updating purchasing procedures
- Creating standardized evaluation checklists
- Developing supplier certification forms
- Training Contracts and Procurement personnel
- Establishing approval workflows
- Reviewing document retention practices
These proactive steps help ensure procurement teams are ready before supplier assertions become commonplace.
RKI Helps Government Contractors Prepare for What's Next
The growing use of Nontraditional Defense Contractor assertions represents one of the latest examples of how government contracting requirements continue to evolve.
While these statutory exemptions can significantly reduce procurement burdens, they also require organizations to implement repeatable, compliant processes that withstand future scrutiny.
RKI Accounting works with government contractors to strengthen procurement processes, improve compliance programs, and develop sustainable internal controls that reduce administrative burden without increasing risk. Whether your organization is preparing for an influx of NDC assertions or reviewing broader procurement policies, our experienced consultants can help you establish procedures that support both compliance and operational efficiency.
Contact RKI Accounting today to learn how your Contracts and Procurement teams can confidently navigate evolving defense contracting requirements while mitigating downstream compliance risk.
Frequently Asked Questions
What is a Nontraditional Defense Contractor?
A Nontraditional Defense Contractor is an organization that has not performed under a fully CAS-covered Department of Defense contract for at least one year before the solicitation.
Why are more suppliers expected to assert NDC status?
The FY2026 NDAA introduced statutory exemptions that reduce compliance requirements for qualifying contractors, making NDC status more attractive to commercial suppliers.
Do NDC exemptions eliminate all procurement requirements?
No. While qualifying contractors may receive statutory exemptions from Truthful Cost or Pricing Data, FAR Part 31 Cost Principles, and DFARS Business Systems requirements for applicable DoD contracts, prime contractors should still maintain documented review procedures and consistent procurement practices.
How should prime contractors prepare for NDC assertions?
Organizations should establish standardized review procedures, define documentation requirements, train procurement personnel, implement approval workflows, and maintain complete procurement records to ensure supplier assertions are handled consistently and compliantly.