Acquisition Transformation

In December, SASC Chairman Sen Roger Wicker set the stage with the FORGED Act to modernize the defense acquisition system by streamlining regulations, accelerating technology development, and improving efficiency.

In April, President Trump issued Executive Order 14265 - Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base and related EOs on commercial, procurement, and foreign military sales. This was the first time a President issued such an action to drive major acquisition reforms.

In June, HASC Chairman Rep. Mike Rogers and Ranking Member Rep Adam Smith published the SPEED Actto restructure, streamline, and modernize the defense acquisition system.

Collectively, this provided a bi-partisan, bi-cameral, and bi-branch push to transform defense acquisition - all driven by a common recognition that the fundamental failure of the current acquisition enterprise is its inability to deliver warfighting capabilities at the speed and scale demanded by today's national security environment. The acquisition system today sees:

• New weapon systems take decades to move from concept to fielding.

• Costs for new programs regularly escalate, forcing the DoW to procure fewer units or cancel initiatives after years of development.

• Emerging technology firms and established primes routinely demonstrate compelling prototypes-yet rarely see them transition into fielded capability.

• Combatant commanders forced to rely on 30-year-old legacy systems with abysmal readiness rates (often below 50%).

• Production programs continuing to be capacity limited due to exquisite supply chains and archaic processes, while adversaries mass-produce ships, aircraft, and munitions at an unprecedented pace.

To address these challenges, DoW issued three memos under the acquisition reform umbrella (Acquisition System, Requirements, and Foreign Military Sales). For this post, we will focus primarily on the acquisition elements which are captured in:

• Memo: Transforming the Defense Acquisition System into the Warfighting Acquisition System to Accelerate Fielding of Urgently Needed Capabilities to Our Warriors

• Acquisition Transformation Strategy(a glossy version of the second attachment to the memo).

This new strategy was the focus of the SECWAR's big speech at NDU to Department and Industry executives outlining DoW's bold proposals to transform defense acquisition. We unpack some of these proposals in more detail and assess what a successful implementation looks like and some of the challenges that will likely be encountered.

Disclosure: We were involved in shaping some of these reforms over the past year and many preceding commissions, panels, and recommendations.

Rebuilding our military and reestablishing credible deterrence demands the Department of War (DoW) put our Acquisition System and Enterprise on a wartime footing and dramatically accelerate the fielding of new technology and advanced capabilities to maintain the military superiority of our Armed Forces. To drive urgency and achieve acceleration, we recently transformed the way military requirements are developed, and now direct the transformation of the Defense Acquisition System (DAS), in accordance with Executive Order (EO) 14265, "Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base," and an overhaul of the Foreign Military Sales system to ensure we are rapidly delivering capabilities for our Warfighters and allies and partners. Together, these transformational changes are essential to increase and accelerate the production of munitions and other critical weapon systems to maximize our combat readiness, ensure the rapid and continuous modernization of key capabilities across all domains, and expand manufacturing capacity in our national industrial base to prepare for surge production if deterrence fails.

Effective immediately, the DAS is redesignated the Warfighting Acquisition System (WAS) and will now and henceforth aggressively prioritize th'e timely and urgent delivery of operational capabilities to the Warfighter. This change recognizes that acquisition is a warfighting function and must enable the continuous adaptation and improvement of our warfighting capability. Today's unacceptably slow acquisition delivery and fielding times stem from three systemic challenges:

(1) fragmented accountability where no single leader has the necessary authorities to lead our programs and urgently deliver results;

(2) broken incentives that reward completely satisfying every requirement and specification at significant cost to on-time delivery; and (3) government procurement behaviors that disincentivize industry investment, efficient production, and growth, leading to constrained industrial capacity that cannot surge or adapt quickly.

The core principles of this transformation are simple: instill the warrior ethos in the acquisition workforce and enterprise, inject a sense of urgency and relentless focus on speed by empowering those directly responsible for delivery to make and own decisions, cut through unnecessary layers to focus the WAS on speed, accountability, and mission outcomes, and prioritize flexible requirements and resource trades to enable timely delivery at the speed of relevance. Every process, board, and review must justify its existence by demonstrating how it directly supports accelerating capability delivery to meet Warfighter needs. The attached Initial Directed Implementation Actions directs initial actions to execute this acquisition transformation.

The Under Secretary of War for Acquisition and Sustainment (USW(A&S)) and the Service Acquisition Executives (SAE) will immediately begin executing the transformation directed herein. Within 30 days, the USW(A&S) implementing guidance for cross-cutting transformation based on the initiatives contained within the attached Acquisition Transformation Strategy. Within 60 days of publication of the USW(A&S) implementing guidance, each Military Department will provide the USW(A&S) their implementation plans in response to the USW(A&S) guidance and the attached strategy.

To ensure timely and effective implementation, the USW(A&S) will chair monthly Acquisition Acceleration Reviews to track the establishment of Portfolio Acquisition Executives, portfolio scorecard performance, removal of unnecessary barriers, and adoption of this directive. Reviews will focus on timelines for delivery of combat capability and revitalization of the industrial base to expand competition. We will continually adjust as we identify additional opportunities to optimize our acquisition processes for agility.

This memorandum directs structural change that concentrates authority in accountable leaders, leverages competition to adapt at speed, and transmits investable signals to industry. These provisions are effective immediately and, where inconsistent with existing policies, take precedence. This transformation represents an enormous shift in DoW' s approach to the development, production, and delivery of capabilities to our Warfighters. Speed to capability delivery is now our organizing principle: the decisive factor in maintaining deterrence and warfighting advantage. Successful implementation requires our acquisition, contracting, test, cost and resourcing professionals fully embrace and aggressively implement this strategy. I will hold the Military Department Secretaries accountable throughout this implementation, who will in tum work closely with their SAEs to ensure complete compliance. I charge every member of our team to adopt wartime urgency as they execute their duties. We have a historic opportunity to restore deterrence in the face of an increasingly dangerous security environment. Our country is counting on us. We will deliver.

USW(A&S) will:

Working with the Military Departments (and other Components with acquisition portfolios, as directed), establish PAEs by transforming and reorganizing existing Program Executive Offices with a governance structure that prioritizes speed. Within 30 days, each Component will nominate initial portfolios for establishment.

Within 60 days, each Component shall submit their complete transformation plan transitioning all major acquisition activities to PAE portfolios within two years. The Military Services shall establish PAEs, delegating authority and flattening chains of command to prioritize speed. The acquisition chain of authority will flow from the Defense Acquisition Executive (DAE) to the Service Acquisition Executives (SAEs) to the PAEs.

The PAE structure shall preserve the statutory authority of the SAEs for all Military Service-managed programs and portfolios. The Military Services, through their SAEs, will establish PAEs as the single accountable official for portfolio outcomes with authority to:

1. Structure programs as schedule-driven capability increments with aggressive production delivery schedules, unit-cost ceiling goals, and broad mission effectiveness goals. Make trade-offs throughout the development to permit iterative enhancement and rapid delivery of subsequent increments. Make prudent cost, schedule, and performance trades that prioritize time-to-field, including execution of portfolio-level programming within defined and authorized boundaries.
2. Implement capability trade councils, replacing configuration steering boards, to integrate operational and acquisition authorities and make requirement trade-offs, and waive technical standards and other certification requirements not mandated by statute or safety.
3. Maximize use of Modular Open System Architectures (MOSA) for development programs moving forward by obtaining delivery of critical system interfaces with government purpose rights enable modular competition and supply chain resiliency.
4. Organizationally align contracting officers to report directly to PAEs in the acquisition chain of command, to maintain responsiveness to the operational problems that materiel solutions are intended to address.

Within 60 days, the USW(A&S), in partnership with the Director of the Economic Defense Unit (EDU), will establish the Wartime Production Unit as an office within the OUSW(A&S) to serve as an integrating function working across the Do W and Military Services and with industry to accelerate the production and delivery of critical weapons and systems through better visibility into challenges, applied expertise in supply chain optimization, manufacturing and software means of production, improved contracting approaches, funding mechanisms, and the direct allocation of resources.

Within 90 days, issue guidance requiring the following whenever feasible and appropriate to account for the unique statutory and operational requirements of the Organic Industrial Base, other sustainment enterprises, and foreign military sales programs. This guidance will address:

1. Utilization of all authorities under the Adaptive Acquisition Framework with a focus on deliveries and volume.
2. Non-Federal Acquisition Regulation-based procurement methods and instruments as preferred agreements, to the extent practicable.
3. Use of all incentives to prioritize the timely delivery of capability; rewarding early delivery and penalizing delay proportionally.
4. Commercial products and offerings, in whole or in part, as the preferred acquisition approach, with enhanced presumption of commerciality to expand qualifying vendors. Preferred usage of streamlined solicitation approaches including Commercial Solutions Openings (CSOs) across all acquisition tiers to the extent legally permissible, with CSO procured items designated items designated as commercial. If commercial solutions are not available, then look to modify a commercial solution, followed by new development if nothing exists.
5. Processes to evaluate and accept alternative solutions that achieve operational objectives through different technical approaches.

Within 150 days, update 5000-series DoW Instructions, DoD 7000.14-R Financial Management Regulation (FMR), Defense Federal Acquisition Regulation Supplement (DFARS), and other relevant documents to codify the directions contained in this memorandum. Provide recommendations to the Deputy Secretary of War to:

1. Delegate decision authority for acquisition programs to the Military Departments SAEs and PAEs, wherever appropriate and legally permissible.
2. Reduce documentation to statutory minimums and delegate responsibility for required reviews, analyses and documentation to the Military Services wherever legally permissible.
3. Where appropriate, replace the analysis of alternatives with competitive prototyping.

Within 180 days, publish portfolio scorecards with primary performance measures for time from validated need to initial and full operational capability.

Within 180 days, issue guidance for SAEs and PAEs to implement the following practices:

1. Two-to-production standard: Where affordable and appropriate to gain greatest value for the warfighter, maintain at least two qualified sources for critical program content at the appropriate system decomposition level through initial production unless waived by the respective SAE.
2. Module-level competition via MOSA: Establish and maintain accessible repositories of interface specifications and supporting documentation in machine-readable format that enable third-party integration without original equipment manufacturer coordination, unless waived by the SAE.
3. Scalable production strategies: Evaluate options for multi-track acquisition strategies that decouple design from production to permit third-party surge manufacturing capacity. Design for exportability by building capabilities with features that permit provision to Allies and Partners wherever feasible.
4. Adaptable test approach: In coordination with the appropriate military service accredited test organizations, establish persistent test environments and accredited pipelines that enable rapid certification, qualification of modified systems, and reciprocity for system testing already done.

Within 180 days, the USW(A&S) will prepare options to cease DAU's compliance-focused training operations and transform remaining resources into a competency-based education institution that identifies and develops high-potential acquisition leaders through experiential and project-based learning.

Within 180 days, publish new contracting guidelines to ensure clear incentives for timely delivery, increased production capacity, and investable demand signals for private capital. The Director of the Economic Defense Unit (EDU) will support the USW(A&S) by developing a play book deploying capital in various forms - grants, loans, options, purchase commitments, and investments - tied to pre-agreed performance metrics.

Within 180 days, prioritize education and rotation programs that provide acquisition professionals direct exposure to commercial industry practices, manufacturing and operational expertise, and real-world problem-solving.

Within 180 days, provide a roadmap and policy recommendations to establish accredited test pipelines that enable continuous updates to fielded systems, validate module interfaces to establish boundaries to permit component substitutions without full system requalification where safety permits, and define certification boundaries and qualification standards that allow PAEs to modify systems within established parameters without complete recertification. PAEs exercise decision authority while delegating technical assessment to qualified subject matter experts within accredited test authorities.

The Under Secretary of War (Comptroller) and the Director, CAPE, working with the USW(A&S) and the Military Departments, will:

Improve budget flexibility: Within 180 days:

1. Prioritize efforts of the Planning, Programming, Budgeting, and Execution (PPBE) Reform Task Force on obtaining budget line item and reprogramming reform within PAE portfolios for execution flexibility within portfolios.
2. Revise guidance and seek necessary legislative relief, as needed to ensure the Service FMs have appropriately delegated authority and responsibilities to direct execution of below-threshold realignments of resources.
3. Prepare PB 2027 PPBE Reform Package to revise program elements and any other budget structures to ensure proper alignment and budget formulation flexibility within portfolios.

Expand the Industrial Base: Get more companies building military equipment, make it easier for new ones to join in, come up with better ideas, work faster to win contracts, and deliver results faster.

The DIB has been consolidated from 51 prime vendors following the Cold War down to just five major prime contractors developing our most critical weapon systems today. The DIB is stagnant, building the world's best and most exquisite weapon systems at low volume while relying on obsolescent parts, outdated manufacturing processes, and stale innovation. In contrast, the commercial industry outpaces the DIB in advancing cutting edge technology across multiple product domains while gaining cost efficiencies from increased volume and productivity gains with each successive generation.

The Department will restore innovation, accelerate production, gain negotiating leverage, and more effectively manage cost and schedule growth by promoting competition with lowered barriers to entry and diversification of prime and subcontractor sourcing without sacrificing quality. New market entrants foster increased competition and provide diverse technologies and systems with varying capabilities and price points. Through a broad range of diverse sources, the Department can meet current and future operational needs by procuring a high-low mix of capabilities, balancing the need for exquisite, high-end solutions that have longer development and delivery timelines with more economic and readily available and manufacturable solutions.

The Department will also drive greater competition by providing increased testing capacity, competitions, and exercises to enable industry to better understand the Department's needs and demonstrate mature products and services early in the acquisition process. Through our Capability Portfolio Management (CPM) approach, Program Acquisition Executives (PAEs) will include diverse performers and nontraditional vendors in source selection across all DOW service and product solicitations as much as allowable and more aggressively assess and manage competitiveness within their industrial base sector when developing acquisition strategies, requesting and allocating funding, and negotiating contracts to protect vendor diversity, healthy competition, and accessibility of non-traditional defense companies. The Under Secretary of War for Acquisition and Sustainment (USW(A&S)) will develop the tools, best practices, and training to ensure PAEs and program management teams have the skilled talent to effectively manage the industrial base and the supply chain to maximize competition, product choice, and negotiating leverage to maintain a healthy industrial base.

Stabilize Demand Signals: Award companies bigger, longer deals, so they'll be willing to invest more to grow the industrial base that supplies our weapons.

The Department and the DIB often incur unnecessarily excessive unit and non-recurring cost growth. This is without the benefits of long-term planning, stable resource commitments, or predictable procurement funding in annual budgets and appropriations.

This is more acute in some areas than in others, such as munitions programs, where programs have historically been decremented to cover shortfalls on other programs resulting in wide ranging procurement quantities year over year. By increasing the consistency of a stable, focused, long-term, and predictable demand signal in planning, programming, and budgeting and multi-year procurements, the DIB will be better postured to increase capital investment and gain production efficiency with sufficient confidence of the return on their investment, provide more responsive delivery timelines, and increase production volume and velocity.

The Department has begun pursuing increased production and demand signal stabilization for the munitions industrial base through the Munitions Acceleration Council, and will work with the U.S. Congress to pursue this more consistent and stable demand signal through multiple channels across a range of areas, including increased use of multi-year procurements, long duration and high volume contracting, economic order quantity authorization, guaranteed purchase orders, and stable or fenced funding sources.

Accelerate Commercial Preference: Maximize purchase of products, services, and parts available in the commercial marketplace to avoid additional cost and schedule.

Through this transformation effort, the Department will incentivize the warfighting acquisition workforce (WAW) to pursue solutions from a broader industrial base for novel or more effective solutions by strengthening the guidance, training, and resources on the effective use of Commercial Solutions Offerings (CSOs), other transactions, and related agreements, commercial acquisition, and rapid contracting practices.

These transformations will also strengthen market research and contracting guidance, training, tools, and processes to ensure consideration of commercial products and services and non-developmental items as the default approach consistent with statute. The Department will place greater focus on identifying commercial products and services that will meet the Department's needs and PAEs, PEOs, and Program Managers (PMs) will provide the metrics and scorecards to indicate how these policies have been implemented and the outcomes they have achieved.

Acquisition Workforce Excellence: Hire top talent from industry and government, then turn them loose to make big things happen.

Acquisition transformation will be largely dependent on an WAW with the skills, training, experience, and authority - both in government and industry - to cut through the red tape and deliver results. The Department will build and augment that workforce with a focus on recruiting, retaining, and training highly skilled and highly experienced operators and SMEs in key positions for our critical programs and industrial activities. We can ensure the WAW is properly staffed, trained, and postured for success through several key initiatives, including government and industry rotations, blended career paths that focus on developing the skills and experience of everyone, and more active WAW recruitment and management to more effectively meet the needs of the Department and each member of our workforce.

Government and industry rotations will include members of both government and industry on a dependable recurring cycle to ensure that we are training our workforce - across the board - with on-the-job experience. The Department has already begun to augment the workforce with operating teams delivering manufacturing and supply chain expertise to industry partners in the submarine industrial base. These operating teams and placement of experienced operators in key programs and companies will address manufacturing and production issues and provide greater collaboration and insight across government and industry teams. The Department will develop a comprehensive transformation plan of the WAW in the Acquisition Workforce Transformation Plan,
which will be prepared and delivered separately.

Accountable Program Leadership Terms: Keep our best leaders in the job longer to deliver the best results.

The Department will assess and adjust program management slating and assignment processes to enable longer tenures for PEOs, PMs and other critical leadership and functional positions. The Department must have leaders serve in these critical positions long enough to have an impact and benefit from the incentives and accountability that drives performance over longer terms. In many cases, the Department has not adhered to its own policies for length of tenure, and those tenures may not be as long as required to achieve the needed results. The OUSW(A&S) will assess the effects of tenure on military and civilian career paths, as well as how we assign military members or civilians to those leadership positions, and determine the right balance given the program assignment and criticality of the capability.

Accountability is dependent on clear and consistent evaluation criteria and standards. Where appropriate, DOW-wide common civilian employee performance key performance indicators (KPIs) will be developed and implemented for acquisition workforce occupations and roles. These KPIs will provide transparent, quantifiable, performance expectations and help identify areas for improvement and recognize successes. By establishing common KPIs, the Department will improve accountability by aligning expectations to desired outcomes and reducing subjectivity in the performance management process.

Portfolio Acquisition Executives: Empower our program leaders with control of a full team of subject matter experts and the authority to direct program outcomes, move money, and quickly adjust system features to deliver on time and under budget.

The Department must establish new paradigms for acquisition and pivot from program and platform-centric structures, processes, and strategies to deliver integrated suites of capabilities across platforms and systems. The Department will adopt a phased approach to scale portfolio practices, resources, and authorities, enabling greater speed and flexibility within portfolios and maximizing efficiencies and mission impact. This includes working with the Military Services to identify how PEOs can be realigned to serve as PAEs), such as the potential consolidation of PEOs addressing related products or segments of kill chains to ensure more cohesive planning and decision-making across the Military Services. This will create a balanced management and oversight construct focusing on two dimensions: (1) delivery of the platforms, weapons, and systems (delivery of things); and (2) integration and interoperability between systems to deliver system-of-systems architectures and warfighting capabilities (connection between things).

The PAEs will operate with expanded authorities for resourcing, requirements, and acquisition decisions within prescribed portfolios, allowing for more rapid trades and priority shifts within assigned portfolios. The portfolios the PAEs oversee will likely be related systems that integrate to deliver capabilities across programs and will be structured and bounded within a Military Department or Defense Agency. The requirement to look across Military Departments and Defense Agencies at the various portfolios and programs necessary to close kill chains will be met by the DOW's CPM processes using mission engineering.

The USW(A&S) will identify PAE portfolio candidates to pilot implementation, in coordination with the Military Services, to begin execution immediately. Initial PAEs will be focused on portfolios that require significant integration across platforms, systems, weapons, and grouping of like-capabilities. While establishing initial PAEs, the Department will right-size the authorities, structure, and operation of PAEs across the Military Departments.

The Department will empower PAEs with additional flexibilities in resourcing and requirements through budget consolidation and portfolio-level requirements. The USW(A&S) will partner with the USW(Comptroller) to implement Planning, Programming, Budgeting, and Execution (PPBE) reform efforts and explore options to empower PAEs to flexibly apply funding to emergent needs while maintaining maximum transparency with OMB and the U. S. Congress. The Military Departments, the Joint Staff, and the USW(A&S) will collaborate to prepare a playbook on developing portfolio-level requirements documents aligned to operational outcomes instead of system-specific technical requirements. Finally, the Department will ensure PAEs are empowered to manage their portfolio and deliver results through direct supervisory authority over professionals across critical disciplines, including acquisition, contracting, testing, and systems engineering. The OUSW(A&S) will establish accountability measures of merit that prioritize outcomes rather than activity across the acquisition enterprise. This will be addressed more extensively in the Acquisition Workforce Transformation Plan, prepared and delivered separately.

Incentivize the Workforce: Pay our acquisition professionals well and hold them responsible for getting the best deals for the warfighter, no matter what it takes.

To ensure the Department is operating with speed and rigor, we must empower and incentivize PMs to take risks by providing performance incentives to those who take risks that result in successful outcomes. We must take strides to empower those in positions to influence change and make a concerted effort to improve. Incentivizing PMs to take risks can come in a variety of forms, but the Department will lean forward and work with the U. S. Congress to identify opportunities to fund monetary incentive awards for appropriate risk taking, driving change in program offices, and leading change with speed and innovative ideas. For those who drive change successfully, the Department plans to provide incentives as compensation for leading change and removing barriers.

This bucket is primarily focused on reorganizing the Program Executive Officers with a governance and portfolio structure that enables greater speed. It establishes Portfolio Acquisition Executives (PAEs) as the accountable officials for portfolio outcomes with improved authorities. It addresses the following reform areas:

• Portfolio Acquisition Executives
• Capability Portfolio Management
• Capability Trade Councils
• Accelerate PPBE Reform
• Portfolio Scorecards and Data-Driven Acquisition
• Integration in the Adaptive Acquisition Framework
• Balanced and Flexible Technical Experts

What's Included

PAEs will wield the authority needed to orchestrate dozens of siloed programs into cohesive, integrated capability suites-shaping requirements, budgets, and strategies to accelerate delivery and amplify mission impact. Where past acquisition executives prioritized “taking your time to get it perfect,” today's imperative is rapid deployment and iteration, intelligently balancing acquisition and operational risks. This unlocks expansive trade space across the lifecycle, favoring the 85% solution delivered now over elusive perfection years down the line.

Rather than a PEO overseeing dozens of disconnected programs with minimal synergy, a PAE will curate a unified portfolio to drive integration and interoperability-powered by MOSA architectures, enabling tools, and proven strategies. By realigning the acquisition workforce toward portfolio and program outcomes, we dismantle the entrenched compliance- and process-driven culture in favor of agile, results-oriented execution.

The reforms also implement the recommendations from the PPBE Reform Commission on consolidating program elements and budget line items within portfolios. This provides the PAEs greater flexibility to shift investments to maximize portfolio mission outcomes. This can include investing in common infrastructure, platforms, and test ranges across acquisition programs driving efficiencies. It can stabilize funding for priority capabilities and be more responsive to changes in operations, threats, technologies, risks, programs, and priorities.

Likely Impact

We see this as one of the most critical reforms since it has the ability to address a wide swatch of legacy acquisition challenges. PAEs should be able to capture more emerging technologies and transition successful prototypes into their portfolio of capabilities, fueling greater competition, high/low mix of capabilities, mission thread performance, and supply chain resiliency. Portfolios should accelerate deliveries of integrated capabilities.

Implementation Challenges

While it is relatively easy to create new personnel structures, it is more complicated to build the supporting processes and shift the culture to support the new construct. This requires dedicated leadership and resources. PAEs must elevate most elements of acquisition, requirements, and budget domains from a program to portfolio level to deliver integrated suites of capabilities. Realigning contracting and technical authorities under the PAEs requires overcoming decades of cultural norms.

A key element of assessing the impact of portfolio management is the formulation of portfolio scorecards and performance measures that capture metrics such as time from validated need to initial and full operational capability (IOC/FOC). It will take some dedicated effort working with the right operational commands to draft and iterate on a series of measurable outcomes.

PPBE reforms require building trust with Congress - particularly the appropriators, who have historically resisted such flexibilities. This demands greater visibility and collaboration between the DoW and Congress on early strategies, priority initiatives, critical issues, and budget frameworks. Throughout the fiscal year, more frequent engagements and deeper insights into budget execution are essential for transparency and oversight. With that trust established, as PAEs shift funding within their portfolios, it should no longer surprise the Hill-and ideally, it will foster greater alignment and flexibility. Yet this is Washington, D.C., where recent history remains short on trust and transparency.

Near-Term Steps

The Services have proactively established new organizational structures, consolidating PEOs into fewer PAEs, defining their responsibilities, and designating initial PAEs. The Army publicized its changes, identifying six PAEs: Fires; C2 and Counter-C2; Maneuver Ground; Maneuver Air; Agile Sustainment and Ammunition; and Layered Protection Plus CBRN. The other Services are expected to announce their changes soon.

The Services should continue a series of discussions-facilitated by external change-management experts-among the PAEs and other key authorities to clearly define desired outcomes, articulate how roles and responsibilities will evolve, and enable the new paradigm. Similar engagements should occur within PAE portfolios, extending to subordinate organizations, including program offices, to establish common, repeatable processes; streamlined procedures; and alignment with portfolio outcomes.

PPBE reforms demand resolute leadership to drive bold changes to decades of entrenched and constrained financial management practices. This begins with confirming Jeffrey Bornstein, the nominee for DoD Comptroller, to lead these efforts. It requires Service Secretaries to champion changes alongside their Service Financial Management and Comptroller leadership, rebalancing authorities and processes in favor of the PAEs. Portfolio budget flexibility is just one of many PPBE reforms ripe for implementation.

This bucket encapsulates a number of different elements that all contribute in our view to providing the foundations for an adaptive acquisition system that keeps ahead of the threats and delivers iterative capabilities to the warfighter that are smartly sustained. It addresses the following reform areas:

• Middle-Tier Acquisition (MTA)

• Rapidly Generate New Kill Chains

• Modernize Systems Engineering

• Improve Cost Estimation

• Fixing the Broken Supply Chain

• Open Systems Architectures

• Modernize Test Infrastructure

• Government Weapons Repair and Maintenance

• Lifecycle Sustainment Plans

What's Included

The Department must now scale MTA guidance, training, and resources to ensure innovation from industry can be used to shape novel warfighting capabilities. The Department will explore opportunities to establish a new acquisition pathway or amend current acquisition pathways to build, test, and deliver kill chains in a more agile, rapid manner aligned with operational demand.

Includes a focus on transforming how acquisition strategies are developed and approved. This involves a greater scaling of the MTA pathway supported by field training teams that have relevant expertise and lessons learned. This includes delegating approval down to the lowest level (possibly beyond what has already been done in this area) and making OSD involvement a by exception matter. As part of the rapid kill chain concept, the goal is to move even faster than the MTA pathway and be able to rapidly deliver commercial prototypes in 24 months or less. Most importantly is a push to move to mission-based analysis to inform resourcing decisions (this means a more data-driven process rather than a preferential or politically-driven one).

To support the acquisition focus, there is a proposed shift in supporting processes that can be a major hindrance to speed. These include systems engineering, cost estimation, supply chain, testing and interoperability processes.

The Department must continually modernize systems engineering processes and tools to provide the most modern capabilities and guidance, including driving value engineering early in programs and services to reduce lifecycle cost.

• For systems engineering, it means making better use of digital tools (Model-Based and Mod/Sim) and integrating them with mission engineering kill chains to support making better requirement trades, driving better integration with industry and updating outdated processes that don't comport with a digital paradigm (such as reviewing dozens of paper-based products).

The OUSW(A&S), working closely with CAPE and OUSW(R&E), will assess how to best apply cost estimates to program baselines, improve data collection practices, and leverage historical data more effectively when considering acquisition approaches, risk posture, and unique requirements.

• For cost estimation, DoW is encouraging a more collaborative approach between PMs and estimators that allows for dialogue on key factors that can dramatically influence the final cost output (an analyst inputs an activity as high or lower risk). Today, much of this information is transmitted through documents and spreadsheets often with minimal discussion through the process.

Acquisitions often experience delays in delivering and sustaining weapon systems and realize capacity limitations due to weaknesses and constraints in the DIB.

• For supply chain transparency and mitigation, DoW is encouraging a full mapping of supply chains at all levels that enables proactive risk mitigation and resolution at the enterprise level. This enterprise view is expected to provide an improved ability to identify where Defense Production Act investments may be needed and to pair government funding with industry investment.

The Department will fully implement MOSA in all acquisition strategies to the maximum extent practicable by leveraging open standards, pursuing software application programming interfaces, and asserting IP rights.

• For interoperability, this involves continuing to reinforce the importance of MOSA and open standards to meet specific government goals (competition, tech insertion, lower lifecycle costs and performance updates).

The Department must resource and empower the Test Resource Management Center (TRMC) to provide the digital infrastructure required to accelerate and optimize access to and use of testing proving grounds.

• For testing, this provision was focused on the Test Resource Management Center (TRMC) to robust their testing pipeline infrastructure by incorporating different commercial software products, configuring for joint testing events and system of systems integration activities. Most interestingly, the memo indicates TRMC will also pursue capabilities to provide third-party certifications.

The Department must continue to conduct necessary product support analysis early in the program lifecycle…and work to provide PMs the ability to simplify and tailor both the product support strategy and the LCSP for programs that are planned to have short operational lifespan.

Finally, adaptive acquisition must always consider the impacts of rapid fielding when it comes to sustainment and strive to minimize the burdens there. As part of that, the memo focuses on the government's ability to execute depot repair and maintenance and the ability to tailor Lifecycle Sustainment Plans for systems that have shorter lifespans and are designed for rapid iterations.

Likely Impact

While fundamentally, there are not a lot of new concepts in this memo, there is a fresh refocus that is helpful for pushing forward and building on the work already started. This memo recognizes the larger universe of constraints that even MTA programs face - and that limit speed to fielding. Addressing the broader issues can supercharge the MTA pathway and bring it to its full potential - especially when paired with use of commercial tech, flexible contracting approaches and robust portfolio management.

The rapid kill chain pathway supports a similar goal and puts an emphasis on viewing promising prototypes as essentially urgent operational needs with a tight schedule for delivery. Having hyper-focused leadership attention on speed, enabling broad use of streamlined pathways and building the the supporting processes could be highly impactful in making rapid fielding the new acquisition model. This could also enable a much more streamlined approach for getting SBIR concepts into operator's hands.

On systems engineering, an ongoing effort is underway to embed digital engineering practices into all new acquisition programs and to adapt them for legacy systems. Full adoption of digital system modeling and mission engineering across the acquisition enterprise would deliver a comprehensive system-of-systems understanding of technical challenges. This would enable far more precise engineering-level analysis of which investments yield the greatest operational impact-whether closing critical capability gaps or mitigating vulnerabilities. It could also strengthen requirements trade-off discussions by providing rigorous, data-driven insights into lower-value requirements that drive disproportionate cost across the kill chain.

Furthermore, integrating existing and in-development industry solutions into these digital and mission-engineering environments would greatly simplify the evaluation of emerging capabilities. It would also illuminate the high potential and superior cost-effectiveness of commercially oriented solutions-particularly when paired with innovative concepts of operation (CONOPs) that can be rapidly prototyped and refined through sandbox campaigns within the mission-engineering framework.

Finally, coupling this capability with the use of common mission threads-led by the Combatant Commands and adopted across the Services-would help enable a level of cross-Service collaboration that has long been aspirational.

The proposed reforms for interoperability and supply chains directly support this move to digital engineering as it enables a more transparent view (if complete) of the interfaces and subcomponents. Too often today, this type of information is scattered across numerous architectural views and bill of materials. Documenting these details in an authoritative source of truth where they can be dynamically refined would be a game changer. Mitigating supply chain challenges and ensuring interoperability even as systems continue to be modernized will require continued monitoring and proactive systems engineering - this reform helps progress those goals.

With respect to TRMC, the organization has historically focused on a limited set of highly complex programs requiring large test ranges like SCIFIRE the hypersonic test effort with Australia. However, TRMC's potential to manage a far broader and more diverse portfolio is substantial (and it is likely pursuing initiatives not visible to us).

Evolving TRMC's test pipeline to incorporate commercial products and leverage them in joint testing events, and provide third-party certification could be highly impactful. Smaller companies consistently cite the lack of validated test data as a major barrier to gaining DoW interest and contracts. Enabling TRMC to test and certify emerging commercial technologies could lower that barrier, accelerate adoption, and facilitate easier integration of innovative commercial solutions into operational capabilities.

On the lifecycle management front, having the ability to tailor plans that comport better with the envisioned operations of the system would help reduce the amount of upfront paperwork it takes to get a program going. The key to reform here will be to get program offices to think differently and devise an approach that ensures the best value for the government (this could be a recognition that the platform will never be maintained by the government but rather as part of a COCO model). When it comes to acquiring more attritable systems, a shift in mindset will also be needed.

Implementation Challenges

The primary challenge to any new accelerated pathway is that if bureaucrats in the functional communities continue demanding the same exhaustive planning detail, the transformation memo's vision of speed will remain unattainable. Achieving real acceleration will require A&S, SAEs, and PEOs to forcefully counter status-quo resistance-most often seen in reflexive non-concurs on staffing packages. Current momentum and strong SECWAR top-cover provide a rare window to drive these changes within this Administration.

The continued challenge with building end-to-end digital environments is the willingness to share information across different stakeholders. Historically, it has been challenging for any one office to get access to the models that exist in hundreds of different offices. This will also require leadership to negotiate those accesses and potentially escalate. USW(R&E) seems well poised to help solve the mission engineering challenges but as each PAE needs to replicate this for their portfolio and needs access to information outside of their control, there will be hurdles to overcome.

Cost estimation reform is essential for faster acquisition cycles (as we did for the Software Acquisition Pathway). Although the strategy reinforces many legacy practices, we recommend moving beyond a prime-contractor cost models shaped by past cost and schedule overruns. A more effective approach would blend historical data with direct, current inputs from diverse industry sources-especially for elements transformed by commercial advances (modern manufacturing, software, digital testing). This broader, commercially informed cost baseline would yield realistic estimates that better enable more rapid execution cycles.

For interoperability, its easy to just slap MOSA into every contract however there are broader technical and business considerations that must be balanced in terms of level of openness, when a military vs commercial standard makes sense, understanding potential performance ramifications and the imposed cost. Equally important will be the validation process for ensuring the implementation actually achieves the goals.

Mapping supply chains means access to proprietary Bill of Materials which will undoubtedly be the biggest challenge to execute analyses across the enterprise. In many cases, there is a lot if nuanced information that is required to understand what a suitable replacement component would look like given the architectural progression of the system and specific design constraints. This is best done within a portfolio by staff that intrinsically understand the different systems and have access to the SMEs.

TRMC will only be successful in its quest for transforming the test enterprise if it can obtain buy-in from the different developmental and operational test authorities. This will require a level of reciprocity that its environment adequately replicates real-world operations as envisioned by the respective military service - otherwise an independent evaluation may not provide a notable difference in crossing the valley of death.

The challenges with the sustainment community are primarily driven by their focus on solving all issues up-front rather than as an iterative process through the design, development and tradeoff steps of a program. This will require PMs to incorporate Product Support Managers into the design process and collectively identify what is needed for the specific program. The default cannot just be government purpose data rights and organic depot maintenance for every system.

Near-Term Steps

• All SAEs (or Service Secretaries) issue a memo reinforcing the key tenets needed for adaptive acquisition - related to MTA and Kill Chain approaches, the need to pivot from many status quo processes, the push to digital engineering, the need to leverage common mission threads (with R&E and CCMDs), the need for PMs to be more involved in the cost estimation process and to incorporate sustainment SMEs as key design principals. They should detail the specific steps that they are planning to build an end-to-end environment at the portfolio level.

  • A key element in this memo that reinforces what the SECDEF signed is the provision of top cover support at the Secretarial level for decisions made at lower levels. This clear indicator of support will go a long way in providing the motivation to try new approaches and shift from the status quo.

• PAEs should establish specific guidance on supply chain reporting that would enable smart enterprise management of defense industrial base considerations -recognizing where their limitations are and focusing on the highest impact areas.

• PAEs and their Chief Architects/Engineers should work with R&E and service counterparts to devise more detailed scenario-based training that demonstrates the different paths for MOSA implementation and where/when to use it based on the program's objectives (and specific service goals).

• PAEs should begin discussions with TRMC on how to leverage their ongoing efforts to build a third-party certification that they can honor as part of their prototype pipelines and to support their small business transition goals.

This area implements multiple executive orders and themes from the FY26 NDAA bills reinforcing the statutory preference for commercial products and services. It is long overdue for the Pentagon to buy commercial already. It addresses the following reform areas:

• Accelerate Commercial Preference

• Accelerate Private Capital Investment

• Common-Sense Accounting

What's Included

Use all the authorities under the Adaptive Acquisition Framework with a focus on deliveries and volume.

• This includes using the Middle Tier of Acquisition pathway for rapid prototyping and rapid fielding/production. It also requires reinforcing how to properly execute an MTA program and novel uses of the acquisition pathways to rapidly iterate on solutions, particularly by leveraging commercial products and services.

• This includes scaling adoption of the Software Acquisition Pathway. Recall in March, SECWAR signed a memo directing modern software acquisition to maximize lethality. It directed using the SWP as the preferred pathway for software development. It also directed using CSOs and OTs as the default approach for software contracting.

• It also includes rethinking and scaling the use of the Acquisition of Services pathway. Today it is a contracting process for more routine services. Going forward the DoW can acquire many more military capabilities as a service.

Non-Federal Acquisition Regulation-based procurement methods and instruments as preferred agreements, to the extent practicable.

• Other Transactions enable rapid, flexible agreements with non-traditional and traditional defense companies for research, prototyping, and production. These offer exciting alternatives to lengthy, cumbersome FAR-based contracts that were often a barrier or disincentive for novel tech companies. DoD can also leverage Procurement for Experimental Purposes to acquire a few systems, including commercial, to explore how they can integrate into the DoW environment. There are an array of other agreements including CRADAs, PIAs, and TIAs to collaborate with industry, academia, and non-profits on R&D.

Use of all incentives to prioritize the timely delivery of capability; rewarding early delivery and penalizing delay proportionally.

• Over the next year, expect clearer guidance for contracting officers and more innovative deal structures tailored to program managers, PAEs, and industry partners. Rather than relying on cost-plus contracts that inadvertently reward schedule delays and inefficiencies-driving up overall costs-future awards will emphasize schedule-driven incentives. Historically, the DoD used Cost-Plus-Incentive-Fee (CPIF) contracts to accelerate timelines (and control costs) by tying fee adjustments to performance targets.

• Looking ahead, the Department may increasingly leverage progress payments linked to delivered capabilities, directly aligning contractor cash flow with milestone achievement. In competitive environments, the DoD can award multiple vendors for a common capability, rewarding the fastest performers-who meet rigorous quality and performance standards-with follow-on orders and expanded production share.

Commercial products and offerings, in whole or in part, as the preferred acquisition approach, with enhanced presumption of commerciality to expand qualifying vendors. Preferred usage of streamlined solicitation approaches including Commercial Solutions Openings (CSOs) across all acquisition tiers to the extent legally permissible, with CSO procured items designated items designated as commercial. If commercial solutions are not available, then look to modify a commercial solution, followed by new development if nothing exists.

• DIU pioneered novel, rapid CSO processes for the department to competitive select vendors. Starting with a problem statement solicitation, often one page. Companies submit a 5-page white paper or 15-slide PPT deck solution. DIU and their DoW partners review and invite selected companies to pitch and demo their solutions and provide supporting details. From there they negotiate a final OT agreement with one or more companies.

Processes to evaluate and accept alternative solutions that achieve operational objectives through different technical approaches.

• Historically, DoD RFP solicitations imposed overly prescriptive requirements that severely limited the solution space. In some cases, this stemmed from pre-selecting a favored vendor; more often, it resulted from inadequate industry engagement or from requirements managers and engineers over-specifying the system. Moving forward, the Department will adopt a more open posture, welcoming solicitations that invite novel, performance-based approaches to solving the mission need.

Provide clear incentives and potential penalties to industry: Within 180 days, publish new contracting guidelines to ensure clear incentives for timely delivery, increased production capacity, and investable demand signals for private capital. The Director of the Economic Defense Unit (EDU) will support the USW(A&S) by developing a play book deploying capital in various forms - grants, loans, options, purchase commitments, and investments - tied to pre-agreed performance metrics.

• As evidenced by multiple deals this year, the Department is forging closer partnerships with industry to deliver speed and scale at unprecedented levels. This entails harnessing private capital, aligning with economic incentives, and tapping diverse funding streams to transform stagnant sectors into agile, high-output enterprises. The overarching vision: ReIndustrialize-a bold renewal of American defense manufacturing through targeted capital investments in shipyards, factories, and workforce development to accelerate production, expand capacity, and ensure robust surge capability in the face of major conflict.

Likely Impact

If done properly and boldly, these reforms can drastically pivot industry's business models. The objective is rebuilding the industrial base so more companies compete on each contract to offer novel solutions at lower costs. As DoW scales use of commercial contracts and agreement for warfighting capabilities, companies will spend more their own capital on R&D and competition will pivot from paper proposals of promises to fly-offs, shoot-offs, and other exercises of prototype or operational systems and services. Instead of spending a decade or two overseeing analysis, design, development, test, integration, and production of a systems, the DoW can rapidly acquire capabilities from multiple vendors with continuous competition. If the DoW is acquiring commercial capabilities that has a large, established user base, they will benefit by regular performance upgrades and potentially lower costs. Ultimately, the warfighters get a regular cadence of new technologies in their hands.

As Secretary Hegseth laid out in his speech, the vision is “to inspire American industry to become a wartime industrial base that focuses on speed and volume, through reliable demand and adaptable business practices for current partners and new entrants alike…. For those who come along with us, this will be a great growth opportunity, and you will benefit. To industry not willing to assume risk in order to work with the military, we may have to wish you well in your future endeavors.”

Implementation Challenges

For many established companies in the defense industrial base, these changes will upend decades-old business models. Some will resist, claiming bias or favoritism toward new entrants. Last year, the five prime contractors spent far more on stock buybacks than on reimbursed IR&D- each far exceeding the total defense earnings of all non-traditional firms combined. A growing number of firms are already pivoting to new business models and redirecting investments to seize emerging opportunities.

Most acquisition programs-especially major weapon systems-are already in development or production, leaving limited room to adopt commercial models. Going forward, however, PAEs will acquire more capabilities through rapid commercial methods, including as-a-service approaches. This requires structuring programs from the outset-including requirements-to enable innovative acquisition strategies. As the DoD transitions beyond JCIDS, it must avoid reverting to overly prescriptive solutions in operational and contracting documents. Framing operational problems, challenges, and needs in broad terms empowers industry to propose a wide array of novel solutions. Organizations capable of rapidly experimenting, testing, and integrating commercial and defense technologies are essential to delivering decisive advantages to the warfighter.

Near-Term Steps

Contracting leadership across OSW and the Services must curate and publish clear how-to guidance to acquisition professionals on how to best leverage commercial acquisition. It should have workshops, training, and collaborative forums for the workforce to learn best practices and lessons to overcome challenges. There must be clear direction and expectations that acquisitions going forward must first consider commercial approaches, while doing otherwise requires justification and approval.

As part of PAE metrics and reporting, portfolios should track what percentage of spending and actions are commercial including recent trends and upcoming projections. Given the diverse set of capabilities in each portfolio, a PAE overseeing carriers and large ships may justifiably have low commercial adoption, whereas a digital PAE overseeing C2 solutions should have a considerably higher rates.

As for aligning private capital, this is where PAEs will be flexing new muscles to work with their pool of companies as well as the Economic Defense Unit to shape new deals on strategic investments in facilities, production, and workforce. Rebalancing risk sharing with industry will include more stable demand signals, longer-term contracts, and correct incentives for industry to raise and deploy private capital to drive growth.

It addresses the following reform areas:

• Procure Industry-Driven Solutions

• Maximize Flexible Contracting

• Reform Bid Protests

• FAR / DFARS Reduction

What's Included

Traditional contracting solicitations with detailed government requirements for industry to build to will be rare. The new approach will focus on operational problems for industry to solve including gaps in kill chains for companies to propose and demonstrate solutions to close those gaps. This will fuel greater Department and industry collaboration on emerging tech and military solutions.

Use of Other Transaction Authorityfor rapid and flexible prototype and follow-on production agreements along with other non-FAR methods will be the preferred contracting practice and used to the greatest extent practicable. Contracts will incentivize timely deliveries of capabilities including rewarding early deliveries and penalizing delays.

Where appropriate, the acquisition leaders will maintain competition throughout the acquisition lifecycle including maintaining two qualified vendors for initial production. Contracts will further drive module-level competition through open approaches and shared interfaces.

As part of a federal-wide effort, the Federal Acquisition Regulation underwent a revolutionary overhaul. The FAR, and the Defense FAR Supplement (DFARS) were slashed to statutory must-haves and proven best practices. Thousands of pages of regulations were moved to guidance or eliminated.

Likely Impact

This will fuel increased participation and competition for many contracts which will decrease costs and increase innovation. Increased use of OT agreements will save months or potentially years from contracting processes and make it easier for thousands of companies to do business with the DoW. Thousands of hours of compliance in contract preparation to execution of contracts will be saved by the Department and industry resulting in faster awards and deliveries and realizing billions in cost savings.

Implementation Challenges

Our beloved contracting workforce has been strained for years with the contract files stacking higher than the number of qualified contracting officers to process them. With the various personnel reforms over the last year, the Department has lost thousands of contracting officers. Implementing flexible, rapid OT agreements requires experienced contracting professionals who understand what to include and exclude.

Similarly with the revolutionary FAR/DFARS overhaul, contracting officers will need to adjust to the new environment. Some will struggle without the comfort of many FAR clauses to reduce their risk. It will take time to digest all the changes and shape new norms within each organization on what right looks like with new contracts. There will be some failures on contracts that critics will point to, but the key is to share lessons and continuously improve to achieve the desired outcomes.

Near-Term Steps

With the annual churn in the contracting workforce, we need to rapidly train and develop the workforce on executing OT agreements. This will require boot camps, workshops, and other intensive efforts to get thousands up to speed quickly on the new paradigm. Contracting leaders up and down the chains of command will need to overly communicate with their workforce on best practices, expectations, and training opportunities to guide them through what will be a culture shock for many.

This bucket enacts the latest in a series of deregulatory initiatives across the federal government to enable greater speed, cost-efficiencies, and innovation. Congress is taking bold steps to streamline Title X, and federal agencies are streamlining procurement regulations, organizations, and processes.

It addresses the following reform areas:

• Reduce Test Oversight

• Replace Analysis of Alternatives

• IT Acquisition

What's Included

Within 150 days, update the DOD 5000-series of acquisition policies, the cumbersome 7,330-page Financial Management Regulation, Service level policies, and other relevant documents. It includes delegating decision authorities, reducing documentation, reviews, and analysis. Furthermore pivot legacy analysis of alternatives to more competitive prototyping.

Acquisition policies like the Middle Tier of Acquisition and Acquisition of Services can be revamped to remove low-value, bureaucratic elements to enable greater speed and flexibility. Service level policies could be streamlined or eliminated to avoid additive burdens and instead pivot to robust guidance outlining for acquisition professionals on Service-unique implementation measures.

What is very exciting is digitizing acquisition policies, processes, and pathways including harnessing AI solutions, to enable the workforce to operate with greater speed and success throughout the acquisition lifecycle.

Reducing test oversight started with the reduction of staff in the Director of Operational Test and Evaluation (DOT&E) office. It further seeks to align developmental and operational test. Test is still critically important to do, and that responsibility will shift more to the Service and PAE levels.

Likely Impact

After the initial confusion over what changes and how they affect your program or organization, the new streamlined, aligned, and digitized policies will enable greater speed, flexibility, and success. Rather than overloaded policies dictating every step, broader guardrails define the boundaries. Robust guidance equips the acquisition workforce with practical how-to instructions for navigating each phase, offering numerous tailorable options supported by a range of tools and resources.

This shift will foster a culture of managed risk and accelerated delivery of integrated solutions to warfighters. We can finally retire the checklists with 1,001 tasks before passing each milestone and collecting $200. Empowered acquisition professionals will apply critical thinking to their programs' unique aspects, craft strategies for smart risk management and lifecycle navigation, and pivot as circumstances evolve.

Implementation Challenges

Having been a part of countless acquisition policy creation or updates, it is painfully slow and bureaucratic. Hated comment resolution matrices with hundreds of comments from dozens of organizations are torture unsuitable for our worst enemies.

The test community will take time to pivot to a new paradigm. One focused more on digital foundations, rapid/iterative/continuous testing - even after delivery - with greater alignment of DT and OT between industry and government. The regular integration of solutions from multiple vendors will be a challenge that must be met.

Near-Term Steps

DoW leadership must take bold strides to empower real reformers to take the pen on key policies and cut, tailor, and align to enable the desired transformational outcomes.

A strong leader is needed to coordinate efforts across a broad mix of acquisition pathways, functional areas (owned by different organizations), and balance OSW with Service policies. Mr. 5000, the leader who did that for the last 20-years, just retired a few months ago. With short timelines in SECWAR's memo, there must be waivers to the traditional policy update processes.

This bucket is primarily focused on addressing key defense industrial base challenges that artificially limit DoW's ability to scale production and address key supply chain issues that drive program delays, limit private investment and increase overall costs. It addresses the following reform areas:

• FMS Reform

• Increase Due Diligence

• Go Direct-to-Supplier

• Establish Industrial Base Consortium

• Wartime Production Unit

What's Included

The Department's FMS reform efforts will address broad and impactful changes to the processes, organizations and people that execute the Department's FMS system.

Includes a focus on reforming the FMS process to streamline the process and limit deltas in processing the requests and delivering needed capability. Concurrently, it also pushes a greater onus on PMs to design for exportability. When systems are designed for FMS and Direct Commercial Sales in advance, it streamlines the ability to sell to allies and partners and helps expand overall production capacity.

The Department will develop and implement an enhanced process to assess critical areas of each investment .

For provision of Defense Production Act (DPA) funds and Industrial Base Analysis and Sustainment support, establishes a more rigorous process for vetting companies / partnerships and imposes more performance monitoring requirements.

The Department will establish proper incentives and contractual mechanisms to ensure effective integration across the supply chain.

To minimize pass-through costs (which can be substantial on major contracts), creates a model where the Government procures more components and subsystems directly from suppliers. The idea here is that this approach will generate economies of scale and provide another avenue for managing key supply chain constraints.

The Department will leverage the existing Industrial Base Council (IBC), the Joint Industrial Base Working Group (JIBWG), and the Joint Defense Manufacturing Council (JDMC) to serve as the Department's mechanism for coordinating industrial base initiatives across the Office of the Secretary of War (OSW), the Defense Agencies, and the Military Departments.

There is no detailed change in policy here but rather a broader set of responsibilities handed to the specified groups. The overall goal is to remove policy and procedural barriers for non-traditional defense contractors, maximize use of commercial standards, mitigate supply chain issues, expand production capacity and build workforce pipelines. It also includes a survey of current efforts in this space with the goal of consolidation to eliminate duplication and standardize governance.

The Department will take immediate action to transform how we rapidly accelerate the manufacturing and production of hardware and software capabilities to the Warfighter through the establishment of the Wartime Production Unit.

This change essentially merges the Joint Production Accelerator Cell with another team that is focused on improving how deals are accomplished to make them faster and more aligned with commercial practices. This is partly accomplished through what can only be termed more relational-type contracting practices. The new org is expected to be supported by an advisory team comprised of c-suite executives.

Likely Impact

Overall the memo represents positive reinforcement in various areas that have had reforms underway such as FMS, supply chain and scaling production. Standing up the Wartime Production Unit for instance hits the accelerator to support scaling munitions, a priority that the DoW has been pursuing over the last year.

On FMS, an Executive Order signed in April kicked off a DoW tiger team looking at streamlining opportunities (outcomes expected soon). On exportability, DODI 5000.01 (Defense Acquisition System) already has had that as one of the core tenets however this requirement has historically been counteracted by exquisite operational requirements and potential development cost increases. The DoW will prioritize the ability to sell overseas more than it has in the past.

In other cases, there are new processes added to the mix that seem likely to drive upfront processing time. On DPA/IBAS funding, the additional set of company, financial, economic, risk and compliance analyses seem likely to drive delays in getting awards processed. While it certainly makes sense to execute a level of due diligence, making it harder and more complicated does not comport with the tenor of the memo. In many cases, DPA invests in companies that are doing something no other entity is pursuing - and the national security business case is clear and not always financially compelling. Late in Sep, DoW awarded $43.4M in DPA award to Alaska Range Resources, LLC (ARR) to extract, concentrate, and refine extracted stibnite to produce military grade antimony trisulfide. This was an important award to onshore a material needed for the military that was produced and distributed by China.

The “direct to supplier” area which while admirable in its goals risks becoming a paperwork exercise (additional reporting) for companies acting in an integrator role (every OEM). While there are single points of failure, the best approach for addressing that is to award more contracts with broader requirements that allow other components to be used or to award DPA funds to bolster a struggling supplier. Having the Government serve as an intermediary, even if it saves some funding, is likely to add complexity and not achieve the desired outcomes…especially if it starts to into a GFE/P-type situation.

The most exciting development is the incorporation of senior industry executives into the production scaling planning. A major lesson from WWII (re: Freedom's Forge) was that when it came to mass-production, having experts in key government advisory positions can make an enormous difference in how deals need to be structured and where the Government can best help to achieve key outcomes.

Implementation Challenges

Given that so many of these efforts are already well underway, there are no specific challenges in continuing their implementation. Ultimately when it comes to supply chain issues and production scaling, we still think the free market approach is the best solution. If the ordering patterns change (move to more low-end weapons and place larger and more consistent orders), then the supply chain will follow and resolve its own issues (in most cases).

When it comes to adding new onerous processes and having the Government serve as an arbiter for parts and components, there will likely be pushback from industry and other entities that will have to be managed.

On getting more involvement from the executive level to inform production strategies, there will likely be no shortage of interest - this may be the easiest effort to implement across the entire memo.

Near-Term Steps

The key step here is to provide industry with specific guidance on what will change and provide clarity on some of the areas mentioned above. It will be important to provide specific POCs that can be contacted to support the efforts.

This bucket is focused on improving the performance of the acquisition workforce which is arguably the most important element of all the reforms since without the right people, experience and empowerment, all the other reforms become much harder. It addresses the following reform areas:

• Acquisition Workforce Excellence

• Accountable Program Leadership Terms

• Warfighting Acquisition University (WAU)

• Incentivize the Workforce

• Digitize Acquisition

What's Included

The Department will build and augment that workforce with a focus on recruiting, retaining, and training highly skilled and highly experienced operators and SMEs in key positions for our critical programs and industrial activities.

The key here is that the Government will prioritize real technical and operational expertise in acquisition hiring rather than just legacy DoD experience. The goal is to also establish more government to industry rotations so that expertise can be shared across the two sectors.

The Department will assess and make adjustments to program management slating and assignment processes to enable longer tenures for PEOs, PMs and other critical leadership and functional positions.

This will focus on establishing longer tenures for key leadership positions, issuing a more refined methodology on military versus civilian roles and establishing KPIs that enable improved performance measurement.

To cultivate the next generation of acquisition leaders, the Department will transition the Defense Acquisition University to the Warfighting Acquisition University, and institutionalize a modernized training methodology that emphasizes immersive, scenario-based experiential learning focused on portfolio management competencies.

This reform represents an important shift away from compliance only training and towards more scenario-based training that reflects more real-world situations. This shift also includes more focus on portfolio management and leadership competencies as well as working across functional domains. Critically, it also requires much greater focus on venture capital and commercial practices to give acquisition professionals the foundation they need to craft smarter business deals.

To ensure the Department is operating with speed and rigor, we must empower and incentivize PMs to take risks by providing performance incentives to those who take risks that result in successful outcomes.

This reform area focuses on how to improve the incentive structures for PM's and other leaders to take more risk in executing novel acquisition approaches.

The Department will scale efforts to leverage digital and AI tools in preparing and reviewing program strategies to enable greater speed and quality, centralizing decision making within the PAE and PM structure, and accelerate approval authorities for most program documentation to the PM, the PEO, the SAE, or the Defense Acquisition Executive.

This reform area is focused on reducing the burden on PM's using the latest in AI tools and reducing the bureaucracy associated with making decisions and gaining approvals.

Likely Impact

There is great potential in focusing more on the acquisition workforce, bringing in new skillsets and aligning incentives. Some of these efforts have been tried before while others have been desperately called for with little action such as conducting a major transformation of the Defense Acquisition University and incorporating more learning on commercial / venture capital operations.

This reddit post from a few years ago captures the general impression of DAU from most acquisition professionals (and we also have taken every PM course provided there). It should be noted there are some excellent faculty members there who have tried to make a difference (shout out to Dr. Ann Wong, Glenn Lamartin , Lynne Giordano, and Blair Stanford) but sadly the majority of the curriculum is outdated and the format is way too PowerPoint heavy, focused on policy, not practice. The reforms proposed will be welcome by many at DAU and across the acquisition enterprise. We strongly believe that new content needs to primarily be driven by outside organizations to provide a fresh rework of the curriculum and leverage more modern learning tools.

If DAU can model and scale some of the highly successful programs (such as Immersive Commercial Acquisition Program (ICAP) and Defense Ventures Fellowship) that have been used to support rotational assignments and bring an in-depth industry perspective to select program managers and contracting officers, then if no other workforce reform was implemented, this would result in major impacts. Anecdotal evidence shows that when acquisition professionals are exposed to other perspectives and given different experiences, they have an impact and they bring that back into their workspace.

Perhaps no one has done more to advance use of AI tools for acquisition inside DoD than the CDAO team (Ryan Connell, Bonnie Evangelista, and Cherish Lesko) who stood up Acq Bot and regularly brings awareness to the potential in blogs such as this one: How I use AI in my daily work as a DOD Acquisition Manager. Leveraging the work Ryan and others have done to advance the provisioning of these tools would be very impactful as program managers and other functionals often have to use very manual intensive processes to respond to taskers and execute basic management functions. Automating certain reporting functions and having easier approaches for developing contract documentation could free up valuable time for planning and strategy development.

If AI tools are paired with real streamlining efforts as outlined in the memo (reducing reviews and accelerating decisions), then there could be significant efficiencies gained that could contribute directly to faster contracts, better source selections and more rapid delivery of capability to the warfighter.

Implementation Challenges

When it comes to implementing workforce reforms, the greatest challenge comes from the inherent complexity and diversity of tasks. It is easy to develop KPIs on paper but it is often hard to isolate the results to a single person such that they can be easily attributed and rewarded. Acquisition is and will remain a team sport until all decisions are handed over to a single AI agent - so more often than not, a program that slips its schedule or overruns is an outcome driven by 20 different people throughout the system, including the industry performers. This will remain a challenge when it comes to offering serious financial incentives. Despite this fact, there should still be rewards for those try new approaches and are bold enough to go outside the box to find an approach that has potential to deliver capability at speed.

For acquisition civilians, the ACQDEMO personnel system was set up specifically to support setting goals, rewarding performers and punishing laggards. The observed challenge was maintaining consistency across the many different offices and over time it became a bastardized tool based on hierarchy rather than performance or novel thinking. This will have to be addressed.

The goals to increase tenure of acquisition professionals in a single job so that they have a greater chance of seeing the results of their decisions and being appropriately rewarded is contradicted by the military promotion system which still favors breadth over depth and generally punishes lack of career movement. Military members on the acquisition track should likely be given their own career path that does not require them to compete with operational personnel.

On a positive note, historically, hiring technology professionals from industry was a challenging endeavor given that government salaries were so low and working conditions often subpar compared to the plush environments in silicon valley (no bringing your dog to work days). However, with defense having a resurgence and there now being a sexiness to the industry, the DoW has a unique opportunity to exploit the interest and bring on some incredible talent. The next challenge will be retaining this talent which may require improvements in IT system operations, facility infrastructure and other reforms that often frustrate new private sector entrants to government service.

Building on the Deputy Secretary's workforce memo in April to explore consolidated functions, flattened hierarchies, speed over process, fiscal discipline, and digital first operations - we understand that an Acquisition Workforce Transformation Plan will be issued separately in the coming months. We sincerely hope that it will take a pragmatic approach to this critical area and make the near-term changes that will result in significant outcomes (industry talent, transform DAU and education in commercial practices) while making some strides towards the broader systemic challenges that will not be immediately resolved.

Near-Term Steps

• Form a tiger team of a few select service acquisition professionals, A&S personnel, and DAU faculty to develop a solicitation for a company or non-profit entity with deep expertise in defense acquisition to craft new curriculum for the program management career field.

  • Over time, do this for all of the career fields, continually modernizing the material without having to go through the onerous curriculum approval process that exists today.

• Scale the Defense Civilian Training Corps which is already working to provide college student with modern acquisition training and internships.

• Designate CDAO as the linchpin for AI acquisition tools and provide them an appropriate budget for fielding and maintaining a suite of different tools to support an array of acquisition functions and minimize workforce burdens.

• Scale DIU's Immersive Commercial Acquisition Program (ICAP) and restart the Defense Ventures Fellowship to begin a more robust industry-government rotational program. DoW leadership convey a request to tech executives for their support in executing the program.

• Commission acquisition organizations to begin more intense recruiting activities at tech fairs and colleges to build interest in joining defense acquisition.

• PAEs should solicit support from third-party entities to execute value-stream mapping exercises on their current processes and identify areas that deserve attention and reform.