Highlighting Key Takeaways from the Pentagon Acquisition Transformation Strategy

On November 7, 2025, Secretary of War Pete Hegseth announced the Department of War’s (“DoW”) Acquisition Transformation Strategy (the “Strategy”) during a speech to military leaders and industry at the National War College on Fort McNair.  The Strategy sets out five pillars for acquisition reform, each containing near-and long-term actions to “ensure delivery of capabilities to the American warfighter” at a more rapid pace.  

In connection with the speech, DoW also released three memoranda that redesignate the Defense Acquisition System as the Warfighting Acquisition System (“WAS”) and announce certain actions to implement the announced Strategy:

1. Transforming the Defense Acquisition System into the Warfighting Acquisition System to Accelerate Fielding of Urgently Needed Capabilities to Our Warriors;
2. Reforming the Joint Requirements Process to Accelerate Fielding of Warfighting Capabilities; and
3. Unifying the Department's Arms Transfer and Security Cooperation Enterprise to Improve Efficiency and Enable Burden-Sharing. 

 The following are key highlights from the Strategy.

Pillar 1: Fuel the Arsenal of Freedom: Rebuild the Defense Industrial Base

Under the first pillar, the Strategy lays out ten objectives to transform the Defense Industrial Base (“DIB”), primarily focusing on expanding the number of companies supplying DoW, enhancing scalability and production, attracting private investment, and leveraging commercial solutions more broadly, as follows:

• Expand the Industrial Base – The Strategy proposes that DoW will lower barriers to entry and promote competition to encourage new market entrants that will expand the industrial base.  DoW further pledges to increase “testing capacity, competitions, and exercises” designed to provide more insight to industry regarding DoW’s needs.
• Stabilize Demand Signals – DoW proposes to award “bigger, longer deals” so that companies will be more willing to invest and grow the industrial base.  This includes leveraging “multi-year procurements, long duration and high volume contracting, economic order quantity authorization, guaranteed purchase orders” and other long-term funding sources to achieve stabilization of demand across the industrial base.
• Accelerate Private Capital Investment – The Strategy emphasizes that increased private capital will accelerate creation of new companies and expand production capabilities.  DoW proposes to seek more injection of private capital into R&D and leverage “greater public-private partnerships to increase risk sharing with DIB suppliers.” 
• Increase Due Diligence – The Strategy proposes that DoW will scrutinize every deal to “confirm it is the best deal for the warfighter” and will therefore apply “enhanced diligence” for negotiated or evaluated projects.  DoW proposes to evaluate mechanisms for “recouping investments” and to engage in “rigorous negotiation tactics” to drive these goals.
• Accelerate Commercial Preference – Building on actions this year across the federal government to promote the adoption of commercial practices, the Strategy promotes maximizing the purchase of products/services directly from what is available in the commercial marketplace to reduce cost and optimize delivery schedule. 
• Go Direct-to-Supplier – Drilling down on commercial focus even more, the Strategy promotes direct negotiation with commercial suppliers at all levels of the supply chain to avoid what it identifies as “single points of failure” from consolidation with “the big prime contractors.”
• Procure Industry-Driven Solutions – The Strategy further proposes to drive “faster” procurement through pursuit of “solutions-based acquisition” that will eschew requirements developed “without industry input” in favor of a more flexible approach to engaging with contractors on proposed solutions to “solve operational problems” rather than rejecting solutions outright when they do not conform to rigid requirements. 
• Reform Bid Protests – The Strategy proposes to pursue “new statutory authority” to “permit” the Government Accountability Office to implement a “losers pay” rule that would withhold profit or fee from an incumbent protester that secures an extension of performance but later has its protest dismissed as legally, factually, or procedurally deficient. 
• Maximize Flexible Contracting – The Strategy promotes pursuit of Other Transaction Authority (“OTA”) for prototype and follow-on production efforts, and it indicates that DoW will provide “additional resources, guidance, and training” to expand the use of OTAs. 
• Establish the Industrial Base Consortium –DoW will also expand internal initiatives to coordinate and re-focus existing consortia on removing barriers for nontraditional defense contractors, maximizing the use of commercial standards, and “smoothing transitions from R&D to acquisition programs of record.”  DoW further intends to create a “single, department-wide plan that aligns acquisition authorities, incentives, and governance to bolster industrial base resilience.”   

Pillar 2: Elevate and Empower the Acquisition Workforce to Rapidly Deliver Capability

The Strategy proposes measures to improve talent recruitment, training, incentives, and retention to grow and maintain a high-quality acquisition workforce.  As part of the transition to Portfolio-Based Acquisition, the Strategy proposes to “empower” Portfolio Acquisition Executives ("PAEs”) with authority over a team of subject-matter experts (in acquisition, contracting, engineering, testing) and budget flexibility to direct and adjust portfolio outcomes rapidly, including by moving funds and making “requirements trades” to meet operational priorities.  The “Transforming the Defense Acquisition System” memo also includes Initial Directed Implementation Items, directing the Under Secretary of War for Acquisition and Sustainment (“USWA&S”) to nominate portfolios for PAE establishment, and each DoW component to submit “complete transformation plans” that outline how to transition all programs to the PAE model within the next two years.  These implementation items also include, within the next 180 days, changes to personnel policies, performance measures and training, and implementation of portfolio scorecards.

The Strategy would provide PAEs with new tools for rapid cross-functional decision-making on military acquisition requirements, including Capability Portfolio Management—a proposed data-driven, cross-Department framework to optimize acquisition and fielding of similar systems across portfolios—and Capability Trade Councils intended to enable timely requirements trades in collaboration with Department leadership and military services.  Although the Strategy acknowledges that funding decisions require congressional action, it also proposes to reform the Planning, Programming, Budgeting, and Execution process in line with the proposed portfolio approach.  The “Transforming the Defense Acquisition System” memo directs the DoW Comptroller and Director of Cost Assessment and Program Evaluation (“CAPE”) to take steps to improve budget flexibility, via revised guidance, legislative proposals, or revisions to program elements, within 180 days.

Pillar 3: Maximize Acquisition Flexibility through Reduced Regulations and Process

The Strategy proposes to “move fast with speed and rigor” by removing unnecessary process and reducing regulations.  The Strategy would remove the Middle Tier of Acquisition process to reduce administrative burden, in line with a Field Training Team initiative established in the Fiscal Year 2025 National Defense Authorization Act (“NDAA”); invest in new, better, and more test equipment, ranges, and people to facilitate better and faster weapons testing; and “decrease the number of bureaucratic test managers and increase the number of actual testers” of weapon systems following the DoW’s initial steps to “reduce oversight, eliminate redundancy,” and, ultimately, return test and evaluation oversight mechanisms to the Military Departments for most programs.  The “Transforming the Defense Acquisition System” memo then directs the Undersecretary of War for Research and Evaluation (“USWR&E”) to provide, within 180 days, a roadmap and policy recommendations for streamlined and responsive test and evaluation requirements.

Other efforts under the Strategy include the introduction of Artificial Intelligence (“AI”) to reduce administrative burdens and accelerate approval processes, as well as actions to evaluate the scope, number, and effectiveness of internal reviews.  DoW will also seek to use new tools to enable data-driven decisions to optimize resources and improve program performance tracking.  These efforts extend to prioritizing the delivery of “realistic and accurate” cost estimates for defense systems.

The Strategy includes several proposals that would require legislative action, or that contemplate reinterpreting current law, including introducing more flexibility for software and hardware acquisitions under the Information Technology Management Reform Act, the Clinger-Cohen Act (“CCA”) of 1996; transitioning from Cost Accounting Standards (“CAS”) to commercially used Generally Accepted Accounting Principles (“GAAP”); increasing CAS applicability thresholds; and increasing competition by encouraging new contractors to participate, including nontraditional defense contractors.  The Strategy also proposes to undertake a “complete and revolutionary overhaul of the FAR and the DFARS” by streamlining the regulations to include “only what is absolutely vital” and removing “anything that slows down government contracts, especially the Truth in Negotiations Act” based on a belief that market pressure will provide inherent cost and quality management, and the submittal of current cost or pricing data will no longer be needed.

The “Transforming the Defense Acquisition System” memo requires the USWA&S to issue guidance within 90 days addressing preferred means of contracting—including preferences for “Non-[FAR]-based procurement methods and instruments,” commercial solutions, rewards and penalties based on delivery schedule, and alternative solutions evaluation.  The USWA&S must also update the DoW instructions and the DFARS within 150 days to “codify the directions” in the memo.  

Finally, the Strategy lays out DoW’s proposals for reforming and modernizing the Foreign Military Sales (“FMS”) program so that it can serve as an engine for the domestic industrial base, and for understanding the causes of delays throughout the program.  The “Unifying the Department’s Arms Transfer and Security Cooperation Enterprise to Improve Efficiency and Enable Burden-Sharing” memo directs the USWA&S and the Undersecretary of War for Policy to develop and submit, within the next 60 days, a plan to reform FMS to solve for delays and use the program to support the domestic Defense Industrial Base.

Pillar 4: Develop High Performance Systems through Rigorous Enterprise Technical Execution Excellence

The Strategy proposes that DoW develop high-performing acquisition systems and systems engineering that can handle the speed, volume, and urgency of U.S. military hardware and software procurements through several initiatives.

The Strategy proposes that DoW will create the Wartime Production Unit (“WPU”) to “transform how [it] rapidly accelerate[s] the manufacturing and production of hardware and software capabilities to the warfighter.”  The DoW already has the Joint Production Accelerator Cell (“JPAC”) as well as a separate deal team to accelerate the manufacturing, production, and delivery of defense hardware and software by structuring business deals that enhance production capacity and overhaul contract execution through financial incentives.  However, DoW wants to combine the efforts of the JPAC and the deal team and create the WPU to “manage and execute the direct support of the urgent acquisition production priorities” of DoW and “bring in C-suite executives to advise on industrial production optimization.”  The WPU will also expand its collection and review of data, including contract costs, delivery timeliness, and performance outcomes from all contracts (not limited to sole-source contracts in excess of $1 billion, which is the current requirement), to evaluate negotiations and adjust strategies.  The implementation memo calls for establishment of the WPU within 60 days.

The DoW is also proposing to undertake a comprehensive transformation to modernize its systems-engineering processes and tools throughout the lifecycle of defense acquisition programs to better meet warfighter needs by enabling agile development, integrating advanced technologies, and reducing lifecycle costs.  Part of this transformation includes the adoption of digital engineering and model-based systems engineering, including mission engineering, model-based systems engineering, modeling and simulation environments for virtual and constructive testing and training, and developmental integration and testing, “which will fuel rapid, iterative designs and technology insertion to maximize mission outcomes” and reduce testing, design defects, and program delays, among other things.  According to DoW, “this transformation is critical, given the rapid modernization of technology and the increased use of software acquisition, advanced computing, artificial intelligence, and model-based acquisition.”

Additionally, the Strategy proposes that DoW will implement the Modular Open Systems Approach (“MOSA”) framework into all acquisition strategies, which is aimed at: enhancing interoperability among systems, encouraging competition, avoiding vendor lock, facilitating technology insertion and performance improvements, and reducing life-cycle costs of weapons systems through cost-effective and responsive modernization and sustainment.  DoW already has a MOSA Guidebook, which aligns with the Defense Open Work IP Guide, to provide technical and business guidance in applying MOSA principles, but moving forward, DoW proposes to integrate MOSA more robustly into acquisition and sustainment strategies across programs. 

The “Reforming the Joint Requirements Process to Accelerate Fielding of Warfighting Capabilities” memo calls for a cross-functional process of adopting a portfolio-based, rather than requirement-based, acquisition system that can produce platforms that serve multiple military services or defense needs.  That work will encompass both the systems engineering processes and tools, and the implementation of a MOSA framework, and will occur at the DoW and military service level, with timelines ranging from 90 to 120 days for the first steps.

Pillar 5: Improve Lifecycle Risk Management

In response to the ongoing debate on the right-to-repair for defense articles, the Strategy proposes to “plan for and acquire systems with the ability to conduct organic depot-level maintenance, repair, and overhaul of systems and sub-systems to ensure military readiness for any conflict.”  While acknowledging the need to protect commercial intellectual property and data rights, the Strategy seeks to align contracts to “program development, production, and support strategies early in development and production” so that the contracts can include “the necessary technical data packages for organic or third-party maintenance, computer software development, tooling, supply chain management, training, repair, and overhaul.”

In recognition of the limits of the defense industrial base, the Strategy proposes to “integrate various tools and organizational efforts to provide broad and deep supply chain illumination, prioritize issues, and enable proactive mitigation of supply chains risks[,]” including for raw materials and components.  The Strategy will begin that effort with munitions acceleration efforts.

The Strategy proposes to modify Lifecycle Sustainment Plan (“LCSP”) guidance to permit tailoring for short-lifespan programs, and to reduce burdens.  The Strategy is also revising sub-regulatory guidance to consolidate a product or system’s LCSP responsibility with a Product Support Manager position. 

Where the rubber meets the road: Secretary Hegseth’s strategy and Congress’s proposed legislation

Secretary Hegseth’s release of the Strategy now—as Congress is negotiating an acquisition reform-focused NDAA—places a marker for the DoW’s preferred outcomes.  The versions of the NDAA passed by the House of Representatives and the Senate would advance acquisition reform proposals focused on revising the DoW acquisition lifecycle and requirements process, with significant emphasis on the acquisition of major defense acquisition programs, interoperability between original equipment manufacturers, data rights that allow DoW to sustain systems over their lifetime, expansion of commercial preferences, and streamlining of acquisition generally.  Both bills also propose changes to align DoW acquisitions to a MOSA framework. 

However, the Strategy may hinder the NDAA conference negotiations as the Strategy adopts ideas from the House and Senate NDAAs that are still being negotiated and finalized, including changes to CAS thresholds, implementation of a MOSA framework, expansion of nontraditional defense contractor treatment, and establishment of portfolio-based acquisitions, supply chain illumination, and use of Product Support Managers.  The Strategy also includes proposals that Congress has recently rejected, including robust bid protest reform. 

We will continue to monitor DoW’s implementation.