What to Know about the New Defense Acquisition Transformation Strategy

This morning, the Department of Defense/War (DOD/W) published its long-awaited Acquisition Transformation Strategy. Rumors surfacing a week earlier about a draft memo summarizing the strategy led many to believe the eventually published document would be a final six-page version. Instead, the DOD/W released a 46-page pdf file of the strategy. Here is what industry needs to know about it.

The strategy outlines five areas of reform:

• Rebuilding the Defense Industrial Base
• Empowering the Acquisition Workforce to Rapidly Deliver Capability
• Maximizing Acquisition Flexibility by Reducing Regulations
• Developing High Performance Systems Through Technical Excellence
• Improving Lifecycle Risk Management

The following summarizes important points scattered through the areas listed above. It is not a comprehensive summary of the strategy.

Rebuilding the Defense Industrial Base

Expanding the industrial base by increasing the number of companies that build military equipment is critical. The DOD/W will make it easier for new companies to do business by fostering “better ideas,” awarding contracts faster, and delivering results faster.

The Defense Industrial Base (DIB) (i.e., weapons manufacturers) has shrunk from 51 prime vendors in the 1990s to only 5 vendors today. The DOD/Ws objective is to increase competition by making it easier for new companies to become involved and bring fresh ideas to the table. Doing so will be the responsibility of Program Acquisition Executives (PAEs), formerly known as Program Executive Offices, working closely with program managers. PAEs will award longer contracts with higher values to incentivize company involvement and will operate closer to investment managers for increased oversight. PAEs will also be key players in consolidating program budgets and aligning program portfolios with DOD/W priorities.

The DOD/W will reach out to private equity and venture capital to secure increased investment in companies that provide key systems and capabilities. Doing so will strengthen the DIB and bring new companies into the DOD/W ecosystem.

Current investments will be subject to increased scrutiny using analytical tools and an assessment criteria process to determine if the DOD/W is getting the return on investment it demands. If not, then changes will be made to the investment, including potentially ending it altogether.

Commercial Solutions Openings, Other Transaction Agreements, and other commercial procurement procedures will be given priority. Acquisition personnel will be authorized to go directly to suppliers to secure best prices, meaning they will in some cases bypass prime contractors and resellers. Prime integrators will be subject to keener oversight as far as complex systems are concerned.

Artificial Intelligence (AI) and predictive analytics will be used to track the success of deployed solutions across Combatant Commands to determine effectiveness. Industry consortia and improved DOD/W market research will be used to identify and field the best solutions industry has to offer. These will then be purchased through flexible contracting methods, such as CSOs and OTAs.

The DOD/W intends to ask Congress to reform the bid protest process, allowing it to resolve bid protests faster and make protest losers pay if protests are deemed frivolous. This objective will take external help (i.e., Congress) to enact, so changes could take some time to enact, if they are enacted at all.

DOD/W will expand contact with industry consortia to acquire innovative solutions. Existing programs and initiatives will be mapped to various industry consortia to identify areas of synergy for the DOD/W to exploit via commercial agreements.

Empower the Acquisition Workforce

Training and recruiting will be stepped up to increase the size and expertise of the Warfighting Acquisition Workforce. Acquisition personnel will also rotate in teams between industry partners and DOD/W organizations to grow expertise. Training at the Defense Acquisition University, renamed the Warfighting Acquisition University, will be improved to reorient acquisition personnel toward commercial best practices.

Planning, Programming, Budgeting, and Execution (PPBE) Reform

In March 2024, the final report of a DOD/W commission released 28 recommendations for improving the PPBE process. These were then updated in January 2025. The DOD/W will implement recommendations that remain unfulfilled, but which promise better resourcing flexibility and acquisition agility.

Reducing Regulations

The DOD/W is eliminating the Joint Capabilities Integration and Development System (JCIDS) and will rely more heavily on implementing Middle Tier Acquisition (MTA) pathway approval processes. MTA processes will be digitized using AI to prepare and review acquisition program strategies. Lastly, Portfolio Scorecards will be created to assess program performance and budgets.

Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) Reduction

Truth in Negotiations Act (TINA) requirements will be dialed back in favor of allowing competition to drive down prices. TINA requires contractors to submit accurate, complete, and current cost or pricing data when negotiating government contracts exceeding a specific cost threshold and absent adequate price competition.

Open System Architectures

The DOD/W will fully implement the Modular Open Systems Approach (MOSA) into acquisition strategies for all programs to promote interoperability, competition, technology insertion, performance improvement, and reduce lifecycle costs.

Repair and Maintenance

Companies will be required to allow the DOD/W to acquire systems with the ability to conduct organic depot-level maintenance, repair, and overhaul of systems and sub-systems.

Summing up, the new strategy:

• Increases contract values. Certain contract awards will be longer in duration and have higher ceiling values to incentivize industry partners.
• Emphasizes speed. As Secretary Hegseth said on Friday, the DOD/W will increase its acquisition risk to acquire and field capabilities faster. It will be willing to fail early and often to garner success.
• Puts large primes in the crosshairs. By promising to go directly to providers for parts and components, integrators will be moved to the side. Complex programs/solutions will still require the involvement of integrators, but they will be subjected to greater oversight.
• Shifts acquisition authorities closer to programs. Making PAEs responsible for coordinating budgets and project performance will lead to closer scrutiny. It could also lead to unexpected changes in budgets and delivery schedules depending on performance.
• Prioritizes the use of alternative acquisition pathways. CSO and OTA procedures will be used more often to acquire commercial solutions. This change could hamper the ability of competitors to lodge protests.