Copyright Breaking Defense
WASHINGTON — The Pentagon appears poised to order sweeping changes to the way it buys weapons and platforms, signaling a paradigm shift to emphasize speed over all else by mandating more commercial competition, fewer internal review processes and new incentives both for DoD officials and industry, according to a draft memo obtained by Breaking Defense. The plan, which has not yet been made public, includes several major changes that could cause heartburn amongst the traditional defense primes, such as direction to “proportionally” penalize contractor delays to weapons programs and to incentivize “investable demand signals for private capital.” “The core principle of this transformation is simple: place accountable decision makers as close as possible to program execution, eliminate non value added layers of bureaucracy, and prioritize flexible trades and timely delivery at the speed of relevance,” according to the memo, titled “Transforming the Warfighting Acquisition System to Accelerate Fielding of Capabilities.” “Every process, board and review must justify its existence by demonstrating how it accelerates capability delivery to meet warfighter needs,” it states, later adding, “Speed to capability delivery is now our organizing principle: the decisive factor in maintaining deterrence and warfighting advantage.” Breaking Defense obtained the memo, which is marked draft and is subject to change, just days before Defense Secretary Pete Hegseth is set to address a crowd of defense CEOs and top military acquisition officials on Friday for a speech expected to deal with acquisition reform. It is unknown if Hegseth intends to announce these changes from the stage. The Pentagon did not immediately respond to a request for comment. Politico first reported on the memo. The dense, six-page memo, which is addressed to “senior Pentagon leadership” as well as combatant commanders, renames the “defense acquisition system” as the “warfighting acquisition system,” noting that the Pentagon’s acquisition enterprise will now prioritize getting technology to the battlefield as quickly as possible. “Today’s unacceptably slow acquisition fielding times stem from three systemic challenges: fragmented accountability where no single leader can make trades between speed, performance and cost; broken incentives that reward completely satisfying every specification at significant cost to on time delivery; and procurement patterns that disincentivize industry investment, leading to constrained industrial capacity that cannot surge or adapt quickly,” the memo reads. Todd Harrison, a budget and acquisition expert with American Enterprise Institute, said that the memo showcases a clear sea change from the last wave of defense acquisition reform, where defense officials primarily focused on lowering cost. “What it does not acknowledge is that there’s always an inherent trade off between cost, schedule and performance,” he said. “He’s [Hegseth is] saying, of those three, I want to prioritize speed. What he’s not saying is, ‘I’m willing to accept higher costs and lower performance.’ But that is the reality, that when you prioritize one, you’re making sacrifices in one or both of the others.” The document contains a four-page “initial implementation framework” to be carried out by the office of the Pentagon’s top weapons buyer, Michael Duffey, the undersecretary of defense for acquisition and sustainment. It directs Duffey to issue additional implementation guidance for the changes to the acquisition system within 45 days, with each military department tasked with providing their own implementation plan to the acquisition office within 60 days. Duffey will also chair monthly “acquisition acceleration reviews” to track the transformation of the Pentagon’s acquisition apparatus, with reviews focused on “combat capability delivery timelines and sustained competition health.” If what’s in the draft memo holds, here are the major changes coming to the Pentagon’s acquisition system: Portfolio Acquisition Executives Among the biggest changes outlined in the memo is a shift from the Pentagon’s longstanding practice of orienting its acquisition enterprise around weapons programs — with a Program Executive Office to manage each effort — to wider Portfolio Acquisition Executives (PAE) where a single official is accountable for many interrelated programs, with the ability to shift cash among weapon systems based on performance or schedule considerations. The memo notes that portfolios can be organized by “mission synergies, technological domains or operational integration needs,” with the PAE reporting to the service acquisition executive. In line with the stated goal of the reorganization, PAE’s will be judged heavily on whether they deliver systems to the warfighter on time and on schedule. That includes two major shifts in how the PEO offices have worked in the past. First, PAE appointments will be tied to delivery cycles, with a baseline four-year minimum in the role and possible two-year extensions. A major complaint about program managers in the past is that they would only be there for two or three years, not enough time to truly see a program through. In addition, the memo states that PAEs will have “incentive compensation” tied to “capability delivery time, competition, and mission outcomes.” How that kind of compensation for a member of the uniformed military will work is not spelled out. In order to keep programs moving forward, the PAE will have the authority to “make prudent cost, schedule and performance trades that prioritize time-to-field” — in other words, focusing on fielding “good enough” technology instead of waiting for a product that meets every single requirement. PAEs should also prioritize the on-time incremental delivery of technology wherever possible, the memo notes. “Increments should target an initial fielding date accompanied by goals for unit cost ceiling and minimum standards for mission effectiveness,” the memo states. “All other attributes should remain tradable throughout development to permit incremental enhancements and rapid delivery of subsequent increments, to include waiver authority for technical standards and environmental and other compliance requirements, where not mandated by statute or safety. ” The new PAEs are also tasked with enacting Modular Open System Architectures across their programs, including by asserting government purpose rights over critical software interfaces — a move that allows the Pentagon to retain the data rights needed to avoid “vendor lock,” a term used to describe weapon systems that can only be modified and often repaired by the company that designed it. “There’s always been this talk of, DoD should own the IP rights,” Harrison said. “And then industry, especially a lot of the new defense companies, push back and say, ‘Hey, our valuation as a company is our IP. You can’t expect us to hand it over the keys to the company.’ This actually strikes a very logical balance.” Along those same lines, the memo directs an approach of multiple vendors being built into the system. “Maintain at least two qualified sources for critical program content at the appropriate system decomposition level through initial production unless waived by the respective Service Acquisition Executive (SAE),” one bullet point in the memo reads. “This preserves government leverage when it is strongest and enables frequent re-competition of modular components and alternative supplier sourcing based on demonstrated performance.” Harrison was less complimentary on this change, pointing out that it could lead to greater costs for the Pentagon where it tries to maintain having multiple suppliers of components or systems. “What that means is you’re going to be paying extra to have that option, and it does not always make sense,” he said. The Defense Acquisition University also gets a reworking under the plan to reflect the focus on speed. Per the memo, “Within 180 days, [Duffey’s office] will prepare options to immediately 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.” Apparently now dubbed the “Warfighting Acquisition University,” the university will “establish selective cohort-based programs combining experiential and project-based learning on real portfolio challenges, industry-government exchanges, and case-method instruction that develops critical thinking and rapid decision-making.” The memo directs every military service and component to submit within 60 days a list of portfolios it is proposing to be initially stood up. A full implementation plan is due in 90 days, with a two-year deadline for all acquisition activities to transition to the portfolio acquisition executive model. The potential PAE change, like several others in the memo, mirrors reforms sought by the congressional armed services committees in their versions of the fiscal 2026 National Defense Authorization act. The Senate version of the NDAA contains similar language ordering the DoD to shift to a portfolio model. Moving To ‘Commercial First’ Contracting One change that will likely win the support of defense companies of all sizes is a wider adoption of commercial or other alternative contracting processes instead of automatically defaulting to the far more onerous Federal Acquisition Regulation. Companies that do business with the Pentagon — especially those with a robust commercial business — have historically complained that the Pentagon’s reliance on federal contracting rules forces dual-use companies to maintain separate financial systems. The memo instructs the Pentagon to issue guidance within 90 days on how to use speedier contracting options, such as Other Transactions and Commercial Solutions Openings, “wherever feasible and appropriate.” It also directs the Pentagon’s acquisition office to develop “a method to evaluate and accept alternative proposals” outside of current contracting processes — which could lead to radical changes in how DoD buys new tech. “That leaves so much open to new defense companies to come in and disrupt big acquisition programs,” Harrison said. “That is the kind of thing where it’s like the Air Force puts out an RFP [request for proposals] to buy a new bomber, and someone comes in with a missile. And they’re basically saying you still need to evaluate and at least consider these out of the box alternatives.” The shift to commercial first contracting is also a change proposed in the Senate Armed Services Committee’s version of the FY26 NDAA. In addition to ordering more streamlined contracting methods, the memo also calls for the DoD 5000, which lays out Pentagon acquisition policy, to be updated within 150 days. That update should reflect that decision authority for weapons programs rests with the services and PAEs whenever possible, reduce required documentation, eliminate redundant review and consolidate milestones. Portfolio Scorecards And New Incentives For Industry To keep all of these efforts on track, the memo calls for the establishment of “portfolio scorecards” to grade the performance of acquisition portfolios. “Drawing on successful models in critical minerals mining and processing, submarine shipbuilding, and munitions acceleration, DOW will structure deals that unlock private capital through advance market commitments, risk-sharing mechanisms, and commercial-like incentive structures,” the memo reads. “PAEs will track adoption of these contracting approaches through portfolio scorecards. This fundamental shift will enable outcome-based agreements that reward speed and scale.” The memo directs the Pentagon to publish scorecards within 180 days that contain “primary measures” that assess delivery schedules, prototypes, initial operational capability and production ramps. Notably, the department also lists “secondary” performance metrics that appear to center around lowering the risk of producing a given technology, including percentage of commercial content, number of dual-sourced components and production lines, number of instances of successful integration of third-party technologies, and mission capable rates. With new ways to score how well industry is performing also comes new ways to incentivize companies to work faster and more efficiently — as well as potential penalties for poor execution. One section of the memo that may be of particular interest to industry is language that directs acquisition officials to use “time-indexed incentives” for contracts. Those incentives could include rewards for companies that deliver product early, but also would “penalize delay proportionally,” said the memo, which does not provide further details. “I think the big primes are going to hate that,” Harrison said. “But it’s fair, right? If schedule is the priority then you should pay people more when they deliver ahead of schedule. You should pay them less when they deliver behind schedule. So it’s completely fair in that it aligns incentives with DoD’s stated priorities.” Also within 180 days, the Pentagon plans on publishing new contracting guidelines to “ensure clear incentives for timely delivery, increased production capacity and investable demand signals for private capital.” The emphasis on private capital and commercial content may prove to be a concern for defense primes, as those are buzzwords for the Silicon Valley-backed defense startup scene. Leadership in the Pentagon has been clear it wants to emphasize new entrants in the defense industrial base, with Army Secretary Dan Driscoll going so far as to say earlier this month that “the Silicon Valley approach is absolutely ideal for the Army.” The memo also references a new “Economic Defense Unit (EDU)” that will develop “a playbook of modern commercial contract and agreement structures and defining performance benchmarks for industry partners.” The new organization, which has not been publicly announced, will also work with the Pentagon to deploy capital through grants, loans and other investments to defense technology firms. It is unclear how EDU will differ from the department’s existing Office of Strategic Capital, which works with private capital to scale investments for critical technologies. Beyond the department’s emphasis on dual use tech and private capital, large legacy defense primes are likely to have concerns about the substance of certain changes, such as the larger DoD push to own interfaces, Harrison said. “I think a lot of the big primes are going to be skeptical of this, but probably quiet in their skepticism,” he said. “I think they’ll probably start quietly communicating, these are the problems we have with this. And they’ll probably do that directly to the Hill, because they’re not going to change this within the building.” Aaron Mehta contributed to this report.
