The Pentagon appears poised to revolutionize the way it buys weapons and platforms, signaling a major paradigm shift. According to a draft memo obtained by Breaking Defense, the emphasis will shift to speed, by encouraging commercial competition, reducing internal bureaucracy, and creating new incentives for both DoD officials and the defense industry.
Penalties for Delays and Incentives for Private Capital
The plan, which has not yet been made public, includes significant changes that could create discontent among traditional contractors. These include „proportionally” penalizing delays in weapons programs and stimulating „investable demand signals for private capital.”
Eliminating Bureaucracy and Focusing on Rapid Delivery
„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,” the memo, titled „Transforming the Warfighting Acquisition System to Accelerate Fielding of Capabilities,” states.
„Every process, board, and review must justify its existence by demonstrating how it accelerates capability delivery to meet warfighter needs,” it continues, later adding, „Speed to capability delivery is now our organizing principle: the decisive factor in maintaining deterrence and warfighting advantage.”
Prioritizing Speed Over Cost and Performance?
Todd Harrison, a budget and acquisition expert at the American Enterprise Institute, said the memo demonstrates a clear shift from the last wave of defense acquisition reform, where officials focused primarily on cost reduction.
„What it does not acknowledge is that there’s always an inherent trade-off between cost, schedule, and performance,” he said. „He [Hegseth] is saying that, of these three, he wants 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 make sacrifices in one or both of the others.”
Implementing Changes: Deadlines and Responsibilities
The document contains an „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.
Duffey must issue additional implementation guidance for the changes to the acquisition system within 45 days, and each military department must provide its 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, focusing on „combat capability delivery timelines and sustained competition health.”
Acquisition Portfolios and Responsible Managers
One of the biggest changes highlighted in the memo is the shift from the Pentagon’s long-standing practice of orienting its acquisition activities around weapons programs – with a program executive office to manage each effort – to broader Portfolio Acquisition Executives (PAE), where a single official is responsible for many interconnected programs, with the ability to transfer cash between weapon systems based on performance or schedule considerations.
PAEs will be judged largely on whether they deliver systems to the military on time. PAE appointments will be tied to delivery cycles, with a baseline minimum of four years in the role and possible two-year extensions. In addition, PAEs will have „incentive compensation” linked to „capability delivery time, competition, and mission outcomes.”
Prioritizing „Good Enough” Technology and Incremental Delivery
To keep programs moving forward, PAEs will have the authority to „make prudent cost, schedule, and performance trade-offs that prioritize time-to-field” — in other words, focusing on fielding „good enough” technology instead of waiting for a product that meets every requirement. PAEs should also prioritize the timely incremental delivery of technology whenever possible, the memo states.
Open System Architectures and Maintaining Multiple Suppliers
The new PAEs are also tasked with enacting modular open system architectures within their programs, including by asserting government rights over critical software interfaces — a move that allows the Pentagon to retain the data rights needed to avoid „vendor lock-in.” The memo also recommends maintaining at least two qualified sources for critical program content at the appropriate level of system decomposition.
Emphasis on Commercial Contracting
A change that will likely win support from defense companies of all sizes is a wider adoption of commercial or other alternative contracting processes, rather than automatically resorting to the Federal Acquisition Regulation. The memo instructs the Pentagon to issue guidance within 90 days on how to use faster contracting options, such as Other Transactions and Commercial Solutions Openings, „whenever feasible and appropriate.”
Performance Evaluation and Incentives for Industry
To keep all of these efforts on track, the memo calls for the establishment of „portfolio scorecards” to evaluate the performance of acquisition portfolios. It also calls for publishing new contracting guidelines to „ensure clear incentives for timely delivery, increased production capacity, and investable demand signals for private capital.”
The memo also mentions a new „Economic Defense Unit (EDU)” that will develop „a playbook of modern commercial contract and agreement structures and define performance benchmarks for industry partners.”
