Eye on Policy

The latest talk-of-the-town stems from the 40+ page November 7 memo from Defense Secretary Pete Hegseth. The memo follows up the Trump White House Executive Order 14625 from last April, so the industry has been on notice.

Many in the defense business wondered what would happen to the many reform commissions and committees that have been looking at Defense procurement reform. The community has been looking to see how or whether the scattered efforts at speeding technology adoption would coalesce into comprehensive policy.

Now we have it. The DOD memo explicitly references the work of the congressionally mandated Planning, Programming, Budgeting, and Execution (PPBE) Reform Task Force, which completed and submitted its work months before the 2024 election. Among other things, the SecDef is calling for a fiscal 2027 PPBE reform package “to revise program elements and any other budget structures to ensure proper alignment and budget formulation flexibility within portfolios.”

The keyword is portfolios. The idea of gathering related but separate lines of effort into portfolios undergirds many of the reform efforts. The initiative calls for a “pivot from program- and platform-centric structures, processes and strategies to deliver integrated suites of capabilities across platforms and systems.” To that end, the order calls for each “component” to “nominate initial portfolios for establishment.” They have 60 days to appoint Portfolio Acquisition Executives (PAE). After that, they have a two-year deadline for transitioning to portfolio management.

Note, too, that contracting officers will report to PAEs under the plan.

Make sure you read an accompanying explainer publication the DoD put out a couple of days after the Hegseth memo.

The list of reforms stacks up high—so high, one wonders how much of it will get done. Let’s be real. Hegseth is no Robert S. McNamara, whose intellect and force of personality set in place management structures that endure to this day. He held office (1961-1968) for nearly two presidential terms, following a remarkable industrial career. It remains to be seen whether Hegseth has what it takes to drive even 10% of these proposed reforms to deep establishment.

But central among them is procurement reform. The need for procurement reform has a wide, steady and bipartisan constituency. This looks like the moment.

The order indeed states that the Department of War, as it calls itself, “is undertaking a complete and revolutionary overhaul of the FAR [Federal Acquisition Regulation] and the DFARS [the Defense supplement to the FAR] to right size the regulatory environment in collaboration with interagency partners.” It promises more details to come.

Why all this now? Essentially, the plan seeks to speed the conversion of new technology into delivered capabilities, a longstanding problem that has spurred the many scattered efforts like the Defense Innovation Unit. It also seeks to expand and strengthen the defense industrial base using a variety of means. They range from government investment and regulation cutting, to clearer requirements, streamlined test cycles and steadier demand signals to incentivize contractors to make their own investments. The plan even calls for revising the cost accounting standards long used in Defense contracting so they’re more like commercial accounting.

Expect an emphasis on IT acquisition, including revision of guidance under the 1996 Information Technology Management Reform Act. There’s also a push to “digitize acquisition” using artificial intelligence.

You’ll also find broad language on supply chains and open architectures. Coupled with the proposed acquisition strategies, some analysts see the government doing more of its integration work and contracting directly with hardware component manufacturers. That couples with greater technical training of the federal workforce connected to Defense planning and acquisition.

The plan doesn’t overlook too many perceived weaknesses. For example, it calls for renaming the venerable Defense Acquisition University to Warfighting Acquisition University. WAU would “institutionalize a modernized training methodology that emphasizes immersive, scenario-based experiential learning focused on portfolio management competencies.”

The United States faces real threats the reforms seek to mitigate. Arms production capabilities don’t match the pacing threat of China. U.S. dominance in space is slipping away, with once-unassailable space platforms now threatened. Artificial intelligence coupled with new, large volume unmanned platforms appear to be the future of war—and deterrence. Development-to-capability cycles have steadily lengthened over the last 25 years, with resulting systems that are expensive to buy and sustain. Much potentially disruptive new technology has changed things like shopping and gaming but not the defense of the nation.