On November 7, 2025, Secretary Pete Hegseth proclaimed in a speech to defense industry executives that the “defense acquisition system as you know it is dead.” On November 10, the Department of War (“DoW”) published three directives and a related Acquisition Transformation Strategy (“ATS”) that describe the sweeping changes announced by Secretary Hegseth in more detail. These major policy and structural changes could represent a paradigm shift, aimed at streamlining defense acquisition processes, speeding up delivery timelines, and increasing transparency and accountability in the defense acquisition system. This reform agenda is an opportunity for small and mid-sized contractors that can quickly adapt. Defense contractors and those involved in the defense supply chains should be tracking these key takeaways and stay up to date as implementation moves forward.

Key Takeaways:

  • A key goal of the new system is to expand the industrial base and have more companies building military equipment at a faster pace. DoW aims to restore innovation and lower barriers to entry in order to diversify the prime and subcontractor base, seeking to include diverse performers and non-traditional vendors in source selection.
  • Speed is prioritized.
    • Commercial solutions will be prioritized to deliver capabilities faster. Commercial products and services vendors should see additional opportunities in contracting, even where the commercial product or service may not be the perfect fit for the military requirement.
    • Non-Federal Acquisition Regulation (“FAR”) vehicles for acquisition (e.g., Other Transaction Authority (“OTA”)) will be used more expansively.
    • Middle Tier Acquisition will be prioritized in an attempt to streamline delivery of capabilities.
  • Increased emphasis on multiple sources for fulfilling requirements, new Program Acquisition Executives (“PAEs”) empowered to direct program outcomes, and non-traditional acquisition may mean that unsolicited proposals have a greater chance at success. The key will be to understand well the interests of the PAEs and others involved and where to deliver the proposals.
  • DoW is advocating for legislative changes to the bid protest rules to discourage the filing of potentially frivolous bid protests and accelerate processing and adjudication timelines. These changes would add substantial risk for protestors and would have dramatic effects on contractor strategy regarding protests. We will be tracking future National Defense Authorization Acts and other statutory changes to see if these proposals are adopted.
  • The FAR and Defense Federal Acquisition Regulation Supplement (“DFARS”), which the Executive Branch can change without Congress, are already being overhauled (see the “Revolutionary FAR Overhaul” and Executive Order 14265). These changes aim to streamline the regulations and ease compliance burdens, including through a new proposal in the ATS to seek to use market forces and competition to limit the need for triggering the requirements of the “Truth in Negotiations Act (TINA) and TINA Lite” (41 U.S.C. Chapter 35, Truthful Cost or Pricing Data). DoW’s review in response to Section 4 of E.O. 14275 should shed more light on this proposal and similar efforts.
  • The Joint Capabilities and Integration Development System process, which defined acquisition requirements for defense programs, is being replaced with three new DoW activities that seek to accelerate the identification of top priority needs and how they will be fulfilled, enhance early engagement with industry, and ensure budgeting decisions are more closely tied to need.
  • Arms transfer and security cooperation tools will continue to be streamlined to reduce regulatory and process barriers to enable U.S. capabilities to get to our allies and partners more quickly and transparently consistent with E.O. 14268. This includes (1) the reinstatement of the 2018 Conventional Arms Transfer Policy, the overarching policy that guides the U.S. Government’s consideration of Foreign Military Sales (“FMS”) and Direct Commercial Sales (“DCS”) cases; and (2) narrowing the scope of items only available through government-to-government transfers, allowing industry to have more DCS opportunities.
  • The Defense Security Cooperation Agency and Defense Technology Security Agency will soon be overseen by the Under Secretary of War for Acquisition and Sustainment instead of the Under Secretary for Policy. This change will likely mean that U.S. readiness and defense industrial base concerns will gain greater prominence in the FMS and DCS systems over foreign policy considerations.

These fundamental changes to the defense acquisition system represent an opportunity for many defense contractors, especially smaller and more nimble companies and companies that provide commercial products or services. Although the announcement is ambitious and includes a wide variety of proposals, some of which are not yet well fleshed out in public (for example the integration of AI into acquisition processes), change in the defense acquisition system will not happen immediately and implementation is likely to be uneven for some time. The key for all contractors in this space will be understanding what changes are occurring on the ground and adapting quickly to them.

Companies seeking to take advantage of this transformation must also remain cognizant of the myriad legal and regulatory requirements on defense contractors that remain in place (e.g., the False Claims Act, the Cybersecurity Maturity Model Certification, export controls, the Procurement Integrity Act). As a boutique law firm focused on the defense, security, and intelligence sectors, Fluet is closely tracking these developments and is standing by to address questions as DoW implements these significant changes to its acquisitions processes and policies.