Draft Memo Offers First Look at Pentagon Acquisition Reforms

The Pentagon is readying a slew of reforms to its acquisition practices designed to speed up the military’s process for buying weapons and systems and structure its program offices to prioritize competition and commercial capabilities, according to a draft memo. 

The document, obtained by Air & Space Forces Magazine, links the Defense Department’s “unacceptably slow acquisition fielding timelines” to three primary causes:

Lack of accountability and flexibility among acquisition leaders
Misaligned performance incentives for industry
Unwillingness to take advantage of commercial or private sector investment, which the memo argues is key to delivering systems quickly and at scale. 

To remedy those issues, the department calls for more streamlined buying practices and flexibility in program offices. If adopted, it would mandate commercial-first acquisition approaches and require more adaptable testing approaches and “scalable production strategies.” It would also incentivize companies to deliver on time by rewarding those that meet schedule targets and penalizing delays. 

“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 document states. “Every process, board, and review must justify its existence by demonstrating how it accelerates capability delivery to meet warfighter needs.” 

The draft memo comes just days before Defense Secretary Pete Hegseth is slated to speak to defense executives and military acquisition leaders at National Defense University on Nov. 7. It also echoes proposals from both the House and Senate, where lawmakers are proposing legislation that would repeal large portions of federal acquisition law and prod the Pentagon to more readily embrace commercial technology. 

The Pentagon declined to address the substance of the proposed changes or say whether Hegseth plans to announce them in his upcoming speech.

“The War Department will not comment on leaked documents, pre-decisional or otherwise,” Pentagon Press Secretary Kingsley Wilson told Air & Space Forces Magazine, referring to the alternate title of the agency authorized by the Trump administration.

One of the biggest shakeups in the memo is a requirement for the military services to reorganize existing program executive offices. It calls for the establishment of portfolio acquisition executives, or PAEs, who would manage programs based on mission types and would focus on technological and operational integration. 

This approach is a departure from the department’s more traditional, siloed program management style. It would give the services more flexibility to move resources among programs as threats and needs evolve and could provide more transparency into how much funding is actually required to perform certain missions. Congress has advocated that the department move to a portfolio-based acquisition and budgeting approach, and the Space Force has already partially implemented the construct.

The move would also streamline authority, giving the PAE a direct line to the service acquisition executive and eliminating other approval layers. The memo also calls for delegating decision authority to the military departments, and the PAEs within them, wherever possible.  

The programs within these portfolios would be schedule-driven and would focus on outcomes over compliance. The memo also directs PAEs to adopt commercial practices like iterative capability development and to default to contract types like commercial solutions openings and other transaction authority.  

Within each portfolio, the memo states, the services will create performance scorecards that emphasize schedules and delivery milestones and that measure things like the level of commercialization and mission capability rates.  

The department also plans to introduce a “two-to-production standard” that would require acquisition programs to maintain at least two sources for “critical program content” until the effort reaches initial production. Programs would also maintain “scalable production strategies” that decouple design from production so that a third-party manufacturer could be tapped, if needed, to ramp up production.  

To make it easier to upgrade a capability throughout its lifecycle, DOD wants to establish “accredited test pipelines” that would allow for continuous updates to hardware or software without having to revalidate the entire system. 

On contracting reform, the department plans to establish an Economic Defense Unit focused on collating commercial best practices for structuring contracts and measuring performance. The new unit would also support Pentagon’s grant, loan and investment disbursement programs, work that today is overseen by the Office of Strategic Capital.  

“Drawing on successful models in critical minerals mining and processing, submarine shipbuilding, and munitions acceleration, [the Department of War] will structure deals that unlock private capital through advance market commitments, risk-sharing mechanisms, and commercial-like incentive structures,” the document states.  

Finally, the memo endorses recommendations from the Commission on Planning, Programming, Budgeting, and Execution, which Congress convened during the Biden administration to reform DOD’s budgeting practices. In particular, the department directs the Pentagon comptroller and the director of Cost Assessment and Program Evaluation to implement the commission’s recommendations on budget line and reprogramming reforms, which called for program offices to have the ability to transfer more funding with greater flexibility.