2025 The Pivotal Year for Defense Acquisition
and 2026 is going to be the year of execution to implement the new paradigm!
As we close out 2025, we have to acknowledge it as the most consequential year for defense acquisition reform in a generation. We witnessed the Pentagon, Congress, and the White House aligning on the need and prescription for modernizing how the U.S. procures and fields military capabilities. Below are a few of our key takeaways.
Transforming Defense Acquisition
Unparalleled Budget Year
Private Capital Integration
Organizational Shifts
Service Initiatives
Golden Dome
Looking to 2026: Year of Execution
Transforming Defense Acquisition
The year kicked off with a flurry of Executive Orders, in March and April, focused on solving some of the core issues with acquisition and contracting. The modernizing defense acquisition EO was exciting as it mandated comprehensive reviews of major defense acquisition programs, promoted streamlined acquisitions through a ten-for-one deregulation rule, and directed acquisition workforce reform to enable innovation and measured risk-taking. The commercial contracting EO was also very important as it reinforced the FASA Act and reemphasized the need for acquisition professionals to leverage commercial innovation. These weren’t suggestions or think tank papers but presidential directives with teeth.
Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement
Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base
Ensuring Commercial, Cost-Effective Solutions in Federal Contracts
The retirement of the Joint Capabilities Integration and Development System marked another watershed moment. JCIDS had long been criticized as a bureaucratic bottleneck that slowed capability delivery. Its elimination signaled the end of an era, though questions remain what requirements process will replace it and whether the new approach would truly enable the speed the warfighter needs.
The FY26 NDAA emerged as a landmark piece of legislation, merging the Senate’s FORGED Act and the House’s SPEED Act into a comprehensive framework for acquisition transformation. Key provisions included creating Portfolio Acquisition Executives with consolidated authority to deliver capabilities on fixed schedules, execute tradeoffs, use commercial-first approaches, employ novel business models to attract private capital, and leverage enhanced authorities for Combatant Commanders.
This was all paired with Secretarial memos that culminated with the bold issuance of Secretary Hegseth’s Acquisition Transformation Strategy. Having the Senate, House, White House, and Pentagon simultaneously pushing serious reforms created what we called a once-in-a-generation event. With this extraordinary alignment, the question shifted from whether reform would happen to how quickly the enterprise could implement the myriad changes and train the workforce to begin executing them.
Unparalleled Budget Year
This was by far the most unique defense budget year in recent memory with a number of notable (if not all desirable) moments:
Full-year CR Passed for FY25. This was last seen in 2013. Fortunately, the CR did include some unique flexibilities as it relates to new starts.
HAC-D Impatience. The White House didn’t send the full budget to Congress until 30 May driving HAC-D to issue its mark-up ahead of the PB submittal (described as unprecedented). The law requires it by the first Monday in February.
One Big Beautiful Bill. While reconciliation bills are not uncommon, 2025 was significant in it being so defense-focused (adding $150B in supplemental funding) and being integrated with the broader President’s Budget.
Shutdown. Congress failed to pass a CR by 1 Oct leading to a 43 day shutdown, which represented the 11th government shutdown and the longest in U.S. history. It placed enormous strain on the acquisition workforce and industry partners.
Living Large in 2026. While the appropriations process is still underway, the FY26 budget projects to have a 27% increase in RDT&E and 18% increase in procurement (with the inclusion of reconciliation funds).
Private Capital Integration
A consistent theme through 2025 was that the defense industrial base needed to shift from a peacetime posture to one with a wartime footing. A significant driver of that transformation was recognizing that a prime-dominated, low-competition defense market focused on exquisite defense capabilities was ill-suited for the future and that a dynamic industrial space powered by private capital investment with the ability to scale commercially-driven and lower-cost technologies was the path forward.
The financial markets stepped up, injecting at least $19B into the defense innovation ecosystem. These major private investment hauls represent the commitment:
Anduril Industries raised a $2.5B Series G round led by Founders Fund.
Saronic Technologies raised a $600M Series C round that included General Catalyst, Andreessen Horowitz (a16z), 8VC, and Caffeinated Capital.
Chaos Industries raised a $510M Series D round led by Valor Equity.
Castelion raised a $350M Series B led by Altimeter Capital and Lightspeed Venture Partners
Shield AI raised a $240M Series F round that included L3Harris, Hanwha Aerospace and Andreessen Horowitz (a16z).
Forterra raised a $238M Series C round led by Moore Strategic Ventures.
On the government side, there was continued (if unfinished) progress in attracting private capital towards specific defense investments including:
The Office of Strategic Capital making a direct $150M loan to MP Materials, to support the addition of a critical heavy rare-earth separation capability.
AFWERX STRATFI awards selecting 23+ companies to bring novel ideas and tech, as well as contributing private investments to Air Force/Space Force needs.
The Army allocating $750M to its new FUZE program to help scale promising companies that are solving an Army problem and builds on private investments.
The Navy, as part of its new Rapid Capabilities Office, is more directly engaging with the investment community, providing demand signals, offering classified sessions and crafting new business models.
We featured some of the larger firms powered by private capital in a recent post to convey the progress. Our recap of the Reagan National Defense Forum also showed industry leader commitment to integrating commercial tech and the capital class’s willingness to continue investing in defense (if progress continues).
Organizational Restructuring
The Pentagon's organizational chart underwent significant revisions this year.
USD(R&E) folded DIU back into the org and longtime DIU Director Doug Beck departed shortly afterwards - now with a potentially interim leader.
USD(R&E) also folded in the Chief Digital and AI Office (CDAO) to “accelerate Department-wide AI transformation.”
USD(R&E) condensed and refocused its critical technology areas. The changes reflect a greater focus on fielding for operational impact and moving away from mere prototyping but rather scaling in the near-term.
Acquisition enterprises are being redrawn around Portfolio Acquisition with executive positions replacing Program Executive Officers. This is expected to extend to the OSD-level too with implementation of a previous directive.
The Deputy Secretary established congressionally confirmed Direct Report Portfolio Managers (DRPMs) to provide oversight of strategic modernizations.
Submarine - to oversee acquisition of nuclear submarines.
Critical Major Weapon Systems - to oversee 5 major Air Force efforts.
Golden Dome - to oversee the layered defense of the Homeland.
Joint Interagency Task Force 401 (JIATF-401) - to manage all C-UsX efforts. Managed at the Army level, but with DRPM-like authorities and access.
SECWAR directed the reduction of the number of general/flag officers by 10-20%. There are also rumors of a major consolidation in combatant command positions with some Services already following along (see Army and Air Force).
Service Initiatives
Army Transformation Initiative (ATI)
Secretary Driscoll and GEN George rolled out ATI in May to create a leaner force, cut obsolete systems, reduce overhead and restructure organizations. The biggest change is merging Army Futures Command with TRADOC to form Transformation and Training Command (T2COM) led by GEN Hodne. In merging the two commands, the Army unified the functions of force design, force development and force generation. This is aligned with the Transforming in Contact initiative that aims to accelerate the fielding new capabilities and leverage commercial technologies. The Project Convergence experimentation is likely to continue with Capstone 6 (scheduled for August 2026) heavily focused on the Next Generation Command and Control (NGC2) program, which aims to advance the Army’s C2 capabilities and architecture.
Navy Rapid and Robotic
The Navy made a number of positive changes this year that herald a new era for U.S. maritime power. A major shift was cancelling the Constellation-Class Frigate program, which will now instead follow the Coast Guard’s lead. This coincided with the announcement of a bold new battleship program (part of the Golden Fleet effort).
On the unmanned side, the Navy has leaned forward with a new major USV program, called Modular Surface Attack Craft (MASC), which consists of different USV classes that can be configured for a wide range of missions. The Navy is also working with DIU on an unmanned undersea effort to rapidly deploy “low-cost undersea effectors.” On the acquisition side, the Navy created a new deputy assistant secretary of the Navy (DASN) for robotic and autonomous systems and PAE Robotic and Autonomous Systems to oversee those efforts plus at least 60 other unmanned programs. The Navy RCO was also established, as a lean organization with Rapid Capability Cells in each of the PAE/PEO organizations (assembling the elite 5% of disrupters in each office to pursue key operational problems).
Marine Corps
The Marine Corps published a Force Design Update detailing progress on achieving the vision set by Gen Berger. The Landing Ship Medium is key to its goals, and the Marine Corps return to its amphibious heritage - fortunately the Navy took positive steps to advance that in 2025. Upgrades continue for the Marine Expeditionary Units including NMESIS, MADIS, resilient command and control, unmanned systems, and advanced sensing networks. The III Marine Expeditionary Force continues to mature its Expeditionary Advanced Base Operations (EABO) concepts in the Indo-Pacific with exercises combining allied forces that also integrated unmanned resupply and autonomous surface vessels. The 12th Marine Littoral Regiment is on-track for being stood-up next year.
Air Force
The Air Force continued to implement it’s One Force Design which imagines three primary mission areas that drive force structure needs and CONOPS to better enable its Agile Combat Employment execution in the Indo-Pacific.
It is abandoning some key elements of its GPC Reoptimization (Air Base Wing model, Integrated Capabilities Command and Airman Development Command). However, it is pressing ahead with a warrant officer track, Multi-Capable Airman, Department Level Exercises and refinement of Deployable Combat Wings. On the acquisition front, there is still some finalization underway however AFMC has already been downgraded to a three-star and current PEOs will likely be redesignated as PAEs.
Space Force
The Space Force has had quite the year with several important updates. They issued Space Force Doctrine 1 which emphasizes the Space Force’s preeminent mission of Space Superiority and integration into the joint force. Accompanying this, is the tactical Space Warfighting Framework which details how counterspace operations will be executed across three mission areas: orbital warfare, electromagnetic warfare and cyberspace warfare. This framework was paired with an inaugural International Partnership Strategy that included appointing an allied officer as Assistant Chief of Space Operations. They renamed Space Operations Command to Combat Forces Command to emphasize a warfighting posture. They created System Deltas to pair with Mission Deltas and “streamline the work between acquisitions and operations through intimate collaboration.” Negotiations with Congress are still ongoing regarding the establishment of a Space Futures Command.
Golden Dome
One of the first major acquisition initiatives of the new Administration was to set the vision and action plan in an Executive Order for a new major missile defense shield, initially called Iron Dome (after the Israeli system) but later updated to Golden Dome. This represents a bold challenge to the acquisition community to deliver a highly technical system with a complex concept of operations in a short period (by 2028).
The EO called for a new reference architecture, requirements, and implementation plan along with an updated review of the current defense posture, military authorities and a funding plan from OMB for getting it across the finish line. In July, the Senate confirmed Gen Mike Guetlein as the new Direct Reporting Program Manager.
While there is a lot that is still unknown about the full planned architecture and associated acquisition efforts, there have been some advances in 2025.
SHIELD IDIQ. MDA selected 2,100 vendors for its $151B Scalable Homeland Innovative Enterprise Layered Defense (SHIELD) IDIQ covering many tech areas.
Space-Based Interceptors (SBI) Prototypes. The Space Force awarded initial prototype contracts (~$10M each) for development of SBI capabilities to Northrop Grumman, Lockheed Martin, Anduril Industries, and True Anomaly.
LEO Missile Tracking Layer. SDA awarded ~$3.5B in contracts to Lockheed Martin, Northrop Grumman, L3Harris Technologies, and Rocket Lab to provide 72 missile tracking satellites for missile warning and tracking capabilities.
PAC-3 Production. The Army awarded Lockheed Martin a $9.8B contract to produce 1,970 PAC-3 Missile Segment Enhancement interceptors and hardware.
THAAD Expansion. Lockheed Martin was awarded $2B for THAAD production and a contract for up to $2.8B for continued THAAD development.
Low Cost Interceptor. MDA issued an RFP, awards should be announced in early CY26. The word is that interest was high including some non-traditional players.
Balloons. MDA issued an RFP for a High Altitude Infrared Search and Track (HAIRST) capability, specifically focused on an energy efficient sensor.
While the FY27 budget request (due in Feb) will give more insights into the longer-term set of investments, DoW received at least $25B for Golden Dome priorities in the One Big Beautiful Bill (see budget deep dive here).
Military Space-Based Sensors: $7.2B
Space Based and Boost Phase Intercept Capabilities: $5.6B
Military Missile Defense Capabilities: $2.6B
Acceleration of Hypersonic Defense Systems: $2.2B
Air Moving Target Indicator Military Satellites: $2B
Ground Based Missile Defense Radars: $2B
Looking Forward: Execution is Everything
As we discussed in Unleashing the Warfighting Acquisition System, implementation is key this year. The vision is set, plans are formed, most of the key leaders are in place, and there is energy in the air. Opportunity alone doesn’t deliver capability. Execution will determine whether 2026 delivers lasting change or just another reform effort that reversed course. We are hopeful that does not happen!
Here a few key things we will look for to determine if progress is on-track:
Acquisition policies and guidance are updated quickly to align to vision.
Use of commercial technologies expands and other transactions grows.
Demand signals are provided for private investors and growth in defense VC/PE.
Unmanned programs continue apace and focus on achieving scale.
PAEs are actually empowered to execute tradeoffs to accelerate schedule.
Appropriators support expanded budget line consolidation (portfolio budgets).
The FY27 budget reflects a more balanced high-low mix of capabilities.
Combatant commanders get a larger voice in investment priorities.
Requirements processes advance to allow more dynamic prioritization.
DAU/WAU enables more third-party entities to provide acquisition training.
Our Mission Continues (and Expands)
Throughout 2025, we provided you with timely analysis of budgets, legislative developments, organizational changes, and programmatic decisions. We connected dots between White House priorities, congressional actions, and Pentagon execution. We highlighted opportunities for defense tech companies to engage effectively and helped acquisition professionals navigate unprecedented change.
As we move into 2026, our mission remains unchanged, but we also embark on a new journey to expand our support to the defense acquisition workforce and leadership. We will announce more details soon. In the meantime, thank you for being part of our community of over 12,000 subscribers (which has doubled over the past year). Your engagement, feedback, and shared commitment to improving defense acquisition makes this work meaningful. Here's to a successful 2026—may it be the year we prove that no other country can come close to the innovation, speed and lethality that the U.S. can generate when it has the will power.
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