Read-Out of Secretary of War’s DRAFT Acquisition Overhaul Memo

Bottom Line Up Front (BLUF): Secretary of War Hegseth ordered the Department of War (DoW) to overhaul the entire acquisition enterprise, redesignating the Defense Acquisition System (DAS) as the “Warfighting Acquisition System” (WAS). This marks the most sweeping decentralization of authority since the Packard reforms. Speed-to-field, modularity, and private-capital engagement will replace compliance and documentation as the organizing principles of defense procurement. Power is shifting from Service Secretariats to newly created Portfolio Acquisition Executives (PAEs), who will have expanded authority to waive requirements, approve reprogramming, and engage industry directly.

STRATEGIC CONTEXT:
  • The Secretary is redefining acquisition as a warfighting function, not an administrative one.
  • The WAS reframes procurement as part of operational readiness, aligning acquisition timelines with deterrence and combat preparation.
  • The Department is declaring speed-to-capability as the decisive factor in maintaining advantage. Contractors should expect less tolerance for bureaucratic delay, more emphasis on iterative fielding, and a sustained focus on continuous modernization.
ORGANIZATIONAL OVERHAUL:

Core Change: Creation of Portfolio Acquisition Executives (PAEs) to replace Program Executive Offices (PEOs).
  • Each Service will consolidate PEOs into PAE portfolios within two years.
  • New direct chain of command: Program Manager > PAE > Service Acquisition Executive.
  • PAEs empowered to:
           o Make cost/schedule/performance trades prioritizing speed.o Enforce Modular                            Open System Architectures (MOSA) and assert government data rights.
           o Reprogram funds within portfolios and waive non-statutory compliance                                    requirements.
           o Hold contracting officers accountable for mission outcomes, not compliance                            metrics.
  • Streamlines bureaucracy and concentrates decision-making at execution level.

COMPETITIVE ENVIRONMENT:

Core Change: Continuous, modular competition replaces traditional prime dominance.
  • Implements “two-to-production” rule—two qualified sources through initial production unless waived.
  • Establishes machine-readable interface repositories to allow third-party integration without OEM consent.
  • Programs structured around incremental fielding cycles rather than monolithic development.
  • Encourages competition within systems over the full lifecycle (“modular sustainment competition”).

CONTRACTING & FINANCE:

Core Change: Transition to commercial-style contracting and financing. 
  • Preferred use of OTAs and CSOs: FAR-based contracting becomes secondary.
  • Time-indexed incentives: early delivery rewarded, delays penalized.
  • Commercial-off-the-shelf (COTS) approaches made default acquisition path.
  • Establishes Economic Defense Unit (EDU) to design hybrid contracts using:
            o Grants, loans, and investments tied to performance metrics.
            o Purchase commitments to attract private capital.
  • PPBE reform to allow below-threshold reprogramming and portfolio-level budgeting.

HUMAN CAPITAL & INSTITUTIONAL REFORM:

Core Change: Cultural reset in acquisition workforce.
  • Defense Acquisition University (DAU) becomes Warfighting Acquisition University (WAU).
  • Training shifts from compliance to commercial agility, portfolio management, and rapid decision-making.
  • Program Mangers and PAEs receive:
             o Four-year minimum tenures, tied to performance on speed and outcomes.
             o Pay incentives for timely delivery and competition.
             o Authority to remove underperformers swiftly.
  • Expands industry-government exchange programs and blended career paths.