Forging a Stronger Defense Industrial Base
Previously confined to a narrow circle of Defense Department specialists, discussions of procurement reform now attract the attention of a wide range of policymakers, business leaders, and national security analysts. The erosion of the U.S. defense industrial base, combined with China’s massive and still growing manufacturing might, have made Defense procurement a matter of increasing urgency with major implications for both national security and economic policy.
In the face of growing security threats around the world, the United States struggles to produce military materiel in sufficient quantities across both high-tech and legacy categories—from artillery shells to drones to nuclear submarines. Many supporting industrial sectors, such as key machine tools, electronics equipment, and commercial shipbuilding components, are essentially nonexistent in the United States. Current estimates suggest that, in a military conflict with China, American armed forces would exhaust their supplies of some key munitions within a week. After three years of war in Ukraine, NATO artillery shell production remains far below targets, while operations against Houthi attacks on shipping lanes earlier this year were discontinued in part because of concerns over replenishing missile stockpiles.
Despite the rise of exceptional companies like Palantir or Anduril, start-ups and other new defense industry entrants still face high barriers to securing a sale to the Pentagon. Budgeting and resource allocation cycles can force companies to wait for years to receive a production order. Overly restrictive requirements sideline commercial options. Acquisition personnel face a risk-averse culture that prioritizes protest-proof paperwork over promising outcomes. Supply-chain and cyber obligations create additional fixed costs that small firms cannot afford. As a result, many promising businesses—particularly capital-intensive hard-tech and manufacturing companies—disappear in the “Valley of Death,” the period between technology development and production at scale.
The Pentagon’s byzantine procurement process has been in place for over six decades, and the last fundamental reforms took place in the 1990s to early 2000s, during America’s unipolar, “end of history” moment. Long before DOGE became a household name, the Clinton administration attempted to streamline government with an initiative called the National Performance Review or NPR. Initiatives like the Base Realignment and Closure (BRAC) process and the infamous “last supper” contributed to the consolidation and steady attrition of the defense industrial base in the years following the Cold War. Needless to say, America now faces a much different geopolitical context, and Defense procurement processes must be updated to meet today’s challenges.
Congress’s Need for SPEED and FoRGED
Two procurement reform bills are currently being considered in Congress, as part of the fiscal year 2026 National Defense Authorization Act (NDAA). The House’s Streamlining Procurement for Effective Execution and Delivery (SPEED) Act and the Senate’s Fostering Reform and Government Efficiency in Defense (FoRGED) Act offer similar solutions but with different points of emphasis. These pieces of legislation reflect years of preparation and offer an opportunity to finally make major, necessary reforms to an inadequate system.
These key reforms can be classified into five general categories: portfolio acquisition, “commercial first” approaches, past performance factors, the definition and treatment of nontraditional defense contractors, and acquisition workforce metrics. Ideally, Congress will combine the best aspects of both bills in the final version of the NDAA.
Both the SPEED and FoRGED bills take similar approaches to acquisition reform. Both bills empower acquisition personnel to promote a more portfolio-oriented management approach. A portfolio-oriented approach, which holistically manages products or systems based on a set of capabilities, is how leading technology companies fund and assess their product development. This has been a long-overdue change, given that the current program-centric model requires formal requirements to be written for each type of program, which can take years and millions to develop. The U.S. Army, for example, spent over a decade and $580 million to create a replacement for the M9 Beretta pistol.
There are some differences between the two proposals, however. SPEED gives Program Executive Officers (PEOs) more responsibilities, develops a Mission Engineering and Integration Activity initiative for joint, cross-service requirements, and refreshes life-cycle management policies. FoRGED, on the other hand, replaces PEOs with Portfolio Acquisition Executives (PAEs) who would have integrated authority over shaping requirements, budgeting, and acquisition strategy for specific portfolios. Despite their differing approaches, both encourage procurement officers to identify what works in the private sector and then scale it up for use in the armed forces.
A second key reform involves how the Department of Defense (DoD) is instructed to consider commercial solutions, as both bills promote changes to transaction authorities, alternative capability-based pricing, and acquisition thresholds. Such changes are essential because commercial options can save money while providing the same or better quality required for combatant commands in a number of areas.
Here again, the difference between the two pieces of legislation, is in the details. The SPEED Act expands commercial buying practices and uses alternative capability-based pricing for all contractors. Additionally, the SPEED Act establishes the Bridging Operational Objectives and Support for Transition (BOOST) program within DIU to help startups cross the Valley of Death.
The FoRGED Act, meanwhile, mandates commercial procedures for acquisition as a default and gives nontraditional contractors, such as start-ups, a boost by exclusively allowing alternative capability-based pricing. FoRGED clearly prioritizes expanding the number of businesses that contract with the DoD, rather than just making the paperwork more straightforward.
On the whole, the FoRGED Act undertakes a more comprehensive overhaul of the acquisition process. The bill repeals over 300 statutory barriers, introduces a sunset clause for future statutory reporting requirements, and restricts the DoD from adding any unnecessary clauses. This more ambitious view is needed, given that the legal paperwork already hampers new entrants.
Another key area in need of reform is the treatment of nontraditional contractors, which can impact how new entrants are treated or supported as they scale. The FoRGED Act expands the definition of nontraditional contractors, aiming to both reduce compliance burdens and increase the DoD’s options from vendors. Companies defined as traditional defense contractors face extensive regulations on everything from employee work hours and compensation to corporate profit margins. Such regulation may be necessary to protect taxpayers in areas where there is no commercial competition (e.g., bomber aircraft or nuclear submarines) but creates harmful incentives and severely hampers companies trying to innovate and thrive in competitive commercial markets. Preserving companies’ ability to operate as nontraditional defense contractors, therefore, is an essential complement of shifting to a commercial-first approach and attracting new entrants into the defense industrial base.
Past performance factors in awarding contracts also require reform. The fact that a company may have been awarded DoD contracts in the past does not inherently mean they are the best choice for new programs that require different technologies, products, and capabilities. Too often, past performance factors have functioned to penalize new entrants. At the very least, the weighting of past performance should be significantly reduced, and arguably might only apply as a negative factor—i.e., companies with a record of failing to deliver on time and on budget, or other poor performance, should be penalized in new contracting decisions.
The FoRGED Act, however, largely overlooks one area of reform that the SPEED Act addresses best: the acquisition workforce. The acquisition workforce is too often locked in a “risk-averse” culture that favors conventional platforms over innovative ones. Officers are evaluated based on error-free compliance and the avoidance of protests rather than intelligent risk-taking. SPEED overhauls procurement officer training and evaluation, starting with a review of both the Defense Acquisition University (DAU) and career development programs. SPEED also loosens—while retaining key protections—post-employment restrictions, which can encourage individuals to consider the public-private talent exchange program. SPEED thus provides a foundation for continued reforms in staffing that is worth incorporating into FoRGED.
Forging a New Acquisition System
Defense procurement reform is increasingly critical to meeting America’s growing national security challenges, and is also an important pillar in rebuilding the U.S. industrial base more generally. The FoRGED and SPEED Acts advance fundamental reforms that are long overdue and offer necessary improvements to a procurement system built for a past era. Congress should combine the best features of both bills in the final version of this year’s NDAA.