DoD Overhauls Acquisition Process for Faster, Larger, and More Commercial-Like Procurements

The US Department of Defense recently announced reforms to defense acquisition processes as well as arms sales to foreign militaries. The department will reshuffle several offices in efforts to streamline acquisition and sales processes and simplify approvals, with the goal of accelerating defense acquisitions and foreign military sales.

Secretary Pete Hegseth announced the overhaul on November 7, 2025 before a gathering of defense industry executives. The reforms have been presented as necessary to “rebuild the defense industrial base.” Some of the reforms are immediately applicable while others are aspirational or require congressional approval. Under the most immediate reforms, the US Department of Defense (DoD) will consolidate related acquisition efforts and attempt to streamline foreign military sales (FMS). The Department’s acquisition office and each branch of the military must develop detailed implementation plans in the coming months.

FOREIGN MILITARY SALES – BACKGROUND, IMPORTANCE, AND CHALLENGES

The Arms Export Control Act authorizes the sale of weapons and other defensive articles to foreign nations. Under the FMS program, the foreign nations and the United States negotiate payment terms and delivery schedules, and then the United States either sells the items from existing stockpiles or acts as a purchasing agent, managing an acquisition from a defense contractor on behalf of the foreign nation. The Defense Security Cooperation Agency (DSCA), within DoD, is charged with overseeing the FMS program, in cooperation with the US Department of State.

The FMS program constitutes a significant portion of defense trade. Total sales through the FMS program have surged in recent years, from nearly $81 billion in FY 2023 to nearly $118 billion in FY 2024. While direct sales from producers still represent a larger share of total defense trade—approximately $200 billion in FY 2024—FMS is gaining ground. From FY 2023 to FY 2024, sales through the FMS program increased nearly 46%, while direct commercial sales increased 24%.

Despite this growth, the FMS program continues to be criticized as overly burdensome and slow. Transactions in the FMS program go through lengthy reviews by DoD, the State Department, and occasionally by Congress to make sure the sale aligns with the US administration’s foreign policy objectives. Because DoD is the first-tier purchaser, defense contractors must comply with the myriad of regulations in the Federal Acquisition Regulations (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). These shortcomings have been exacerbated by the unprecedented volume of sales caused by the conflicts in Israel and Ukraine.

REFORMS TO THE FMS PROGRAM AND DEFENSE ACQUISITIONS

To address these challenges, in April, the White House issued two executive orders (EO 14265 and EO 14268) directing the secretary of defense to develop plans for accelerating defense acquisitions and the sales of weapons to allies. The reforms announced on November 7, 2025 are in response to these executive orders.

Regarding the FMS program, Secretary Hegseth announced that both the DSCA and the Defense Technology Security Administration, the office that approves arms exports, will be moved to DoD’s acquisition program. The reshuffling is aimed at streamlining the FMS process by allowing the same officials who manage weapons acquisitions to also approve their sale to allies.

Along similar lines, DoD will create high-level portfolio acquisition executives (PAEs) who will oversee related acquisition efforts and have performance incentives linked to the speed of delivery. Previously, individual weapons acquisitions were overseen by a program executive officer. Now, several related acquisitions will be consolidated under a PAE with authority to shift resources among the acquisitions in their portfolio.

DoD simultaneously released an Acquisition Transformation Strategy outlining a host of initiatives. Among them are steps the department will take to incentivize speed and innovation, increase competition and flexibility for acquisitions, and reduce compliance costs. Some potential future changes in the strategy include the following:

• Extending the award terms to create “bigger, longer deals”
• Exploring “alternate capital investment” in the defense industrial base while simultaneously increasing due diligence on government investment deals
• Maximizing the use of commercial products and services to simplify acquisitions
• Establishing incentives to work with direct suppliers rather than through large prime contractors
• Reforming bid protests to discourage the filing of “frivolous bid protests”
• Using artificial intelligence (AI) to reduce administrative burdens on DoD
• Reviewing and rescinding existing guidance regarding information technology acquisitions
• Awarding bids that do not completely fulfill solicitation requirements
• Transitioning from Cost Accounting Standards (CAS) to commercially used Generally Accepted Accounting Principles (GAAP)
• Cutting down on the DFARS to remove burdensome clauses

POTENTIAL NEAR-TERM IMPACTS OF THE POLICY

Above all else, the changes signal a shift to prioritizing speed. Contractors for DoD should expect to see acquisitions with tighter timelines and more performance indicators linked to the timeliness of deliveries. Relatedly, the industry may also see a greater demand for commercial off-the-shelf technology and iterated or modular products.

Contractors could also see more contract modifications, stemming from the new authority granted to PAEs to shift resources between acquisition efforts with their respective portfolios. To increase competition, DoD may earmark more acquisitions for small businesses or prefer offers directly from suppliers, rather than offers laden with subcontractors. However, because of other initiatives within the US administration, contractors with a preferred bidder status could see increased scrutiny of that status. Finally, DoD also signaled it will award larger contracts with longer periods of performance, in an effort to increase risk taking and investment.

Considering the significant changes to the bid process, contractors should reevaluate their traditional bid response system to ensure they are adequately addressing the revised solicitation requirements. On the other side, contractors can prepare to bid on solicitations even in cases where they do not fulfill all the solicitation requirements.

Finally, as the FMS program grows, so will compliance burdens as bribery and corruption can play unfortunately significant roles in military and defense sales. Recently, an aerospace and defense company paid over $950 million to resolve a Department of Justice investigation into, among other issues, bribery related to foreign military sales to Qatar. Contractors seeking to take advantage of the FMS program should ensure they have high quality written and enforced anti-corruption and anti-bribery policies, including whistleblower processes and protections.

Concrete details for many of these initiatives, such as proposed revisions to the FAR and DFARS, remain to be seen, but they should crystallize over the coming months as the office for acquisition and sustainment and leaders of each branch of the military release detailed implementation plans. Morgan Lewis will continue to follow developments in this area.