Photo: Martin Falbisoner
President Trump on December 18, 2025 signed into law S. 1071, the National Defense Authorization Act (NDAA) for Fiscal Year 2026, Public Law No. 119-60. As is customary, Title VIII of the legislation addressed acquisition reform. Those statutory provisions (discussed below along with other reform measures) were summarized in a Joint Explanatory Statement from the House and Senate Armed Services Committees, a statement which by its terms serves as a conference report for the NDAA.
Editor’s note: This summary, which may be updated, was prepared for use by the Procurement Reform seminar at the George Washington University Law School.
Congress’ core intent in Title VIII of the NDAA was to change the way the Department of Defense (DOD) (the Department of War) buys and maintains technology. Title VIII included many elements of H.R. 3838, the Streamlining Procurement for Effective Execution and Delivery (SPEED) Act from the House of Representatives (sponsors’ op-ed), and S. 2296, the Senate-passed version of the NDAA (which in turn drew on the Senate’s Fostering Reform and Government Efficiency in Defense Act (the “FoRGED Act”) (background), introduced late last year by Senate Armed Services Committee Chairman Roger Wicker). A key strategic goal was to move from a rigid, “program-by-program” oversight model to a more agile, portfolio-based management system.
For an outstanding summary of the NDAA see Melissa P. Prusock, Michael J. Schaengold, Paul F. McQuade, Eleanor (Elle) M. Ross & Jordan N. Malone, Feature Comment: The Substantial Impact Of The Fiscal Year 2026 National Defense Authorization Act On Federal Procurement Law, Government Contractor, Feb. 4, 2026
Assessing the NDAA’s Reforms Against the Revolutionary FAR Overhaul
Taken at face value, the Trump administration’s Revolutionary FAR Overhaul and the most recent NDAA appear to be fully aligned: both aim to reduce regulatory constraints in order to advance federal procurement. On closer examination, however, the annual NDAA process and legislation show how statutes often reflect compromises, half-steps and missed opportunities for improvement. For whatever reason — perhaps a lack of legislative consensus or political will, institutional caution, deference to the other branches of government, or a simple lack of information — Congress often paints only part of the solution in statute. Regulations must fill that gap, and sometimes regulations have to be written against a fully blank space left by Congress.
This reality — that in the U.S. system of democratic government, with a complex, highly mature procurement system, Congress alone cannot shape all the laws governing the procurement system — contradicts the Revolutionary FAR Overhaul’s assumption (apparently grounded in recent Supreme Court decisions, such as Loper Bright Enterprises, which stressed Congress’ primacy in writing the law) that all regulation must be based on statute, and any other regulations presumptively should be eliminated.
As noted in an earlier post, where the FAR overhaul process leaves provisions in place, under the Executive Order which is guiding the FAR overhaul, the OFFP Administrator and the FAR Council are to consider whether to set those regulations (or any new FAR provisions not required by statute) to “sunset” (expire) automatically within four years, unless renewed by the FAR Council.
Consistent with the Executive Order, the overhaul would create a global requirement, under a new FAR 1.109, that all “FAR sections that are not required by statute must expire 4 years after the effective date of the sections,” unless approved by the FAR Council. The guiding OMB memorandum emphasized that “all FAR requirements not directed by statute that remain in the FAR [after the overhaul] will expire four years after the effective date of the rule unless renewed by the FAR Council.” The assumption which informs these directives — that only statutes should undergird procurement law — seems misplaced when read against the reality of U.S. legislative reform, discussed below in the context of the most recent NDAA. (The prior year’s NDAA, like its predecessors, followed a similar pattern of legislative half-steps and compromises; the summary of last year’s NDAA is also linked at the bottom of this page.)
The annual defense authorization legislation is an enormous asset to the U.S. procurement system because it allows Congress to “steer” the system in new directions, often playing a critical role in overcoming agencies’ institutional inertia or entrenched industry’s opposition to reform. As the discussion below shows, however the statutory reform process is not perfect — it’s often rushed and incremental — and it is highly unlikely that any long-term observer would argue that statutes alone should govern a sound U.S. procurement system.
Legal Reforms: NDAA
Bid Protests – Withholding Contract Payments: Section 875
Bid protests were a focus of debate in 2025, in part because of frustration (especially in the government) with incumbent contractors that, having lost a follow-on contract, protest the award to a competitor — merely (in the view of some) to extend the revenue stream from the original contract.
The original House version of the NDAA, introduced in June 2025, included a provision (Section 818) that would have required the Defense Department to revise the Defense Federal Acquisition Regulation Supplement (DFARS) to establish procedures for a contracting officer to seek disgorgement of profits from an incumbent contractor if that contractor filed a protest that was ultimately dismissed by the Government Accountability Office.
In July 2025, the House Subcommittee on Government Operations held a hearing on “Bid Protest Reform: Understanding the Problem” (Congress.gov record of hearing). Witnesses at the hearing addressed several proposed bid protest reforms before Congress — including a proposal for GAO to charge costs to protesters — and uniformly argued that the federal bid protest system is fundamentally sound, after a century of development.
In the following months the focus shifted back to the armed services committees, and to how to address the problem of protests by losing incumbents.
In Section 875 the final version of the NDAA called on the Defense Department to amend the DFARS so that, if an agency enters into an interim (“bridge”) contract with the incumbent contractor while the incumbent’s protest is pending at GAO, the contracting officer can withhold payments of up to 5% of the total due on that contract. Those withheld payments will be forfeited if the protest is dismissed, by a final determination, “based on a lack of any reasonable legal or factual basis.”
As passed, the language of Section 875 left an ambiguity. Under the new statute, payments may be withheld (and forfeited) only if the agency “was prohibited from awarding a new contract” under 31 U.S.C. 3553(c). As a practical matter, however, protests are often lodged after award of a new contract — but in those cases, the agency has not been “prohibited from awarding a new contract.” Disappointed incumbent contractors facing potential forfeiture under Section 875 may argue that in those cases where the contract was awarded before the protest was lodged no payments may be withheld or forfeited.
Commercial Products & Services: Secs. 1821 et al.
The final NDAA included several important reforms regarding the purchase of commercial products and services. These reforms run parallel to the changes through the Revolutionary FAR Overhaul meant to encourage federal officials to purchase from commercial markets first. The NDAA provisions include:
- Section 1821 – Listing in DFARS of Required Provisions: The NDAA calls for the Defense Federal Acquisition Regulation Supplement (DFARS) to list defense-unique contract clause requirements based on laws, executive orders, or acquisition policies that may be applied to contracts or subcontracts (if not tied to a federal prime contract) for the procurement of commercial products and commercial services, and separately for the procurement of commercial off-the-shelf items. Congress’ intent appears to be to make contracting with commercial companies simpler by encouraging the Defense Department to include only those clauses specifically required in contracts for commercial goods and services.
- Section 1822 – Commercial-First Mandate: The NDAA strengthens the requirement to use commercial products and services to the maximum extent practicable. It requires the Department of Defense to establish a formal process to show that a commercial solution cannot work before the Department uses a noncommercial solution. The Joint Explanatory Statement notes that this provision, based on a provision in the original Senate bill (Section 825), calls for a formal process at the Defense Department for determining the nonavailability of commercial products or commercial services. It requires the contracting officer and the portfolio acquisition executive (a new role, described below) to submit a written memorandum before using non-commercial solicitation procedures, to explain the decision based on market research and requirements analyses. Section 1822 also adds contractors, consultants, researchers, and advisors as acquisition officials to ensure their compliance with rules prioritizing the preference for commercial products and commercial services when supporting the Department in market research and requirements drafting. This last requirement may have been a response to the Percipient.ai case (background), in which a potential supplier alleged that its cutting-edge commercial solution had been unlawfully ignored by the purchasing agency and its prime contractor (which the supplier alleged was a competitor).
- Section 1823 – Commercial Solutions Openings Expanded: An awkwardly named but increasingly popular acquisition strategy is “Commercial Solutions Opening” (CSO). (See GSA CSO guide.) The Defense Acquisition University (DAU) notes that a CSO is “is a long-duration (typically one or more years) solicitation seeking innovative solutions to government-specified problems or needs, known as ‘areas of interest,’ using commercially-available technologies and/or capabilities.” A CSO’s areas of interest “can be added, changed, or removed from a CSO over time.” The DAU summary notes that a CSO “may result in award of other transactions (OTs) or FAR-based procurement contracts and agreements, depending upon the intent to award such instruments being described within the CSO itself and the statutory authority being utilized.” In Section 1823, the NDAA expands the purposes for which CSO solicitation procedures may be used, to allow a CSO procurement for any (not just “innovative”) commercial products and services. Section 1823 also creates authority for sole-source follow-on procurements, so long as the statutory requirements for competition and prototype contracting are met.
- Section 1824 – Limits on Commercial Subcontracts Clauses: Consistent with Section 1821 (summarized above), Section 1824 of the NDAA references the contemplated lists of required clauses to narrow the clauses that can be imposed through subcontracts for commercial goods and services. .
- Section 1827 – Advance Payments / Commercially Utilized Acquisition Strategy: Under federal law, “advance payments” to contractors are disfavored. As DAU explains, an “advance payment” is a payment “made before work commences.” Because of “the high degree of risk associated with advance payments, they are the least preferred method of contract financing.” Section 1827 of the NDAA clarifies that certain upfront payments — payments made pursuant to a “commercially utilized acquisition strategy” — for commercial services are not “advance payments,” which should make it easier for the Defense Department to use standard commercial subscriptions or SaaS (Software as a Service) models.
- Section 1828 – Review of Commercial Buying: The NDAA calls for the Defense Department to “conduct a comprehensive review” of the Department’s approach to acquiring commercial products and commercial services, and to report to Congress.
Competition Requirements – Amendments: Section 812
Section 871 of the original Senate bill proposed a number of statutory changes regarding competition (see Senate Armed Services Committee report), which were carried into Section 812 of the final NDAA. One change will be to 10 U.S.C. 3012, to make clear that the requirement for “full and open competition” is met when the Department purchases through the General Services Administration (GSA) Multiple Award Schedule program so long as “best value” is achieved — no longer when orders under the program “result in the lowest overall cost alternative to meet the needs of the United States.”
Cost and Pricing Reforms: Sections 1804, 1806 & 1826
The NDAA brought important reforms regarding cost and pricing issues:
- Section 1804 – TINA Threshold Increase: The NDAA raised the statutory threshold for the Truth in Negotiations Act (TINA) (mandatory submission of certified cost or pricing data) from $2 million to $10 million. This should reduce the paperwork burden for medium-sized contracts.
- TINA “Sweeps” Study: As the Defense Contract Audit Agency (DCAA) has explained, a TINA “sweep” is “a process whereby a contractor reviews its records to determine if more current cost or pricing data exist and need to be disclosed to the government.” Under current practice, it is common for an agency and the contractor to enter into a provisional “handshake” agreement on price, only after which will the contractor enter into a “sweep” to determine if other relevant cost or pricing data should be produced. As Congress’ Joint Explanatory Statement noted (in its discussion of “Legislative Provisions Not Adopted”), although the original House and Senate bills would have penalized contractors that did not submit all relevant cost or pricing data early on by barring them from using information for a later “sweep” as a defense against a government claim of defective cost or pricing data, the final legislation did not contain either provision. The Joint Explanatory Statement did note “concerns that contractors may not be providing disclosures of cost or pricing data in their possession prior to a price agreement, opting to disclose such data only after agreement and immediately before contract award,” a practice which “may result in upward adjustments to contract pricing without providing time for sufficient review due to factors such as the expiration of funds or urgent military needs for the products or services.” Congress therefore directed the Defense Department “to require the Acquisition Innovation Research Center to submit a report to the Secretary of Defense by January 30, 2027, assessing whether these practices constitute a systemic problem in the sweeps process and identifying ways to address them.” The Defense Department is to submit the report to Congress. The report is to assess (1) the sweeps process, (2) whether prime contractors have withheld data until after the “handshake” agreement on price, with an explanation of why; (3) whether it is feasible and wise to bar prime contractors from submitting data after a handshake agreement on price; and (4) recommendations to improve the disclosure of cost or pricing data prior to sweeps.
- Section 1806: Cost Accounting Standards (CAS): Under federal cost regulations, “full coverage” of the Cost Accounting Standards means that the business unit must comply with all of the Cost Accounting Standards. Section 1806 of the NDAA raised the threshold for full Cost Accounting Standards (CAS) coverage from $50 million to $100 million. As the Joint Explanatory Statement which accompanied the NDAA noted, the earlier House bill had contained a provision (sec. 1824) that would have required the Defense Department to supplant the Cost Accounting Standards with Generally Accepted Accounting Principles (GAAP) if GAAP “would serve as a viable commercial accounting standard and system.” The final legislation, however, merely directed the Defense Department to find ways to streamline CAS compliance, and to brief the armed services committees by March 15, 2026. By that date, Congress directed, GAO is to provide a briefing to congressional committees on progress.
- Section 1826 – Nontraditional Contractor Exemptions: The NDAA exempts nontraditional defense contractors from the complex “Cost Principles” under FAR Part 31, which should make it easier for emerging technology companies to work with the military. This is part of a suite of exemptions for nontraditional defense contractors under Section 1826, including from requirements for accounting systems (DFARS 252.242-7006), earned value management systems (DFARS 252.234-7002), cost estimating systems (DFARS 252.215-7002), material management and accounting systems (DFARS 252.242-7004), contractor property management systems (DFARS 252.245-7003), contractor purchasing systems (DFARS 252.244-7001), contractor business systems (DFARS Section 252.242-7005), special cost or pricing issues (including defective pricing) (DFARS 215.407), and required cost or pricing data and certifications (10 U.S. Code § 3702). A “nontraditional contractor” under 10 USC 3014 means an “entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards.”
Documents Referenced in Solicitations: Section 802
Section 802 of the NDAA says that the Defense Department must note the date of a document (a published technical standard, for example) referenced in a solicitation. Section 802 further says that if the referenced document changes after the solicitation is issued, the new version of the referenced document must be noted by an updated notation. If not, “the version of the document that shall apply with respect to such contract or other agreement is the version in effect at the time of the issuance of the solicitation.” This appears to shift to the Defense Department at least some of the risk of tracking and updating notations to documents referenced in a solicitation (and ultimate contract) which have been revised.
Financing Costs Allowable – Pilot Program: Section 803
Private financing is increasingly important as the government seeks to purchase cutting-edge technologies which require enormous capital investments. Traditionally, the government has refused to reimburse contractors for financing costs when contractors use private capital for federal cost-reimbursement contracts. Under the current cost principles at FAR 31.205-20, costs of financing are generally unallowable. As the Joint Explanatory Statement noted, both the Senate bill (Sec. 822) and the House bill (Sec. 808) contained provisions that would have permitted financing costs to be allowable and allocable as a cost for federal contracts and subcontracts, with certain stipulations. The final version of the NDAA took a narrower approach. Section 803 of the NDAA authorized “the Secretary of Defense to establish a pilot program [through 2029] to evaluate the feasibility, risks, and benefits of expanding contract cost principles . . . of the Department of Defense to allow for certain financing costs to be considered allowable and allocable as a direct or indirect cost” of a covered contract.
Past Performance: Section 824
In the U.S. federal system, per FAR Subpart 42.15 past performance is typically assessed separately from contractor qualification (responsibility) (see background). Past performance is often assessed on a scored basis (much like a technical evaluation). As the Defense Acquisition University notes, per the FAR an agency’s past performance assessment is often based on a bidder’s selected Contractor Performance Assessment Reports (CPARs) from prior federal contracts. The NDAA seeks to drive reform of that system, at least with regard to Defense Department contracts, and calls for other reforms to pare unnecessary burdens on small businesses and “non-traditional” contractors (as noted, firms not performing under full CAS coverage).
The original House bill’s Section 836 called for the Defense Department to refocus past performance evaluations — including considering past performance information from outside government — in order to increase competition. The House Armed Services Committee report noted that the number of defense logistics contractors had decreased, and there are “commercial firms with global logistics experience and strong past performance on large, complex non-governmental projects that are not contracting with the Department of Defense.” The House report said that the “Department can encourage new participation in the defense industrial base, including additional providers of logistics services, if the acquisition process accepts and values relevant non-governmental past performance.”
Section 824 of the final legislation called for the Defense Department to issue guidance (intended to supplement, not supplant, existing guidance) within one year on:
- When the Defense Department should encourage competition (especially on new requirements) by allowing past performance information from commercial or other non-government projects.
- How the Department should validate non-government past performance.
- Using other methods of evaluation, beyond past performance, such as demonstrations and testing of technologies.
Section 824 also called for the Defense Acquisition Regulations (DAR) Council to convene within 90 days to identify “specific, unnecessary procedural barriers that disproportionately affect the ability of small business concerns and nontraditional defense contractors to compete for contracts with the Department of Defense, with a focus on streamlining documentation and qualification requirements unrelated to the protection of privacy and civil liberties.” Working with the public, including small businesses, the Department is to identify policies and regulations that are “obsolete, overly burdensome or restrictive, not adequately harmonized, or otherwise serve to create barriers to small business concerns and nontraditional defense contractors,” or that “unnecessarily increase bid and proposal costs.” The Department is to take action, and brief the Armed Services Committees, within two years. The legislation was silent on how this initiative is to be coordinated with the ongoing Revolutionary FAR Overhaul.
Repeals of Prior Legislation: Section 811
The Senate bill, per Senate Armed Services Committee Chairman Roger Wicker’s FoRGED Act, called for the repeal of scores of statutory requirements, including (according to the Joint Explanatory Statement) many “related to acquisition policies and processes and to reduce administrative complexity related to reporting mandates, expired pilot programs, outdated requirements, [and] limitations.” Those repeals were carried into the final legislation. The repealed provisions are summarized here, and are detailed here; these reviews were produced using artificial intelligence in a cutting-edge research initiative through George Mason University, led by Richard Beutel and Art Nicewick; see their report, The Potential Role of AI in Legislative Research and Drafting: Results of a Pilot Program (2025).
Conclusions on Using AI for Legal Research and Drafting: The report by Richard Beutel and Art Nicewick concluded that “AI’s ability to process vast datasets . . . accelerates research, while its predictive tools help anticipate implementation challenges. . . . However, staff must oversee AI outputs to ensure alignment with [principals’] intent and political realities—AI might excel at technical drafting but miss nuanced stakeholder dynamics. Ethical use, such as avoiding biased data in procurement analysis, is also critical. . . . AI-generated explanatory materials may lack the persuasive finesse or rhetorical flourish that human drafters bring to bear, particularly in politically charged contexts. Moreover, errors in AI summarization could misrepresent intent necessitating rigorous proofreading by staff. Adapting legal frameworks with AI is not foolproof. . . . Additionally, over-reliance on AI could lead to ‘path dependency,’ where staff favor incremental tweaks over bold reforms, simply because the system excels at refining what already exists. . . . The technology may lack the political acumen to weigh trade-offs or anticipate stakeholder reactions, areas where human judgment remains irreplaceable.”
Right to Repair: Section 805
The right of the Department of Defense and its service members to repair purchased equipment, independently from the equipment manufacturer and at reasonable cost, has been a controversial issue. Many members of Congress and the Trump administration favored extending the right to repair. The House and Senate versions of the NDAA would have afforded the military services broad rights to repair their own equipment; industry opposed those provisions. Section 804 of the final NDAA took a narrower approach, and merely called for the Defense Department to establish a digital system to track and manage technical data necessary for repairs, and to verify contractors’ compliance with technical data requirements. This should make it easier for Defense Department personnel to exercise existing rights to repair.
The Joint Explanatory Statement focused blame for the problem on the Department, not contractors; it concluded that “the Department’s challenges related to [repair] are not rooted in an insufficiency in the law, but rather insufficiencies in the Department’s planning and resourcing decisions made early in the acquisition phase related to the sustainment of the systems it procures, and in some cases the Department’s insufficient inspection, acceptance, and management of technical data that have been negotiated.” The House and Senate joint statement strongly encouraged “the Department to make every effort to ensure that the maximum amount of competition is maintained throughout development, procurement, and sustainment phases,” and “to ensure that lack of technical data does not impede the effective operation and maintenance of systems acquired by the Department.”
Supply Chain Illumination and Domestic Sourcing (Sections 833-836)
Sections 833-836 of the NDAA focused on “illumination” of the Defense Department’s supply chain, and new preferences for domestic sources. The goal is to enhance security of supply – to ensure, for resilience and security, that the Defense Department can “see” and rely upon the vendors in its supply chain.
Section 833 addressed interim national security waivers for supply chain illumination. The legislation calls for the Defense Department to authorize contracting officers to accept delivery of a noncompliant item (an item barred by statute, such as certain items from China) under an interim national security waiver. The contractor must be using a qualifying supply chain illumination tool, must have disclosed the presence of the noncompliant item, and the program manager must determine that the noncompliant item does not represent a security, safety, or flight risk. The legislation in effect encourages contractors to put supply chain monitoring (illumination) measures in place. If an interim waiver is granted, the contractor will be required to undertake additional remedial measures, including identifying compliant alternative sources.
Section 834 called for the Defense Department to develop a strategy to eliminate, by 2030, its reliance on optical glass from: North Korea, the People’s Republic of China, the Russian Federation, Belarus and Iran. Section 835 similarly called for the Defense Department to develop a similar strategy to stop the Department’s reliance on computer monitors from all the same countries, except Belarus.
Section 836 called for the Defense Department to establish, by January 2027, a publicly available online repository of information from offerors, related to their sensitive products’ compliance with statutory sourcing prohibitions. The items covered by the repository are to be those offered by small businesses and manufacturers of certain critical items. The Department is to assess, and brief Congress, on whether this information repository might be expanded to become a normal part of supplier onboarding and review. An offeror’s false submission explicitly could trigger fraud liability under the False Claims Act. Offerors are to be encouraged – including through training – to register their products.
Tariffs Exemption: Not Adopted
Although Section 874 of the original Senate defense authorization bill would have strengthened the Defense Department’s exemption from tariffs, that provision, which was vigorously opposed by the Trump administration, ultimately was not included in the NDAA. The Joint Explanatory Statement did, however, call for a report from the Defense Department on the cost impact of the Trump administration tariffs, and on reciprocal defense procurement agreements with allies which may support a Defense Department exception from tariffs. A more complete discussion of this issue is available here, in the blog post linked at the right.
Uninsurable Risk – Classified Work: Section 801
Section 801 requires the Department of War to ensure that classified, fixed-price contracts do not carry uninsurable losses for work-in-process when commercial insurance is unavailable, in order to protect contractors from catastrophic financial failure on high-risk projects.
This provision was originally Section 804 of the SPEED Act in the House version of the bill. There, the House Armed Services Committee noted that “a contractor performing on a classified contract is generally unable to secure insurance from third-party commercial insurance providers because the Department of Defense is unlikely to allow the contractor to acknowledge the existence of the contract or underlying program to a commercial insurance provider.” To fill that gap, the House provision required “the government to assume the risk of loss for work in process on a classified contract.”
Under Section 801 of the final NDAA, the government’s assumption of the risk of loss would be limited to the loss not otherwise covered by the contractor’s insurance, and would not apply if the loss was a result of “workmanship error” (i.e., “damage to work in process that is a result of an incorrectly performed skill-based task, operation, or action that was originally planned or intended”) by the contractor.
Acquisition Management Reforms: NDAA
Contract Cancellations Report: Section 874
Section 874 of the NDAA calls for annual reports on contract cancellations and terminations at the Department of Defense. The first report would cover fiscal year 2025, when the Trump administration, in part due to the efforts of the “Department of Government Efficiency” (DOGE), ended billions of dollars’ worth of Defense Department contracts. The reports are to detail (among other things) the contract number; the values of the contracts, obligations and any termination settlements; a justification, including whether (A) the contract did not align with the Secretary of Defense’s priorities; (B) the requirement no longer exists; (C) the requirement has decreased; (D) if the requirement still exists, the contract did not meet cost, schedule or performance obligations; or (E) the cancellation was done under “any other rationale as determined by the Secretary.”
This reporting requirement originated in the Senate Armed Services Committee, which commented in its report on the legislation: “The committee notes the Department of Defense’s efforts to implement the President’s ‘“Department of Government Efficiency’ cost efficiency initiative . . . . The committee commends the Department for its efforts to find efficiencies . . . , but notes that cancelled contracts should be codified through reprogramming requests or rescission packages that are approved by the Congress. Furthermore, the committee is disappointed in the lack of detail provided to date by the Department on the total amount of savings announced, which does not include any specifics by contract item line number and are, therefore, unverifiable.”
Cybersecurity Review and Harmonization: Section 866
Section 866 of the NDAA Directs the Defense Department to review its units’ cybersecurity requirements with an eye to eliminating duplicative cybersecurity regulations and to create a single, uniform standard for contractors to follow. As the Joint Explanatory Statement noted, the NDAA directs “the Chief Information Officer of the Department of Defense, in coordination with the Chief Information Officers and representatives from the service acquisition executives of each military department, to harmonize and reduce unique cybersecurity regulations” levied on the Defense Industrial Base. (For further detail on cybersecurity-related reforms under the NDAA, see the Crowell & Moring summary.)
Defense Acquisition University Review: Section 825
Section 825 of the NDAA directed the Defense Department, “acting through the Director of the Acquisition Innovation Research Center,” to “conduct a comprehensive assessment of the Defense Acquisition University [DAU].” The assessment is to look at DAU’s organization, its curriculum, its faculty and resources, DAU’s use of outside training and certifications, and its experiential and field training. AIRC is then to make recommendations to the Defense Department on training the acquisition workforce, and the Defense Department is to report to Congress within one year.
On November 7, 2026, Secretary of War Pete Hegseth announced that DAU would be renamed the “Warfighting Acquisition University.”
The Acquisition Innovation Research Center (AIRC), based in the Stevens Institute of Technology, “reaches across academia to enable defense innovation and evidence-based decision making.” Prof. Christopher Yukins, who teaches GW Law’s Procurement Reform course, and David Drabkin, who participates in that course, authored AIRC’s congressionally mandated studies on bid protests and debarment for the Department of Defense.
Defense Civilian Training Corps: Section 823
The NDAA’s Section 823 authorizes the Defense Department’s hiring of members of the Defense Civilian Training Corps (DCTC). The DCTC program, which operates through collaboration between the DoD and academia, helps train scholars in the partnership between the DoD and the defense industrial base. The pilot program and curriculum are led by the Acquisition Innovation Research Center (AIRC) (described above), in partnership with the several universities to create a comprehensive talent development program. DCTC scholars are selected through a rigorous and highly competitive process.
Performance Metrics Revised: Section 826
Section 826 of the NDAA calls for restructuring of the performance evaluation metrics used for the Defense Department’s acquisition workforce. It requires the Defense Department, within 180 days, to implement mandatory key performance indicators (KPIs) evaluating members of the acquisition workforce. These KPIs would look to (1) delivering operational capabilities to the armed forces expeditiously; (2) facilitating innovative solutions to enhance military effectiveness and responsiveness; (3) ensuring supply chain and industrial base resilience and surge capabilities; (4) cultivating a leadership culture that encourages responsible risk-taking; (5) continuous education, including proficiency in artificial intelligence. The new evaluation criteria will also assess: (1) adopting innovative acquisition authorities; (2) preference for commercial products and services, including through market research; (3) engagement with end users, and incorporating their feedback; (4) supporting iterative development and handling program tradeoffs; (5) professional development to broaden expertise and assume expanded responsibilities in cross-functional initiatives; and (6) overcoming obstacles to prioritize end-user outcomes. As part of this effort to advance the acquisition workforce the Defense Acquisition University (DAU) is to develop experiential training.
Portfolio Acquisition Executives (PAEs): Section 1802
In a major reform of the acquisition process, the final NDAA’s Section 1802 will create a new role, Portfolio Acquisition Executives (PAEs). Instead of managing a single weapon system, PAEs manage entire “portfolios” (e.g., all tactical drones), allowing them to shift funds and requirements rapidly between programs to meet emerging threats.
Under the statute, a portfolio acquisition executive will be the “senior acquisition official designated by the component acquisition executive or the service acquisition executive of the military department concerned, as applicable, to lead a portfolio of capabilities, with authority for plans, budgets, and execution of programs assigned to the portfolio, including life-cycle management.”
The Joint Explanatory Statement noted the sponsors’ belief that “transitioning Program Executive Officers to Portfolio Acquisition Executives (PAEs) will enable the Department of Defense to transition from managing acquisitions on a program by program basis to managing portfolios of programs to better deliver capabilities to end-users.” To make portfolio management work, the Joint Explanatory Statement said, “PAEs must be provided with functional support from the disparate stakeholders of the acquisition system including contracting, budgeting, engineering, and related disciplines, and be empowered to make decisions across all of these areas.” The goal is “to reduce bureaucracy, not to add an additional layer of bureaucracy.” To accomplish this, the Joint Explanatory Statement said, “we intend for PAEs to report directly to the service acquisition executives and program managers to report directly to the PAE. Functional support for the portfolio should, to the maximum extent practicable, be under the operational control of the PAE with administrative control of personnel and certain clearances retained outside of PAE authority as needed.”
Other Developments: Trump Administration
Executive Order Constraining Defense Contractors
On January 7, 2026, President Trump signed an executive order, “Prioritizing the Warfighter in Defense Contracting.” The executive order is intended (according to the White House) “to stop defense contractors from putting stock buybacks and excessive corporate distributions ahead of production capacity, innovation, and on-time delivery for America’s military.”
The accompanying White House press release noted that the Trump administration wants to hold “underperforming defense contractors accountable to ensure the United States military maintains the most lethal warfighting capabilities in the world.” While it acknowledged firms’ right to earn profits, the White House argued that “America’s defense industrial base has a responsibility to ensure America’s warfighters have the best possible equipment and weapons.” The White House complained that “many defense contractors have been incentivized to prioritize investor returns over the Nation’s warfighters,” and to “spend billions on stock buybacks and excessive dividends while falling behind on critical weapon systems and production timelines.” Some firms, the White House said, “have pursued newer, more lucrative contracts while failing to deliver on existing ones and sacrificed production capacity, innovation, and on-time delivery for stock buybacks and non-ordinary-course dividends to shareholders. . . . This behavior weakens military readiness, delays vital capabilities, and betrays the American people.”
As a result, the executive order called for the Defense Department to address the following:
- “Underperforming” contractors: The executive order said that within 30 days, the Secretary of Defense is to identify defense contractors for critical weapons, supplies, and equipment (there is no mention of services contractors) that are (1) underperforming on their contracts, (2) not investing their own capital into necessary production capacity, (3) not sufficiently prioritizing United States Government contracts, or (4) whose production speed is insufficient as determined by the Secretary, and that have, during the period of underperformance or insufficient prioritization, investment, or production speed, engaged in any stock buy-back or corporate distribution. If a contractor is identified, the Secretary is to provide that contractor with notice, and “then engage as needed with the . . . contractor to resolve the issues identified in such notice, including, where permissible under applicable law, providing the contractor with the opportunity to submit a remediation plan approved by its board of directors for review by the Secretary, during the 15-day period following notification.” None of the critical terms here — “underperforming,” “necessary production capacity,” “sufficiently prioritizing,” “production speed is insufficient,” “stock buy-back” or “corporate distribution — is defined, which leaves great uncertainty about how the order will be implemented. (See National Law Review summary).
- Remedies for underperforming contractors: If the contractor’s remediation plan is deemed “insufficient” the Secretary may “initiate immediate actions to secure remedies . . . through use of any voluntary agreement of the contractor, available enforcement actions under the Defense Production Act [DPA] (50 U.S.C. 4501 et seq.) [background on DPA: Congress.gov and Yale School of Management], and any available contract enforcement mechanisms.” The Secretary is to take into account “the financial condition of the defense contractor, the economic viability of relevant programs, and the potential mutual benefits” of government opportunities “coupled with capital investments by the contractor.”
- Contract provisions barring certain buy-backs and corporate distributions: Within 60 days, the Secretary is to incorporate into existing and new contracts “a provision prohibiting both any stock buy-back and corporate distributions by the contractor during a period of underperformance, non-compliance with the contractor’s contract, insufficient prioritization of the contract, insufficient investment, or insufficient production speed as determined by the Secretary.”
- Limiting executive compensation: While President Trump suggested in a Truth Social post that defense executives’ compensation should be limited to $5 million annually, the executive order was less precise. The order says only that future contracts must “stipulate that executive incentive compensation for contractors will not be tied to short-term financial metrics . . . and instead will be linked to on-time delivery, increased production, and all necessary facilitation of investments and operating improvements required to rapidly expand” U.S. stockpiles and capabilities. Under future contracts, if the Secretary finds that a contractor is underperforming, has not complied with contract requirements, has not sufficiently prioritized the contract or made sufficient investment, or that production speed is inadequate, the Secretary may “require that executive base salaries of the contractor be capped at current levels, with increases allowed for inflation” for long enough for the Secretary to scrutinize the incentives built into executive compensation to make sure that compensation is “directly, fairly, and tightly tied” to the government-focused metrics outlined above.
- Stopping military sales advocacy: If a contractor is identified as underperforming, the Secretary of Defense, in consultation with the Secretary of State and the Secretary of Commerce, is to consider whether it is appropriate to forego or stop advocacy efforts for those underperforming contractors competing for an international Foreign Military Sale or Direct Commercial Sale.
- Change to Securities & Exchange Commission (SEC) stock buy-back rule: The executive order also directed the Chairman of the SEC to “consider whether to adopt amended regulations governing stock buy-backs” under SEC Rule 10b-18 that would prohibit use of the rule’s safe harbor when defense contractors are identified as “underperforming.” It is not clear, however, how this would work, as Rule 10b-18 by its terms merely provides publicly traded firms (“issuers”) with a “safe harbor” from “liability for [market] manipulation under [securities laws] . . . solely by reason of the manner, timing, price, and volume of their repurchases when they repurchase the issuer’s common stock in the market.” (See Congressional Research Service background.) In other words, it is unclear what intersection there is between the executive order (which addresses how a firm is performing under contract) and Rule 10b-18 (which narrowly addresses how a firm buys back its own shares).
In sum, the executive order raises concerns that it is too vague and may be difficult to implement. While, as the New York Times noted, defense contractors’ focus on their own profits has been a perennial point of debate in Washington, and a 2023 Defense Department study found that contractors were spending more on stock repurchases even as their investments in research and development declined (see chart), the Executive Order left it largely to the Defense Department to determine how to refocus defense contractors’ efforts.
New Anti-Fraud Division Announced
On January 8, 2026, the Trump administration announced that it was establishing a new anti-fraud division in the Department of Justice.
“To combat the rampant and pervasive problem of fraud in the United States,” the White House said, “the DOJ’s new division for national fraud enforcement will enforce the Federal criminal and civil laws against fraud.” The new Justice Department division is to be headed by a Senate-confirmed Assistant Attorney General, who “will be responsible for leading the Department’s efforts to investigate, prosecute, and remedy fraud,” to oversee “multi-district and multi-agency fraud investigations; provide advice, assistance, and direction to the United States Attorneys’ Offices on fraud-related issues; and work closely with Federal agencies and Department components to identify, disrupt, and dismantle organized and sophisticated fraud schemes across jurisdictions.” The new Assistant Attorney General will also “help develop and set national enforcement priorities, and propose legislative and regulatory reforms,” and to “advise the Attorney General and Deputy Attorney General on issues involving significant, high-impact fraud investigations and prosecutions and related policy matters.”
The White House announcement initially created confusion because it was not clear how the new anti-fraud division would coordinate with the existing civil and criminal fraud units in the Justice Department.
The new unit’s leadership was clarified when Vice President J.D. Vance announced that the “Justice Department would create a high-ranking position with broad authority to investigate fraud across the country that would be ‘run out of the White House’ and answer directly to himself and President Trump.” Alan Feuer, Vance Announces New Justice Dept. Fraud Post to Be ‘Run Out of the White House’, N.Y. Times, Jan. 8, 2026. The Times argued that the “assertion by Mr. Vance that he and Mr. Trump intended to exercise direct supervision over a senior Justice Department official was one of the administration’s most brazen efforts to date to toss out the traditional boundaries that have long existed between the White House and investigations conducted by federal law enforcement.”
The puzzle regarding organizational structure was further resolved a few days later when Bloomberg News reported, based on an internal email from the Justice Department, that the new anti-fraud unit would be separate from the existing Justice Department units:
The Justice Department plans to insulate its criminal and civil fraud sections from a White House-run enforcement initiative rather than merge them into the newly established fraud division, according to an internal email reviewed by Bloomberg Law.
“It has been decided that the Fraud Section will remain entirely intact under the current Criminal Division structure and its mission will remain the same,” Tysen Duva, the Criminal Division’s assistant attorney general, wrote to the office’s employees late Monday.
The new Senate-confirmed position, which Vice President JD Vance said Jan. 8 will be supervised directly by himself and President Donald Trump, will “be in addition to both the Criminal Division Fraud Section and the Civil Division Fraud Section,” Duva continued. “When a nominee is confirmed, that individual will hire attorneys to staff his/her own office.”
Ben Penn, Exclusive: DOJ Fraud Staffers to Be Protected From New White House-Led Unit, Bloomberg News, Jan. 12, 2026.
The consensus among legal observers (Morgan Lewis; National Law Review (Polsinelli); WilmerHale) was that the new Justice Department unit probably will rely primarily on the False Claims Act, the statute traditionally used against fraud in the federal government, for civil actions and enforcement.