The emphasis on speed in the Pentagon’s newly unveiled slate of acquisition reforms may come with increased near-term cost increases, analysts say. But according to U.S. defense officials, the new weapons-buying construct provides the military with enough flexibility to prevent runaway budget overruns in major programs.
“The one important point here is we’re emphasizing speed, but we’re not mandating speed,” Michael P. Duffey, the undersecretary of defense for acquisition and sustainment, told reporters Nov. 10.
Unveiled in a Nov. 7 speech by Secretary of Defense Pete Hegseth, the Pentagon’s new “Arsenal of Freedom” strategy amounts to a reordering of acquisition priorities, making the expense of new kit a less important factor in decision-making. Whereas the Defense Department previously emphasized “cost, schedule, performance,” in that order, Duffey said the new priority starts with schedule and ends with cost.
“There’s certainly no question about the emphasis on speed, but recognizing that there’s a need for judgment and flexibility,” Duffey said.
To give the services more acquisition flexibility, the Pentagon plans to move away from its current program executive office structure, where teams manage individual weapons programs, to a broader “portfolio” approach. A memo issued by Hegseth on Nov. 7 states that the portfolio acquisition executives will have “a governance structure that prioritizes speed,” though the document also notes that “prudent” trade-offs should still be made between schedule, capabilities, and cost.
That means that while speed may matter most, the department plans to pursue it in a measured way.
“It’s part of the reason we’re also hoping to provide the flexibility to the portfolio acquisition executives, to be able to move money around and to trade requirements,” Duffey said.
‘Time Is Money’
Analysts and other outside defense experts said the upfront cost of maintaining multiple lanes of competition, bolstering supply chains, and incentivizing companies to deliver on faster timelines will be a challenge for the Pentagon—particularly if it doesn’t see a funding increase over the next few years.
“More competition is more expensive,” Arnold Punaro, a former Senate Armed Services Committee staff director and now a defense consultant, told Air & Space Forces Magazine. “It’s going to be challenging to get more competition within a flatline budget. They’ll have to adjust priorities.”
In a Nov. 10 note to investors, Byron Callan of Capital Alpha Partners said several of the initiatives Hegseth announced carry implied costs, including the mandate to support more component firms. He added, though, that cutting development timelines should ultimately yield cost savings.
“Time is money, so if development and production timelines can be shortened from acquisition reform, there should be cost savings that can be applied,” he said.
Significant savings could come from awarding longer, multiyear contracts and emphasizing sustainability, Punaro noted. The bulk of a system’s lifecycle cost lies in long-term maintenance and upgrades, so placing more value on sustainability at the front-end could pay off over time.
Increasing competition, while it carries an upfront cost, should also yield more affordable capabilities over time, he said.
“Certainly we’ve seen that when you have two sources, it drives up quality and drives down cost,” Punaro said. “But that is expensive.”
Ultimately, the Pentagon thinks its reforms will lead to cheaper systems over time by encouraging companies to invest more of their own money in development rather than relying on government funding, and by applying a so-called commercial-first approach, buying into technologies that already exist if they fit the military’s needs.
Todd Harrison, a senior fellow at the American Enterprise Institute and a defense budget expert, said that while the department is “saying a lot of the right things” and making plans to tackle foundational acquisition issues, there are questions over whether they can implement this scale of reform.
“In terms of cost, I’m not aware of it ever actually panning out that faster is cheaper when it comes to defense acquisitions, but it’s not always prohibitively expensive to speed things up,” he told Air & Space Forces Magazine.
And while Congress appears poised to end the government shutdown—which has slowed much of the Pentagon’s acquisition efforts and halted new contracts—the department’s longer-term funding outlook is unclear. Lawmakers are poised to pass a continuing resolution that would keep the Pentagon operating at fiscal year 2025 levels through January or until Congress passes full-year appropriations.
Meanwhile, congressional leaders this summer passed a reconciliation bill that will boost the Pentagon’s budget to $1 trillion for fiscal year 2026, but it remains to be seen whether—and how much— funding DOD will receive in future years.
Duffey said the Pentagon will work to implement Hegseth’s acquisition reforms regardless of how its near-term topline shakes out.
“Budgets will always be a constraint, and I think we’ll always have to factor that into how we’re pursuing this,” Duffey said. “Certainly, I’ll be an advocate for what I believe the budget is required in order to get the capability we need. But my focus has been on, based on the budgets that we have, how can we optimize the system to deliver the best capability at the greatest speed, for the lowest cost.”
Better Buying Power
Eventually, the Pentagon wants to incentivize companies to pay for more development of weapons programs themselves and to increase the number of non-traditional defense companies eyeing programs. That external investment, Duffey said, could eventually increase the Pentagon’s “buying power” by reducing some upfront costs.
“So it may take some time for us to realize those gains,” Duffey said. “But, between longer duration contracts that incentivize private sector investment, where we have mature systems, or a greater competitive landscape where we have less mature systems, say in unmanned systems or in space, where … competition can be a driver towards speed and greater cost borne by industry.”
That approach could prove tempting to newer defense companies, particularly those funded by venture capital or private equity firms.
“Where there are new entrants or privately funded startups that are showing interest in doing business with the department, we want to do what we can to ensure that we give them every opportunity to prove their ability to compete and seek to leverage that competition to achieve our goals,” Duffey said.
But there are limits to what upstarts can produce as traditional defense companies still make most of the Pentagon’s big-ticket items, Harrison noted.
“There are a lot of newer defense companies that are looking for market share, trying to get in the door, and they may well be open to the idea of funding initial development themselves. The question is, how many programs are actually going to be feasible for these companies?” Harrison said.
Even for that are more willing to invest their own funds, he said, are ultimately aiming to make a profit.
“Their funders are looking for high-risk, high-reward opportunities,” Harrison said. “At the end of the day, these companies may be willing to risk a lot of money up front, but they are going to expect more profit down the road. They’re eventually going to be made whole and then some. They’re going to make money, and if they don’t, they will not stick around.”
The Pentagon’s reforms will not be instant, Duffey said, noting that the Pentagon is “at the beginning stages” of its transition and still working through its implementation plan. Many of the priorities outlined in three new memos from Hegseth on the acquisition reforms call for 30- to 90-day periods to flesh out details of how the changes will be carried out.
Analysts, including Harrison, urged those eager for improvements to temper any expectations for immediate transformation.
“I think that people have got to be patient,” Harrison said. “These things take time, even when time is the metric you’re trying to improve. These kinds of fundamental systemic changes don’t happen overnight. I think it will take a while to see if this actually bears fruit.”
