A Comprehensive Analysis of U.S. Defense Acquisition Policy and Industrial Base Modernization (September 3-14, 2025)

Executive Summary

This report offers a high-level summary of the most critical changes in the U.S. defense acquisition system from September 3-14, 2025. The period saw a potent combination of administrative reforms, legislative actions, and strategic investments aimed at updating and strengthening the nation's defense industrial base. The biggest policy change was the final approval of the Cybersecurity Maturity Model Certification (CMMC) DFARS rule, which significantly transforms the cybersecurity landscape for the entire defense supply chain. At the same time, the Department of Defense (DoD) is launching a "Revolutionary FAR Overhaul" and gaining legislative support from the "SPEED Act," showing an apparent, top-down effort to make bureaucratic processes more efficient. These reforms are backed by targeted, multi-million dollar investments in key industrial sectors, such as solid rocket motors and next-generation autonomous systems, emphasizing a strategic push for increased capacity and technological leadership. This report combines these developments to provide a comprehensive and future-focused analysis of their impact on all involved stakeholders.

Section 1: The Evolving Regulatory and Legislative Framework

This section analyzes the most critical policy and legislative updates, highlighting a coordinated approach to tackle long-standing problems of inefficiency and supply chain fragility.

1.1 Finalization of the Cybersecurity Maturity Model Certification (CMMC) DFARS Rule

The Department of Defense published the final CMMC Defense Federal Acquisition Regulation Supplement (DFARS) Procurement Rule in the Federal Register on September 10, 2025.^1. The rule, which becomes effective sixty days later on November 10, 2025, marks a significant shift in the DoD's cybersecurity approach, transitioning from a self-attestation model to a verifiable, contractually mandated program. The final rule introduces two new DFARS clauses: DFARS 252.204-7025, included in solicitations as a notice provision, and an updated DFARS 252.204-7021, which contains the contractual CMMC requirements.

This final rule is the most impactful development of the reporting period. It marks a fundamental change in the relationship between the DoD and its contractors. The rule’s three-year phased implementation serves as a key policy tool that will enable the DoD to gradually introduce these requirements into selected contracts before they become mandatory for all applicable contracts in Year 4.³ This method seems to be a clear acknowledgment by the DoD of the potential for this rule to cause significant disruption and loss within the defense industrial base (DIB), especially among small businesses. By adopting a gradual rollout, the DoD intends to give companies time to adapt, invest in compliance, and prevent a sudden shrinkage of the vendor pool. This strategy balances the need to protect sensitive data and maintain a diverse and competitive industrial base. The exclusion of contracts solely for Commercially Available Off-the-Shelf (COTS) items from CMMC requirements further emphasizes this effort to lessen unnecessary compliance burdens on low-risk procurements.³

A significant new burden will be placed on prime contractors, who are now required to verify that their subcontractors have met CMMC requirements, even though they cannot view their subcontractors' CMMC certificates or self-assessment information in the Supplier Performance Risk System (SPRS) ¹ This structural change introduces a new layer of risk and liability for prime contractors, who must now develop their own methods for downstream verification. It may also foster a new market for third-party compliance services and strong supply chain management tools. This shift places the liability for subcontractor non-compliance directly on the prime, fundamentally changing the prime-subcontractor relationship.

The rule also provides limited flexibility through its allowance for a conditional CMMC status, which can be maintained for up to 180 days for Levels 2 and 3.^1. During this period, contractors must resolve any outstanding items listed in their Plan of Action and Milestones (POA&M). This feature balances the DoD's need to progress with critical programs and industry's requirement for time to address security gaps. It offers a structured process for remediation, while emphasizing that a final, compliant certification is essential for long-term contract performance. The CMMC Unique Identifier (UID) system acts as the main tracking mechanism in SPRS, indicating a higher standard of rigor and data-based enforcement in the CMMC program.

1.2 The Revolutionary FAR Overhaul (RFO): A Paradigm Shift in Procurement

The Revolutionary FAR Overhaul (RFO) is a comprehensive initiative mandated by Executive Order (E.O.) 14275, signed on April 15, 2025, which calls for a review and simplification of the Federal Acquisition Regulation (FAR). The goal is to make the FAR more concise, understandable, and focused on core procurement requirements by removing non-statutory, redundant, or outdated language and improving clarity through plain language. This initiative is a proactive, administration-led effort to address the root causes of acquisition delays systematically.

The updates to FAR Part 12, "Acquisition of Commercial Products and Commercial Services," exemplify this strategy. The part has been fundamentally re-engineered in its structure, scope, and operational mechanics to make federal buying faster, simpler, and more aligned with commercial practices.⁵ The removal of 46 clauses and provisions, representing an approximate 30% reduction in requirements for commercial contracts, is a tangible result of this effort.⁵ This initiative is an apparent attempt to lower the barrier to entry for commercial companies that may be reluctant to navigate the complexity and administrative burden of traditional FAR-based contracts. By streamlining the process, the DoD hopes to attract a wider pool of innovative, non-traditional vendors, which complements the use of Other Transaction Agreements (OTAs) and innovation-focused units like DIU and AFWERX.

Similarly, FAR Part 33, "Protests, Disputes, and Appeals," has been updated to minimize protests and resolve them at the lowest possible level.⁶ This revision adds a new purpose statement, reorganizes the section for clarity, and requires protests to be shared with the contracting office within one day of filing.⁶ This clear focus on reducing protests highlights a shift toward prioritizing speed and efficiency in acquisition over procedural perfection. The DoD aims not only to fix the bureaucratic aspects of the buying process but also to address the inertia within the oversight process. This change is designed to prevent frivolous protests from delaying the delivery of critical capabilities to the warfighter, a key theme of the FY26 NDAA.⁷

1.3 Key Legislative and Administrative Adjustments

The FY26 National Defense Authorization Act (NDAA), H.R. 3838, also known as the "Streamlining Procurement for Effective Execution and Delivery (SPEED) Act," is pending legislation that seeks to reform the acquisition system by removing "burdensome red tape." This bill, which codifies parts of 15 Executive Orders and over 30 legislative provisions, aims to accelerate the delivery and development of new capabilities through streamlining the requirements process.

These legislative proposals are supported by practical, tangible administrative steps, such as the final FAR rule on Inflation Adjustment of Acquisition-Related Thresholds, which was published on August 27, 2025, and becomes effective on October 1, 2025.^8. The adjustments, while seemingly minor, have a significant ripple effect. By raising the thresholds, the DoD empowers thousands of contracting officers to make purchases more quickly without triggering time-consuming competitive procedures. This change streamlines many low-dollar-value purchases, reduces administrative overhead, and allows the acquisition workforce to focus on more complex, high-value procurements. It also makes it easier for small businesses to engage with the government on these smaller opportunities.

The following table provides a clear overview of the inflation-adjusted thresholds.

Threshold Category	Old Threshold	New Threshold
Micro-Purchase Threshold
General Purchases	$10,000	$15,000
Domestic Contingency Operations	$20,000	$25,000
Overseas Contingency Operations	$35,000	$40,000
Simplified Acquisition Threshold (SAT)
Standard	$250,000	$350,000
Domestic Contingency Operations	$800,000	$1 million
Overseas Contingency Operations	$1 million	$2 million
Humanitarian/Peacekeeping Operations	$500,000	$650,000
Subcontracting Plan Threshold
Prime Contracts	$750,000	$900,000
Construction	$1.5 million	$2 million

The clarification of SAM.gov registration requirements to focus only on offer submission and contract award is another administrative change that removes a major hurdle for new and small businesses. The previous system, which often required constant registration, created a technical obstacle that could unfairly penalize small companies for minor mistakes. By making this rule simpler, the government is clearly removing a technical barrier to entry, showing its commitment to expanding the DIB to include non-traditional participants.

Section 2: Strategic Investments and Industrial Base Modernization

This section details the DoD's material commitments to rebuilding and retooling the defense industrial base, emphasizing a strategic focus on resilience and next-generation technology.

2.1 Targeted Investments to Rebuild the Defense Industrial Base

Three awards totaling $39.6 million were announced through Title III of the Defense Production Act (DPA) to expand the solid rocket motor (SRM) industrial base. The recipients include ICF Mercantile ($9.3 million), Materials Resources, and SPARC Research.¹⁰ Separately, Materials Resources LLC was granted $25.2 million via DPA Title III for the same purpose, utilizing Additive Manufacturing processes.¹¹ These DPA awards, although not in the billions, are strategically important. They demonstrate a focused and detailed approach to strengthening specific, vulnerable points in the defense supply chain.

Using a Defense Industrial Base Consortium (DIBC) Other Transaction Agreement (OTA) solicitation to award DPA Title III contracts is a significant and innovative step. DPA Title III is a traditional industrial policy tool with a long history, while OTAs are a modern, adaptable procurement method designed to bypass typical bureaucracy. Combining these two approaches demonstrates a new level of agility in how the government funds industrial base initiatives, shifting from slow, bureaucratic procedures to a more swift and collaborative process.

The award to Materials Resources for leveraging Additive Manufacturing in SRM production clearly signals that the DoD is focused on modernizing rather than just replenishing its industrial base. Additive manufacturing provides the potential for increased production agility, shorter lead times, and greater design flexibility. The DoD is not merely rebuilding the old industrial base; it is actively investing in and adopting new technologies to ensure future resilience and maintain a competitive edge.

2.2 The Push for Autonomy and Next-Generation Capabilities

The Navy has awarded contracts to develop Collaborative Combat Aircraft (CCA) drones to major defense contractors such as Anduril, Lockheed Martin, General Atomics, Boeing, and Northrop Grumman.¹² These CCAs are uncrewed systems designed to enhance the Navy's ability to deliver airstrikes and support manned fighter aircraft.¹² This initiative is a concrete example of the strategic vision outlined by Secretary of War Pete Hegseth's July memorandum on drone dominance, which calls for increased drone production and rapid integration of unmanned systems across all service branches.¹²

The Navy's choice to award CCA contracts to both legacy defense primes and a non-traditional firm like Anduril shows a commitment to a hybrid innovation model.¹² The DoD understands that legacy primes have the scale and systems integration expertise needed for major programs. Meanwhile, non-traditional firms have the speed and advanced technology to enable rapid development. This hybrid approach aims to combine the strengths of both ecosystems to speed up the delivery of essential capabilities.

This hardware push is supported by key secondary efforts, such as the Blue Object Management Challengeannounced by the Defense Innovation Unit (DIU) in partnership with U.S. Indo-Pacific Command.¹³ This challenge emphasizes AI-enabled data integration and smart databases.¹³ While the CCAs are the hardware, the challenge is about acquiring the software and data infrastructure needed to operate them effectively at scale. The focus on AI-enabled data integration indicates that the DoD is considering the entire ecosystem required for distributed, autonomous operations.

Section 3: Key Contract Awards and Market Trends

This section details the most notable contract awards during the period, providing a snapshot of market activity and a synthesis of the key trends influencing it.

3.1 Prime Contractor Awards

Lockheed Martin secured a significant $9.8 billion U.S. Army contract to produce 1,970 Patriot Advanced Capability-3 Missile Segment Enhancement (PAC-3 MSE) interceptors.¹⁴ Other notable awards include a $70 million contract to BryceTech for chemical, biological, radiological, and nuclear (CBRN) capabilities, and a Space Force Range Contract awarded to Amentum.¹⁴

The Lockheed Martin contract highlights ongoing investment in large-scale, traditional platforms and munitions, which continue to serve as the foundation of modern military strength. The contract's value reflects the continuous focus on missile defense capabilities amid changing global threats. The other awards, though smaller, showcase the broad scope of the defense market, including specialized support services and non-traditional sectors like CBRN, emphasizing the diversity needed to address today's security challenges.

The following table summarizes a selection of the most notable awards from this period.

Awardee	Award Value	Sponsoring Agency/Branch	Purpose	Citation
Lockheed Martin	$9.8 billion	U.S. Army	To produce 1,970 Patriot Advanced Capability-3 Missile Segment Enhancement (PAC-3 MSE) interceptors.	14
Lockheed Martin, Anduril, General Atomics, Boeing, Northrop Grumman	Contract awards announced	U.S. Navy	To develop Collaborative Combat Aircraft (CCA) drones.	12
ICF Mercantile	$9.3 million	DoD via DPA Title III	To establish the first domestic production source of rayon filament cellulose precursor rayon for Solid Rocket Motors.	10
Materials Resources LLC	$25.2 million	DoD via DPA Title III	To expand the solid rocket motor industrial base through Additive Manufacturing.	11
Eudia	$1.25 million	AFWERX SBIR Program	To transform procurement with AI-augmented intelligence.	15
F3EA Inc.	$245 million	U.S. Army Contracting Command, Orlando	Hybrid contract for special operations forces requirements analysis, prototyping, training, operations and rehearsal IV.	16

3.2 The Shifting Landscape for Small Businesses and Non-Traditional Firms

This period highlights a deliberate effort to include small and non-traditional firms. The AFWERX program awarded a $1.25 million Direct-to-Phase II Small Business Innovation Research (SBIR) contract to Eudia to revolutionize procurement with augmented intelligence.¹⁵ This award isn’t just about a specific technology; it focuses on using the acquisition process as a means for internal transformation. The Eudia platform aims to simplify procurement processes, a primary objective of the RFO and the SPEED Act.¹⁵ By investing in a commercial solution to improve its own bureaucracy, the DoD demonstrates its commitment to applying commercial innovation to its internal operations.

Additionally, the Defense Logistics Agency (DLA) held its sixth annual Industry Collider Day on September 3, 2025, to connect small businesses with program managers and highlight contracting opportunities.¹⁷ This event is a clear example of an agency's proactive effort to bridge the gap between small businesses and government requirements. Along with the new DIBC OTA open announcement for unsolicited proposals, it indicates a shift from a reactive, passive procurement model to a more collaborative, partnership-based approach.

Section 4: Forward Outlook and Strategic Implications

4.1 Synthesis of Policy and Practice

The DoD is implementing a careful "dual-track" acquisition strategy. The first track focuses on reforming the traditional, FAR-based system through initiatives like the RFO and the SPEED Act to enhance overall efficiency.⁵ The second track involves the parallel and expanded use of non-traditional vehicles, such as OTAs and challenges from organizations like DIU and AFWERX, to rapidly acquire critical capabilities from non-traditional vendors.¹² This strategy recognizes that institutional change takes time, but geopolitical and technological threats demand immediate action. As a result, the DoD is working to improve the core system while also developing agile, flexible pathways to rapidly acquire what is most urgently needed.

Cybersecurity is also becoming an essential market factor. The final CMMC rule, with its phased rollout, fundamentally changes the relationship between industry and the DoD. In the years ahead, cybersecurity compliance will be as crucial as technical skill and cost competitiveness for participation in the defense industry. This is a long-term strategic move aimed at strengthening the supply chain against ongoing threats, especially from state-sponsored actors. The short-term challenges of compliance, in the DoD's perspective, will result in long-term benefits for supply chain security and national safety.

4.2 Recommendations and Considerations

For defense contractors, it is crucial to act now to develop strong compliance management and verification systems for subcontractors in anticipation of the new CMMC rule, which places this responsibility squarely on prime contractors. Small and non-traditional businesses should leverage the administrative reforms and the phased CMMC rollout to get their compliance in order. They should also actively seek opportunities through innovation units and OTAs, which are specifically designed to be more accessible.

For government officials, the postponement of the COSMOS industry conference due to "executive orders and budget uncertainties" indicates that even top-down reform can lead to temporary friction.¹⁹ Clear communication and guidance will be essential to prevent administrative changes from causing additional delays.

4.3 Conclusion

The period from September 3-14, 2025, was more than just a series of isolated events; it exemplified the DoD's larger strategic shift in acquisition. The alignment of regulatory streamlining, legislative support, and targeted investments shows a unified effort to meet the demands of modern warfare. The CMMC rule will act as a fundamental, market-influencing element for the near future, while ongoing efforts for autonomy and industrial base resilience indicate a clear direction for U.S. defense readiness. The nation is actively racing against time and deploying every available tool to safeguard its technological and industrial advantage.