Key Developments and Policy Updates in U.S. Defense Acquisition and the Defense Industrial Base (September 15–30, 2025)

Policy News and Developments - Pentagon

I. Executive Summary: Strategic Observations for the DIB

The latter half of September 2025 was defined by the confluence of legislative instability and rapid regulatory action, setting the strategic course for the Defense Industrial Base (DIB) into the next fiscal year. This two-week period was marked by the impending expiration of critical legal authorities, primarily the Defense Production Act (DPA) and the Small Business Innovation Research (SBIR) programs.¹ This legislative friction prompted proactive, structural contingency planning by the Department of Defense (DoD), notably through the Senate Armed Services Committee's (SASC) proposal of independent industrial base authorities via Section 849A of the FY 2026 National Defense Authorization Act (NDAA).¹ The resulting legislative uncertainty measurably impacted innovation flow, causing AFWERX to halt key solicitations.²

In contrast to the legislative environment, the administration executed a series of swift regulatory changes. Five high-impact Federal Acquisition Regulation (FAR) Class Deviations were issued to implement Executive Order 14275, signaling an aggressive push to overhaul acquisition processes, including negotiating standards and foreign sourcing requirements.³ Meanwhile, major contract awards focused on solidifying the digital foundation—illustrated by the Army’s 10-year, $1 billion commitment to SAP enterprise services ⁴—and boosting conventional kinetic surge capacity, exemplified by nearly $1 billion allocated for Modular Artillery Charge System (MACS) production.⁴

A significant trend is the increasing convergence of cybersecurity compliance requirements across both traditional and non-traditional acquisition (NTA) pathways. The finalization of the DFARS rule for assessing contractor cybersecurity implementation ⁵ coincided with OTA vehicles, such as the Cornerstone OTA, explicitly mandating adherence to the same rigorous standards (DFARS 252.204-7012).⁶ Simultaneously, NTA vehicles, including the Defense Innovation Unit (DIU), demonstrated speed and focus, awarding prototype efforts specifically targeting cost asymmetry in Counter-Unmanned Aerial Systems (C-UAS) solutions.⁷

II. Legislative and Budgetary Environment: Critical Deadlines and Contingency Planning

2.1. Defense Production Act (DPA) Reauthorization Status and Operational Risk

The defense acquisition community faced immediate operational risk stemming from the scheduled expiration of the DPA's industrial authorities on September 30, 2025.¹ Since its enactment in 1950, the DPA has provided the President with essential national security powers, including the authority to prioritize contracts (Title I), allocate scarce materials, and finance surge defense production capacity (Title III).¹ As the reauthorization status remained pending during this period ¹, the DIB faced the possibility of a critical lapse in executive mechanisms necessary for rapid crisis response and strategic industrial policy.

The potential for relying solely on a contentious legislative process to maintain these powers led to a structural shift in approach. The SASC’s decision to pursue alternative, Pentagon-controlled authorities rather than relying entirely on DPA reauthorization—a process primarily managed by non-defense committees, such as Banking—indicates a growing institutional desire within the DoD to establish permanent, dedicated mechanisms for DIB revitalization. The failure of Congress to finalize DPA reauthorization by the sunset date accelerated the efforts of DoD stakeholders to secure autonomous authority over industrial policy, thereby reducing their reliance on cross-committee political negotiations.

2.2. The FY 2026 NDAA Countermeasure: The Proposed Section 849A

In a direct response to the uncertainty surrounding the DPA, the SASC advanced Section 849A of the FY 2026 NDAA.¹ This provision proposes converting the existing Industrial Base Fund (IBF, 10 U.S.C. section 4817) into a new, dedicated toolkit of DIB revitalization authorities.¹ The proposed authorities are designed to closely mirror the financial and capacity-building powers historically available under DPA Title III.¹

The objective of Section 849A is to institutionalize DoD industrial policy autonomy. By creating a comparable, non-expiring mechanism within Title 10 of the U.S. Code (Armed Forces), the Pentagon seeks an insulated vehicle for making necessary investments in the industrial base. This development signals a permanent shift toward a more aggressive, centrally managed industrial policy driven directly by the Office of the Assistant Secretary of Defense for Industrial Base Policy, which will inevitably shape where future modernization and capacity funds are directed within the DIB.

2.3. Instability in the Innovation Pipeline: SBIR/STTR Program Expiration

Adding to the legislative risk was the pending expiration of congressional authorization for the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, also scheduled for September 30, 2025.² The operational consequences of this lapse were immediate and measurable. As of September 23, 2025, AFWERX announced an indefinite extension of the pre-release period for SBIR/STTR 25.4/D Release 12 topics.²

This delay provides tangible evidence that instability in legislative authority directly impedes the operational velocity of DoD innovation hubs. While Other Transaction Authorities (OTAs) and other flexible vehicles continue to operate, the halt in the statutory SBIR/STTR flow impacts thousands of small technology businesses, slowing the critical pipeline for Phase I and early-stage dual-use research and development (R&D) funding.⁸

III. Federal and Defense Acquisition Regulatory Updates

3.1. FAR Class Deviations Implementing Executive Order 14275

The final days of September 2025 saw a coordinated regulatory blitz, with five separate FAR Class Deviations issued on September 29 and September 30, 2025, all in support of Executive Order 14275, entitled “Restoring Common Sense to Federal Procurement.” These deviations are scheduled to become effective on November 3, 2025.³

The simultaneous issuance of multiple, high-impact deviations targeting core acquisition phases—including Part 15 (Negotiation), Part 16 (Contract Types), Part 19 (Small Business), Part 25 (Foreign Acquisition), and Part 42 (Contract Administration) ³—suggests significant executive urgency to operationalize broad acquisition reform. The deviation concerning Part 25 (Foreign Acquisition) is particularly notable, indicating potential modifications to Buy American Act waivers or shifts in domestic preference requirements. This regulatory action will necessitate immediate review by DIB members with global supply chains to assess compliance and potential cost impacts starting in early November.

Table 1: Summary of FAR Class Deviations Pursuant to Executive Order 14275 (Sept 2025)

FAR Part	Issue Date	Effective Date	Subject/Area of Impact	Strategic Implication
Part 15	2025/09/29	2025/11/03	Contracting by Negotiation (Source Selection)	Streamlining competitive procedures, potentially affecting proposal requirements.3
Part 16	2025/09/29	2025/11/03	Types of Contracts	Modification to risk profile associated with contract vehicle selection.3
Part 19	2025/09/26	2025/11/03	Small Business Programs	Adjustment to utilization or evaluation criteria for small business participation.3
Part 25	2025/09/30	2025/11/03	Foreign Acquisition	Critical: Likely changes to domestic sourcing preferences (Buy American/Trade Agreements).3
Part 42	2025/09/30	2025/11/03	Contract Administration	Changes affecting oversight and operational management post-award.3

3.2. DFARS Final Rule: Mandatory Cybersecurity Assessment

The regulatory framework for contractor cybersecurity implementation reached a new stage of maturity with the publication of the Final Rule for DFARS Case 2019-D041, "Assessing Contractor Implementation of Cybersecurity Requirements," on September 10, 2025.⁵ This rule amends multiple sections of 48 CFR, including Parts 204, 212 (governing Commercial Products), 217 (Special Contracts), and 252.⁵

The finalization of this long-pending rule signifies the institutionalization of the Cybersecurity Maturity Model Certification (CMMC) framework. Critically, by amending rules governing commercial items (Part 212), the DoD ensures that the protection of Controlled Unclassified Information (CUI) is now a mandatory requirement for a broader and more diverse set of suppliers. This action eliminates ambiguity regarding compliance and establishes a rigorous cybersecurity baseline required for participation in the DIB.

3.3. DoD Directives on Logistics and Policy Procedure

DoD policy memos during the surrounding period highlight the ability of acquisition authority to act as an immediate mechanism for fixing readiness failures. A May 20, 2025, memorandum, issued by the Secretary of Defense, directed U.S. Transportation Command (USTRANSCOM) to take immediate action to support Permanent Change of Station (PCS) moves following deficiencies in the performance of the Global Household Goods Contract (GHC).⁹

The intervention required USTRANSCOM to fully leverage both the GHC and the legacy Tender of Service (ToS) program through September 30, 2025, maximizing move coverage and off-ramping non-serviced GHC shipments to the ToS program based on capacity shortfalls.⁹ Furthermore, the Secretary mandated implementing adjustments to the government-constructed costs for reimbursement of personally procured moves, setting these rates at 130 percent of current GHC rates to reflect market conditions.⁹ This high-level intervention demonstrates how acquisition policy is rapidly leveraged as an administrative tool to address immediate operational crises and restore mission effectiveness, especially during peak fiscal activity.

IV. Major Defense Contract Awards (September 15–30, 2025)

The major defense contract awards observed during this period represent strategic fiscal year close-out spending, heavily prioritizing enterprise digitization and conventional kinetic capability surge.

4.1. Strategic IT Modernization and Enterprise Services

The Army made a profound commitment to long-term digital integration with a $1,000,000,000 firm-fixed-price contract awarded to SAP National Security Services Inc. for an SAP RISE end user license agreement.⁴ This 10-year commitment formalizes the requirement for a unified, modern Enterprise Resource Planning system—a foundational digital infrastructure necessary for advanced data management and mission capabilities.

Parallel investment in the digital ecosystem was evident in the Air Force's award to Northrop Grumman Systems Corp., a $ 972 million, indefinite-delivery/indefinite-quantity (ID/IQ) contract with a ceiling of $972,000,000 for Air Force Modeling and Simulation (M&S) support services.¹⁰ This investment reflects the prioritization of the tools required to design, acquire, and sustain systems in the Digital Engineering era, which is critical for future rapid system development and testing.

4.2. Conventional Fires and Kinetic Depth Surge

A robust economic signal confirming the DIB's focus on maximum production throughput for conventional weapons was the award of a $998,643,443 modification to Armtec Defense Products Co. for Modular Artillery Charge System (MACS) M231 and M232-series Combustible Case Assemblies.⁴ This modification raised the total cumulative face value of the MACS contract to approximately $1.9 billion.⁴ The commitment of nearly $1 billion through an existing contract mechanism demonstrates that current strategic requirements demand maximizing the production of proven systems to achieve necessary surge capacity in high-demand consumables.

4.3. Vehicle Procurement and Readiness

Major vehicle awards during this period utilized distinct funding mechanisms to address separate geopolitical requirements. BAE Systems Land & Armaments L.P. received a modification of $396,078,918 to definitize production for Bradley-based A4 vehicles, representing a standard, scheduled domestic modernization effort.⁴

In contrast, Textron Systems Corp. was awarded a $163,378,441 firm-fixed-price contract for Mobile Fire Support Vehicles (MFSVs), with funding explicitly obligated using Fiscal 2024 Ukraine Security Assistance Initiative (USAI) funds.⁴ This practice demonstrates the mechanism used to rapidly inject capital into the DIB to fulfill immediate foreign policy and security assistance requirements, utilizing separate, congressionally controlled resource partitions. Infrastructure awards also supported global posture, evidenced by the $75 million combined ceiling Indefinite-Delivery/Indefinite-Quantity Multiple-Award Contract (MACC) granted by NAVFAC EURAFCENT for construction and renovation at Naval Support Activity Souda Bay, Greece.¹¹

Table 2: Selected Major Defense Contract Awards (September 15–30, 2025)

Recipient	Contracting Activity	Award Value	Platform/Service	Type/End Date	Funding Context
SAP National Security Services Inc.	Army Contracting Command, Rock Island	$1,000,000,000	SAP RISE End User License Agreement	Firm-Fixed-Price/Sep 14, 2035	Enterprise Resource Planning Modernization.4
Armtec Defense Products Co.	Army Contracting Command, Newark	$998,643,443 (Modification)	Modular Artillery Charge System (MACS) Assemblies	Modification/Mar 4, 2026	Critical Conventional Munitions Production Surge.4
Northrop Grumman Systems Corp.	Air Force	$972,000,000 (Ceiling)	Air Force Modeling and Simulation Support Service	ID/IQ (Various)/TBD	Digital Acquisition Strategy Enabler.10
BAE Systems Land & Armaments L.P.	Army Contracting Command, Detroit Arsenal	$396,078,918 (Modification)	Bradley-based A4 Vehicle Production	Modification/Nov 30, 2027	Domestic Fleet Modernization.4
Textron Systems Corp.	Army Contracting Command, Detroit Arsenal	$163,378,441	Mobile Fire Support Vehicles (MFSVs)	Firm-Fixed-Price/Nov 30, 2028	FY 2024 Ukraine Security Assistance Initiative (USAI).4
Environmental Chemical Corp. et al.	NAVFAC EURAFCENT	$75,000,000 (Combined Ceiling)	NSA Souda Bay Construction/Renovation (MACC)	ID/IQ MACC (5 Years)	Strategic Infrastructure for Global Posture.11

V. Innovation Pathways: DIU, AFWERX, and OTA Activity

While statutory innovation programs faced delays, the flexible, non-traditional acquisition (NTA) pathways continued to execute targeted awards, demonstrating the shift toward rapid prototyping and strategic supply chain investment.

5.1. Defense Innovation Unit (DIU) Counter NEXT Awards

On September 29, 2025, DIU selected Anduril Industries and Zone 5 Technologies to develop prototype solutions for the Counter NEXT program, focusing on defeating Group 3 and above adversarial Unmanned Aerial Systems (UAS) threats.⁷ This program is strategically focused on changing the economic calculus of conflict.

The project explicitly aims to provide a deeper interceptor magazine, simplify reloading, and address the cost asymmetry currently prevalent between expensive interceptors and inexpensive threats.⁷ By prioritizing the leveraging of Commercial Off-the-Shelf (COTS) components wherever possible, DIU validates the need for production models that favor rapid iteration, resilience, and mass production over high complexity. This strategic goal will favor commercial vendors who can rapidly scale low-cost solutions, potentially altering the competitive landscape for C-UAS capabilities.

5.2. Defense Industrial Base Consortium (DIBC) OTA

The Defense Industrial Base Consortium (DIBC) OTA, overseen by the Office of the Assistant Secretary of Defense for Industrial Base Policy, demonstrated its evolving role beyond pure technology prototyping. Debut, a San Diego-based company, received a $2 million award via the DIBC OTA.¹²

This funding is designated for producing business and technical plans detailing the construction of a domestic bioindustrial manufacturing production facility, with the potential for follow-on awards up to $100 million.¹² The use of the OTA as a financial instrument for securing strategic industrial capacity (bio-manufacturing) confirms its expanding function as a precision tool for core DIB recapitalization and supply chain resilience efforts.

5.3. Cornerstone OTA: Mandatory Compliance Convergence

The Cornerstone OTA confirmed the trend of merging compliance standards across acquisition vehicles. A Special Notice published on September 21, 2025, reinforced that Cornerstone Consortium members must comply with core security regulations, specifically citing DFARS 252.204-7012 (Safeguarding Covered Defense Information).⁶

The explicit inclusion of this foundational DFARS clause within the flexible OTA environment confirms that adherence to CUI protection standards is non-negotiable across the DIB. This regulatory action effectively mandates that all non-traditional vendors entering the defense ecosystem through OTAs must demonstrate a cybersecurity maturity and reporting capability equivalent to that required of traditional FAR contractors, streamlining and harmonizing cyber standards.

Table 3: Key Awards and Policy Updates in Non-Traditional Acquisition (Sept 2025)

Vehicle/Consortium	Program/Topic	Key Recipient(s)	Award Focus	Critical Update	DIB/Acquisition Implication
DIU	Counter NEXT	Anduril Industries, Zone 5 Technologies	C-UAS (Group 3+) Interceptor Prototyping	Leveraging COTS, addressing cost asymmetry in prototyping.7	Validates rapid NTA path for countering immediate operational threats.
DIBC OTA	Bioindustrial Manufacturing Planning	Debut (San Diego)	Domestic Production Facility Planning ($2M)	Competitive award targeting critical supply chain resilience.12	OTA used proactively for DIB revitalization by OSD Industrial Base Policy.
Cornerstone OTA	Consortium Management	Cornerstone Members	N/A	Special Notice reinforcing DFARS 252.204-7012 compliance.6	NTA vehicles are held to the same standard as FAR contracts for CUI protection.
AFWERX (SBIR/STTR)	25.4/D Release 12	N/A	Small Business R&D Topics	Topic release delayed due to Congressional reauthorization expiry (Sept 30, 2025).2	Legislative instability creates a direct, operational bottleneck for small business innovation funding.

VI. Industry Day Announcements and Future Market Signals

The Air Force Test Center’s (AFTC) Installation Contracting Division announced an Industry Day for September 30, 2025, focused on procuring a commercial solution for a new Aerodynamic Test Facility.¹³ The requirement is for a scaled representation (either 1/16th or 1/8th) of the existing Tunnel 16S and Tunnel 16T test legs, with a flexible location being considered at either the United States Air Force Academy (USAFA) or Arnold AFB.¹³

The formal decision to seek a commercial solution for core Test & Evaluation (T&E) infrastructure signals that the Air Force is willing to transfer the risk and complexity of modernizing aging test facilities to the private sector. This approach offers significant market opportunity for private sector investment and ownership in military infrastructure through alternative financing or contracting models designed to accelerate recapitalization.

VII. Strategic Synthesis and Recommendations

The period spanning mid-to-late September 2025 confirms that the U.S. defense acquisition ecosystem is simultaneously navigating radical regulatory change and profound legislative risk.

The primary conclusion is that executive branches are actively compensating for legislative gridlock. The looming expiration of the DPA, coupled with the stalled SBIR/STTR reauthorization, prompted the SASC to pursue the independent industrial base authorities in Section 849A  and triggered an immediate halt to significant AFWERX funding.² This necessitates a strategy for prime contractors to closely monitor the NDAA process as Section 849A offers a robust, dedicated funding alternative to the DPA. Small businesses reliant on SBIR/STTR must actively pursue alternative funding streams through OTAs or private capital until authorization is restored.

Furthermore, the simultaneous release of five FAR Class Deviations supporting EO 14275 ³ demands immediate internal governance adjustments, particularly concerning Part 25 (Foreign Acquisition). These changes, effective November 3, 2025, will impact global sourcing and compliance for DIB members. This urgency is mirrored by the maturation of cybersecurity compliance: the finalization of the DFARS cybersecurity rule ⁵, coupled with explicit compliance mandates in OTAs ⁶, confirms that cyber readiness (DFARS 252.204-7012 compliance) is the universal, non-negotiable baseline for all organizations entering the defense marketplace.

Investment priorities remain focused on foundational digital capabilities (SAP RISE, M&S support) ⁴ and maximizing the surge capacity of proven kinetic systems (MACS).⁴ The targeted use of the DIBC OTA for securing domestic bio-manufacturing capability ¹² highlights that specialized supply chain resilience is an increasing, targeted investment area driven by OSD Industrial Base Policy. Finally, the DIU's focus on cost-effective C-UAS prototypes ⁷ signals a strategic pivot toward scalable, affordable attrition warfare capabilities, favoring commercial companies that can rapidly leverage COTS technologies.

Works cited

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