U.S. Defense Acquisition Policy and Key Developments: A Report on the Period August 17 - September 01, 2025

Executive Summary: Strategic Trends and Key Developments

This report provides a comprehensive analysis of the U.S. defense acquisition landscape and associated policy, legislative, and contract developments between August 17 and September 01, 2025. The period is defined by a high-velocity, multi-front campaign to reform and modernize the defense acquisition system, a concerted effort driven by a top-down mandate from the Executive Branch. This push for reform is not limited to a single initiative but is characterized by a series of interconnected actions across the regulatory, legislative, and programmatic spheres.

The significant themes observed during this two-week window underscore a strategic shift in how the Department of Defense (DoD) is approaching its procurement and industrial base challenges. First, a revolutionary regulatory overhaul of the Federal Acquisition Regulation (FAR) is actively progressing, with new, streamlined parts being released and implemented by agencies through class deviations. This effort is designed to remove non-statutory burdens and accelerate procurement timelines. Second, there is a clear focus on strategic investment in the industrial base, with the DoD leveraging flexible contract vehicles like Other Transaction Authorities (OTAs) and Defense Production Act (DPA) funding to make highly targeted investments in critical sectors such as space, microelectronics, and vital minerals. Third, the DoD is making a strategic investment in its innovation infrastructure, as evidenced by a massive cooperative agreement awarded by the Defense Innovation Unit (DIU) to institutionalize pathways for commercial technology.

While major, multi-billion-dollar contracts continue to be awarded to traditional defense primes, the period reveals a clear and deliberate effort to simultaneously lower barriers to entry for non-traditional and innovative firms. This dual-track approach, however, may lead to some potentially centralizing effects on the overall market. The legislative and regulatory pipelines appear tightly linked, with NDAA provisions and Executive Orders being rapidly translated into new rules and contract opportunities. Finally, the period was not without contention, as a significant court ruling temporarily blocked a DoD policy, and a notable leadership change occurred at DIU, demonstrating the dynamic nature and inherent complexities of these reform efforts.

The Policy and Legislative Framework: Driving Change from the Top

The period from late August to early September 2025 highlights a coordinated effort across the Executive and Legislative branches to reshape the defense acquisition system fundamentally. Executive Orders and legislative proposals are acting as primary catalysts for the changes seen at the regulatory and programmatic levels.

Executive and Congressional Action

The overarching policy framework for acquisition reform is being established by presidential action. The ongoing Revolutionary FAR Overhaul (RFO) is a direct result of Executive Order (E.O.) 14275, "Restoring Common Sense to Federal Procurement," and is supported by E.O. 14265, "Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base".¹ The public comment period for E.O. 14265 closed on August 8, 2025, signaling the end of the initial feedback phase and the beginning of more formal implementation. The explicit goals of these orders are to "refocus the FAR on its statutory roots" and "streamline" FAR supplements, a process intended to "modernize the duties and composition of the defense acquisition workforce".¹

On Capitol Hill, the legislative process for Fiscal Year 2026 is underway, with the House having already passed both the Military Construction-Veterans' Affairs and Defense Appropriations bills.⁴ Proposed acquisition-related legislation, such as the "Streamlining Procurement for Effective Execution and Delivery (SPEED) Act" (H.R. 3838) and the "FoRGED Act," is being considered for inclusion in the committee-approved versions of the FY26 National Defense Authorization Act (NDAA).¹ These bills aim to modernize the acquisition system by streamlining processes and leveraging commercial technology to build the defense industrial base.¹ The Aerospace Industries Association (AIA) has expressed support for the FoRGED Act, stating it "will streamline the Department of Defense's acquisition system by removing cumbersome regulations to unleash industrial innovation".¹ Despite this progress, a continuing resolution is seen as the most probable path forward to avoid a government shutdown, given the limited number of legislative days remaining in the appropriations calendar.⁴

DoD Policy Announcements and Directives

During the period, the Defense Pricing, Contracting, and Acquisition Policy (DPCAP) directorate issued two notable policy memorandums. An August 25, 2025, memorandum highlights existing authority in the Defense Federal Acquisition Regulation Supplement (DFARS) that allows for "duty-free entry" of critical end products and materials into the U.S..⁵ This targeted effort aims to reduce the cost impacts of tariffs on the defense industrial base and is supported by updates to DFARS clause 252.225-7013.⁶ A second memorandum, dated August 22, clarifies the "Space-as-a-Service" pilot program, narrowing its scope to exclude general office leasing and other administrative facilities.⁵ This refinement indicates the DoD's active role in shaping and clarifying new, flexible policies as they are put into practice.

Judicial and Administrative Rulings

A U.S. District Court issued a preliminary injunction that temporarily blocks the DoD from enforcing a new policy capping indirect costs for awards to universities at a 15% rate.⁴ The injunction was issued in a case brought by academic associations and prevents the DoD from rejecting proposals that use federally negotiated rates.⁴

This legal challenge reveals a fundamental tension within DoD acquisition reform. While there is a strong push for cost-cutting and efficiency across the board, efforts to control spending can clash with the need to maintain and strengthen the academic research base. The injunction demonstrates that not all reform efforts will proceed without opposition and that legal and administrative challenges from key stakeholders can temporarily halt or alter policy implementation. It underscores the principle that the DoD's authority is not absolute and is subject to checks and balances from other sectors.

The Evolving Regulatory Environment: FAR and DFARS Updates

The period saw continuous and significant activity on the regulatory front, with the most notable development being the ongoing Revolutionary FAR Overhaul (RFO) and the implementation of new rules.

The Revolutionary FAR Overhaul Initiative

The RFO, spearheaded by the Office of Federal Procurement Policy (OFPP) and the Federal Acquisition Regulatory Council (FAR Council), is a comprehensive, top-to-bottom rewrite of the FAR.² The initiative aims to return the FAR to its "statutory roots," removing redundant, unclear, and non-essential provisions to create a more concise, understandable, and user-friendly regulation.²On August 21, 2025, the FAR Council released new model deviation text for FAR Parts 9 (Contractor Qualifications), 33 (Protest, Disputes, and Appeals), 46 (Quality Assurance), and 49 (Termination of Contracts).⁸ These draft texts are open for informal feedback until October 6, 2025, reflecting a continuous, rolling effort to implement the RFO.⁹

The General Services Administration (GSA) is the first agency to officially adopt the new framework, issuing a class deviation for FAR Part 49 on August 18, 2025.¹⁰ This memorandum provides a clear example of the RFO's intent, as it streamlines the part by removing over 2,500 words of non-essential language while retaining core statutory requirements like the Contract Disputes Act of 1978.¹⁰ The GSA's proactive adoption of the new FAR parts signals a willingness among agencies to embrace the RFO, setting a precedent for others to follow.

The RFO introduces strategic and operational implications. While it could reduce administrative burdens for contractors and tiny businesses by removing non-statutory clauses, the overhaul also presents potential challenges.² The removal of specific mandates and the shift of some material to non-mandatory buying guides could increase reliance on contracting officer discretion and potentially lead to legal uncertainty in areas like late offer submissions.² A key change is the new "mandatory preference" for using Best-in-Class (BIC) government-wide contracts, which will significantly drive competition toward centralized, pre-approved vehicles.¹¹

New Rules and Compliance Requirements

Two significant final rules were published during the period, demonstrating the rapid implementation of recent legislative mandates. On August 25, 2025, the DoD published a final rule in the DFARS to implement Section 812 of the FY24 NDAA.¹³ This rule prohibits contracting officers from awarding contracts under a North American Industry Classification System (NAICS) code beginning with 5416 (consulting services) to offerors that hold contracts or subcontracts with "covered foreign entities" unless they have an approved conflict-of-interest mitigation plan.¹³ The rule, which takes effect on October 24, 2025, expands the certification requirement to include subcontracts and affiliates, a change not explicitly required by the original statute.¹³

A separate final rule, also effective on August 25, 2025, makes numerous technical and editorial changes to the DFARS.⁶ Key updates include changing "Restrictive Markings" to "Asserted Restrictions" in multiple parts related to intellectual property and revising the "Duty-Free Entry" clause (252.225-7013) to update contact information.⁶ This regulatory activity, from a comprehensive overhaul to targeted, legislative-driven rules and minor editorial corrections, underscores the high volume and rapid pace of regulatory changes. It also signals a concerted effort not only to simplify and streamline the acquisition process but also to harden it against national security threats and supply chain vulnerabilities.

Strategic Contracts and High-Value Acquisitions

The period from August 17 to September 01, 2025, saw the award of several high-value contracts, primarily to traditional defense contractors. These awards demonstrate a continued commitment to significant, long-term modernization and sustainment programs.

Table 1: Notable Defense Contract Awards (August 17 - September 01, 2025)

Contractor Name	Award Date	Awarding Organization	Contract Value	Contract Type	Program/Description	Contract Vehicle/Justification
Raytheon	Aug. 29, 2025	U.S. Army	$1.7B	Modification	Lower Tier Air and Missile Defense Sensor (LTAMDS) production	Not Specified
BAE Systems	Aug. 28, 2025	Naval Air Systems Command	$1.74B	IDIQ	Advanced Precision Kill Weapon System II (APKWS II) production	Not Competed
Lockheed Martin Corp.	Not Specified	Missile Defense Agency	$18.3M	Modification	Terminal High Altitude Area Defense (THAAD) component obsolescence	Not Specified
Fairbanks Morse Defense	Aug. 28, 2025	Navy	$35.4M	IDIQ	Diesel engine lifecycle and in-service support	Not Competitively Procured
General Dynamics IT	Not Specified	Naval Information Warfare Systems Command	$98.5M	IDIQ	Naval Enterprise Service Desk (NESD)	OTA Follow-on Production
Airborne Tactical Attack Co.	Not Specified	Naval Air Warfare Center	$199.1M	IDIQ	Contracted Air Services (electronic warfare training)	Competed; Two offers
World Wide Technology LLC	Aug. 26, 2025	Air Force	$100M	IDIQ	IT Transformation with AF CyberWorx	Competed; Two offers

 

Analysis of Major Awards

The most significant award in this period was the $1.7 billion modification to Raytheon for the production of the Lower Tier Air and Missile Defense Sensor (LTAMDS).¹⁵ This next-generation radar is a critical component of the Army's Integrated Air and Missile Defense system, designed to replace the legacy Patriot system's radar and counter advanced threats like hypersonic weapons. The award obligates significant Fiscal Year 2025 procurement funds from the Army and foreign military sales funds from Poland, which is the first foreign customer for the system ¹⁵

The Navy also awarded BAE Systems a $1.74 billion indefinite-delivery/indefinite-quantity (IDIQ) contract for the production of up to 55,000 Advanced Precision Kill Weapon System II (APKWS II).¹⁶ The contract, which was not competed, is for the production of a laser-guided precision weapon for the Navy, Army, and Foreign Military Sales customers.¹⁶ These contracts, along with an $18.3 million modification for Lockheed Martin's Terminal High Altitude Area Defense (THAAD) system, demonstrate the continuous need for sustainment and modernization efforts on existing, high-value platforms ¹⁷

Another notable award was the $35.4 million contract to Fairbanks Morse Defense for diesel engine support, which was not competitively procured.¹⁶ This reliance on specific, trusted partners for critical industrial capabilities highlights the DoD's need for continuity in key sectors.

The major awards during this period reveal a dual-track strategy in DoD acquisition. While there is a strong policy push to foster innovation and lower barriers to entry for non-traditional firms, the majority of the most significant awards still go to traditional defense primes through established or non-competitive channels. This suggests that while the DoD is actively pursuing new ways of doing business, the conventional, long-term procurement model remains the dominant force for central platform and system acquisitions. The use of non-competitive awards and modifications to existing contracts underscores the necessity for continuity and sustainment for core defense programs. A true "revolution" in large-scale procurement is a long-term goal, not an immediate reality.

The Innovation Ecosystem: Awards from DIU and AFWERX

In parallel with large-scale, traditional acquisitions, the DoD's innovation units are making targeted, strategic investments that reflect a fundamental shift in how the Department engages with the commercial and non-traditional defense sectors.

Defense Innovation Unit (DIU) Developments

DIU's activities during this period reflect a strategic focus on building innovation infrastructure rather than simply acquiring a specific product. DIU awarded a five-year, $600 million cooperative agreement to the Applied Research Institute (ARI) to lead and manage the "Defense Innovation OnRamp Hubs".¹⁸ This program is designed to integrate commercial and dual-use technologies into the DoD ecosystem by providing physical locations and expert support for non-traditional partners.¹⁸ This move is a strategic investment in institutionalizing a permanent pathway for innovation.

The departure of DIU Director Doug Beck in August prompted the Pentagon to name Emil Michael as acting head and publicly reaffirm the unit's independence.¹⁹ This signals the DoD's commitment to DIU's unique role as a bridge to the tech sector, and Michael's comments about focusing on "targeted 'sprints'" to speed adoption and leveraging private-sector AI investments provide insight into the unit's future direction.¹⁹

AFWERX Awards and AI Integration

The Department of the Air Force's innovation arm, AFWERX, provides a clear case study for the tactical implementation of acquisition reform. On August 20, 2025, AFWERX awarded a $1.25 million Direct-to-Phase II Small Business Innovation Research (SBIR) contract to Eudia.²⁰ The contract's objective is to apply Eudia's "Augmented Intelligence" platform to transform and streamline procurement processes, beginning with augmented contract review.²⁰ The platform aims to reduce bottlenecks and enable the government to maximize its budgets by combining human expertise with AI.²⁰ This award demonstrates how innovation units are using flexible contract vehicles to address the problem of bureaucratic procurement directly.

Other Transaction Authority (OTA) and Industrial Base Awards

The use of OTAs and other targeted investments continues to expand, serving as a key mechanism for both rapid prototyping and industrial base resilience. A $98.5 million contract for General Dynamics Information Technology was awarded as a follow-on production contract, pursuant to the OTA of 10 U.S. Code 4022(f).²¹ This serves as a prime example of the successful transition from a prototype OTA to a full-scale production vehicle, a key objective of the OTA model.

Awards from consortia like the Defense Industrial Base Consortium (DIBC) and Cornerstone are also strategically focused on addressing supply chain vulnerabilities. For example, the DIBC awarded a $2 million contract to Debut for bioindustrial manufacturing ²², and a British firm, Guardian Metal Resources, announced a DPA Title III award of $6.2 million for a tungsten project in Nevada, highlighting its recent acceptance into both the DIBC and Cornerstone OTAs.²³ These awards are deliberately targeted to strengthen critical supply chains in sectors like microelectronics, critical minerals, and bioindustrial manufacturing.²²

The awards from DIU and AFWERX are fundamentally linked by a common objective: to acquire solutions that improve the processof defense acquisition, rather than simply a new weapon system. The DIU award builds the physical and human infrastructure for non-traditional partners to engage, while the AFWERX award builds the technological infrastructure to streamline that engagement. This reveals a sophisticated, two-pronged strategy in which the DoD uses innovation units and alternative contract vehicles to bypass traditional bottlenecks and build a new, parallel acquisition system that can bring commercial technology and non-traditional firms to the fight faster.

Integrated Analysis: Connecting the Dots

A comprehensive analysis of the period from August 17 to September 01, 2025, reveals a sophisticated nexus of policy, regulation, and practice in defense acquisition. The findings from each section are not isolated but are strategically aligned in a broad campaign to modernize the system.

The Revolutionary FAR Overhaul (RFO), driven by Executive Orders, is the overarching policy framework.² On the ground, this is being manifested through agency-level class deviations and targeted awards that directly address the problems the RFO is designed to solve. For example, the GSA's proactive class deviation for FAR Part 49 is a tangible step toward a more streamlined regulation. At the same time, AFWERX's contract with Eudia uses AI to attack the problem of bureaucratic procurement, a key obstacle that the RFO is intended to remove.¹⁰

The awards via OTAs and DPAI funding are not random; they are highly targeted to critical sectors of the industrial base identified in national strategies.²² From space ground systems to bioindustrial manufacturing and critical minerals, the DoD is using these flexible contract vehicles to address specific, high-priority vulnerabilities. This shows a deliberate effort to secure and diversify the supply chain, a goal directly tied to national security priorities.

A key tension is also emerging between centralization and decentralization. The RFO's push for "Best-in-Class" (BIC) contracts could centralize procurement, potentially favoring larger firms or consortia already on these vehicles.¹¹ However, legislative proposals like the "SPEED Act" and the mission of DIU point toward a more decentralized model, with greater authority at the component or portfolio level.¹ This potential conflict highlights a strategic choice for the future of the acquisition system: whether to concentrate buying power to gain efficiency or distribute it to foster innovation and resilience. The success of the OTA follow-on to General Dynamics IT suggests that this distributed model can also lead to large-scale, long-term contracts.²¹

Recommendations and Future Outlook

The period from August 17 to September 01, 2025, represents a critical phase in the DoD's acquisition reform efforts. Based on the analysis, the following recommendations and a forward-looking outlook are provided for both industry and government stakeholders.

Recommendations for Industry

1.     Embrace Innovation Vehicles: Companies should actively monitor and consider joining consortia like the DIBC and Cornerstone. The awards for critical minerals and bioindustrial manufacturing show that OTAs are a growing and essential pathway for both traditional and non-traditional firms, not just for high-tech, but for foundational industrial sectors.

2.     Prepare for the RFO: Firms should proactively review the model deviation texts for new FAR parts as they are released and engage with professional organizations to provide feedback. The changes to Part 49 and the introduction of a BIC mandate are just the beginning, and staying informed will be critical for navigating future opportunities and compliance requirements.

3.     Focus on Compliance: The new final rule on conflicts of interest is not optional. Firms should assess their relationships with covered foreign entities and prepare a mitigation plan in advance of the October 24, 2025, effective date to ensure they remain eligible for contracting opportunities.

Recommendations for Government

1.     Provide Clarity on Centralization vs. Decentralization: The DoD should provide clear guidance on how the BIC mandate and a potentially more decentralized acquisition authority will coexist to avoid confusion and ensure consistent application across all agencies.

2.     Leverage AI for Internal Processes: Following the lead of AFWERX, the DoD should continue to explore how commercial AI solutions can be used to streamline internal administrative functions across the acquisition lifecycle. This will accelerate procurement and allow acquisition professionals to focus on higher-value activities.

Forward-Looking Outlook

The coming months will be critical for the future of the defense acquisition system. The likely passage of a continuing resolution or a full FY26 NDAA will codify many of the proposed legislative reforms, translating broad policy goals into statutory requirements. The RFO will continue its rolling rollout of new parts, with model deviation texts for additional FAR parts expected to be released. Additionally, the new DIU leadership under Emil Michael will likely announce its strategic priorities and initiatives for the coming year, providing further clarity on the unit's direction and its role in accelerating the adoption of new technology.

 

Appendices and Citations

Table 2: Key FAR and DFARS Updates (August 17 - September 01, 2025)

Regulation/Rule Title	Publication Date	Effective Date	Affected Parts/Sections	Key Changes	Strategic Significance
DFARS Final Rule (Conflicts of Interest)	Aug. 25, 2025	Oct. 24, 2025	DFARS 209.572, DFARS 252.209–7012	Prohibits contracts to firms with ties to covered foreign entities without a mitigation plan; applies to subcontracts.	Implements FY24 NDAA mandate to address national security risks and supply chain vulnerabilities, adding new compliance requirements for consulting services.
DFARS Final Rule (Editorial Changes)	Aug. 25, 2025	Aug. 25, 2025	Parts 205, 212, 225, 227, 242, 246, 252	Updates addresses and links; changes "Restrictive Markings" to "Asserted Restrictions"; corrects cross-references and clerical errors.	Continuous effort to clarify and maintain the DFARS, improving accuracy and alignment with existing policies, particularly concerning intellectual property.
Revolutionary FAR Overhaul (RFO) Model Deviation Text	Aug. 21, 2025	N/A (For informal feedback)	Parts 9, 33, 46, 49	Streamlines and simplifies these parts; removes non-statutory and non-essential content; moves guidance to non-regulatory buying guides.	A core component of the Executive Branch's top-down push to reduce administrative burdens, accelerate procurement, and return the FAR to its statutory roots.
GSA Class Deviation RFO-2025-49	Aug. 18, 2025	Nov. 3, 2025	FAR Part 49	Adopts the new, streamlined RFO model for Termination of Contracts; removes over 2,500 words of non-essential language.	The first agency-level implementation of a new RFO part, demonstrating tangible progress and setting a precedent for other agencies.

 

Citations

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