Contractors should anticipate increased use of alternative contracting methods and heightened scrutiny of efficiency and costs in defense programs.
On April 9, 2025, President Trump issued an executive order (the Order) to streamline the defense acquisition process and workforce, and potentially eliminate defense programs that are over budget or behind schedule. According to the Order, the current defense acquisition system is “antiquated” and fails to provide the “speed and flexibility” needed to support the US Armed Forces. The Order aims to improve the nation’s ability to “deliver state-of-the-art capabilities at speed and scale through a comprehensive overhaul” of the defense acquisition system. See the fact sheet accompanying the Order.
Key Components of the Order
First, the Order directs the Secretary of Defense to deliver to the president, within 60 days, a plan to reform the Department of Defense’s (DOD) acquisition processes. The plan must incorporate “to the maximum extent possible” “a first preference” for commercial solutions, consistent with the Federal Acquisition Streamlining Act of 1994.1 The Order also emphasizes the use of other alternative acquisition methods such as Other Transactions Authority (OTA) agreements, a type of award that is not subject to the Federal Acquisition Regulations and allows greater flexibility in contracting terms. In addition, the Order encourages use of the military services’ Rapid Capabilities Offices, which focus on rapid procurement for immediate- and short-term needs.
Second, it directs the Secretary of Defense to review “each functional support role within the acquisition workforce to eliminate unnecessary tasks, reduce duplicative approvals, and centralize decision-making.” Within 120 days, the Secretary of Defense must submit a plan to the president to “reform, right-size, and train the acquisition workforce.” The plan must include changes to performance evaluation metrics and workforce training, and an analysis of necessary acquisition workforce levels.
Third, it requires the Secretary of Defense to oversee a review of DOD acquisition regulations, manuals, instructions, and implementation guides relating to acquisition, to identify those that may be eliminated or revised to “promote expedited and streamlined acquisitions.” The Order also requires compliance with President Trump’s January 31, 2025, executive order which directs agencies to identify 10 regulations for elimination for every new regulation issued.
Fourth, the Order requires the Secretary of Defense to review, within 90 days, all Major Defense Acquisition Programs (MDAPs) as defined in 10 U.S.C. § 4201. An MDAP is a DOD acquisition program that is not a “highly sensitive classified program,” and that is (1) designated as an MDAP by the Secretary of Defense; or (2) is estimated to require more than (A) $300 million in eventual total expenditure for research, development, test, and evaluation; or (B) an eventual total expenditure for procurement of more than $1.8 billion.2 This definition does not include programs for the acquisition of automated information systems.3
An MDAP that is (1) more than 15% behind schedule based on the current Acquisition Program Baseline (APB); (2) 15% over cost based on the current APB; (3) “unable to meet any key performance parameters”; or (4) “unaligned with the Secretary of Defense’s mission priorities,” will be considered for cancellation. In the fact sheet accompanying the Order, the White House identified several MDAPs that were behind schedule.
Takeaways for Contractors
In light of this Order, contractors should be prepared for an increase in the use of alternative methods of contracting, including OTAs, in future procurements. They should also be mindful of the increased focus on efficiency and speed in acquisitions, including in programs in which performance is already underway. Contractors with MDAPs 15% or more behind schedule or over cost should be prepared to address questions or concerns from government officials about the importance of the relevant program and steps that can be taken to address any schedule or budget issues.
Latham lawyers will continue monitoring and providing updates on changes to acquisition regulations and processes.
