Leaked Pentagon Memo Unveils Sweeping Reforms For Defense Innovation

A leaked Pentagon draft memo proposes a sweeping overhaul of the U.S. defense acquisition process aimed at cutting delays, boosting accountability, and modernizing procurement in response to escalating global security challenges.

The six-page draft, reviewed by Defense One, outlines reforms meant to “restore deterrence in the face of an increasingly dangerous security environment.” It emphasizes streamlined internal reviews, restructured acquisition roles, and stronger penalties for defense contractors that exceed budgets or miss deadlines.

Kingsley Wilson, a Pentagon spokesperson, declined to comment on the “pre-decisional” document.

According to the draft, current “unacceptably slow acquisition fielding times” stem from fragmented leadership, misaligned incentives, and limited industry investment. To address this, the memo proposes appointing “Portfolio Acquisition Executives” with greater decision-making authority, introducing “scorecards” to track program progress, and implementing “time-indexed incentives” to keep projects on schedule and within budget. Each military branch must submit implementation plans within 60 days.

Politico first reported the memo, which precedes Defense Secretary Pete Hegseth’s upcoming address to industry leaders. The Trump administration has made acquisition reform a central goal, complementing earlier guidance on software procurement and new executive orders targeting defense efficiency.

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Defense analysts and lawmakers agree reform is overdue, noting programs like the Air Force’s Sentinel ICBM, which ran 81 percent over budget. Critics warn, however, that emphasizing speed could risk quality and create further cost overruns.

Todd Harrison of the American Enterprise Institute said the new “time-indexed incentives” represent a significant departure from traditional fixed-price contracts. “It may incentivize companies to deliver poor-quality products before they are ready for prime time just to stay on schedule,” he said.

Others voiced caution about discouraging Federal Acquisition Regulation-based contracts, which could push companies to overpromise on delivery timelines.

Still, many see opportunity in the memo’s push toward portfolio-based flexibility, which could better align spending with evolving technologies and needs. Defense consultant Arnold Punaro called the proposals “ambitious” and said if implemented, they could “break the long-standing paradigm that has constrained defense acquisition for decades.”

Rep. Donald Norcross (D-NJ) echoed support for the changes but emphasized maintaining cost control and product quality. “We cannot lose sight of delivering better capabilities at a reasonable cost to taxpayers,” he said.

Industry leaders such as Aerospace Industries Association CEO Eric Fanning praised the memo’s “forward-looking” tone and practical timelines. “They’re focused on the right things: accountability, incentives, and procurement patterns,” he said.

Fanning noted that the new system should encourage both private investment and Pentagon efficiency, creating a faster, more responsive defense industrial base. “We’ve got a system right now that discourages investment because they don’t know if there’s a return on investment,” he added.

To help workers adapt to the shift, the memo also directs the Pentagon to retrain contracting staff to understand new authorities and delivery expectations.

The draft also calls for dual-sourcing contracts, wider use of fast-track “Other Transaction Authorities,” and preference for modular, open-source designs, aligning defense development more closely with commercial tech models.

One former military official said the reforms could help smaller firms compete with defense giants, pointing to outdated processes that have hindered innovation. The official cited the example of ineffective drones sent to Ukraine, arguing that “top cover” for risk-taking startups has long been missing.

Such startups are increasingly stepping in. Aurelius Systems, a 16-person U.S.-Ukrainian partnership, designs directed-energy weapons to disable drones using affordable, readily available components. Its founder, Michael LaFramboise, said their work with Ukrainian front-line operators offers a “glimpse into what the next conflict might look like.”

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While some experts remain cautious, most agree that the Pentagon’s proposed reforms represent a defining step toward faster, more flexible, and more accountable defense procurement.

Editor’s Note:

This story highlights a pivotal moment in U.S. defense modernization. As the Pentagon pushes to streamline acquisitions, balancing speed, cost, and quality will test the future of military readiness and industrial cooperation.