DoD Procurement & Acquisition Reforms (2025)

Executive Orders & Policy Reforms: The Administration recently issued sweeping directives with the stated goal of streamlining defense procurement. On April 9, 2025, the Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base was enacted, directing the Secretary of Defense to overhaul acquisition processes for speed and flexibility. Within 60 days, DoD must submit a reform plan that emphasizes commercial item purchases, Other Transaction Authority (OTA), Rapid Capabilities Office policies, and other streamlined pathways. The EO further mandates a review of the acquisition workforce to cut “unnecessary tasks” and duplicative approvals, and a 90-day review of all Major Defense Acquisition Programs – with any program 15% behind schedule or cost to be considered for cancellation. A complementary April 15 EO directs the Office of Federal Procurement Policy to purge the FAR of “non-essential” provisions.

FAR and Regulatory Changes: Alongside these EOs, new regulations promote faster, less burdensome buying. In January 2025, DoD/GSA/NASA proposed a FAR rule to expand small-business set-asides on multiple-award contracts – updating acquisition planning and SBA coordination to favor small firms. Final rules effective January 17, 2025, clarify suspension/debarment procedures and implement SBA’s small-business size regulations, e.g., representation of size/status on orders. DoD also proposed DFARS revisions to adjust statutory and non-statutory procurement thresholds for inflation. The Cybersecurity Maturity Model Certification is slated for “phased implementation” once DFARS clauses are finalized (expected in mid-2025). Together, these measures signal shorter procurement timelines, e.g., mandating use of existing rapid authorities and automated processes wherever possible.

Impacts on Small Business & Contractors

Small Business Goals and Set-Asides: In Jan 2025 the SBA reset its FY2025 contracting goals, reducing the Small Disadvantaged Business SDB prime award target from 15% down to a 5% statutory floor. This 5% goal applies across all agencies, replacing higher agency-specific goals. Analysts predict this will reduce awards to SDB firms, which had reached ~12% in FY2024, as agencies pull back on SDB set-asides. DoD is instead promoting other small-business channels: for example, a proposed FAR rule would increase small-business order set-asides on MACs, with more SBA involvement in planning. DoD’s Office of Small Business Programs also continues active outreach in priority areas, e.g., cybersecurity, AI, space, and highlights opportunities under new technology acquisitions (see below).

Regulatory Updates: Major SBA regulatory changes also took effect in January 2025. A final HUBZone rule, effective January 16, 2025, tightens the definition of a firm’s “principal office” disallowing virtual offices, and sets stricter HUBZone residency rules, but eases some requirements, e.g., reducing employee residency from 180 to 90 days and moving annual recertification to once every three years. DoD, GSA, and NASA also published FAR clauses to implement SBA’s Mentor-Protégé and size re-representation rules, for example, requiring contractors on set-aside orders to re-confirm size/status under certain MACs. New FAR incentives now encourage subcontracting to Puerto Rico and U.S. territories. Meanwhile, updated suspension/debarment rules promote procedural consistency. Overall, these shifts adjust how small businesses qualify and compete: HUBZone firms face tighter workspace rules, while Mentor-Protégé and MAC reforms aim to encourage joint ventures and small-business involvement.

Technology-Specific Acquisition Changes

Artificial Intelligence (AI): DoD’s AI procurement guidance is evolving rapidly. In January 2025 the “Removing Barriers to American Leadership in AI” (EO 14179), order was signed, mandating that federal AI policies become “forward-leaning, pro-innovation, and pro-competition”. New OMB memos (issued spring 2025) revise prior Biden-era AI directives: agencies must still address risks, but with reduced oversight on new AI tools. Notably, the OMB AI Procurement Memo directs agencies to avoid vendor lock-in and promote competition in AI acquisitions. The memos largely exempt classified National Security Systems from civilian AI rules, deferring to forthcoming DoD guidance. In practice, DoD is piloting AI to speed contracting. For example, the Pentagon launched the SWIFT program (Software Fast-Track) in May 2025: it uses AI (including LLM tools and automated SBOM analysis) to grant rapid provisional ATOs for software, replacing manual RMF processes. The Army’s new #CalibrateAI pilot uses a generative-AI assistant to streamline acquisition tasks, e.g., parsing policies, conducting market research. These changes seek faster procurement of software and tech platforms.

Space Systems: DoD continues expanding commercial and rapid space acquisitions. In May 2025, the Space Force awarded a new 10-year, $237M IDIQ (the Space Test Experiments Platform 2.0 or STEP 2.0) to 12 companies – from large primes to SmallSat specialists. STEP 2.0 will buy modular small satellite buses for experimental payloads, tapping the commercial launch market to accelerate space tech testing. This builds on DOD’s broader shift toward “enterprise SATCOM”: a 2025 GAO report notes DoD is moving from siloed satellite systems to an integrated architecture that mixes DoD and commercial constellations for resilience. The report observes DoD “plans to implement elements of the new approach within the next 5 years,” including automating SATCOM resource allocation and buying multi-network user terminals. On the contractor side, Space Systems Command’s focus on rapid-launch “Victus” satellites and standard payload buses is also pushing acquisition boundaries. For example, a new Space Force “warfighting framework” emphasizes space superiority and rapid procurement to counter jamming threats. These space-focused initiatives underscore DoD’s priority on leveraging commercial innovation and shortening space program timelines.

Communications and GPS: DoD is retooling military communications acquisitions for resilience and speed. A key 2025 development is the new enterprise SATCOM strategy noted above. In practice, this means buying open-architecture terminals and services that can link across multiple satellite and terrestrial networks, as well as expanding partnerships with commercial SATCOM providers. Congress has urged accelerated 5G adoption on bases and disaggregated network buys for on-the-move communications. DoD also continues to enforce telecom safeguards: for instance, FY2025 NDAA provisions, effective late 2025, bar contracts involving certain foreign vendor technologies. For GPS and PNT, DoD has engaged with FCC rulemaking: in April 2025 industry urged the FCC to coordinate spectrum licensing changes for new GPS alternatives with DoD, reflecting DoD’s concern over GPS jamming. While not a DoD rule per se, these spectrum policy shifts could indirectly affect future GPS acquisitions, for example, funding for alternative PNT systems.

New Contract Vehicles & Pilot Programs

• Anything-as-a-Service (XaaS) Pilot: The FY2024 NDAA directed DoD to launch an “Anything-as-a-Service” pilot to explore consumption-based contracting. In May 2025, DoD’s Pricing/Contracting office issued a memo establishing the pilot, initially targeting Software-as-a-Service, Data-as-a-Service, and “Space-as-a-Service” product codes. The idea is to procure technology capabilities, combining software, hardware, data and services, on a pay-per-use basis and compare cost/speed against traditional buys. Over time, this could reshape contracting for cloud, AI services, and even space-borne infrastructure.
• Space Test Platform 2.0 (STEP 2.0): As noted above, Space Force’s new IDIQ (12 vendors, 10 years, ~$237M) for small satellite buses attempts to make space tech prototyping routine. This vehicle resembles NASA’s SEWP or DIU purchases in that it opens access to innovative commercial providers alongside big primes.
• Software Fast-Track (SWIFT): DoD CIO’s May 1, 2025 SWIFT program is effectively a new “contracting” approach for software. By using automated, AI-driven security assessments (SBOM + LLM analysis), vendors can receive provisional ATOs much faster. This is a departure from static Authority-to-Operate processes – a kind of acquisition reform aimed at continuous modernization.
• Acquisition Workforce/Process Pilots: In response to the acquisition EO, DoD is considering an office consolidation: merger of the Strategic Capabilities Office, Defense Innovation Unit, and Chief Digital/AI Office into a DARPA-like entity. No decision is final, but if implemented this would centralize experimental and prototype contracting. Separately, DoD has begun setting shorter milestone timelines and “red team” reviews for major programs to catch delays early, as mandated by the April 2025 EO.

Funding Priorities & Timelines: Overall, budget priorities and schedules reflect the above shifts. The public rhetoric emphasizes speed and risk-taking: Congress and DoD leaders have warned that “lagging” programs will be cut if they exceed 15% cost/schedule slips. Pentagon directives urge program managers to use rapid authorities to field new tech faster. In practice, funds are flowing more into near-term capabilities, e.g., small satellites, AI-enabled systems, and less into long-horizon research. One analysis notes the Pentagon plans to cut spending on abstract research in favor of practical warfighter systems. DoD budgets for FY2026 are expected to prioritize computing, AI, space sensors, and resilient networks, in line with these new policies.

Key Takeaways: In sum, since January 2025, DoD acquisition policy has pivoted toward speed, commercial solutions, and small businesses. New executive orders and rules mandate shorter timelines, favoring commercial items and OTAs, and workforce reform. Small business participation will move away from SDB targets toward new set-aside guidance and HUBZone changes. Cutting-edge tech areas see tailored initiatives: AI procurement is being overhauled, space acquisitions are tapping commercial innovation, and communications buys seek more resilience. Together these changes aim for a leaner, more agile DoD procurement system.