Ten Months of Defense Acquisition Reform: What the Feinberg Memo Means and Where the Reform Actually Stands
In November 2025, Secretary Hegseth stood at a press conference and announced the Warfighting Acquisition System. Speed to capability. Fewer approval layers. Fixed-price as preference. Commercially driven timelines. It was a clear statement of direction.
Ten months later, that direction has become a stack of binding policy. The speech has become law, executive order, and internal Department directive. And the cumulative effect is more significant than any single piece of the reform suggests on its own.
Here is what actually happened, in sequence, and what the defense acquisition reform means for defense contractors pricing and bidding work today.
November 7, 2025: The Warfighting Acquisition System directive
Secretary Hegseth's memo set the organizing principle: speed to capability replaces compliance process as the guiding logic of defense acquisition. Programs would rely more on fixed-price structures, shorter design-to-delivery cycles, and commercially driven competition. Acquisition officials would have more authority and fewer approval requirements. The reform was directional. The execution would follow.
December 2025: The FY2026 NDAA delivers the enabling law
Congress provided the legislative foundation. Section 1806 raised the basic CAS threshold from $2.5M to $35M and full CAS coverage from $50M to $100M. Section 1826 exempted nontraditional defense contractors from FAR Part 31 cost principles, DFARS business system requirements, and TINA certification entirely. The heavy legislative work was done. Everything that followed was execution of authority Congress had already granted.
April 30, 2026: Executive Order 14402 makes fixed-price the mandate
The President signed Executive Order 14402, "Promoting Efficiency, Accountability, and Performance in Federal Contracting," directing federal agencies to make firm-fixed-price contracts the default and preferred method of procurement. For the Department of Defense, non-fixed-price awards above $100M now require agency head approval. By July 29, 2026, the Department was required to review its ten largest non-fixed-price contracts and assess opportunities to renegotiate toward fixed pricing.
This is the single most consequential change for defense contractor pricing. Fixed-price is no longer a preference. It is a mandate, with an approval burden attached to any deviation. Cost risk that previously sat with the government on cost-reimbursable contracts now sits with the contractor. And it sits there from the moment the bid is submitted.
September 14, 2026: The Feinberg memo: Fostering One Strong Industrial Base
Deputy Secretary Feinberg's memo is the most recent and most operationally detailed piece of the reform. It directs the Department to implement the FY2026 NDAA threshold increases immediately, and then goes further on three fronts.
First, CAS to GAAP. The memo directs the Department to submit proposals to the Cost Accounting Standards Board within 60 days to make CAS exemption the default, confine remaining CAS coverage to sole-source cost-based development or incentive-fee procurement, and ensure CAS applies to individual contracts rather than entire business units. The shift to GAAP as the accounting baseline is the stated goal. This piece requires CASB rulemaking and is not self-executing, but the Department is now formally committed to pursuing it on a defined timeline.
Second, shadow CAS is banned. Contracting officers cannot impose CAS-equivalent data requirements under a different name. The memo explicitly prohibits this and requires a joint enforcement-posture statement within 30 days.
Third, risk-based audits. DCAA and DCMA are directed to draw on contractors' existing GAAP-audited financials rather than conducting duplicate reviews. Forward pricing rate agreements will be overhauled to use data maintained in the ordinary course of business.
What is still in motion
Two pieces of the reform are not yet self-executing. The CAS-to-GAAP transition requires the Cost Accounting Standards Board, an independent statutory body, to act through its own rulemaking process. The profit policy reform, rewarding risk carried and capital invested rather than cost incurred, requires a DFARS rule change with public notice and comment. Both are in motion. Neither is waiting on Congress.
Everything else; the threshold increases, the fixed-price mandate, the shadow CAS ban, the audit posture shift, the nontraditional contractor relief, is in effect or implementing on the timelines the memos specify.
The net effect for defense contractors
Read in sequence, the reform does three things simultaneously. It raises the formal compliance threshold, reducing the paperwork requirement on a wide band of contracts. It mandates fixed-price as the default, transferring cost risk to the contractor on those same contracts. And it signals a shift from government-unique accounting to commercial standards, reducing the overhead of maintaining parallel CAS and GAAP systems.
The firms reading this as pure compliance relief are missing the second part. The formal backstop that previously forced rigorous cost documentation is moving. The fixed-price mandate that puts the contractor on the hook for every dollar of overrun is not. And the speed requirement that compresses the window available to build an accurate estimate is accelerating.
The firms that will benefit from this reform are not the ones that did less. They are the ones whose internal pricing discipline was already strong enough that the compliance regime was not carrying the weight for them.
What this means for your estimating process
The Feinberg memo specifically calls out the need for contractors to have forward pricing rate agreements drawn on data maintained in the ordinary course of business. That language matters. It is a description of what mature, ERP-integrated estimating looks like in practice: cost data that exists as a byproduct of how you run your business, not as a separate compliance exercise maintained to satisfy a government requirement.
For pricing and estimating teams, the practical implications are clear. Fixed-price work requires accurate cost estimates built from first principles, connected to historical actuals, traceable to their source data, and linked directly to project execution. Excel is not that system. A legacy standalone pricing tool that does not connect to SAP is not that system. An ERP-native estimating platform that creates the audit trail as a byproduct of building the estimate is exactly that system.
The reform did not change what good estimating looks like. It changed how urgently every defense contractor needs it.
How Twenty5 iPE helps
The reform removed the external compliance requirement on a wide band of contracts. It did not remove the need for cost data that is accurate, traceable, and defensible under fixed-price risk. iPE gives defense contractors the ability to build estimates from structured cost element frameworks, grounded in historical actuals from prior programs, with a full audit trail created automatically across the project lifecycle. When the bid is won, the estimate connects directly to SAP project execution with zero re-entry. And when the program closes, actuals feed back into iPE to sharpen the next estimate. The compliance backstop moved. The internal discipline it enforced still has to be there, and iPE is how you build it.
