For months, congressional leaders have been working to deliver what they have described as “the most significant acquisition reforms in a generation.” But several key provisions — including measures on pricing transparency, oversight of major programs and Other Transaction Authorities — were ultimately dropped from the final version of the fiscal 2026 defense policy bill.

Both the House and Senate sought to close the loophole that allows companies to submit cost and pricing data after contract price is agreed upon. 

The House version of the defense bill included a provision that would prohibit contractors from using cost or pricing data that is more than 30 days old as a defense against defective pricing allegations. Lawmakers backing the proposal said it would “empower the Defense Department to enter into contracts with sufficient pricing information.”

The Senate version of the bill contained a similar provision, but both proposals were removed from the final bill. 

Instead, lawmakers directed DoD officials to examine whether late disclosures of cost or pricing data is a systemic problem and recommend ways to fix it. 

“We note that the sweeps process under the Truth in Negotiations Act is a post-price agreement review requiring contractors to disclose any updated cost or pricing data in their possession for certification before contract award. We are aware of concerns that contractors may not be providing disclosures of cost or pricing data in their possession prior to a price agreement, opting to disclose such data only after agreement and immediately before contract award,” the lawmakers said in the joint explanatory statement. “This practice may result in upward adjustments to contract pricing without providing time for sufficient review due to factors such as the expiration of funds or urgent military needs for the products or services.” 

House-led efforts to rein in cost overruns and strengthen oversight of major defense acquisition programs were also blocked during the conference process. The proposal would have accelerated the Pentagon’s reporting timeline, requiring the department to alert Congress within 30 days of any significant or critical cost overruns.

Also omitted is a House proposal to curb the outsized influence of tech giants over the cloud computing and artificial intelligence defense contracting spaces. The measure would have directed DoD to ensure there is a competitive award process when procuring cloud computing, data infrastructure and AI capabilities.

OTA reforms 

While other transactions are intended to move innovative technologies out of the lab and into production, lawmakers said it remains unclear how often these agreements actually lead to follow-on production contracts. 

But a House proposal that would have required Pentagon officials to provide a report on detailing use of follow-on agreements made under Other Transaction Authorities between 2022 and 2025 did not make it into the bill.

Instead, the Government Accountability Office was directed to conduct a review of how OTAs are used, including whether follow-on agreements deliver long-term capability.

The House also sought to require large OTA-funded projects to follow the same oversight rules as major defense acquisition programs, but that proposal was ultimately dropped from the final bill as well.

Small business and workforce provisions left out

A House provision aimed at expanding opportunities for veteran-owned small businesses was stripped from the bill — the measure would have required DoD to set annual contracting goals for small businesses owned by veterans. Moreover, it would have allowed the Pentagon to use noncompetitive procedures when awarding certain contracts to veterans.

“We note that veteran-owned small businesses are an important part of the defense industrial base and we encourage the Secretary of Defense to continue supporting veteran-owned small businesses,” the lawmakers said.

The House’s proposal to create a standardized Schedule V for reporting veteran employment and retention data across all DoD contracts and grants was also dropped from the final bill.

Another House provision would have required the department to ensure contractors are meeting the federal 7% disability hiring requirement.

Portfolio management reforms

While the move to a more portfolio-centric approach to acquisition is a feature of the defense policy bill, negotiators dropped a Senate proposal to establish “capstone requirements” for future portfolio acquisition executives. The shift in strategy for defining needs aimed to improve speed and innovation by revising programs in consultation with the Joint Requirements Oversight Council.  

The House also tried to address DoD’s longstanding high turnover in key acquisition leadership roles by requiring a six-year minimum assignment for bosses formerly known as program executive officers, but the effort failed to advance. Instead, the final bill directs the Pentagon to brief Congress next year on “actions taken to strengthen stability in program management and tenure for critical acquisition positions.”

Legislators did endorse the spirit of the foiled measure.

“Stable, milestone-aligned tenure is essential to program continuity, accountability, and cost and schedule performance. Short-term assignments can incentivize short-sighted decision-making by officials who will not be present to manage long-term consequences,” they said. “Longer tenure strengthens accountability by ensuring that the same leaders who initiate major acquisition decisions remain responsible for their execution and outcomes. Frequent rotations disrupt long-term planning, erode institutional knowledge, and hinder the Department’s ability to deliver capabilities to the warfighter on time and within budget.” 

The House passed the annual defense bill on Wednesday. The legislation now heads to the Senate.

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In the Army, a new acquisition bureaucracy is starting to take shape. It means new names for some longstanding Army organizations. But at its core, the reorganization is about letting Army officials manage the acquisition system as portfolios of capabilities with less of a focus on individual programs.

That idea’s been championed by outside reform advocates for years, including when the “Section 809 panel” on acquisition reform released its final report in 2019. The Congressional panel on Planning, Programming, Budgeting and Execution Reform echoed the call as part of its recommendations. So did both the House and Senate in their respective versions of the latest Defense authorization bill. And last month, it got the explicit endorsement of the secretary of Defense.

“We will leverage taxpayer dollars in a more accountable, flexible and deliberate manner to maximize their value across capability portfolios,” Defense Secretary Pete Hegseth said during an address at the National War College. “We will shift funding within portfolios’ authorized boundaries swiftly and decisively to maximize mission outcomes. If one program is faltering, funding will be shifted within the portfolio to accelerate or scale a higher priority. If a new or more promising technology emerges, we will seize the opportunity and not be held back by artificial constraints and funding boundaries that take months or even years to overcome.”

In that address, Hegseth credited the military services with laying the groundwork for some of the reforms he wants to make department-wide. And the Army started its implementation work last month, naming six new “portfolio acquisition executives.” Each of those PAEs will oversee different “capability areas” with programs managed by what had, up until now, been called program executive offices (PEOs), and will now be called capability program executives (CPEs).

But there’s more in those portfolios than just the former PEOs, said Brig. Gen. Christine A. Beeler, the capability program executive for Simulation, Training and Instrumentation (CPE STRI).

“The PAE is going to be able to wrangle all of those enablers, and we are just one enabler to the PAE,” said Beeler during a staff town hall late last month. “There are also folks up at big Army that are going to help us on the programming side … and you’ve got requirement folks. That can get combined and come to us in a single requirements community of practice, so that things that get decided at the PAE level will be easier to understand and make trades on.”

Last week, another of those former PEOs announced the details of its own internal reorganization. Leaders of the newly-dubbed Capability Program Executive for Command, Control, Communications, and Network say most of their changes will be at the program manager level — both to align with the Army’s broader acquisition “transformation” agenda, and to orient the office more explicitly around the Army’s plans for Next Generation Command and Control.

The changes there include four new program offices — one each for applications, data and AI, infrastructure and transport, plus changing roles for several other offices. CPE C3N officials expect to detail the changes during the next Army technical exchange meeting at Aberdeen Proving Ground next month.

Beeler said there will be program office changes within her organization as well, but the reorganization will take until the summer of 2027 to fully unfold. Along with that, she said, will be a reduction in senior officer positions.

“The key changes were a mandated reduction of command select list billets by 30% at both the O-6 and the O-5 level,” she said. “So that means, over time, we’re going to transition from three CSL billets to two CSL billets at the O-6 level, and from eight CSL billets eventually to five CSL billets at the O-5 level.”

And at the even more senior levels, Beeler says the end state of the Army’s acquisition reorganization is that the new PAEs will be two-star generals or the civilian SES equivalents. And the CPEs will be one-star positions.

But those details — like many others in the reorganization — are still subject to change.

“This is a very time and event-driven process,” she said. “We’re not jumping in tomorrow, both feet and everything’s changed. That wouldn’t make any sense, and we would lose the discovery part of how these pathfinder adjustments to the acquisition process are actually going to work. For the time being, we will be the Capability Program Executive STRI. We believe in the future we’re going to change the logo and we’ve got some ideas out there for how we’re going make other changes over time, but at the end of the day, this is what we’re going to do. We simulate the fight, we replicate the threat, and we’re going to make sure that the Army can win across all domains.”

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