A new forecast projects that defense spending will keep rising through 2035, while civilian agencies face years of flat or shrinking budgets, continued cuts and growing pressure to scale back. 

The Professional Services Council’s latest federal market forecast, compiled with input from more than 400 industry volunteers and subject-matter experts, predicts that in an environment where legislative logjam is likely to persist, defense spending will continue rising at roughly 2% annually after its first $1 trillion budget in fiscal 2026 — a one-time spike driven by reconciliation —  while cuts will “continue to fall disproportionately on civil agencies until elections change the balance of power.”

“What this means in practical terms is that the fiscal environment for the next decade will be tight, competitive, highly dependent on supplemental funding, reconciliation and prone to crisis-driven appropriations. Base budgets alone will struggle to drive new initiatives, especially on the non-defense side. In this environment, as one of our interviewees suggested, it’s best to keep your customers close and your congressional supporters and lobbyists closer,” Mike Riley, a volunteer for PSC’s Vision Federal Market Forecast told reporters last week.

In the defense space, PSC volunteers said their discussions with defense stakeholders revealed a shift, or “strategic realignment,” in the Pentagon’s priorities. While the Indo-Pacific Command remains of “elevated importance,” the Northern Command and Southern Command are gaining new emphasis as the department puts greater focus on homeland, border security and expands its presence in Latin America and the Caribbean. 

“This year was a bit of an interesting year for us. A lot of defense folks acknowledge the growing importance under this administration, but also a lot of consternation about the directions the administration might be going and just kind of the lack of clarity. There’s some continuing trends — deterring China, integrated deterrence, that pivot to the Pacific — that’s an ongoing thing that didn’t change from the previous administration. Of course, border security, the Department finds itself in an uncomfortable position,” Jason Dombrowski, a volunteer for PSC’s Vision Federal Market Forecast, said.

“They are getting a little bit more heavily involved in domestic politics than they would otherwise prefer to. Certainly, they always reiterated their intent to be responsive to the commander in chief. But historically, of course, the American military has tried to avoid a domestic role,” he added.

The department is also placing greater emphasis on the Golden Dome missile defense system, shipbuilding and munitions under this administration.

“I think everyone’s been paying attention to the news that there has been some very notable plus ups and focuses of this administration, most notably around shipbuilding, but also to include things like nuclear modernization, which in previous years we had highlighted as a potential toss up, but this year definitely moved into the winners category,” Dombrowski said.

Acquisition reform

The Defense Department also moves to implement Defense Secretary Pete Hegseth’s sweeping acquisition reforms, which emphasize greater competition, faster delivery and making commercial technology the default option. It’s unclear whether the department has the ability to implement those changes given deep personnel cuts across the contracting workforce.

“The contracting professionals — there seems to be a large reduction. How do we get this done? That fundamental capacity to get things done is really going to make a difference, whether you’re putting out contracts, supply chain, workforce throughput … It’s going to affect how we can actually help out the government. Adaptability is the name of the game,”Jim Kainz, a PSC volunteer, said.

In addition, the department’s new acquisition strategy promises to lower barriers to entry to encourage startups and non-traditional vendors to join the defense industrial base. Dombrowski said that while stakeholders are cautiously optimistic about the reforms, there is also a “healthy cynicism of saying, ‘How is this time any different?’” 

“This administration has made a big priority of trying to attract new people, and we looked at the pros and cons of it. It’s probably worth noting that, aside from a few very notable successes that we can all figure out, there hasn’t really been much movement in this regard,” Dombrowski said. 

“We’re very excited, certainly [Commercial Solutions Opening] and [Other Transaction Authority] and just a variety of things that should provide a lot of flexibility, but let’s see it,” he added.

Winner and losers

Dombrowski and Kainz said several areas emerged as clear “losers” in this year’s defense outlook, including the department’s buying power, which continues to erode as inflation and reshoring efforts drive up costs across programs.

Legacy systems and advisory and assistance services are facing cuts, and U.S. Africa Command and Central Command are being pushed lower on the priority list as resources shift toward European Command.

There is also uncertainty around operations and maintenance funding, which Dombrowski and Kainz said remains a major concern for both think tanks and potential customers. Sustainability initiatives appear to be split — the “green side of sustainability” will most certainly lose ground, while efforts tied to energy resilience may gain momentum. 

Contested logistics, once considered a toss-up, is gaining traction as a priority, and scalability — the ability to rapidly increase production in a crisis — is emerging as a clear winner across the department.

Overall, research and development spending is increasing, but only in areas related to advanced weapon systems, technologies, drones and energy. 

“However, there’s a belief and a growing expectation that the contracting community will bear more of those responsibilities,” Dombrowski said. “It’s really unclear where that line is going to be drawn between things that are really government exclusive where DoD is willing to pick up all costs associated to it. There are things we can all imagine, like fighter jets. But what about things that are more in the gray areas? Avionics, business process systems, back-office systems, things like that — definitely more of a sense that we are going to have to be developing those on our own.”

If you would like to contact this reporter about recent changes in the federal government, please email anastasia.obis@federalnewsnetwork.com or reach out on Signal at (301) 830-2747.

The post Defense spending will continue to climb as civilian agencies brace for years of cuts, new forecast projects first appeared on Federal News Network.

As the Defense Department moves to implement Defense Secretary Pete Hegseth’s sweeping acquisition reforms, Space Force leaders warn that the depth of workforce cuts is threatening to cripple the service’s ability to execute them.

“You have to have a strong, vibrant workforce to do the work and we’re in a really interesting time and a troubling time. There is a strong, motivated force but there have been an incredible amount of pressures on them this past year,” Maj. Gen. Stephen Purdy, acting assistant secretary for space acquisition and integration at the Department of the Air Force, said Nov. 20 during a Center for Strategic and International Studies event. 

“We have a looming increase in acquisitions coming down the pike, and so that presents us with a really difficult situation of where we need to double down on our acquisition workforce, our acquisition training. We are in a situation where we barely have enough acquirers to do all of the work that we have now,” he added.

Purdy said the service has spent the last few years implementing the acquisition tenets set by Frank Calvelli, who stepped down as assistant secretary of the Air Force for space acquisition and integration in January. Calvelli pushed the service to “build smaller satellites and smaller ground systems and minimize non-recurring engineering or new design.” He also preferred to use fixed-price contracts when possible. Calvelli’s “tenets” were a back-to-basics formula meant to fix chronic problems in space programs.

“We’ve built upon that this last year. We haven’t let grass grow under our feet as we’ve kind of taken over in January. And we’ve built upon that foundation and moved on out and really done a lot this year that kind of foreshadowed [Hegseth’s] acquisition reforms. But the workforce question is really the key piece,” Purdy said.

The Trump administration push to reduce the size of the federal workforce through initiatives such as the deferred resignation program and voluntary early retirement has had an “outsized impact” on the Space Force. In May, Chief of Space Operations Gen. Chance Saltzman told Congress the service had lost nearly 14% of its civilian workforce — much of it coming from Space Systems Command, the Space Force’s acquisition hub.

“I’m worried about replacing that level of expertise in the near term as we try to resolve it and make sure we have a good workforce doing that acquisition,” Saltzman told the Senate Armed Services Committee at the time. 

When asked about the acquisition workforce, Saltzman told reporters that these workforce reduction efforts have taken civilian experts “out of play,” leaving gaps in the institutional knowledge and technical skills.

As the Space Force begins implementing Defense Secretary Pete Hegseth’s acquisition overhaul, which calls for using commercial technology as the default option, great competition and faster delivery, Purdy warned the service may not have the workforce needed to shift to the new way of doing business. 

“If you look at [Hegseth’s] acquisition reforms that he’s laid out, a bunch of great initiatives and things we need to get after. But … you need the numbers of people, and you need the quality to understand. If you say ‘go commercial,’ and if you say, go after ‘new manufacturing mechanisms’ and take advantage of all of the new space companies that are out there, you need a larger number of people just to even track that activity. You need to be able to understand all that’s going on. You need to understand the incentive structure,” Purdy said.

The strain is particularly acute in contracting since the service simply doesn’t have enough contracting officers to handle a much larger workload created by recent acquisition reforms.

“In the past, if we had an acquisition program and we would go 20 years and it would be with one prime, we would maybe have one or two contracts, an R&D contract and a production contract. Pretty simple. One prime, a couple contracts. Now, with some of our programs there’ll be a five-year program, but we’ll probably have 20 contracts because I’m dealing with 10 or 15 different contractors in industry, which is literally what acquisition reform is telling us to do,” Purdy said.

“We have a serious issue here at a federal level on contracting and it’s just the numbers of folks. We do not have the numbers of contractors that we need at a federal level. Every federal agency has problems, and so we do not have the right numbers that we need,” he added.

Saltzman said the service is trying to ease the strain by requesting waivers to the hiring freeze that has been in place since the start of the Trump administration, as well as hiring authorities to fill essential acquisition and contracting roles.

The service also recently launched its first acquisition training course.

Kay Sears, vice president and general manager of space, intelligence and weapon systems development at Boeing, said that while the Space Force acquisition community is more open and collaborative than ever, it is also apparent that the service’s workforce is stretched thin.

“You can tell that they’re stressed. You can tell that they’re overworked. And then when you get into that contracting element that’s really where I see the slowdown, the, ‘Hey, I’ve only got one playbook — I’m going to go follow the playbook,’ and we really start to lose sight of the mission objective,” Sears said.

Acquisition experts have said that while the proposed acquisition changes could meaningfully reshape how the Pentagon buys capabilities, the success of Hegseth’s reforms will hinge on whether the department can equip the workforce with the skills needed to operate differently. 

“Scores of case studies have shown, there has to also be an aggressive, intentional and holistic approach to change management, prominently including how the relevant workforces are developed. Absent re-aligning those processes, real change will remain elusive,” Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, told Federal News Network.

The post Deep personnel cuts jeopardize Space Force’s ability to implement Hegseth’s acquisition reforms first appeared on Federal News Network.

Defense Secretary Pete Hegseth’s acquisition system shakeup is being met with cautious optimism from acquisition experts who say the changes could meaningfully reshape how the Pentagon buys capabilities, manages programs and integrates emerging technologies — if the department can avoid repeating the mistakes of the past.

Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said by and large the changes make a lot of sense — they could help to break down entrenched silos across the department’s acquisition enterprise and drive greater coordination and integration. They also expand on initiatives the department has tried before. 

“There have been a lot of reform efforts over the years — and this one both incorporates similar themes and/or reflects a natural extension of them — and all faced similar challenges in both implementation and sustainability,” Soloway told Federal News Network.

But the success of Hegseth’s reforms will hinge on whether the department can change its culture and equip the workforce with the skills needed to operate differently. Otherwise, the system can quickly revert to its old ways.

“Change is not something that happens by dictate. As they and scores of case studies have shown, there has to also be an aggressive, intentional, and holistic approach to change management, prominently including how the relevant workforces are developed. Absent re-aligning those processes, real change will remain elusive,” Soloway said.

Hegseth’s new proposed structure, Soloway said, somewhat resembles the Integrated Product Teams the department created in the 1990s as part of a major acquisition reform push. There were early successes, but they eventually faded, mainly because the workforce and culture never fully adapted.

And whether the department has the workforce to support such a sweeping overhaul remains an open question. DoD has already lost 5% to 8% of its civilian workforce since the start of the Trump administration through various means such as the Deferred Resignation Program and the Voluntary Early Retirement Authority.

“I’m excited about what [Hegseth’s] speech will do to attract the interest of high talent — folks who might want to come in and help us do this job. We’re certainly always looking for good people to come in and help. We do have some need for additional personnel, at least in my office, and I suspect across the acquisition workforce,” Undersecretary of Defense for Acquisition and Sustainment Michael Duffey told reporters Monday.

In addition, while the new structures and consolidations seem promising, there is always a familiar risk that the reforms could end up adding new layers of bureaucracy rather than eliminating old ones.

“It will take particularly strong, forward leaning leadership on both the civilian and military side as well as new levels of collaboration between and among the services and, importantly, [the office of the secretary of defense],” Soloway said.

And then the reforms Hegseth is proposing will require significant funding — but there is very little mention of resources in the strategy the department recently unveiled.

“That’s one place where the rubber hits the road,” Soloway said.

“The next big thing will be the 2027 budget submission, because some of these things require prioritization, and prioritization requires resourcing. Some of the initiatives like a focus on exportability, focus on developing multi-sourcing for parts and components — these things require resourcing. Where are they going to be in the 2027 budget submission? Because that will show how important it is for the administration,” Jerry McGinn, the director of the Center for Strategic and International Studies’ Center for the Industrial Base, told Federal News Network.

‘Speed to delivery’

Hegseth emphasized that speed will be at the center of this sweeping transformation the department is embarking on. 

“The core principles of this transformation are simple: instill the warrior ethos in the acquisition workforce and enterprise, inject a sense of urgency and relentless focus on speed by empowering those directly responsible for delivery to make and own decisions, cut through unnecessary layers to focus the [Warfighting Acquisition System] on speed, accountability and mission outcomes, and prioritize flexible requirements and resource trades to enable timely delivery at the speed of relevance,” he wrote in a memo.

The focus on speed, Solloway said, may be more critical now than ever. But speed alone isn’t the point – the department has spent the past decade chasing speed through tools like other transaction agreements  and rapid prototyping, but the real measure is whether capabilities are actually fielded.

The post DoD acquisition reform: What will it take to make it last? first appeared on Federal News Network.

While delivering capabilities at speed is at the core of the Defense Department’s acquisition system shakeup, the department’s top acquisition official said the Pentagon is not “mandating speed.”

“We’re continually going to be dependent on the judgment of program leaders who are executing these programs to understand where does the need for speed balance with the risk that we would undertake to cost and/or performance of the system,” Michael Duffey, undersecretary of defense for acquisition and sustainment, told reporters Monday. 

Last week, Defense Secretary Pete Hegseth announced a series of initiatives to overhaul the department’s acquisition process as part of what he described as a broader war on Pentagon bureaucracy. Key changes include prioritizing a commercial-first approach, cutting red tape, increasing competition and bringing more commercial firms and nontraditional contractors into the defense space and transitioning program executive offices (PAO) to portfolio acquisition executives (PAE), which would give these new portfolio officials greater authorities and responsibilities for requirements, resourcing and acquisition.

Most of the changes Hegseth unveiled last Friday are similar to measures currently making their way through Congress.

In the Nov. 7 memo, Hegseth emphasized that speed will be at the center of this sweeping transformation the department is embarking on.

“The core principles of this transformation are simple: instill the warrior ethos in the acquisition workforce and enterprise, inject a sense of urgency and relentless focus on speed by empowering those directly responsible for delivery to make and own decisions, cut through unnecessary layers to focus the [Warfighting Acquisition System] on speed, accountability and mission outcomes, and prioritize flexible requirements and resource trades to enable timely delivery at the speed of relevance,” he wrote in the memo. 

Duffey said while speed to capability delivery is key, given constant budgetary irregularities, his focus is on making the most of the department’s budget — optimizing the system to deliver the best capability at the greatest speed for the lowest cost.

“Those are the parameters we operate in, and that’s what we intend to empower the workforce to make the best judgments going forward,” Duffey said.

Portfolio acquisition executives, Duffey said, will be the ones responsible for striking the right balance between speed and risk, deciding when to accelerate and possibly cut corners to achieve speed or when to delay program delivery.

“We’re hoping to provide the flexibility to the portfolio acquisition executives to be able to move money around and to trade requirements. There’s certainly no question about the emphasis on speed but recognizing that there’s a need for judgment and flexibility in that triangle of cost schedule performance,” he said.

“One thing we’re doing around here nowadays is we’re now saying schedule performance cost instead of cost schedule performance just as a way of emphasizing the fact that speed is priority amongst us,” he added.

It’s unclear whether these portfolio acquisition executives will be the ones making that call — Duffey said the department is still working out those implementation details. “I think what you’ll find is there will be circumstances where they need to have a broader conversation, and there will be circumstances where the threshold will allow them to make that decision on their own,” he said.

Along with Hegseth’s “Transforming the Defense Acquisition System into the Warfighting Acquisition System to Accelerate Fielding of Urgently Needed Capabilities to Our Warriors” memo, the department also released the acquisition transformation strategy — five pillars laid out in the plan include expanding the industrial base; empowering the acquisition workforce to deliver at speed; introducing greater acquisition flexibility through cutting regulations and processes; developing high performance systems; and improving lifecycle risk management. 

Hegseth’s memo already directed the services to begin carrying out a number of key initiatives that emerged from those five pillars.

One of the changes the department seeks to implement is replacing what it calls “redundant and excessive” studies like the Analysis of Alternatives (AoA) that the strategy says delays the start of programs. The process, which takes place early in the acquisition process and is mandated by Congress, is designed to compare operational effectiveness, suitability and life-cycle cost of alternatives. 

The strategy calls for modifying those processes and providing “more rapid and impactful assessment of commercial solutions, existing technologies, and competing prototypes as a preferred approach to the extended document analysis.”

“I think that we can learn more from experimentation and prototyping than we can from an analysis of alternatives. We recognize there may be exceptional circumstances, specifically when it comes to large-scale weapon systems where we may need to do a study of what an alternative might be. But our intent is a heavy focus on prototyping and experimentation as the best learning and best connected to the art of cutting-edge technology,” Duffey said.

The post Speed is central to DoD sweeping acquisition reform, but not a ‘mandate’ first appeared on Federal News Network.

The Pentagon is restructuring the chain of command within its acquisition system, replacing the program executive offices that have long formed the backbone of the Defense Department procurement system with “portfolio acquisition executives” that will be more empowered to make decisions and more directly accountable for performance, Defense Secretary Pete Hegseth said Friday.

The changes are part of a wide-ranging overhaul Hegseth said the department will make as part of what he framed as a war on Pentagon bureaucracy amid a need to accelerate the procurement system, increase competition, use commercial technology as DoD’s default option, and eliminate excessive regulations.

“Speed to delivery is now our organizing principle,” Hegseth said Friday during a 70-minute speech at the National War College in Washington. “It is the decisive factor in maintaining deterrence and warfighting advantage. If our warfighters die or our country loses because we took too long to get them what we needed, we have failed. It is that simple. The sense of urgency has slipped too much, and when you look at what we face, we have to recapture it.”

Commonality with existing proposals

Much of what Hegseth unveiled Friday mirrors reform proposals that are making their way through Congress or that have been suggested by independent reform panels. The rollout also follows a pair of executive orders President Donald Trump issued in April, directing a reshaping of federal acquisition processes.

The move to a more portfolio-centric approach to acquisition, for example, is a feature of both the House’s SPEED Act and the Senate’s FoRGED Act, and the Senate bill also uses the “portfolio acquisition executive” moniker for a reimagined PEO role.

Hegseth offered few details on what DoD’s own conception of the new role would be, but said further guidance would be published within the next 180 days. One key theme, he said, would be empowering the new portfolio officials to make decisions without waiting for bureaucratic approval processes.

“We will break down monolithic systems and build a future where our technology adapts to the threat in real near time. Contracting officers will be embedded within program teams and accountable to program leaders, shoulder to shoulder with our engineers, operators and warfighters who can provide critical, real-world user feedback to the engineers,” he said. “If the mission is not successful, there will be real consequences. We will ensure accountability by extending PAEs’ tenure to be longer than the current PEO service times. We will leverage taxpayer dollars in a more accountable, flexible and deliberate manner to maximize their value across capability portfolios. 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.”

Wartime Production Unit

Meanwhile, Hegseth said DoD is standing up a new organization called the “Wartime Production Unit.” It will be a successor to the existing Joint Production Acceleration Cell, but will be led by a “deal team” that the secretary said would be empowered to make its own agreements with vendors who conduct work across multiple portfolios.

“The deal team will reinforce our contracting workforce, enabling them to work with newly empowered PAEs to negotiate with vendors based on a broader perspective of the vendor’s total book of business within the department, rather than through the lens of a single program, creating leverage and incentives not previously applied,” he said. “This deal team will craft financial incentives that drive contractor performance, demanding on-time delivery of the weapons our warfighters desperately need. It’s about faster negotiations, better results and a commitment to complete transparency and cooperation between the government and our industry partners.”

That approach, Hegseth said, is not just a pilot program — and the department is actively looking to expand the unit and staff it with people who have expertise in the defense business.

“Many talented operators are already on board at the Pentagon, former industry executives who are serving our country to drive success. We call them Business Operators for National Defense, and I encourage those listening who are interested to reach out if you have the skills to contribute to the defense industrial renewal we are embarking on. This may seem like an obvious change, but it’s new for our department to empower world-class operators to help drive necessary change from the Pentagon to industry,” he said. “It’s a fundamental shift in how we arm our warfighters. We are committed to dominating the modern battlefield, and that domination starts with a wartime industrial base focused on execution and operational success.”

Industry’s role

Still to come, Hegseth said, is new guidance that will aim to incentivize contractors to build their own production capacity, let DoD offer clearer demand signals, and create more stable funding streams for multiyear contracts.

As part of that effort, he said, the department would need to ask Congress to alter some existing rules that constrain DoD’s ability to move money between accounts and programs, though he did not specify the exact types of flexibility the department would seek.

“This will build on the great work already done to improve the [planning, programming, budgeting and execution] process and how CAPE and the comptroller interact with Congress,” Hegseth said. “We commit to doing our part, but industry also needs to be willing to invest their own dollars to meet the long-term demand signals provided to them. Industry must use capital expenditures to upgrade facilities, upskill their workforce and expand capacity if they don’t, we are prepared to fully employ and leverage the many authorities provided to the president, which ensure that the department can secure from industry anything and everything that is required to fight and win our nation’s wars.”

And Hegseth warned that companies that aren’t ready to adapt themselves to the department’s vision for a speedier system with more “magazine depth” could soon find themselves with fewer contracts.

“For those who come along with us, this will be a great growth opportunity, and you will benefit,” he said. “To industry not willing to assume risk in order to work with the military, we may have to wish you well in your future endeavors, which would probably be outside the Pentagon. We’re going to make defense contracting competitive again, and those who are too comfortable with the status quo to compete are not going to be welcome.”

DAU is now WAU

But Hegseth said the changes he wants can only happen if DoD achieves a culture change within its own acquisition workforce.

He said he would begin that effort by overhauling the department’s Defense Acquisition University, including by renaming it the Warfighting Acquisition University. He said it would be the “launching pad” for the acquisition workforce and would try to instill in its members a “transformative and warrior mindset.”

“The patriotic men and women in this audience who architect, develop and procure the world’s most lethal and capable technology must be unleashed to deliver the arsenal of freedom faster than we ever have before,” Hegseth said. “The Warfighting Acquisition University will prioritize cohort-based programs combining experimental and project-based learning on real portfolio challenges, industry-government exchanges, and case method instruction that develops critical thinking. And rapid decision making — no more sitting in classrooms learning about failed processes of the past. Our acquisition system is only as good as our workforce.”

The post Hegseth unveils ‘transformation’ of DoD acquisition system first appeared on Federal News Network.