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This email was sent to sajanram1986.channel@blogger.com using Granicus Communications Cloud on behalf of: U.S. Department of War 1400 Defense Pentagon Washington, DC 20301-1400 |
Deputy Secretary of War Steve Feinberg today signed a memorandum, Fostering One Strong Industrial Base, directing the Department of War to remove the accounting, audit, and compliance barriers that have separated the companies serving the warfighter from the rest of the American economy. The memorandum and its implementation appendix set deadlines for the Department's senior leaders to open competition, confine government-unique cost accounting to the narrow set of work that requires it, and rely on the financial controls and audits companies already maintain.
For decades, the Department walled the most dynamic economy on earth off from the industrial base that serves the warfighter. The wall was built from cost accounting rules, duplicative audits, and compliance obligations that attach to entire companies rather than the work procured. It was built to control contractor costs; instead it limited who competes and raised prices. The memorandum moves the Department from government-unique Cost Accounting Standards to the accounting every American company already uses – Generally Accepted Accounting Principles – and pushes those benefits to every tier of the supply chain.
"Selling to the Department of War should be a line of business, not a corporate identity. Our nation's greatest strength is its private sector, and our defense industry must harness and mimic it – unleashing industry first, and protecting taxpayers by confining our most burdensome oversight tools to the narrow set of work that genuinely demands them," said Deputy Secretary of War Steve Feinberg. "Transparency and partnership runs both ways: the Department opens its buying to market forces, pays fair prices with honest margins, and in exchange industry shares, when asked, the cost and pricing information it already keeps."
The memorandum governs how the Department requests and uses contractor cost and pricing information and is the next step in the Warfighting Acquisition System reforms the Secretary of War directed on November 7, 2025. It implements Executive Order 14402, which makes fixed-price contracts the default and cost-reimbursement the exception, and carries forward the August 18, 2026 direction on supplier transparency so that contracting officers can see through the prime to its suppliers when needed – and connect those suppliers to Office of Strategic Capital loans, Industrial Base Analysis and Sustainment funds, and the Department's business operators. Where there is a market – competition, comparable sales, reliable price history – the Department will rely on the market to set the price. Where no market exists, the Department will rely on cost, drawing on the cost and pricing information companies already keep, with no new accounting systems or special data formats required. Information industry provides is used only for authorized Government purposes and is never made available to another company for its own use.
Three objectives drive the change:
• Compete continuously for speed and volume. Carry several performers to production, send real orders to those who deliver, and keep future opportunities open.
• Attach rules to contracts, not companies. One award that carries an oversight regime must not force a company to remake itself. No company should be barred from this market, or trapped in it, by government-unique requirements.
• Audit only what matters, only when risk exists, and never twice. Rely first on the independent audits companies already pay for; reserve government-unique oversight for high-risk work where the Department has no alternative.
Actions directed in the appendix include:
- a Department proposal to the Cost Accounting Standards Board to make exemption the default and confine coverage to cost-based development contracts awarded without adequate competition
- immediate use of the higher cost-accounting thresholds enacted in the Fiscal Year 2026 National Defense Authorization Act;
- senior-level approval before any acquisition strategy brings a new business unit under full coverage;
- commercial product and service determinations within 15 business days;
- simplified, commercial-aligned business-system criteria with acceptance of independent public accounting firm certification in place of separate government review;
- risk-based audit rules;
- expanded use of other transactions and advance market commitments;
- and profit policy under which negotiated margins reflect value delivered, risk carried, and private capital invested – not merely cost incurred.
No new organization or compliance framework will be created, and implementing guidance may not add requirements beyond the memorandum and applicable law.
The memorandum and its implementation appendix are available here. Information for companies seeking to do business with the Department is available at business.defense.gov.
