The Pentagon, one of the world’s largest buyers and sellers of military hardware, is undertaking one of the most ambitious overhauls of its acquisition and arms transfer systems in decades. After years of false starts and reform pledges that yielded limited results, senior officials now insist the current shakeup marks a decisive break from the past — driven by mounting battlefield demands, depleted stockpiles, intensifying geopolitical competition, and direct pressure from President Donald Trump.
The changes come at a pivotal moment. Wars in Ukraine and the Middle East have consumed vast quantities of advanced munitions. At the same time, China’s military expansion and Russia’s resurgence have heightened demand for U.S. weapons from allies across Europe and the Indo-Pacific. The result has been a surge in orders colliding with longstanding structural weaknesses in America’s defense industrial base — chronic delays, cost overruns, limited surge capacity and supply chain fragility.
Now, through a series of executive orders and internal restructuring efforts, the administration is seeking to fundamentally alter how the Department of Defense procures weapons, oversees contractors, and transfers arms abroad.
In January, President Trump signed executive actions targeting defense contractor performance, executive compensation and capital investment practices. The president, who has repeatedly criticized major defense firms for long timelines and what he views as insufficient financial risk-sharing, warned that companies could face contract cancellations if they fail to expand production capacity.
RTX — formerly Raytheon Technologies — found itself squarely in the administration’s crosshairs.
“I have been informed by the Department of War that Defense Contractor, Raytheon, has been the least responsive to the needs of the Department of War, the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands of the United States Military,” Trump said in a post on Truth Social.
He also imposed new restrictions on executive compensation tied to performance metrics and threatened contract action if companies did not invest more aggressively in manufacturing plants, tooling and workforce expansion.
Defense industry executives have responded carefully, attempting to reassure investors while signaling compliance with the administration’s demands. During recent earnings calls, leaders from RTX, General Dynamics and others emphasized billions of dollars in capital expenditures aimed at expanding production lines for missiles, artillery shells and air defense systems. At the same time, they defended dividend payouts and share buybacks as necessary to maintain investor confidence.
According to The Wall Street Journal, the Pentagon has already warned contractors to brace for sweeping performance reviews designed to identify companies that are not fulfilling contractual obligations.
“We have completed initial reviews to assess company performance as part of this executive order and will now undergo an extended period of review in which we will make noncompliance determinations,” Michael Duffey, the undersecretary of defense for acquisition and sustainment, wrote in a Feb. 6 email to industry executives reviewed by the newspaper. “Following the upcoming decision period, we will be in touch with identified companies to begin remediation plans.”
The message was clear: meet production targets and contractual milestones — or face consequences.
Alongside its push to discipline contractors, the administration has introduced what it calls the “America First Arms Transfer Strategy,” designed to realign foreign military sales with domestic industrial priorities.
Earlier this month, Trump announced the initiative, stating that future arms sales would prioritize American interests by using foreign capital to expand U.S. production capacity. The approach reframes foreign demand not simply as a diplomatic tool but as an engine for strengthening the domestic industrial base.
Under this model, large overseas purchases would be leveraged to finance new production lines, workforce growth and infrastructure expansion inside the United States. Officials argue that aggregated global demand can provide the steady, long-term signal companies need to justify major capital investments.
The strategy also aims to streamline and accelerate the notoriously slow Foreign Military Sales (FMS) process, which has frustrated allies facing urgent security challenges.
On Tuesday, Defense Secretary Pete Hegseth announced a significant bureaucratic realignment intended to speed up arms deliveries. The Pentagon has merged the Defense Security Cooperation Agency (DCSA) and the Defense Technology Security Administration (DTSA) within the Acquisition and Sustainment office.
“Everybody wanted weapons, but we couldn’t get them to them fast enough,” Hegseth said in a video posted on X. “And today, as a demonstration of our progress on these issues, I’m proud to share that we’ve completed the realignment of the Defense Security Cooperation Agency and the Defense Technology Security Administration within our Acquisition and Sustainment team.”
DCSA traditionally manages foreign arms sales and long-term security cooperation planning, while DTSA oversees technology transfer risks and export controls. By consolidating the two, officials say they aim to eliminate bureaucratic redundancies and reduce approval timelines.
“This realignment has created a single, coherent defense sales enterprise within the department, one that moves at the speed of war, but with the purpose of deterring aggression,” Duffey said in the same video. “Coupled with this new executive order, we’re now positioned to leverage the total aggregated global demand for U.S. weapons.”
He added that the objective is to “grow our nation’s industrial might, while maintaining the American warfighters’ technological edge” by proactively targeting sales that unlock foreign investment into critical production lines.
The urgency behind these reforms is rooted in hard battlefield realities.
The war in Ukraine has consumed enormous stocks of artillery shells, anti-tank missiles, air defense interceptors and precision-guided munitions. U.S. and allied contributions have drawn deeply from existing inventories. Replenishing them has proven slow and complex.
Similarly, Middle East operations and support for Israel have placed additional pressure on air defense and missile production lines. Many advanced systems — such as Patriot interceptors, precision cruise missiles and long-range rockets — require years to produce, particularly when dependent on specialized components sourced through fragile global supply chains.
China’s expanding military capabilities and assertive posture in the Indo-Pacific further amplify concerns. Pentagon planners warn that a high-intensity conflict with Beijing could consume advanced munitions at extraordinary rates, potentially overwhelming current production capacity within weeks.
These pressures have exposed structural limitations in the U.S. defense industrial base, which contracted significantly after the Cold War. Consolidation reduced the number of prime contractors, while lean manufacturing models optimized for peacetime efficiency left little surge capacity.
Compounding the challenge for traditional defense giants is the rise of well-funded defense technology startups. Companies like Anduril Industries have poured hundreds of millions of dollars into self-financed development and manufacturing infrastructure, promising faster timelines and greater flexibility.
Unlike legacy primes that rely heavily on cost-plus contracts and government-funded development, many startups embrace commercial-style investment models, absorbing more upfront risk in exchange for speed and market positioning.
The Pentagon has increasingly signaled its openness to these newer players. Officials argue that greater competition could reduce costs and accelerate innovation, particularly in areas such as autonomous systems, artificial intelligence and advanced manufacturing.
One major reform targets the longstanding issue of “vendor lock” — the practice in which the original manufacturer retains effective control over a system’s lifecycle, including sustainment and upgrades. Under the new approach, the Pentagon intends to retain greater technical rights, enabling third-party vendors to compete for maintenance and modernization work.
“We will enable third-party integration without prime contractor bottlenecks,” Hegseth said in November. “Success will be measured by the ability of qualified vendors to independently develop, test and integrate replacement modules at the component level throughout the system life cycle. There’s no more complacency and no more monopolies.”
By asserting ownership over system architectures and data rights, the department hopes to foster a more competitive ecosystem — potentially lowering long-term sustainment costs and accelerating capability upgrades.
Despite its sharp rhetoric toward contractors, Pentagon leadership acknowledges that many acquisition problems originate within the department itself.
“We look at ourselves first, the way we do business,” Hegseth said following a visit to Bath Iron Works in Maine. “We’ve been impossible to deal with – a bad customer who… year after year, changes our mind about what we want or what we don’t want, and then we make little, small technological changes, which makes it more difficult for them to produce what they need to produce on time.”
Frequent requirement changes, unpredictable funding streams and complex regulatory frameworks have long plagued defense programs. Even minor design adjustments can ripple through production lines, adding years and billions of dollars to project timelines.
To address these issues, the Pentagon is seeking to simplify contracting mechanisms, provide clearer long-term demand signals and reduce bureaucratic hurdles that deter smaller firms from entering the defense market.
The administration argues that steady, multi-year procurement commitments — combined with aggregated foreign orders — could create the scale and predictability necessary for industry to expand capacity confidently.
Defense spending represents a major driver of the U.S. economy, supporting millions of jobs across manufacturing, engineering and technology sectors. Arms exports also strengthen alliances, reinforce interoperability and extend American strategic influence.
Yet the military-industrial complex — a term popularized during the Cold War — remains politically sensitive. Efforts to reshape its structure carry risks, including potential disruptions to ongoing programs and legal challenges from contractors.
Companies that fail performance reviews could face remediation plans, reduced contract awards or, in extreme cases, cancellation. How aggressively the administration enforces its new standards will shape industry behavior in the coming months.
At the same time, accelerating foreign arms transfers must balance speed with safeguarding sensitive technology. DTSA’s integration into the broader sales apparatus is designed to streamline oversight without weakening export controls — a delicate balance in an era of intensifying technological competition.
Whether this reform effort succeeds where previous initiatives faltered remains uncertain. Defense acquisition reform has been attempted repeatedly over decades, often yielding incremental rather than transformative results.
But officials insist the convergence of war-driven urgency, executive pressure and industrial strain creates a uniquely compelling moment for change.
If the Pentagon can align domestic procurement, foreign sales and industrial investment into a coherent strategy, it could strengthen both military readiness and economic resilience. Failure, however, risks deepening shortages, prolonging delays and undermining U.S. deterrence credibility at a time of mounting global instability.
For now, defense contractors are watching closely — balancing shareholder expectations with White House demands, expanding factories while preparing for performance audits.
The outcome of this sweeping overhaul may redefine the contours of the American defense industrial base for decades to come, reshaping how the United States builds, buys and sells the tools of war in an increasingly volatile world.
