Feinberg signed the *Fostering One Strong Industrial Base* memorandum, which sets deadlines for senior officials to implement the changes. The directive targets rules that the department says have discouraged commercial companies from entering the defense market.
The department will shift eligible contracts from government-specific Cost Accounting Standards toward Generally Accepted Accounting Principles. GAAP is already used across the wider U.S. economy.
“Selling to the Department of War should be a line of business, not a corporate identity,” Feinberg said. “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.”
The department will rely on competition, comparable sales and pricing history when a functioning market exists. Cost data will be used when no reliable market price is available.
Contractors will not be required to create new accounting systems or special data formats for government use. Pricing information may only be used for authorized government purposes and cannot be shared with another company for commercial benefit.
The policy will attach compliance requirements to individual contracts rather than entire companies. One contract requiring enhanced oversight will not automatically place every part of a contractor under the same rules.
Independent audits commissioned by companies will become the department’s first option. Government-specific audits will be reserved for higher-risk work when no suitable alternative is available.
The memorandum also directs officials to avoid auditing the same work twice. Audit decisions will be based on risk rather than applied uniformly across contractors.
Competition will continue deeper into production under the new approach. The department plans to retain several suppliers, place orders with companies that deliver and keep later production opportunities open.
The directive also carries forward the department’s August 18, 2026 policy on supplier transparency. Contracting officers will be able to examine supply chains beyond prime contractors when necessary.
Lower-tier suppliers may be connected with Office of Strategic Capital loans and Industrial Base Analysis and Sustainment funding. The department may also link them with government business specialists.
The implementation plan calls for commercial product and service decisions within 15 business days. Senior approval will be required before a procurement strategy places a new business unit under full Cost Accounting Standards coverage.
The department will immediately apply higher accounting thresholds enacted in the Fiscal Year 2026 National Defense Authorization Act. It will also ask the Cost Accounting Standards Board to make exemptions the default.
Under the proposal, full accounting coverage would focus on cost-based development contracts awarded without adequate competition. Business-system reviews will be simplified and aligned with commercial practices.
Independent public accounting firms may certify company systems in place of separate government reviews. The department also plans to expand its use of other transactions and advance market commitments.
Profit negotiations will take account of value delivered, risk carried and private capital invested. Margins will no longer be based only on costs incurred.
The memorandum implements Executive Order 14402, which makes fixed-price contracts the default and cost-reimbursement agreements the exception. It also forms part of the Warfighting Acquisition System reforms directed on November 7, 2025.
The department will not create a new organization or compliance framework to carry out the policy. Implementation guidance cannot add requirements beyond the memorandum and applicable law.
