The Defense Department’s third message to industry since early May is prompting many contractors to strongly doubt whether Secretary Pete Hegseth’s goal of revitalizing the defense industrial base still is a priority.

Deputy Defense Secretary Steve Feinberg’s Aug. 18 memo on cost and pricing is the latest example in the last three months of the Pentagon adding more compliance and complexity to contractors working for the DoD.

Taken together, industry and acquisition experts say DoD is sending a mixed message at best, and at worst, creating disincentives for companies to join or even stay in the defense industrial base over the long term.

“These memos go in opposite direction of what Secretary Hegseth said in November 2025. These send a signal that DoD doesn’t trust industry and that this is an adversarial relationship,” said David Berteau, a former DoD acquisition executive and long-time procurement expert. “DoD put out all of those memos on speed, innovation and expanding the DIB. But all of this flies in face of that. These new memos either show a lack of understanding of their impact on the initiatives or a lack of understanding of all other things already in place to guard against unreasonable pricing.”

Feinberg’s latest memo says DoD wants to bring more transparency throughout the supply chain around cost and pricing. The focus is around two specific areas. First, DoD says concerning any commercial item product or service contract worth at least $10 million, contracting officers should obtain “full transparency throughout all tiers of the supply chain [which] applies to all contractors and subcontractors.”

DoD wants to achieve this transparency by using application programming interfaces (APIs) to pull cost information directly from contractors’ enterprise resource planning or other financial systems.

As part of this effort, Feinberg also wants to review and potentially reign in contractor profits.

“Additionally, I have directed the Under Secretary of War for Acquisition and Sustainment (USW(A&S)) to establish fair and reasonable contract profit margins by applying commercial best practices tailored to each product or service line,” he wrote. “The department does not intend to limit profitability when contractors realize efficiencies after negotiating a fair and reasonable price based on a realistic baseline. Instead, consistent with the secretary’s Acquisition Transformation Strategy, this effort ensures that transparency and measurement of negotiation outcomes become ingrained standards within our acquisition system. USW(A&S) will update relevant underlying issuances and regulations to align with this memorandum.”

Second, DoD is telling providers of major systems, including IT and weapons, to more regularly provide Cost and Software Data Reporting (CSDR). Feinberg said this data is “vital for the effective management of our major acquisition.”

“Despite this, thousands of these cost reports are currently delinquent across our acquisition portfolio,” he wrote. “The data deficit impairs our ability to assess which programs are providing the most value for the department and which programs require adjustments to remain on track and on budget.”

Feinberg wrote that DoD believes these efforts will “rapidly accelerate” the administration’s goals to build the military and revitalize the DIB. All are part of Hegseth’s “Arsenal of Freedom” initiative, which is a wide-ranging overhaul as part of what he framed in November 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.

But experts stay this memo along with a July 31 open letter from Duffey and Michael Powers, the then-acting Pentagon comptroller, and Duffey’s May 4 memo on Peer Review for Contractor Facilitization Costs, will achieve the opposite effect of what Hegseth called for in November.

The Aerospace Industries Association (AIA) said in a statement that Feingberg’s memo will do more to harm the defense industrial base than help DoD.

“Congress and the Pentagon have spent years trying to streamline acquisition, attract new and innovative companies into the defense market, and deliver capability to the warfighter faster. Industry answered the call and is already moving faster, building more and innovating rapidly,” said an AIA spokesperson in a statement. “However, requiring detailed cost and pricing disclosures throughout every tier of the supply chain would be a move in the opposite direction. This approach risks adding years to acquisition timelines, creating new barriers to delivering critical capabilities to our troops and undermining Congress’ recent modernization efforts.”

An email to DoD seeking comments about the memo and whether it contradicts Hegseth’s initiatives was not returned.

John Weiler, the CEO of the Information Technology Acquisition Advisory Council (IT-AAC), a nonpartisan public-private partnership, said the cost and pricing memo not only undermines Hegseth’s goals, but would end up widening DoD’s “valley of death,” if not modified.

“This memo locks in prime contractors and the status quo, which will include Palantir and Andruil, while imposing non-commercial cost and pricing disclosures that non-traditionals will reject,” he said.

Experts say the cost and pricing memo elicits more questions than answers.

It’s unclear whether the new requirements would apply to existing contracts or only new ones.

DoD also says in the memo that the new threshold of $10 million applies to commercial products and services, but not those that are considered commercial-off-the-shelf (COTS). Experts say that too could create confusion across the industrial base because the definitions of a commercial item are not consistent and now changing with the overhaul of the Federal Acquisition Regulations.

Trey Hodkgins, an independent consultant who works with DoD companies, said commercial items is huge category, especially around things like artificial intelligence, drones and many other popular technologies.

“It’s going to be a real challenge to get the second or third or seventh tier commercial providers to share cost data with anyone. This is not what the commercial market is used to doing and they will not want to do it,” he said. “The premise is when the government buys a commercial item from the marketplace, there is an inherent presumption that they are getting a fair and reasonable price. The memo seems to say we don’t care about FAR or DFARs or the laws that say acquiring commercial products are presumed fair and reasonable because it’s a price set by the market.”

Additionally, Hodgkins said any attempt to limit or establish profit margins among commercial companies will be met with pushback, as will DoD’s desire to connect an API to a contractor’s financial system.

“If commercial customers hear the government trying to prescribe profit margins, they will say buy it or not, but here is the price,” he said. “I think vendors would have a lot of questions and concerns about DoD putting APIs into their systems, especially around privacy and security controls.”

Berteau and Hodgkins said DoD has tried to focus on cost and pricing previously.

Berteau said in 2018 DoD proposed a rule in its acquisition regulations that wanted to let DoD obtain better cost and pricing data when negotiating undefinitized contracts, such as those for weapons systems.

Hodgkins said DoD also tried to submit similar cost and pricing data initiatives for Congress to include them in the defense policy bill.

“The proposals never made it into legislation. Industry and others pointed out that this is completely contradictory to buying commercial items,” he said. “I wouldn’t be surprised if we see other initiatives or proposals on Hill over the next year.”

Berteau, Hodgkins and others don’t disagree with DoD and the Trump administration’s broad premise that the government should get better pricing and better deals from vendors.

Hodgkins said the work the General Services Administration is doing around its OneGov deals and category management are part of this broad effort.

“The market can adjust and pursue deals as they determine what are reasonable prices. But when the government starts saying we will ask for data when they do not have the contract rights to that data, and then apply what they will determine as fair and reasonable pricing and set profit margins, then we are in new territory,” Hodgkins said. “This has been a narrative this administration and others have pursued to ensure taxpayers are getting the best deals. No one objects to that, but we’ve set boundaries about that and made determinations in regulations and law about how that works. This seems to upend some of that.”

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