# DoD Modernizes Procurement for Innovation

The Department of Defense (DoD) is actively transforming its procurement processes to accelerate innovation adoption, particularly for emerging technologies such as autonomous drones and artificial intelligence (AI). Despite initiatives like the Defense Innovation Unit (DIU) and targeted competitions aimed at engaging small and mid-sized businesses, contractors face challenges including funding delays linked to government shutdowns, supply chain disruptions, and evolving policy frameworks. Recent White House directives on fixed-price contracting and anticipated Federal Acquisition Regulation (FAR) Council updates seek to address risk management and pricing flexibility amid unstable requirements and inflationary pressures. Government contractors must adapt to compressed acquisition timelines, increased compliance demands, and the need to demonstrate early proof of value through pilots and measurable outcomes to remain competitive in this dynamic environment.

- **Key agencies involved:** Department of Defense, Defense Innovation Unit, U.S. Army, Air Force, and Department of Homeland Security
- **Contracting implications:** Small and mid-sized contractors should engage early with agencies to clarify deliverables and acceptance criteria, especially under fixed-price contracts
- **Market impact:** Margin pressures and operational risks persist amid rapid AI adoption and compressed timelines, requiring agile proposal development and execution
- **Strategic opportunities:** Participation in DIU programs and targeted competitions offers pathways for innovative startups; engagement at industry summits like the Potomac Officers Club can provide valuable government insights
- **Actionable insight:** Contractors must prioritize trust-building with operational stakeholders and focus on delivering measurable outcomes to align with evolving DoD acquisition priorities

**Jurisdictions:** federal
**Industries:** Defense & Military, Information Technology
**Topics:** Artificial Intelligence, Contracting Vehicles, Policy
**Published:** May 13, 2026

### Government Entities
- Department of Defense (DoD)
- Defense Innovation Unit (DIU)
- U.S. Army
- Air Force
- Department of Homeland Security (DHS)

### Vendors
- Heven AeroTech (defense contractor)
- Legion Intelligence (defense contractor)
- Integer Technologies (defense contractor)
- TERN (defense contractor)
- Lockheed Martin (prime contractor)

### Key Quotes
> The biggest challenge that we see in the market is profitability
> — Kevin Plexico, Senior Vice President of Information Solutions at Deltek

> We’re in war. We need capability that’s delivered to the warfighter yesterday.
> — Duke Hartman, CEO of Integer Technologies

> The defense acquisition system, as you know it, is dead.
> — Pete Hegseth, U.S. Defense Secretary

### Sources
- [The Pentagon Wants Innovation. Small, Nimble Businesses Want to Deliver. So What’s the Problem?](https://www.inc.com/issie-lapowsky/pentagon-wants-innovation-small-nimble-businesses-want-to-deliver-whats-the-problem/91317767) - inc.com
- [
        Fixed‑price contracts assume stable requirements, a rarity in federal missions | Federal News Network](https://federalnewsnetwork.com/contracting/2026/05/fixed%E2%80%91price-contracts-assume-stable-requirements-a-rarity-in-federal-missions) - Federal News Network
- [2026 Deltek Clarity Report Highlights Margin Pressure, AI Growth & Operational Risk in GovCon - GovCon Wire](https://www.govconwire.com/articles/clarity-report-2026-deltek-govcon-kevin-plexico) - GovCon Wire