Competing for Defense Funds: How to Maximize Funding in the Department of War’s New Era

A monumental shakeup is underway at the Department of War, and it goes far beyond the Department’s new name. President Trump’s 2025 Executive Order “Restoring the United States Department of War,” as the formal title signals, is an intentional move away from a primarily defensive posture, and toward “peace through strength,” emphasizing readiness and the United States’ ability to win sustained conflicts. The Department is redefining national security by fusing military power with industrial strength, supply chain resilience, and domestic production policy. This shift has created new opportunities for organizations that can quickly deliver new technologies, add capacity, and create advantages for the warfighter and the broader American industrial base.  

For those new to the defense sector, priorities must be codified in the annual National Defense Authorization Act (NDAA). The FY26 legislation authorizes a historic topline for national defense activities and codifies many executive actions focused on revitalizing the Defense Industrial Base and addressing supply chain vulnerabilities. Key priorities in this year’s NDAA include expanding the Defense Industrial Base Fund to include domestic production and modernization projects in priority sectors, including microelectronics, critical minerals and materials, shipbuilding, drone technology, advanced manufacturing capabilities, and a qualified workforce to deliver these products.  

Once priorities are established in the NDAA, Congress must also pass an annual defense appropriations package to assign a dollar value to those priorities. As of this writing, the FY26 Department of War funding bill is still under consideration. However, the draft text suggests an emphasis on industrial base resilience with more than $300M allocated for the Defense Production Act Title III program, $150M for qualification of second source providers, increasing the National Defense Stockpile, and substantial investment in workforce training, supplier base expansion, as well as automation/process improvements. This explicit link between national security and domestic industrial capacity has been of particular interest to CFS and our clients, and is something we are closely monitoring.  

 

The above lays out the legislative foundation for the Department of War’s investment priorities. The next question is who will be able to tap into these dollars, and through which funding pathways. 

 

Historically, traditional defense primes have often been the proverbial tail wagging the dog, using their scale, contracting history, and influence over requirements to construct “walled gardens” around major programs. Those structures have tended to box out nontraditional contractors, who are frequently confined to small, tightly controlled subcontract roles with limited visibility into future work. The Trump administration has effectively taken a sledgehammer to those walls.  

Traditional defense primes are being pressured to move faster, fund more of their own R&D, and open their ecosystems to emerging suppliers. Concurrently, the Department is deliberately widening the field for nontraditional contractors, including commercial companies that have not historically sold to the Pentagon. The Department has expanded the use of more flexible funding vehicles such as Other Transaction Authorities (OTAs), Broad Agency Announcements (BAAs), multiple and single award  Indefinite Delivery Indefinite Quantity (IDIQ) contracts, Commercial Solutions Openings (CSOs), and other agreements designed to reduce FAR administrative burdens and move money quickly into the market. 

The Army FUZE initiative seems to be a directional indicator of how the Department of War plans to engage nontraditional contractors. The FUZE initiative is a new “front door” for companies looking to work with the Army but are not engaged in the defense sector. It brings several programs (SBIR/STTR, xTech, ManTech, and TMI) under one umbrella and gives the Army a way to find, text, and scale new technologies faster than a traditional procurement cycle would allow. Through FUZE, the Army can run prize competitions, fund early prototypes, run demonstrations, and then quickly move the most promising solutions into follow-on production and fielding. We are also seeing this with the Navy’s NavalX and TechBridge network as well as the Air Force’s AFWERX programs.  

Overlaying all of this is the uncertainty surrounding the SBIR and STTR programs. As of January 2026, the core statutory authorities for SBIR and STTR have lapsed, preventing agencies from issuing new solicitations or making new awards, even as multiple reauthorization bills and compromise proposals move through Congress. The unfortunate reality is that the cumbersome nature of the SBIR/STTR program is not aligned with the funding levels (Phase 1 being a limit of $250,000) available to applicants. There is a sense that Congress is poised to renew but reform the program, with certain members using the lapse to demand changes. There have been heightened concerns about “SBIR mills,” in which a large concentration of SBIR funding is awarded to a small number of firms, and risks of foreign influence and IP concerns with China. We are confident that any reauthorization will most likely come with new strings attached. (Note: The Air Force STRATFI/TACFI programs have also been impacted by the SBIR/STTR lapse.)   

In this environment, the case for partnering with a third-party firm like CFS is stronger than in any recent cycle. The future of defense funding is not a single program or vehicle but rather a combination of authorities that include NDAA industrial base activities, DPA Title III funding, OTAs, IBAS, and other workforce programs, consortium funding, and FUZE-style innovation pipelines that must be navigated together. A specialized advisor can map active and emerging opportunities to your organization’s capabilities, translate legislative text into actionable insights, and design strategies that align your goals with the Trump administration’s priorities. This moment of substantial change within the Department of War can also bring substantial opportunities for those willing to quickly adapt and work within this new system, even if they are new to the Defense sector. 

 

For those ready to take the leap, CFS is your trusted partner to guide you: