White House Pushes for More Commercial Contracting
The White House and the Department of War are pushing to expand the use of commercial item contracting to speed up innovation and lower costs. The move signals a desire for more 'off-the-shelf' solutions and less bespoke compliance from industry. An upcoming Venable LLP webinar will analyze how this shift will impact cost and pricing models for federal contractors.
The push for commercial contracting is part of a broader, more aggressive acquisition overhaul, officially redesignating the Defense Acquisition System as the "Warfighting Acquisition System" (WAS). This isn't just a name change; it's a mandate to prioritize speed-to-field over exhaustive compliance, empowering program leaders to make rapid trade-offs to get capabilities deployed. The new mantra favors "85% solutions" delivered on time over perfect systems delivered late, a significant cultural shift for both the Pentagon and industry. This "commercial-first" approach is being hardwired into the procurement process, with a focus on alternative, non-FAR-based vehicles. Commercial Solutions Openings (CSOs) and Other Transaction Authorities (OTAs) are now the default for software and AI, pathways designed to attract non-traditional and small vendors by lowering bureaucratic barriers. The goal is to harness private sector R&D and accelerate innovation by directly engaging companies that can't or won't navigate the traditional, cumbersome federal acquisition process. The strategy is already manifesting in major AI contract awards. The Pentagon's Chief Digital and AI Office (CDAO) has awarded contracts with ceilings up to $200 million each to frontier AI companies like OpenAI, Anthropic, Google, and xAI to develop AI workflows for national security missions. These deals, often structured as OTAs, signal a clear intent to leverage the most advanced commercial models to solve defense challenges in intelligence, logistics, and business systems. While headlines focus on major tech companies, small businesses are capturing a significant portion of the federal AI market. Between FY22 and FY24, small businesses secured 35% of all federal AI contract obligations, with awards growing 34% from $554 million to $740 million in that period. This growth is often fastest in civilian agencies, which are expanding their AI use 20 times faster than the DoD, presenting a massive opportunity gap for agile firms. For tech startups, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs remain a critical gateway. After a nearly five-month lapse that created significant uncertainty, an agreement was reached in late February 2026 to reauthorize the programs through September 2031. The new agreement modernizes the programs with provisions for larger "strategic breakthrough" awards up to $30 million and standardized contracts to streamline the process from Phase I to Phase III. This acquisition reform extends beyond the DoD. The General Services Administration's "OneGov" strategy aims to consolidate the government's massive purchasing power, especially in IT. By negotiating as a single enterprise buyer directly with original equipment manufacturers (OEMs) for software from vendors like Microsoft and Google, GSA is securing deep discounts and standardizing terms, fundamentally changing the landscape for resellers and integrators.
