Department of War (DoW) is After Your Data and Profit

On August 18, 2026, DoW issued a memorandum calling for broader access to contractor and subcontractor cost data, greater pricing transparency, and increased scrutiny of profit. The direction could significantly affect pricing practices, negotiations, system access, and compliance expectations across the defense industrial base.

On August 18, 2026, Deputy Secretary of War, Stephen A. Feinberg issued a Memorandum for Senior Pentagon Leadership on Supplier Cost and Pricing Transparency. The first paragraph states: The Department of War must have maximum insight into cost and pricing data from industry to negotiate the best price for our weapon systems and other contracts on behalf of the Warfighter, the taxpayer, and our Nation. Through the application of modern information technology and current business best practices, our acquisition workforce will establish a new standard for transparency, competition, and performance.… The memorandum ends with direction to the Under Secretary of War for Acquisition and Sustainment (USW(A&S)) to “update relevant underlying issuances and regulations to align with this memorandum.” Government contractors and industry associations need to push back on this whenever possible.

Concerning Point of the Memorandum

The Department of War wants to reset expectations around supplier cost or pricing data it wants to get its hands on. Here are the key points:

• “Full transparency throughout all tiers of the supply chain applies to all contractors and subcontractors.” In other words, any company (commercial products and services be damned) doing business with DoW will have to allow access to its actual cost data. The only exception is for Commercial Off-the-Shelf items.
• All acquisitions for products and services valued at $10M or more, regardless of whether cost and pricing data requires certification, are fair game. Even competition would not protect your actual cost data from disclosure. It is also unclear as to whether this will impact Other Transaction Agreements (OTAs). Let’s hope not.
• The USW (A&S) will be establishing contract profit margins by applying commercial best practices tailored to each product or service line. Supply and demand in the marketplace establish profit margins. That is the commercial best practice, not a power on high determining what profit should be allowed.
• “Contracting officers must have access to actual cost information at both the prime and supplier levels for these contract actions (except for Commercial Off-the-Shelf items) to support the determination of fair and reasonable pricing.” This should have been introduced with the words “In some cases.” FAR part 15 already allows this access when necessary. The current requirement for contracting officers to rely on competition, then move to marketplace pricing data, and rely on cost data, when necessary, would appear to address the underlying concerns of DoW already.
• “To reduce industry's regulatory burden and compliance costs, USW (A&S) will explore an automated solution consistent with commercial best practices. This approach will establish Application Programming Interfaces to pull cost information directly from contractors' enterprise resource planning or other financial systems.” This is flat out terrifying. DoW officials can simply pull your data whenever they wish, or your system is going to push the data out to DoW without a request. I know of no commercial best practice where your customers can have direct access to your actual cost data.

Cost and Software Data Reporting

The memorandum also brings up the existing cost data reporting requirement under DFARS 252.234-7004, Cost and Software Data Reporting. The memorandum indicates that DoW believes there are numerous contractors that are not complying with this contractual requirement. The USW (A&S) will be working with the Office of the Secretary of War Cost Assessment and Program Evaluation (CAPE) and contracting officers to ensure prime contractors and subcontractors come into compliance.

If you are not currently complying with the requirements of DFARS 252.234-7004, be proactive and reach out to your contracting officer with a plan to become compliant.

DoW Wants to Know How Much Profit was Made

Additionally, in non-commercial sole-source acquisitions where CSDR data is not required, “the USW (A&S) Deal Team [will] collaborates with the Defense Contract Audit Agency (DCAA) to determine cost-effectiveness by comparing actual costs to prices paid.” This will become a standing requirement for contracting officers in the future. DCAA auditors will think it is Christmas every day with no license required to go fishing around in your cost data.

Back when I worked for the DCAA, I supported the DoW (Defense back then) in a similar undertaking. At that time, Shay Asad (he who should not be named) wanted to get his hands on the same actual cost data after price agreement. It turned out that there was no contractual requirement for contractors to provide cost data unless it was necessary to support a follow-on acquisition.

Parting Words

The memorandum ends by stating:

“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…”

This memorandum reads as if it is very open ended and DoW is looking to remove the establishment of reasonable profit from contracting officers and have the USW (A&S) establish a set of profit rates that DoW will allow.

My Thoughts

The current provisions in FAR part 15 already provide contracting officers with access to and use of contractor actual cost data when necessary to determine a fair and reasonable price. Do we really need to be doing postmortems on every awarded contract and subcontract?

This does not appear to fit very well with the DoW Acquisition Transformation Strategy to “Maximize purchase of products, services, and parts available in the commercial marketplace to avoid additional cost and schedule” issues and Executive Order 14271, Ensuring Commercial, Cost-Effective Solutions in Federal Contracts.

If the DoW has all the actual cost data of subcontractors, it is going to make the higher-tier contractors negotiations even that much more difficult.

This is totally unnecessary and likely to drive bad behavior, such as a contracting officer trying to recapture what they think is too much profit on a prior contract.

This also will run afoul of the Congressional actions in the 2026 National Defense Authorizations Act (NDAA) Section 1826 to encourage nontraditional defense contractors to join the industrial base. For one thing these companies are not going to want to provide actual cost data and if they did agree to provide the data their systems are not going to present it is a format that our DCAA auditor friends are going to like.

When and if the USW (A&S) starts proposing new regulations all of us in the industrial base need to push back hard.

Preparing for Increased Cost and Pricing Transparency

As DoW moves toward broader access to contractor cost data and increased scrutiny of pricing and profit, government contractors should evaluate how their current systems, contracts, and internal processes would respond to expanded data requests. Redstone GCI supports contractors by reviewing contract requirements and subcontract flowdowns, evaluating cost and pricing practices, assessing accounting and ERP processes, preparing for DCAA scrutiny, and training contracts, accounting, and leadership teams on the compliance and operational implications of changing DoW requirements.