WASHINGTON — Pentagon contractor pricing is at the center of a new Defense Department push for broader visibility into how weapons are costed, with officials weighing software that could pull information directly from companies’ financial systems, according to a memo reviewed by the National Gazette.
The memo, signed Tuesday by Deputy Defense Secretary Steve Feinberg, signals a reset of the department’s expectations for supplier cost and pricing data. Officials intend to use the information to ensure profit margins remain fair and reasonable.
“Full transparency throughout all tiers of the supply chain applies to all contractors and subcontractors,” Feinberg wrote to senior Pentagon leaders and the heads of defense agencies and field activities. The requirement would apply to negotiations for products and services valued at 10 million dollars or more, whether or not the data must be certified.
Feinberg also directed the Under Secretary of War for Acquisition and Sustainment to set fair contract profit margins by applying commercial best practices tailored to each product or service line.
Pentagon contractor pricing and a direct software link
A central element of the proposal is an automated tool that would give the department machine-to-machine access to defense firms’ financial systems.
To cut compliance costs, the memo says the acquisition office will study an automated solution aligned with commercial practices. The approach would create application programming interfaces to pull cost data directly from contractors’ enterprise resource planning or other financial systems.
Industry groups have long argued that the push for cost and pricing information is onerous. The Aerospace Industries Association said in a statement that industry is already moving faster and innovating rapidly, and warned the contemplated measures “would be a move in the opposite direction.” The group said the approach risks adding years to acquisition timelines, creating new barriers to fielding capabilities, and undermining recent congressional modernization efforts.
The memo does not outline how the automated solution would be funded or implemented, and it is unclear whether adoption would increase industry costs. A Pentagon official confirmed the memo’s authenticity and declined further comment.
Congress has recently adjusted pricing data thresholds to reduce burdens on contractors. The 2026 defense authorization act raised the threshold for certified cost and pricing data to 10 million dollars for contracts awarded after June 2026, up from 2.5 million dollars.
Feinberg stated that the department does not intend to cap profitability when efficiencies are achieved after negotiating a fair and reasonable price based on a realistic baseline. The aim, he wrote, is to ensure transparency and fair negotiations.
Some concerns about a direct software connection may be misplaced, said John Ferrari, a retired Army major general and senior nonresident fellow at the American Enterprise Institute. He said the likely goal is to standardize and streamline how the Pentagon receives cost data, potentially using artificial intelligence to analyze submissions.
“This does not necessarily say the Pentagon’s going to reach in through the machine and pull it out,” Ferrari said, likening it to filing taxes electronically after organizing records.
Overdue cost reports and data use in contracting
The directive urges program managers and contracting staff to ensure timely submission of mandatory Cost and Software Data Reporting, or CSDR, which captures program cost data from contractors.
“Thousands of these cost reports are currently delinquent across our acquisition portfolio,” Feinberg wrote. The lack of data, he said, impairs the department’s ability to judge which programs deliver the most value and which require adjustments to stay on schedule and budget.
The acquisition office is tasked with clearing delinquent reports within 30 days and using CSDR data to assess the quality of sole-source contracts over time.
Cost and pricing information is collected for cost-plus contracts where the government bears the risk of overruns caused by technical or other issues. Greater insight into contractor costs would help the department confirm it is paying fair prices, Ferrari said. He added that more data may require the Pentagon to hire financial experts to interpret it, noting that while AI can assist, specialized expertise remains essential.
Updated at 9:55 a.m. ET on Aug. 21, 2026 to include a response from a Pentagon official. An earlier update added comments from an AIA spokesperson.
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