What to Expect from Secretary Hegseth’s November 7 Speech on the Arsenal of Freedom

Commentary by Jerry McGinn

Published November 5, 2025

Secretary of Defense Pete Hegseth has invited industry CEOs to the National Defense University for an address on the "Arsenal of Freedom" this Friday. The gathering looks to be aimed at undoing the proverbial Last Supper in 1993, when then Department of Defense (DOD) leaders Les Aspin and William Perry met with industry CEOs and ushered in a significant industry consolidation as defense spending plunged after the Cold War from well over 5 percent of U.S. GDP to less than 3 percent. Today's threat environment, paced by China, and dramatic weaknesses in the U.S. industrial base are driving a broad set of actions and initiatives in the Trump administration and on Capitol Hill. To that end, the secretary of defense's remarks will likely focus on recasting and growing the industrial base and reforming how the government acquires and delivers systems. A draft memo and other leaks have outlined some of the expected thrusts of the Pentagon reform effort, which will "prioritize timely delivery of operational capabilities to the warfighter."

The government customer is clearly changing how it buys and how it engages with companies. What does this mean for the industrial base? In short, this creates both opportunities and challenges. Here are five things that government officials and companies across the industrial base should consider going forward.

Historic Opportunity

There is a broad bipartisan consensus that the United States' defense acquisition system is far too slow and not responsive to warfighter needs, and that the industrial base sorely lacks the capacity to meet today's security challenges. This has been amply demonstrated in repeated cost overruns of major programs and in the inability to quickly surge production to meet the demand for munitions to support Ukraine and Israel.

Congress is similarly focused on reform, with the Senate's Fostering Reform and Government Efficiency in Defense (FoRGED) Act and the House's Streamlining Procurement for Effective Execution and Delivery (SPEED) Act proposing major reforms that are currently in conference negotiations for the FY 2027 National Defense Authorization Act. These reform efforts have been building over the past decade through various initiatives, such as the creation of a defense innovation ecosystem through the Defense Innovation Unit and similar organizations, as well as the congressional commission on Planning, Programming, Budgeting, and Execution (PPBE) reform, and have now reached a critical mass.

Speed Is Not Enough

Reform efforts over the past decade have focused on speed to contract, and this one is no different. The use of Other Transactions (OTs) and streamlined solicitation procedures such as Commercial Solutions Openings (CSOs) has been repeatedly emphasized by Pentagon leadership. The Department of Defense's use of OTs has dramatically increased in recent years, growing 220 percent from 2018 to 2023, for example. This is tremendous, but the challenge has been with transitioning capabilities from prototyping OTs and CSOs to programs of record. There are no current metrics for assessing which or how many of these innovation efforts become permanent capabilities, a critical gap that needs to be addressed.

The DOD's actions appear to recognize, however, that scale and delivery are the ultimate key to increasing industrial capacity. The direct report program manager (DRPM) model is currently being used for Golden Dome and is under consideration for the Navy's submarine production and the Air Force's Sentinel program. Driven by Deputy Secretary of Defense Steve Feinberg, these DRPM efforts are laser-focused on improving the timeline for delivery of these major capabilities.

The memo outlines additional initiatives focused on scale, including a two-to-production standard and scalable production strategies, including modular open systems approaches that aim to increase the qualified sources to produce systems or at least modular components. This could help to foster competition through second sourcing and regular re-competition that could help to reduce cost and single-source bottlenecks in supply chains.

Incentives Are the Elixir of the Industrial Base

The Trump administration and Congress are also very focused on attracting commercial companies as well as private capital to the defense industrial base. There has been strong rhetoric from some leaders in the Department of Defense favoring Silicon Valley business practices over those of the traditional prime contractors, but the fact of the matter is, the DOD needs both.

Fortunately, as the monopsonist, the government both sets and regulates the defense market. Companies of all shapes and sizes respond to the market that the government creates. If the DOD wants different outcomes, it can change the incentive structures by which companies operate in the marketplace.

That is clearly what Pentagon leadership is doing by empowering contracting officers, creating time-indexed incentives for contracts that reward early delivery and penalize delays, and prioritizing commercial solutions. It will be up to the companies in the industrial base to respond to these new approaches.

The DOD's focus on attracting private capital also creates a new set of incentives in the industrial base. As mentioned in the memo and evidenced by the multifaceted deal with MP Materials on rare earth processing, the Department is working to unlock private capital through advance market commitments, loans, and risk-sharing mechanisms.

Flexibility, Implementation, and Money Are Key

Flexibility is central to this effort. By establishing portfolio acquisition executives (PAEs), the Department is restructuring its buying organizations to focus on mission and capability areas, similar to those outlined in the PPBE Commission's final report. This will enable PAEs to prioritize funds and make trades across their respective portfolios.

The earlier disestablishment of the Joint Capabilities Integration and Development System (JCIDS) had a similar purpose. The new approach focuses on enabling agility in requirements, bringing industry to the table, and driving structural change.

Implementation will be essential to accomplish this aggressive agenda. Countless Pentagon reform efforts have failed because of the lack of follow-through. The biggest implementation challenge may be the capacity of the DOD's acquisition workforce, which has seen many officials retire under the deferred resignation program earlier this year.

Finally, Secretary Hegseth will need significant and sustained resourcing levels well above 3 percent of GDP to "undo" the Last Supper. While reconciliation provided a substantial infusion of funding, current Department budget projections beyond FY 2026, however, are frankly unclear. He will need to convince Congress and the Office of Management and Budget to enable funding approaches that support his ambitious goals.

We will find out shortly what the secretary of defense announces, and then it becomes a function of what they can get done in the coming three-plus years.

What is clear is that this is truly the hour of the industrial base. The United States should seize the moment and revitalize the United States' industrial capabilities and capacities to better prepare to face its national security challenges.

Jerry McGinn is director of the Center for the Industrial Base and senior fellow with the Defense and Security Department at the Center for Strategic and International Studies in Washington, D.C.

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