Department of War's Artificial Intelligence-First Agenda: A New Era for Defense Contractors

The U.S. Department of War (DOW) issued three coordinated memoranda on January 9, 2026, followed by Secretary Pete Hegseth's speech on January 12, 2026, and a DOW Artificial Intelligence (AI) Acceleration press release that together set a U.S. "AI‑first" wartime‑speed agenda for AI, data and innovation.

• The Artificial Intelligence Strategy for the Department of War memorandum (AI Strategy Memo) directs the DOW to accelerate "America's Military AI Dominance" by becoming an AI‑first warfighting force centered on seven "Pace‑Setting Projects," aggressive data‑access mandates, expanded AI compute and accelerated AI talent hiring.
• The Transforming Advana to Accelerate Artificial Intelligence and Enhance Auditability memorandum (Advana Memo) restructures Advana into a War Data Platform (WDP), an Advana for Financial Management track and a WDP Application Services team to standardize data access for "agentic AI" while supporting fiscal year (FY) 2027 and FY 2028 clean‑audit goals.
• The Transforming the Defense Innovation Ecosystem to Accelerate Warfighting Advantage memorandum (Defense Innovation Memo) designates the Under Secretary of War for Research and Engineering (R&E) as the single Chief Technology Officer (CTO), creates a CTO Action Group, and elevates the Defense Innovation Unit (DIU) and Strategic Capabilities Office (SCO) as core innovation organizations within a unified ecosystem.

Secretary Hegseth's January 12, 2026, speech and the DOW's press release frame AI as the first major proving ground for this unified innovation and acquisition model at "wartime speed."

Taken together, these actions demonstrate the intent to establish an execution model that prioritizes speed, competition among small accountable teams, broad data and compute access, modular open architectures and new AI evaluation criteria with direct implications for how government contractors and industry design and deliver solutions, structure intellectual property (IP) and data‑sharing terms, and engage with the DOW. These DOW actions build on the Trump Administration's previously announced governmentwide policies and initiatives related to AI, including Executive Order (EO) 14179, Accelerating Federal Use of AI through Innovation memorandum and Driving Efficient Acquisition of AI memorandum – which was summarized in a previous Holland & Knight alert – as well as the White House's announced AI Action Plan. The DOW's three memoranda establish a dense set of programmatic directives –  from AI "Pace‑Setting Projects" and data platform restructuring to a unified CTO‑led innovation ecosystem that will drive near‑term changes in how the DOW sponsors, funds and fields capabilities, which could result in changes in how lawmakers develop defense acquisition policy, including funding priorities.

In the subsections that follow, this Holland & Knight alert reviews the key directives in each memorandum and highlights the practical implications for contractors supporting AI, data and defense‑innovation programs.

The AI Strategy Memo

The AI Strategy Memo directs the DOW to "accelerate America's Military AI Dominance" by becoming an "AI‑first" warfighting force aligned with EO 14179 and America's AI Action Plan. The strategy emphasizes rapid experimentation with leading commercial AI models, removes "bureaucratic barriers" and focuses investment in U.S. asymmetric advantages in compute, model innovation, capital markets and operational data. 

Pace‑Setting Projects

At the core of the AI strategy are seven initial "Pace‑Setting Projects" (PSPs) spanning warfighting, intelligence and enterprise missions, each with a single accountable leader, aggressive timelines and monthly reporting to the Deputy Secretary of War and CTO.

DOW Components (i.e., any major entity operating under the Secretary of War) are directed to identify at least three "fast‑follow" projects within 30 days, and the Chief Digital and AI Office (CDAO) must make the foundational AI "enablers" (infrastructure, data, models, policies and talent) developed through the PSPs available across the DOW in real time. 

The AI Strategy Memo also mandates 1) substantial expansion of AI compute infrastructure from data centers to the tactical, remote or "edge" military environments, 2) strict enforcement of the "U.S. Department of Defense (DOD) Data Decrees," including federated data catalogs and CDAO authority to direct release of "any DOW data to cleared users with a valid purpose," with denials to be justified to the Under Secretary of War for Research and Engineering (USW(R&E)) within seven days, and 3) accelerated "AI talent hiring and talent development plans" using special hiring and pay to authorities departmentwide, with Component AI hiring plans due within 60 days. 

Acceleration Expectations

The AI Strategy Memo also sets "acceleration expectations" built around:

• "speed wins" as a decisive variable with a directive for the CDAO to establish deployment velocity and operational cycle-time metrics for all PSPs that are reported monthly to the USW(R&E)
• "AI model parity" with an express directive to establish a delivery and integration cadence with AI vendors that enables the latest models to be deployed within 30 days of public release as a primary procurement criterion for future acquisitions
• "wartime approach" to eliminating "blockers" to data sharing, Authorizations to Operate (ATO), test and evaluation and certification, contracting, hiring and talent management, and "other policies that inhibit rapid experimentation and fielding" through a monthly Barrier Removal Board with authority to waive nonstatutory requirements and escalate for "immediate" resolution
• "competition > centralized planning" to encourage competition for faster military AI integration with a focus on "small, accountable teams" that are engaging in "continuous field experimentation," with an emphasis on receiving feedback "within days not years" and pushing fast updates to AI systems
• "AI-native warfighting" to incorporate AI and autonomy into military planning, tactics, techniques and procedures (TTP) development, and experimentation processes with designated AI Integration Leads, CDAO-established criteria and monitoring by a senior official designated by the joint staff; exercises and experiments that do not meaningfully incorporate AI and autonomous capabilities will be reviewed for resourcing adjustments
• "modular open architectures" to enable component replacement at commercial speed, with direction to acquire AI capabilities to enforce Modular Open System Architectures (MOSA), along with the "DOD Data Decrees"
• "clarifying 'Responsible Al' at the DOW" by utilizing models free from usage policy constraints that may limit lawful military applications with direction to the CDAO to establish objectivity benchmarks as a primary procurement criteria within 90 days, incorporation of standard "any lawful use" language into any DOW contract through which AI services are procured within 180 days and update AI policy guidance at the DOW consistent with the AI Strategy Memo
• "becoming an AI-first department" by bringing the full weight of leadership attention, resources and private‑sector partnerships to embed AI in current workflows and fundamentally redesign workflows, processes, TTPs and operational concepts that predate modern AI

Wholistically, the AI Strategy Memo signals that these initiatives are not abstract policy but an execution road map that will reshape how the DOW sponsors, buys and fields AI capabilities. For the defense industrial base, the throughline is clear: Speed, experimentation, transition to the field and integration readiness will matter as much as traditional past performance, and offerings will be judged on their ability to plug into DOW data, AI compute and MOSA‑driven architectures while supporting rapid model updates and continuous field use.

The AI Strategy Memo is clear that the DOW intends to expand its relationships with contractors to accelerate its AI goals. To meet the DOW where it is, contractors will need to align technical road maps and internal governance with an "AI‑first" standard, including tolerance for more open data sharing, clearer interface exposure and "any lawful use" expectations around model behavior. Companies that can operate at this wartime tempo, deliver deployable AI into contested and enterprise environments, and document measurable mission impact will be best positioned, as these directives translate into concrete solicitations, evaluation criteria and contract terms.

The Advana Memo

Advana – originally "Advancing Analytics" – was created during President Donald Trump's first administration and is the DOW's enterprise data and analytics platform and application ecosystem (the Advana Program).

The Advana Memo directs the USW(R&E) and CDAO to restructure the Advana Program into the below three separate components.

Additionally, the Advana Memo directs that each component under the Advana Program be led by senior technical leaders with enhanced engineering resources and requires the CDAO to provide status updates to the Deputy Secretary every 45 days until the WDP and Advana for Financial Management reach Full Operational Capability (FOC). 

Additionally, the Advana Memo compresses the directed transformation into a set of near‑term milestones:

• within 30 days, reassign Advana personnel to the financial‑management track and stand up a dedicated financial management control plane
• within 60 days, deliver a plan to expand the core data integration layer into the WDP and review/divest legacy tools
• within 120 days, formalize WDP requirements
• within 270 days, after WDP and Advana for Financial Management reach full operational capability, and recommend any needed programs of record while surging additional engineering talent through the U.S. Office of Personnel Management's (OPM) "Tech Force" and temporary U.S. Navy support

For contractors, this effectively signals the Advana Program is being centralized with common interfaces, standardized data pipelines and built‑in audit controls, and it will increasingly favor tools and services that can plug into that platform and strengthen the quality and traceability of financial, acquisition, logistics and readiness data. In practical terms, solutions that are easy to integrate with the WDP and improve the federal government's ability to track and audit its data will have a clear advantage in future competitions.

The Defense Innovation Memo

Finally, the Defense Innovation Memo seeks to replace a fragmented and overlapping set of organizations within the DOW into a unified ecosystem led by a single CTO. It designates the USW(R&E) as the DOW's sole CTO, disestablishes the Defense Innovation Steering Group, Defense Innovation Working Group and CTO Council, and establishes a new CTO Action Group (CAG) to set technical direction and clear "bureaucratic blockers" to quickly deliver new innovations to the warfighter. 

Substantively, the Defense Innovation Memo reorients the DOW ecosystem around three innovation "outputs":

1. technology innovation, focused on differentiated – often classified – defense‑unique capabilities
2. product innovation, centered on adopting commercial and dual‑use technologies from American entrepreneurs and capital markets
3. operational capability innovation, which combines technologies, weapons and tactics into new ways of fighting that generate asymmetric advantage 

Within this new framework, the Defense Innovation Memo defines a CTO‑led innovation ecosystem comprising Defense Advanced Research Projects Agency (DARPA), CDAO, Test Resource Management Center (TRMC), Office of Strategic Capital (OSC) and two execution organizations – the DIU and SCO – which are to be established as DOW Field Activities under 10 U.S.C. § 191, subject to congressional certification. The Defense Innovation Memo also tasks DIU with "commercial product innovation," serving as the DOW's center of excellence for adopting and transitioning commercial technologies and externally developed products, and SCO is charged with cross‑service "operational capability innovation," fielding disruptive applications of existing systems and near‑term technologies that create strategic effects.

The Defense Innovation Memo also restructures the "R&E" within the DOW so that Assistant Secretaries of War (ASWs) are aligned to three innovation outputs:

1. ASW (Science and Technology) will lead technology innovation and foundational science.
2. ASW (Critical Technologies) – to be redesignated ASW (Commercial Technologies) subject to congressional notification – will lead policy for commercial product innovation.
3. ASW (Mission Capabilities) will lead operational capability innovation.

At the service level, the Defense Innovation Memo also requires the secretaries of each military department to brief the CTO within 90 days with a Service Innovation Plan, explaining how laboratories, rapid‑capability offices, software factories and experimentation units are organized around the three innovation outcomes and linked to joint and service operational problems. 

Further, beginning with the FY 2028 budget, each Portfolio Acquisition Executive (PAE)¹ must also include an "Innovation Insertion Increment" in their portfolios – a dedicated funding allocation for rapid capability insertion, software increments, modular component swaps and similar upgrades consistent with modular open‑systems and continuous test‑and‑evaluation practices.

For industry, the Defense Innovation Memo is particularly notable in how it clarifies engagement channels. It directs the DOW to send "clear demand signals" through two complementary pathways: the Mission Engineering and Integration Activity (MEIA), which will conduct problem‑driven engagement organized around the joint force's top operational problems, and DIU, which will continue product‑driven engagement to help program offices adopt capabilities that industry has already built. It also signals a shift to a more structured, CTO‑directed system in which MEIA and DIU become primary front doors for innovation.

Potential Practical Implications for Contractors and the Defense Industry

These DOW actions collectively point toward a procurement environment for AI that prioritizes speed, measurable performance, transition and integration‑readiness over traditional, checklist‑driven evaluations. Contractors should expect solicitations and program decisions to hinge on their ability to deliver and update AI capabilities quickly, plug into DOW data and platform architecture, and demonstrate mission impact in operational use.

• New Evaluation Standards: On the acquisition side, the DOW is signaling new evaluation standards built around "AI model parity" (deployment of the latest models within 30 days of public release), forthcoming model‑objectivity benchmarks and standardized "any lawful use" language for AI services. These shifts may move source selections toward update cadence, observed performance and willingness to support unconstrained lawful military uses of AI, creating tension with common commercial safety guardrails, acceptable‑use policies and risk‑allocation norms. At the same time, a "wartime" approach to barriers – through a monthly Barrier Removal Board and a CTO Action Group empowered to clear blockers – will compress timelines for contracting, testing, authorization and descoping or termination of underperforming efforts. At the same time, the DOW will likely continue to expect contractors to meet stringent cybersecurity standards, given recent AI cyber incidents and operator control and oversight capabilities. This may require companies to consider a bifurcated product strategy or incorporate forthcoming objectivity benchmarks in design.
• Retooling of Data, Security and Authorization Policies: Strict enforcement of the DOD Data Decrees, expansion of a centralized WDP and prioritization of financial, acquisition, logistics and readiness pipelines will make standardized data access a core prerequisite for AI solutions. The CDAO's expanded authority over data release, combined with efforts to enable cross‑domain data flows and rapid ATO reciprocity, is designed to reduce integration and accreditation friction for AI capabilities – but it will also expose contractor systems more directly to departmentwide data and logging expectations.
• IP and Proprietary Information Impacts: These moves have important IP and proprietary‑information consequences. MOSA requirements and WDP integration will increase pressure on vendors to expose interfaces, schemas and integration artifacts sufficient for third‑party access – without prime‑contractor mediation – while audit‑driven use cases heighten expectations for data provenance, logging and traceability of AI‑assisted decisions. Contractors will need clear, technical data and software rights strategies that permit required integration and data sharing while protecting core model assets, architectures and trade secrets.
• Materially Faster Development and Deployment Cycles: Operationally, contractors should plan for materially faster development and deployment cycles, continuous field experimentation with user feedback in days rather than years, and greater reliance on flexible instruments (e.g., Other Transaction Agreements, commercial solutions openings, rapid prototyping/fielding) and channels such as DIU and mission‑engineering activities to move mature capabilities into programs of record. Model‑content and "objectivity" expectations – coupled with "any lawful use" clauses – will require careful alignment between internal governance frameworks, other customer commitments (including export‑control and safety obligations) and DOW's evolving AI policies.

Holland & Knight's Government Contracts Group, Intellectual Property Group and Public Policy & Regulation Group are closely tracking implementation of the DOW's AI, data and innovation initiatives and can assist in assessing risk, updating templates and positioning offerings to compete under this new framework. Organizations with questions about how these developments may affect specific programs, capture strategies, or IP and data rights positions should contact the authors of this alert.

Notes 

¹ Section 1802 of the FY 26 National Defense Authorization Act (NDAA) directed the replacement of Program Executive Officers (PEO) with Portfolio Acquisition Executives (PAEs) at the DOW. This organizational change in the DOW's acquisition leadership focuses on shifting from program-centric to portfolio-centric management.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.