U.S. Army's Strategic Capital Initiative Gains Momentum

The U.S. Army's Strategic Capital Initiative (SCI) program, launched on February 27, 2026, with the release of an overarching request for information (RFI) inviting U.S. industry and private capital to help shape Army modernization, has moved from concept to execution at a remarkable pace. Since the program's launch in late February, the Army has completed two full tranches of competitive solicitations and conditional awards, encompassing critical minerals processing, advanced manufacturing co-production and commercial power generation across more than a dozen military installations.

The program's momentum was on full display on October 14, 2026, at the Association of the U.S. Army (AUSA) Contemporary Military Forum on the Strategic Capital Initiative, where senior Army leaders – including Assistant Secretary Mark Anderson, Assistant Secretary Jordan Gillis and Lt. Gen. Gavin A. Lawrence, Acting Commanding General of U.S. Army Materiel Command – joined industry partners to discuss the program's status, lessons learned and future direction. Responding directly to market questions about whether the initiative would endure through the recent leadership transition at the Pentagon, Assistant Secretary Anderson emphasized that one of the first topics he discussed with the Acting Secretary of the U.S. Department of War (DOW) was "how do we go faster and how do we do more," adding, "to be clear to the market … we're not slowing down, we're moving out." Given these statements and the Army's signal that additional RFIs are forthcoming, now is a critical time for companies to evaluate their positioning under the program.

As discussed in Holland & Knight's previous Government Contracts Blog on the SCI program, the initiative represents a paradigm shift in how the Army leverages private capital and industry expertise to address long-standing modernization challenges – without reliance on annual congressional appropriations. The program is organized around six strategic investment pillars: 1) Energy Resilience and Dominance, 2) Organic Industrial Base (OIB), 3) Strengthening Logistics and Supply Chains, 4) Real Assets and Facilities Utilization, 5) Advanced Manufacturing and Technology Adoption, and 6) Critical Minerals and Resource Development.

This Holland & Knight alert provides an update on the significant developments that have occurred since the initial RFI, including detailed summaries of the two completed tranches of awards, additional SCI activity across multiple pillars, key insights shared at the AUSA forum and practical guidance for industry participants seeking to position themselves for upcoming opportunities.

Background: The SCI Program and Its 6 Pillars

On February 27, 2026, the Army released its overarching SCI RFI, a call for "strategic and actionable input" from leaders across the finance, technology and industrial sectors. The RFI sought specific proposals for financial structures and partnership models that are commercially sustainable and capable of accelerating the Army's modernization and transformation across its vast enterprise. The initiative centers on the recognition that the Army "cannot rely solely on annual congressional appropriations to solve its critical modernization requirements" and must instead "unlock the overwhelming advantage resident in American industry and capital markets."

The RFI identified six strategic investment pillars:

• Pillar 1 – Energy Resilience and Dominance. Develop reliable, independent power grids, energy storage, and commercially scalable, resilient energy systems at Army installations.
• Pillar 2 – Organic Industrial Base. Expand existing arsenal, depot and ammunition plant facilities through investment in automation, robotics, advanced materials and critical technologies.
• Pillar 3 – Strengthening Logistics and Supply Chains. Develop streamlined logistics capabilities and scale cutting-edge dual-use technological solutions, including autonomous logistics.
• Pillar 4 – Real Assets and Facilities Utilization. Maximize utility from non-excess, underutilized Army land through long-term Enhanced Use Leases (EULs) for projects such as data centers, warehousing and industrial parks.
• Pillar 5 – Advanced Manufacturing and Technology Adoption. Establish flexible, dual-use manufacturing capabilities at Army installations through joint ventures and co-production arrangements.
• Pillar 6 – Critical Minerals and Resource Development. Develop partnerships to integrate dual-use mining, processing and extraction technologies for critical natural resources on Army lands.

The Army received more than 200 responses to the RFI and assessed approximately 120 proposals as viable, reflecting significant private-sector interest in the program. Since the initial RFI, the Army has moved aggressively to convert promising proposals into concrete partnership arrangements through competitive solicitations and conditional lease awards.

Tranche 1: Critical Minerals and Advanced Manufacturing (May-June 2026)

The Army's first tranche of SCI awards addressed two closely related pillars – Critical Minerals and Resource Development (Pillar 6) and Advanced Manufacturing and Technology Adoption (Pillar 5) – reflecting the program's emphasis on rebuilding domestic industrial capacity and reducing dependence on foreign supply chains for materials and manufacturing critical to national defense.

Pillar 6: Critical Minerals and Resource Development

On May 18, 2026, the Army announced the first tranche of SCI projects, focused on establishing domestic critical minerals processing capacity on military installations. The associated request for proposals (RFP) was published on SAM.gov on May 15, 2026. Under this initiative, the Army is establishing EULs at select installations to facilitate the domestic processing of critical minerals pursuant to Executive Order 14241 and EUL authority under 10 U.S.C. § 2667.

On June 25, 2026, the Army announced conditional lease solicitation awards to four companies, marking the first time the Army has sited commercial mineral processing facilities on U.S. military installations:

• Anniston Army Depot, Alabama, and Pine Bluff Arsenal, Arkansas – graphite purification
• Red River Army Depot, Texas – lithium refining
• Tooele Army Depot, Utah – boron processing
• Tooele Army Depot, Utah – dysprosium and terbium (heavy rare earth elements) processing

As Dr. Jeff Waksman, Principal Deputy Assistant Secretary of the Army for Installations, Energy and Environment, stated: "The ability to process critical minerals on U.S. soil is a national-defense priority." David Fitzgerald, Deputy Under Secretary of the Army, echoed this sentiment, noting that the awards are "proving the Secretary of the Army's theory that we can operate in a different way."

Key terms of the critical minerals EULs include the following:

• Development is slated to begin as early as 2027, with initial operating capability (IOC) targeted by or ahead of 2028.
• Lessees bear 100 percent of development and operating costs. The Army retains title to the installations and underlying real property.
• Rent is set at or above fair market value (FMV), with the Army preferring in-kind consideration – such as processed minerals or installation improvements – over cash rent.
• Domestic ownership requirements apply to all lessees.
• Davis-Bacon Act prevailing wage requirements and Buy American Act procurement obligations apply.

Pillar 5: Advanced Manufacturing and Technology Adoption

Alongside the critical minerals awards, the Army announced four co-production initiatives at OIB sites, marking the launch of Pillar 5 activities under the SCI program. These co-production arrangements are designed to integrate Industry 4.0 and 5.0 technologies – including advanced automation, robotics, digital engineering and artificial intelligence – into the Army's existing manufacturing infrastructure.

The initial co-production sites include Corpus Christi Army Depot, McAlester Army Ammunition Plant, Red River Army Depot and Pine Bluff Arsenal. A Commercial Solutions Opening (CSO) released in June 2026 targets advanced manufacturing integration at OIB facilities, with specific focus areas including:

• Anniston Army Depot – M88 Recovery Vehicle and M1 Abrams main battle tank component manufacturing
• Red River Army Depot – track shoes and road wheels for armored vehicles
• Corpus Christi Army Depot – rotary-wing aircraft components
• Tobyhanna Army Depot – wiring harness connectors and printed circuit boards

Under the co-production model, the industry partner funds 100 percent of capital expenditures in exchange for a portion of production capacity that may be used for commercial purposes. This structure allows the Army to modernize its manufacturing capabilities at no cost to the taxpayer while creating dual-use production capacity that strengthens both military readiness and the broader defense industrial base.

Notably, the Army also awarded a contract at Red River Army Depot for advanced automation manufacturing, further underscoring the program's commitment to cutting-edge production technologies.

At the AUSA forum, Lt. Gen. Lawrence described additional CSO agreements establishing flexible advanced manufacturing lines at OIB sites, including 1) an agreement at Tobyhanna Army Depot to support radar repair, particularly for radars that are part of the Patriot weapon system, 2) a partnership at Red River Army Depot for battery production and repair parts, and 3) a partnership with Anniston Army Depot addressing engines and components for small unmanned aircraft system rotor systems, intended to onshore that capability in the continental U.S.

Tranche 2: Commercial Power Generation and Energy Resilience (June-September 2026)

The Army's second tranche of SCI awards focused on Energy Resilience and Dominance (Pillar 1), addressing the critical need for reliable, resilient power at military installations. On June 15, 2026, the Army published an RFP on SAM.gov soliciting proposals for commercial power generation EULs at seven installations across the eastern U.S.:

• Aberdeen Proving Ground, Maryland
• Fort Detrick, Maryland
• Fort Drum, New York
• Letterkenny Army Depot, Pennsylvania
• Picatinny Arsenal, New Jersey
• Tobyhanna Army Depot, Pennsylvania
• West Point (U.S. Military Academy), New York

The RFP contemplated a range of power generation technologies, including solar, natural gas, geothermal and nuclear (capped at 500 megawatts per unit), and required that all proposals include a resilience mandate: During grid outages exceeding four hours, facilities must be capable of providing islanded power to the host installation for a minimum of 14 days. Proposals were due June 29, 2026.

On September 18, 2026, the Army announced conditional lease awards to three companies at six locations, including Aberdeen Proving Ground, Maryland; Fort Detrick, Maryland; Letterkenny Army Depot, Pennsylvania; Picatinny Arsenal, New Jersey; Tobyhanna Army Depot, Pennsylvania; and West Point, New York.

The awarded projects include a potential mix of battery energy storage systems, natural gas generation and nuclear electric generation technologies. Dr. Waksman noted upon announcing the awards: "These awards are translating national energy priorities into action – promoting American energy dominance."

Key terms of the energy generation EULs mirror the structure established for the critical minerals leases:

• EUL terms of up to 50 years for the initial lease period, executed under 10 U.S.C. § 2667.
• The lessee bears all development, construction and operating costs.
• During normal grid operations, power generated at the facilities may be sold to third-party off-takers. During grid outages exceeding four hours, the facilities must provide resilient power to the host installation for at least 14 days.
• The Army prefers in-kind consideration (such as resilient power, installation improvements or energy credits) over cash rent, though rent must be at or above FMV.
• Development is anticipated to begin as early as 2027, with IOC targeted by or ahead of 2030.
• Domestic ownership requirements and environmental review requirements apply, consistent with the Tranche 1 terms.

Fort Drum, New York, was not included in the initial round of conditional awards. It remains to be seen whether the Army will issue a follow-on solicitation for that installation or incorporate it into a future tranche.

Additional SCI Developments

Beyond the two completed tranches described above, the SCI program has generated significant activity across multiple pillars, demonstrating the breadth and velocity of the Army's public-private partnership ambitions.

Data Centers (Pillar 4: Real Assets and Facilities Utilization)

In March 2026, the Army announced conditional EUL awards for hyperscale data center development at two installations: 1) Fort Bliss, Texas, encompassing approximately 1,380 acres, with IOC projected for fiscal year (FY) 2027, and 2) Dugway Proving Ground, Utah, covering approximately 1,200 acres, with IOC projected for FY 2029. These awards reflect the growing demand for secure, domestically located data center infrastructure and the Army's ability to leverage its extensive real property holdings to attract private capital.

At the AUSA forum, industry leaders explained that in moving out with the proposed Fort Bliss data center, the parties set aside the "way we always do it" and negotiated the definitive documents from first principles, producing an agreement that "no one's really ever seen before." Assistant Secretary Gillis further indicated that the first SCI data center is expected to go live imminently.

Munitions (Pillar 2: Organic Industrial Base)

Another participating organization is self-investing approximately $1.3 billion to develop a munitions manufacturing facility at Pine Bluff Arsenal, Arkansas, under a conditional EUL award announced in January 2026. This represents one of the largest single private investments at a U.S. military installation and underscores the potential for the SCI model to attract transformative levels of capital.

Logistics (Pillar 3: Strengthening Logistics and Supply Chains)

In August 2026, a consortium was selected for a logistics modernization initiative under the SCI program to modernize the Army's nontactical supply chain networks, and an implementation plan is expected by November 2026. At the AUSA forum, the consortium's leadership described the initiative as focused on "predictive logistics intelligence" – identifying supplier stockouts, geopolitical events, and weather or lane disruptions before they affect readiness. This initiative marks the first major SCI activity under Pillar 3 and signals the Army's intent to modernize its supply chain infrastructure through commercial partnerships.

Key Takeaways from the AUSA SCI Forum

The forum discussion offered several practical insights for companies considering SCI participation:

• Program Durability. Army leadership stressed that the initiative is intended to be an enduring "tool in the Army's toolkit." Assistant Secretary Anderson stated that his goal is for SCI to become "a mature, healthy channel that exists over time," and one industry participant noted that one of its threshold questions was whether the structure "could survive administration changes."
• Clearly Defined Problems and Value Propositions. Gen. Lawrence identified as critical lessons clearly defining the problem and requirements at the outset, understanding the statutory guardrails (such as the distinction between inherently governmental core functions and work subject to the 50/50 rule in the OIB), aligning on each side's value proposition and establishing measurable outcomes reviewed jointly with commercial partners.
• Law vs. Historical Norms. Panelists emphasized distinguishing what is required by law from what reflects historical practice. As one industry participant put it, the key was "deciphering between what has been done because of law and what has been done because of historical norms," and Assistant Secretary Anderson encouraged parties to challenge practices grounded only in norm or preference.
• Certainty and Risk Allocation. Assistant Secretary Anderson noted that EUL vehicles can provide long-term lease certainty that helps de-risk investment, and Assistant Secretary Gillis stated the Army is open to structuring lease terms to be attractive to partners' shareholders and financiers. Industry panelists noted that commercial market risk sits with the private partner and can be managed through phased development and flexible agreements that permit technology refresh within long-lived infrastructure.
• Early, In-Person Engagement. Industry participants urged bringing industry in early, before a procurement, including in-person site engagement with depot personnel, and Assistant Secretary Gillis emphasized that the Army wants to be "easy to do business with" and move away from traditional heavy contracting approaches.
• Nontraditional Entrants. Army leaders stated that SCI is intended to attract nontraditional entrants – including large companies without significant government work and private equity-backed startups – broadening competition in the industrial base.
• Conditional Nature. Notably, awards announced to date are conditional; final lease execution remains subject to completion of environmental review under the National Environmental Policy Act, negotiation of definitive agreements and other conditions, so awardees and their financiers should plan for gating periods.

Future Opportunities and What to Watch

The SCI program continues to mature rapidly, and industry participants should expect additional solicitations and awards in the coming months. Several key developments merit attention:

• Additional RFIs and Solicitations. Assistant Secretary Gillis stated that industry should anticipate another round of RFIs, both targeted to specific pillars and broad enough to invite industry to propose ideas the Army has not yet considered, with the goal of expanding SCI across the Army's installation footprint over the next three to five years. Portions of the Logistics pillar (Pillar 3) and additional Real Assets and Facilities Utilization (Pillar 4) opportunities remain to be addressed through formal solicitations, and additional RFPs and CSOs are expected to follow in relatively short order.
• Parallel Air Force Programs. The U.S. Department of the Air Force (DAF) is pursuing its own private capital efforts under the same EUL authority. These include solicitations for privately financed AI data centers at five bases in the continental U.S. and three installations in Alaska. The DAF is also running its Advanced Nuclear Power for Installations microreactor initiative, which targets an operating reactor by 2030, and a planned Defense Energy Consortium in which members would fully finance energy resilience projects with private capital. Companies pursuing SCI opportunities should watch both services' solicitations.
• Rapid Solicitation Timeline. Army leadership has indicated that it expects to issue CSOs and RFPs within one to two months of receiving a sufficient number of viable RFI responses for a given pillar or sub-pillar.
• Live Open Range Q&A Sessions. Deputy Under Secretary of the Army Fitzgerald hosts weekly Live Open Range Q&A sessions for interested industry participants, providing a direct channel for questions about the SCI program, upcoming solicitations and partnership structures.
• SAM.gov Monitoring. All SCI-related solicitations, RFIs and award notices are posted on SAM.gov. Industry partners should establish alerts and regularly monitor for new opportunities.
• Key Contracting Vehicles. The primary contracting vehicles employed by the SCI program include EULs (under 10 U.S.C. § 2667), CSOs and co-production agreements. At the forum, Assistant Secretary Gillis noted that the Army also considers other transactional authorities, public-private partnerships and real property exchanges, and continues to use energy savings performance contracts outside of SCI. Understanding the legal and regulatory framework governing these vehicles is essential for organizations seeking to participate.

Companies across the defense, energy, manufacturing, critical minerals, technology and logistics sectors should proactively assess their capabilities against the SCI pillars and begin preparing for future solicitations. Given the Army's stated preference for commercially viable, self-sustaining business models and its emphasis on domestic ownership and production, early engagement and thorough proposal preparation will be critical to success.

How Holland & Knight Can Help

Holland & Knight's Government Contracts Group, Public Policy & Regulation Group and Energy & Natural Resources Industry Sector Group are actively monitoring SCI developments and advising clients across the defense, energy, manufacturing and critical minerals sectors. Our attorneys bring deep experience in the legal and regulatory frameworks that underpin the SCI program, including EUL structures, government contracting, public-private partnerships, environmental compliance, energy project development and critical minerals supply chain issues.

Our teams can assist clients in evaluating specific SCI opportunities, preparing and submitting competitive responses to RFIs, CSOs and RFPs, negotiating EUL terms and co-production arrangements, navigating domestic ownership and compliance requirements (including Davis-Bacon Act, Buy American Act and environmental review obligations), structuring commercially viable partnership models aligned with Army expectations and engaging with DOW throughout the process.

For more information about the SCI program and how your organization can position itself for upcoming opportunities, please contact the authors or any member of Holland & Knight's Government Contracts or Energy & Natural Resources groups.

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.