Now that the FY 2026 National Defense Authorization Act (NDAA) is finalized, its implications for the defense and security technology ecosystem are coming into focus. Beyond authorizing funding for the Department of War (DoW), it also signals a deliberate shift toward modernization, commercialization, and inclusion of nontraditional vendors in areas historically dominated by legacy defense contractors. For startups this is an opportunity to align with U.S. national security priorities that will define defense capabilities, procurement, and public-private collaboration for the next decade.
A Clear Signal for Innovation and Modernization
The NDAA’s authorization of $925 billion in total defense spending, and $878.7 billion for the DoW underscores a national commitment to modernization and addressing emerging threats. Much of the NDAA’s language focuses on artificial intelligence, cybersecurity, unmanned systems, and advanced manufacturing, signaling congressional intent to move away from legacy systems that have put US security at risk. Historically, defense procurement has favored large, established contractors. Procurement and compliance complexities have made it difficult for new companies to break in. However, this year’s NDAA recognizes that many of today’s most impactful innovations originate outside the traditional defense industrial base.
- Commercial Solutions Openings (CSOs) (Section 1823) will now allow the DoW to acquire a broader range of commercial and non-developmental items and authorize follow-on production, including sole-source awards. This gives startups and smaller tech firms a faster, streamlined path to transition off-the-shelf products and prototypes into full-scale DoW production, reducing traditional barriers to entry.
- Higher thresholds for certified cost/pricing data (Section 1804) and Cost Accounting Standards (CAS) (Section 1806) now apply only to larger contracts, ($10M+ for cost/pricing data and full CAS coverage at $100M). This change allows startups and smaller tech firms to compete for DoW work without the heavy administrative and accounting burdens that inevitably favor large, established contractors with the time, staff, and capital to manage significant overhead.
- Portfolio‑based acquisitions (Section 1802) shift the DoW toward portfolio management under newly empowered Portfolio Acquisition Executives. Instead of relying on one-off, fixed-scope contracts, this approach lets programs evolve over time so work can be refined, reprioritized, and scaled as needs change.
Together, these changes lower long-standing barriers that have historically favored large, incumbent contractors and make it easier for smaller security vendors to compete on capability rather than scale. The result is a more competitive and innovative defense ecosystem, where newer technologies can be adopted faster and adapted as threats evolve. This shift is especially timely as large contractors face growing scrutiny over monopolistic, vendor-lock practices that can limit flexibility and leave the government overly dependent on a small number of providers.
Regulatory Signals & Readiness
Alongside modernization, the NDAA, in alignment with the White House, is intent on reducing supply chain risk by making sure every contractor meets a common set of security standards. Rather than relying on a few trusted primes, the focus is on ensuring that all vendors handling defense data follow sound cybersecurity practices. Recent improvements to the CMMC process reflect this approach, and the NDAA reiterates that strong, consistent security across the entire supplier base is now a core expectation.
The NDAA, and its supporting guidance, also makes clear that the government is paying closer attention to how advanced technologies are built and managed. For AI, high-performance computing, and SaaS systems, the focus is on how reliable the underlying data is, how securely the systems are built, and how resilient the supply chains are over time.
On quantum readiness, the NDAA doesn’t impose new requirements, but it signals Congress’s intent to prepare for a post-quantum future. Lawmakers have directed the DoW to take a close look at how prepared its cryptographic systems are for emerging quantum threats. By mid-2026, the DoW must report on which systems are most at risk, how quickly they can transition to quantum-resistant cryptography, what tools and resources are needed, and whether the department is on track to complete that transition by 2035.
The ability to scale and compete increasingly depends on both demonstrating technical innovation and readiness for evolving AI governance, secure software mandates, and the eventual transition to post-quantum security standards.
OpenPolicy Insights
This year’s NDAA signals how the government is thinking about security, technology, and who is best positioned to deliver it. While adversaries leverage commercial technology and rapid iteration, the traditional US defense acquisition model has become too costly and leaves the DoW vulnerable. Congress is signaling that maintaining U.S. advantage now requires bringing private-sector innovation into the system faster and on more flexible terms.
For security companies, success will depend both on technical excellence and the ability to deliver secure, adaptable solutions that can evolve as threats change. In that sense, agility itself has become a national security requirement and the defense ecosystem is beginning to reward companies that can provide it.
