Holland & Knight Defense Situation Report: September 2025

A monthly roundup of defense policy news

Welcome back to Holland & Knight's monthly defense news update. We are pleased to bring you the latest in defense policy, regulatory updates and other significant developments. If you would like additional information on anything in this report, please reach out to the authors or members of Holland & Knight's National Security & Defense Industry Sector Group.

LEGISLATIVE UPDATES

Reconciliation Update

As highlighted in the July 2025 Holland & Knight Defense Situation Report, Rep. Mike Rogers (R-Ala.) and Sen. Roger Wicker (R-Miss.), chairs of the U.S. House of Representatives Committee on Armed Services (HASC) and U.S. Senate Committee on Armed Services (SASC), respectively, on July 22, 2025, sent a letter to U.S. Department of Defense (DOD)1 Secretary Pete Hegseth. The chairs requested that a "spending, expenditure, or operating plan" for the $150 billion in funding dedicated to the DOD under the One Big Beautiful Bill Act (OBBB) be made available no later than Aug. 22, 2025. As of publication of this report, the DOD's plan has not yet been submitted to the U.S. Congress. Various sources have speculated release of the plan in October 2025; however, there is not yet official word from the Pentagon as to the plan's status.

Congress is eagerly awaiting this spending plan, as funding priorities within the House and Senate versions of the National Defense Authorization Act (NDAA) and annual defense appropriations bills will, in some cases, be influenced by OBBB allocations. Without Pentagon confirmation at the program level of exactly where the $150 billion in reconciliation funds are heading, a final defense appropriations bill will be difficult to complete.

NDAA Update

On Sept. 10, 2025, the House considered the HASC-reported fiscal year (FY) 2026 NDAA on the floor. The House considered more than 1,000 amendments proposed by its colleagues and eventually passed multiple "en bloc" amendment packages comprising dozens of bipartisan, noncontroversial amendments each. However, some hotly debated amendments, such as those relating to social policy, were debated, and some passed by party-line votes. After debate, the House passed its version of the FY 2026 NDAA, H.R.3838, the Streamlining Procurement for Effective Execution and Delivery (SPEED) and NDAA for FY 2026 by a vote of 231-196. The vote was largely split along party lines, with 17 Democrats voting in favor of the bill and four Republicans voting against.

In the Senate, SASC's version of the NDAA, S.2296, has been pending on the floor. However, because of the lapse in government funding for FY 2025 and Senate Republican leadership prioritizing nomination confirmations, the NDAA has not had any votes. Though Chair Wicker and Ranking Member Jack Reed (D-R.I.) have indicated that they would still like to debate the NDAA and vote on amendments on the Senate floor, this scenario may not occur. If it does not, anticipate a conference between the House-passed bill and SASC-reported bill to occur throughout the fall, with likely passage on a final text for the 65th consecutive year in December 2025.

An outline of current prioritization differences between the House and Senate bills can be found in the July 2025 Holland & Knight Defense Situation Report.

Appropriations Update

The year-long continuing resolution (CR) of FY 2025 funds expired on Sept. 30, 2025. Without the passage of a full budget or CR, the government shut down on Oct. 1, 2025, with only some federal government activities continuing.

On Sept. 19, 2025, the House passed H.R.5371 – Continuing Appropriations and Extensions Act, 2026, an eight-week CR, by a vote of 217-212, only for the bill to shortly thereafter fail in the Senate by a vote of 44-48, having not achieved the necessary 60 votes. On the night of Sept. 30, 2025, when funding was set to expire, the Senate again voted down the House-passed CR by a vote of 55-45, as well as a Democrat-led alternative by a vote of 47-53 in a last-ditch effort to prevent a shutdown.

The shutdown marks the first lapse in funding in nearly seven years, with agencies now implementing furloughs and essential services operating without pay. The appropriations process had shown some progress in early September, with several bills passed or marked up in both chambers, but the breakdown over healthcare tax credits and partisan disputes ultimately stalled a short-term funding solution. It is unclear at this time whether a CR will pass in the coming days, but anticipate the shutdown to last at least through the first week of October 2025.

Recent guidance from the Office of Management and Budget (OMB) advised federal agencies, in the event of a government shutdown, to "use this opportunity to consider Reduction in Force (RIF) notices for all employees in programs, projects, or activities (PPAs) that satisfy all three of the following conditions: (1) discretionary funding lapses on October 1, 2025; (2) another source of funding, such as H.R. 1 (Public Law 119-21) is not currently available; and (3) the PPA is not consistent with the President's priorities." Further, OMB explained that once FY 2026 appropriations are enacted, agencies should revise RIFs as needed to retain the minimal number of employees necessary to carry out statutory functions.

For defense appropriations specifically, CRs prove problematic for DOD operations. CRs generally carry stagnant funding levels, regardless of the cost of defense priorities as laid out in the National Security Strategy, NDAA or elsewhere. They also hamstring the DOD's ability to plan for the future and tackle new challenges to American security. A shutdown will allow for the DOD to continue activities that have already been authorized but not allow for new programs to begin.

On Sept. 30, 2025, there were also several expiring programmatic authorizations that other committees tried to attach to the CR. For example, there were authorities granted under the Federal Aviation Administration (FAA) Reauthorization Act of 2018 that provide the legal basis of U.S. Department of Homeland Security (DHS) and U.S. Department of Justice (DOJ) drone takedown authority; the 2015 Cybersecurity Information Sharing Act, which establishes cyber threat analysis sharing between industry and the federal government; and the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, which are used by many in the defense industry.

SBIR and STTR Reauthorization

As referenced above, the SBIR and STTR program authorizations expired on Sept. 30, 2025. The SBIR and STTR programs, originally developed in 1982 and 1992, respectively, were most recently successfully reauthorized under the SBIR and STTR Extension Act of 2022. The U.S. Small Business Administration (SBA) reports that as it stands today, SBIR grants $4 billion in funds annually, while STTR is estimated to grant more than $600 million. In FY 2024, the DOD was responsible for more than half of award dollars and contracts.

In an effort to avoid program shutdown, the House on Sept. 15, 2025, passed H.R.5100 – To Extend the SBIR and STTR programs by a voice vote. The legislation has been received in the Senate and referred to the Committee on Small Business and Entrepreneurship. Though unlikely to receive stand-alone floor time in the Senate, it is an attractive candidate to be picked up as a rider upon legislation already prioritized on the floor, given the program's proven effectiveness.

While Democrats and Republicans have offered SBIR and STTR programmatic restructuring priorities, it seems unlikely that anything past an extension of the existing programs may be passed in the immediate future. Most recently, Sen. Joni Ernst (R-Iowa), chair of the Business and Entrepreneurship Committee, offered the Investing in National Next-Generation Opportunities for Venture Acceleration and Technological Excellence (INNOVATE) Act, which would reauthorize and reform the SBIR and STTR programs, including eliminating "SBIR mills."

En Bloc Nominations

The Senate has used a procedural maneuver known as the "nuclear option" to change its standing rules relating to voting on political appointees. By changing the Senate rules, executive branch nominees are now eligible to be confirmed in an "en bloc" package.

Among the first batch of appointees confirmed in S.Res.377, many were nominated for DOD and national security positions. These include:

• Justin Overbaugh, Deputy Under Secretary of Defense for Intelligence and Security
• Michael Cadenazzi, Assistant Secretary of Defense for Industrial Base Policy
• Sean O'Keefe, Deputy Under Secretary of Defense for Personnel and Readiness
• Katherine Sutton, Assistant Secretary of Defense for Cyber Policy
• Michael Dodd, Assistant Secretary of Defense for Critical Technologies
• Richard Anderson, Assistant Secretary of the Air Force for Manpower and Reserve Affairs
• William Gillis, Assistant Secretary of the Army for Installations, Energy and Environment
• Jules Hurst III, Assistant Secretary of the Army for Manpower and Reserve Affairs
• Brent Ingraham, Assistant Secretary of the Army for Acquisition, Logistics and Technology
• Michael Obadal, Under Secretary of the Army

Other recent defense and national security offices confirmed by the Senate include:

• Sean Cairncross, National Cyber Director
• Adam Telle, Assistant Secretary of the Army
• Earl Matthews, General Counsel of the Department of Defense

SASC Nomination Hearings

On Sept. 18, 2025, the SASC held a full committee hearing to consider several DOD nominations:

• James Mazol to be Deputy Under Secretary of Defense for Research and Engineering
• Derrick Anderson to be Assistant Secretary of Defense for Special Operations and Low Intensity Conflict
• Kirsten Davies to be Chief Information Officer, DOD
• Platte Moring III to be Inspector General, DOD

Several key items emerged throughout the hearing such as accountability and independence of the inspector general, ongoing illicit drug organization kinetic engagements in the Caribbean and technological competition against U.S. adversaries. Speaking on military technology specifically, Mr. Mazol emphasized in his opening statement, "make no mistake, the United States is running a race against China for 21st century technological supremacy." Addressing artificial intelligence (AI), Sen. Angus King (I-Maine) reflected that "if we lose the AI race we are sunk ... the simple fact is the first country to implement the new technology is the one that wins the war."

Additional DOD nominees who have appeared before the SASC since the previous Holland & Knight Defense Situation Report include:

• Gen. Christopher Mahoney, Vice Chairman of the Joint Chiefs of Staff
• Michael Powers, Deputy Under Secretary of Defense (Comptroller)
• Dr. Amy Henninger, Director of Operational Test and Evaluation, DOD
• David Denton Jr., General Counsel of the Department of the Navy
• Benjamin Kohlmann, Assistant Secretary of the Navy for Manpower and Reserve Affairs

EXECUTIVE AND DEPARTMENTAL UPDATES

Space Command to Huntsville

The Trump Administration announced on Sept. 2, 2025, that the U.S. Space Command would move to Redstone Arsenal in Huntsville, Alabama. As one of 11 unified combatant commands within the DOD, Space Command is responsible for U.S. military operations in space. The move means approximately 1,400 Space Command jobs will move to Alabama over the next five years.

The decision to move Space Command to Huntsville is one in a series of changes for the region, including a recent announcement that the FBI would be moving several hundred positions to Redstone Arsenal, along with possibly relocating an FBI training academy. In addition, President Donald Trump's plans for a "Golden Dome for America" layered missile defense system means that Redstone Arsenal, where development of much of the associated technology is underway, will play a large role in this monumental project. Finally, the U.S. Army's historic $9.8 billion contract award, announced on Sept. 3, 2025, to develop PAC-3 Patriot missiles marks the largest missile manufacturing contract ever associated with Redstone Arsenal, reinforcing Huntsville's critical role in national defense. This investment is expected to drive substantial economic growth, expand advanced manufacturing and strengthen the region's leadership in defense innovation.

For additional information on the move, see Holland & Knight's alert, "Strategic Considerations for Expanding Defense Business to Redstone Arsenal in Huntsville, Alabama," Sept. 22, 2025.

DOD Joint Interagency Task Force for C-sUAS

On Aug. 28, 2025, DOD Secretary Hegseth directed the U.S. Army secretary to formally establish the Joint Interagency Task Force 401 (JIATF 401) to address the growing threat of hostile drones and enhance its small unmanned systems to protect personnel, equipment and facilities at home and abroad. In an effort to focus on speed over process, Secretary Hegseth ordered the disestablishment of the Joint Counter-UAS Office and the establishment of JIATF 401 with expanded authorities to execute capability development and delivery timelines that outpace the threat.

Specifically, the DOD deputy secretary, through coordination with the Under Secretary for Defense for Research and Engineering (USD(R&E)) as the Department Chief Technical Officer (CTO) according to statue, will consolidate all DOD-wide counter small unmanned aerial systems (C-sUAS) research, development, test and evaluation (RDT&E) efforts and resources under JIATF 401, except for Military Service-specific and U.S. Special Operations Command (USSOCOM) C-sUAS program of record development activities.

With numerous reporting requirements back up to the DOD secretary within 30 days of publication, a priority has been set on speed of delivery within this new organization.

DOD Implements Cybersecurity Maturity Model Certification (CMMC) Program

On Sept. 9, 2025, the DOD issued its final rule instituting the CMMC program, effective Nov. 10, 2025. The final rule makes CMMC compliance a mandatory, enforceable element of DOD contracts. Each solicitation and contract will specify the required CMMC level for contractor information systems that process, store or transmit sensitive information. Notably, the rule will be phased in over three years, beginning with select contracts determined by the program office, whereafter CMMC will be required in all applicable DOD contracts involving Federal Contract Information (FCI) or Controlled Unclassified Information (CUI), except those solely Commercial off the Shelf (COTS) items.

For a full analysis of the CMMC and its potential implications, see Holland & Knight's alert, "CMMC Goes Live: New Cybersecurity Requirements for Defense Contractors," Sept. 10, 2025.

Coast Guard Establishes Robotics and Autonomous Systems Office

On Aug. 19, 2025, the U.S. Coast Guard announced the creation of the Robotics and Autonomous Systems (RAS) office, the first in a set of program offices in alignment with Force Design 2028 – a force reorganization plan outlined by DHS Secretary Kristi Noem.

According to the Coast Guard, "the core mission of the RAS PEO is to accelerate the development, acquisition, fielding and sustainment of RAS capabilities across the Coast Guard to enhance mission effectiveness and operational readiness. Key goals include achieving RAS Full Operating Capability (FOC), ensuring seamless integration with ongoing RAS initiatives, developing a robust and adaptable acquisition process tailored to technological advancement, fostering innovation through collaboration with industry, academia, and other government agencies and ensuring the long-term sustainability of deployed RAS capabilities through comprehensive sustainment planning."

Executive Order Issued Creating Secondary DOD Name

On Sept. 5, 2025, the White House issued an executive order (EO) titled "Restoring the United States Department of War." The EO authorizes the use of "additional secondary title[s]" of Department of War, Secretary of War, Office of the Secretary of War, and in subordinate offices within the DOD, such as "Deputy Secretary of War or Under Secretary of War."

While federal agencies may also begin using "Department of War" in communications as directed by the EO, the name "Department of Defense" is established by statute (the National Security Act of 1947 and subsequent amendments). Changing the official name to "Department of War" would require an act of Congress. Though some amendments to the FY 2026 NDAA were introduced, those amendments were not included in the House-passed NDAA or SASC-reported NDAA, which keep the "Department of Defense" name in place.

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