WASHINGTON — The Pentagon is in a race to get $152 billion in 2025 reconciliation spending under contract by the end of September or lose a chunk of the cash.
The Pentagon has already issued guidance to its program offices on how to spend the money before the deadline hits at the end of the fiscal year, a senior department official told Breaking Defense this week.
“Our strategy focuses on maximizing the utility of every dollar in a timely, yet responsible, manner,” the official said.
Last year, lawmakers approved the One Big Beautiful Bill, a sprawling mega-bill that included roughly $152 billion for an array of defense initiatives, including Golden Dome, two Arleigh Burke-class destroyers, munitions, nuclear modernization and more. Although that legislation dictated broad contours for how money should be spent, not all of the defense spending in the bill was tied to specific weapons programs — giving the Pentagon latitude for how it executed the funding.
The Pentagon can spend those funds over several years, but there is a caveat: if it is not contracted out by the start of fiscal 2027 on Oct. 1, the remaining balance will be hit with an 8.3 percent cut.
The looming deadline means the pressure is on to spend, especially given that only $26 billion had been placed on contract by late April, Defense Secretary Pete Hegseth told lawmakers at the time, leaving $126 billion to spend over the five months.
“We’ve got the floodgates about to open and apply to those priorities,” Hegseth said at the time.
The program offices are under pressure, juggling the urgency of getting reconciliation funding under contract by the deadline, as well as making sure those contracts include fair pricing and adequate oversight for the Pentagon, one defense official told Breaking Defense this week, speaking on condition of anonymity because they were not authorized to speak publicly on this topic.
Elaine McCusker, a senior fellow at the American Enterprise Institute and ly the Pentagon’s acting comptroller, said the department needs every dollar it can get to “fix long-term problems.”
“Even a loss of 8.3 percent during roll-over could have consequences,” she wrote in an email today.
“The slow release of the funds, combined with other factors such as the acquisition strategies being used, workforce reductions and synchronization with the late appropriation of the base budget, have definitely challenged the system,” McCusker later added. “The obligation rates have been going up, particularly the last two months, and I think it is still possible they will get close to spending the money this fiscal year and on the right things.”
