Major capability activity areas and pathfinder programs

(a) Transition plan required (1) Submission of plan Not later than one year after the date of the enactment of this Act, the Secretary of Defense, in coordination with each Secretary of a military department, shall submit to the congressional defense committees a comprehensive plan for organizing reorganizing the programs assigned to the portfolio of a program executive officer structure of the Department of Defense in a manner relevant defense budget materials to be primarily organized around major capability activity areas (MCAAs). (2) Elements of the plan The plan required under paragraph (1) shall be developed to more effectively facilitate the development, fielding, operation, sustainment, and modernization of capabilities or activities of the Department of Defense in accordance with the objectives established pursuant to section 3102 of title 10, United States Code (as Code, as added by section 101 1801 of this Act). Act. Such plan shall include the following: (A) A description of each proposed MCAA, including how the specific capability of the Department of Defense that is the subject of each MCAA aligns with and supports joint military capabilities. (B) A proposed schedule, including benchmarks, for phased implementation of the plan to organize the programs of each military department and Defense Agency in a manner primarily organized around MCAAs. (C) A description of any modifications to reporting, budget justification, or data systems required for defense budget materials to be primarily organized around MCAAs, including modifications necessary to maintain transparency and enable effective oversight by the congressional defense committees. (D) Recommendations for statutory or regulatory changes needed to facilitate the reorganization of program executive offices defense budget materials to be primarily organized around MCAAs. (D) (E) A strategy to for maintaining clarity and detail for defense budget materials primarily organized around MCAAs to— (i) preserve accountability for the delivery of a capability of the Department of Defense that is the subject of the proposed MCAA MCAA; and to (ii) enable effective oversight of the proposed MCAA by the congressional defense committees. (E) (F) A description of the process for designating a Pathfinder under subsection (b). (3) Organization by MCAAs (A) In general In organizing programs in a manner primarily organized around designating the proposed MCAAs under this subsection, required by subsection (a)(2)(A), the Secretary shall— (i) organize each proposed MCAA in a capability-oriented structure that reflects the unique and specific aspects of the subject capability of the MCAA; (ii) assign relevant development, procurement, operations, and sustainment activities of the Department to the proposed MCAA as appropriate; and (iii) ensure each proposed MCAA is organized in a manner that— (I) will improve the ability to measure and manage the overall performance in the delivery of the subject capability of the proposed MCAA; and (II) connects amounts authorized funding for activities assigned to the proposed MCAA to the delivery of subject capability. (B) Flexibility The Secretary of Defense shall ensure each military department and Defense Agency has flexibility, according to their specific mission requirements, in the organization of proposed MCAAs. (b) Designation of pathfinder MCAAs mcaas (1) Designation Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall— (A) designate at least two program executive offices of the Department of Defense to be known as Pathfinders; (B) identify the program executive officer (as described in section 1732 of title 10, United States Code, as added by section 1802 of this Act) with the responsibility of administering each such Pathfinder; (C) ensure each such program executive officer organizes the programs assigned to such offices into a MCAA in accordance with the requirements of subsection (a)(3); and (D) submit to the congressional defense committees a notification of each designation made under subparagraph (A), including the total amount authorized to carry out be appropriated for each Pathfinder for fiscal year 2026 and a description of the MCAA associated with each Pathfinder. (2) Additional or alternative materials To inform the development of the plan required by subsection (a), each program executive officer for a Pathfinder shall prepare alternative or additional defense budget materials or develop alternative oversight mechanisms for the capability of the Department of Defense that is the subject of the Pathfinder. (3) Modified transfer authority for Pathfinders pathfinders (A) Authority The Secretary of Defense, acting through a Secretary of a military department or the head of a Defense Agency, may transfer amounts authorized for programs, projects, or activities that are included in a Pathfinder under the jurisdiction of such Secretary or head among such programs, projects, or activities. (B) Limitations A transfer made under this paragraph— (i) shall directly support delivery of the capability of the Department of Defense that is the subject of the Pathfinder; (ii) may not be used to initiate a new start program (as described in section 3601 of title 10, United States Code); (iii) may not be used to terminate a program or activity of the Department that was in operation on or before the date of the designation of the Pathfinder; and (iv) may not exceed 40 percent of the total amount authorized to carry out for a Pathfinder specified under paragraph (1)(D). (3) (4) Additional pathfinders The Secretary of Defense may designate additional MCAAs as Pathfinders under the authority of this subsection if the Secretary notifies the congressional defense committees not later than 15 days prior to each such designation. (c) Report to congress Congress (1) In general Not later than 540 days after the date of the enactment of this Act, and annually thereafter until December 31, 2029, the Secretary of Defense shall submit to the congressional defense committees a report on the progress of the Secretary of Defense in— (A) implementing the plan to reorganize the structure of the defense budget materials to be primarily organized around major capability activity areas; and (B) assessing the effectiveness of the use of a capability-oriented structure in subsection (a)(3) and Pathfinders in subsection (b) to— (A) (i) improve the ability to measure and manage the overall performance in the delivery of the subject capability of the proposed MCAA or Pathfinder; (B) (ii) inform and improve program management and budget planning for future activities assigned to the proposed MCAA or Pathfinder for the delivery of subject capability; and (C) (iii) achieve the objectives of the defense acquisition system established pursuant to section 3102 of title 10, United States Code (as added by section 101 1801 of this Act). (2) Contents The report required under paragraph (1) shall include the following: (A) An evaluation of how the use of MCAAs in preparing defense budget materials has affected the use and allocation of resources and the alignment of such materials with the objectives of the defense acquisition system. (B) The extent to which the use of MCAAs and use of the transfer authority under subsection (b)(2) (b)(3) for Pathfinders affect the speed of addressing emerging threats and adopting new technologies. (B) (C) An analysis of any costs or benefits of using MCAAs. (C) (D) Recommendations, including statutory or regulatory modifications, for— (i) expanding the use of Pathfinders; and (ii) continuing the transition to using MCAAs. MCAAs to prepare defense budget materials. (d) Guidance and directives The Secretary of Defense shall issue such rules or guidance as necessary to carry out this section, and shall ensure such rules and guidance align with recommendations for improved agility and transparency provided by the Commission on Planning, Programming, Budgeting and Execution Reform (established under section 1004 of the National Defense Authorization Act for Fiscal Year 2022 (Public Law 117–81)). (e) Definitions In this section: (1) The term defense budget materials, with respect to a fiscal year, means the materials submitted to Congress by the Secretary of Defense in support of the budget for that fiscal year. (2) The term major capability activity area or MCAA means a compilation of activities that relate to the delivery of a capability of the Department of Defense, as determined by the Secretary of Defense. (2) Defense, for purposes of display in the defense budget materials. (3) The term joint military capabilities has the meaning given in section 181 of title 10, United States Code, as amended by section 201 of this Act. (3) The term program executive officer has the meaning given in section 1732 of title 10, United States Code, as added by section 102 of this Act.Code.