[Federal Register Volume 91, Number 8 (Tuesday, January 13, 2026)]
[Presidential Documents]
[Pages 1377-1379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-00554]
[[Page 1375]]
Vol. 91
Tuesday,
No. 8
January 13, 2026
Part II
The President
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Executive Order 14372--Prioritizing the Warfighter in Defense
Contracting
Presidential Documents
Federal Register / Vol. 91 , No. 8 / Tuesday, January 13, 2026 /
Presidential Documents
___________________________________________________________________
Title 3--
The President
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Executive Order 14372 of January 7, 2026
Prioritizing the Warfighter in Defense
Contracting
By the authority vested in me as President by the
Constitution and the laws of the United States of
America, it is hereby ordered:
Section 1. Purpose. As Chief Executive and Commander in
Chief, I am committed to ensuring that the United
States military possesses the most lethal warfighting
capabilities in the world. Our Nation can only be at
peace if we maintain strength. The performance of
America's defense industrial base is critical to this
capacity. After years of misplaced priorities,
traditional defense contractors have been incentivized
to prioritize investor returns over the Nation's
warfighters.
While the United States produces the best military
equipment in the world, we do not make enough of it
quickly enough to meet the needs of our military and
our partners. As a result, in these dangerous times, it
is imperative that our defense contractors be held to
the highest standards intended to ensure the
advancement of core national interests, including with
respect to the timeliness and quality of the defense
items that they deliver.
Although some contractors have made critical
investments in increased production capacity and been
responsive to our Nation's vital interests, far more
have not. Many large contractors--while underperforming
on existing contracts--pursue newer, more lucrative
contracts, stock buy-backs, and excessive dividends to
shareholders at the cost of production capacity,
innovation, and on-time delivery.
Effective immediately, they are not permitted in any
way, shape, or form to pay dividends or buy back stock,
until such time as they are able to produce a superior
product, on time and on budget.
Every firm across our economy has a right to profit
from prudent investment and hard work, but the American
defense industrial base also has the responsibility to
ensure that America's warfighters have the best
possible equipment and weapons. These two objectives
are not mutually exclusive.
Sec. 2. Policy. It is the policy of the United States
Government to accelerate defense procurement and
revitalize the defense industrial base to maintain
peace through strength. To achieve this, the United
States will no longer allow defense contractors to
single-mindedly pursue investor profits at the expense
of warfighter capability and readiness. Major defense
contractors will no longer conduct stock buy-backs or
issue dividends at the expense of accelerated
procurement and increased production capacity.
Sec. 3. Review. (a) Within 30 days of the date of this
order, and on a continuing basis thereafter, the
Secretary of War (Secretary) shall identify any defense
contractors for critical weapons, supplies, and
equipment that are underperforming on their contracts,
not investing their own capital into necessary
production capacity, not sufficiently prioritizing
United States Government contracts, or whose production
speed is insufficient as determined by the Secretary,
and that have, during the period of underperformance or
insufficient prioritization, investment, or production
speed, engaged in any stock buy-back or corporate
distribution. If a contractor is identified as such,
the Secretary shall provide that contractor with notice
describing the nature of the underperformance or
insufficient prioritization, investment, or production
speed. The Secretary shall then engage as needed with
the relevant contractor to resolve the issues
identified in such notice, including,
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where permissible under applicable law, providing the
contractor with the opportunity to submit a remediation
plan approved by its board of directors for review by
the Secretary, during the 15-day period following
notification.
(b) For those contractors that have already been
identified and studied by the Secretary as of the date
of this order, in the manner described in subsection
(a) of this section, an additional review as described
in subsection (a) of this section may not be required,
as determined by the Secretary.
Sec. 4. Enforcement. (a) In any case where the
contractor's remediation plan is insufficient as
determined by the Secretary, or the contractor and the
Secretary are unable to resolve the dispute as to
underperformance within the relevant 15-day negotiation
period, the Secretary may initiate immediate actions to
secure remedies for the Secretary that will expedite
production, prioritize the United States military, and
return the contractor to sufficient performance,
investment, prioritization, and production, to the
maximum extent permitted by law, including through use
of any voluntary agreement of the contractor, available
enforcement actions under the Defense Production Act
(50 U.S.C. 4501 et seq.), and any available contract
enforcement mechanisms within the Federal Acquisition
Regulations and Defense Federal Acquisition Regulations
Supplement. When considering whether to initiate any
available enforcement action, the Secretary, to the
extent permitted by law, shall take into account the
financial condition of the defense contractor, the
economic viability of relevant programs, and the
potential mutual benefits offered by robust and
sustained growth opportunities from the United States
Government coupled with capital investments by the
contractor.
(b) Within 60 days of the date of this order, the
Secretary shall take steps to ensure that any future
contract with any new or existing defense contractor,
including any renewal, contains a provision prohibiting
both any stock buy-back and corporate distributions by
the contractor during a period of underperformance,
non-compliance with the contractor's contract,
insufficient prioritization of the contract,
insufficient investment, or insufficient production
speed as determined by the Secretary. Additionally, the
Secretary shall ensure such future contracts stipulate
that executive incentive compensation for contractors
will not be tied to short-term financial metrics, such
as free cash flow or earnings per share driven by stock
buy-backs, and instead will be linked to on-time
delivery, increased production, and all necessary
facilitation of investments and operating improvements
required to rapidly expand our United States stockpiles
and capabilities. Further, the Secretary shall ensure
such future contracts allow the Secretary, upon a
finding by the Secretary that a contractor has engaged
in underperformance, non-compliance with the
contractor's contract, insufficient prioritization of
the contract, insufficient investment, or insufficient
production speed, to require that executive base
salaries of the contractor be capped at current levels,
with increases allowed for inflation, consistent with
applicable law, for a time period sufficient to allow
the Secretary to scrutinize the incentive portion of
executive compensation to ensure it is directly,
fairly, and tightly tied to the above metrics.
(c) When a contractor is identified by the
Secretary pursuant to section 3 of this order, the
Secretary shall, in consultation with the Secretary of
State and the Secretary of Commerce, consider whether
it is appropriate to cease ongoing advocacy efforts or
deny new advocacy cases for underperforming contractors
competing for an international Foreign Military or
Direct Commercial Sale.
(d) The Chairman of the Securities and Exchange
Commission shall consider whether to adopt amended
regulations governing stock buy-backs under Rule 10b-18
that would prohibit use of the relevant safe harbor for
defense contractors of the type identified by the
Secretary pursuant to section 3 of this order.
Sec. 5. General Provisions. (a) Nothing in this order
shall be construed to impair or otherwise affect:
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(i) the authority granted by law to an executive department or agency, or
the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget
relating to budgetary, administrative, or legislative proposals.
(b) This order shall be implemented consistent with
applicable law and subject to the availability of
appropriations.
(c) This order is not intended to, and does not,
create any right or benefit, substantive or procedural,
enforceable at law or in equity by any party against
the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any
other person.
(d) The costs for publication of this order shall
be borne by the Department of War.
(Presidential Sig.)
THE WHITE HOUSE,
January 7, 2026.
[FR Doc. 2026-00554
Filed 1-12-26; 11:15 am]
Billing code 6001-FR-P