“We’re trying to buy modern, flexible software from rigid funding authorities. Predictably, that doesn’t work,” said Michael Obadal.
Anastasia Obis
The Army is updating its software guidance and eliminating its existing software funding policy, which has routinely stymied software projects across the service.
Michael Obadal, the agency’s undersecretary, said the new software guidance would be released “in the coming weeks.” The agency plans to revise the document annually to keep pace with the rapidly changing environment.
Meanwhile, canceling existing policies governing how the service pays for software will allow the Army to “apply the right kind of money to the appropriate use case.”
“As many of you know, we have been trapped in the color of money for years. We are trying to buy modern, flexible software with rigid funding authorities. Predictably, it is not working,” Obadal said Thursday during the AFCEA NOVA Army IT Day event.
This shift will give the Army more flexibility in how it uses its operations and maintenance, procurement and software research, development, testing and evaluation funds.
While the flexible use of different colors of money will provide some relief to the service, it is still not “the most effective method” for software financing. Obadal said the Army ultimately plans to pursue Budget Activity 8 (BA-8), which would allow program managers to move away from the hardware-centric budgeting model and instead draw funding from an appropriations category specific to software.
“We are going to pursue Budget Activity 08 for our software, which would reallocate the financing of various appropriations to new software and digital technology in its own budget activity,” Obadal said.
The Department of Defense has long struggled with software procurement for a number of reasons, but the rules governing how the Department pays for software may have been one of the biggest obstacles. The model that Congress and the Pentagon have used to plan and execute the Pentagon’s expenditures were originally intended for long-term hardware procurement. But this structure does not apply well to the agile software development model.
The department has experimented with the use of a separate credit category for software. The idea started gaining traction in 2019, when the Defense Innovation Board found that software programs “tend to damn the colors of money.” “We must create pathways for ‘bleaching’ funds to facilitate this process for long-term programs,” the board wrote in its report. report.
But lawmakers have been hesitant to allow broader adoption of this pathway, beyond a small number of pilot programs, until the Defense Department is able to produce data comparing this approach to traditional appropriation practices.
“Agile finance… we need to have that in the right focus area to apply it to modern software, and it’s a little harder than we think because Congress is involved… But these are the steps we’re taking,” Obadal said.
Obadal also urged the industry to “build systems at scale, not demonstrate them.”
“What we’re asking from the industry as we address these issues is confidence in your solution at scale, not just a demo… That means taking extra steps, thinking about what’s happening for you a year from now, two years from now. Open architectures, interoperable designs, secured by design software, not bolted-on cybersecurity. That’s another incredibly important one: your design and the willingness to adapt to Army timelines and to our operational realities,” he said.
Copyright © 2026 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.
