Continuous Transformation

BCE Consulting's AUSA 2026 Series

This is the first of three pieces designed to help you get the most from AUSA 2026. The series examines how Continuous Transformation is changing budgets, delivering capability to soldiers, and creating new questions, risks and opportunities.

Part I: Transforming the Army Budget

Continuous Transformation in the budget places capability in the field now and funds it by harvesting legacy procurement and cutting the S&T that would close future gaps. For example, aircraft accounts fall $1.7 billion while network acquisition – the heart of the Army’s flagship Next Generation C2 effort – grows $1.2 billion. Within research, development, test and evaluation (RDT&E), discretionary S&T drops more than $1 billion while engineering and development (E&D) grows more than $3 billion. Those tradeoffs carry risk for the Army and for industry. Firms that read the line items can manage their own exposure and identify where the Army’s risk converts into business.

Aviation: Sustain the Fleet, Bet on MV-75

Aircraft and UAS accounts demonstrate these trends most clearly. In rotary-wing aviation, the Army is sustaining current systems while moving development money to the MV-75. Rotary-wing procurement falls from $2.1 billion in FY26 to $379 million in FY27. The Army partly offsets that cut with a $293 million increase in modifications for the existing fleet and a $600 million increase in MV-75 E&D, to $2.1 billion. It pays for the shift by accepting risk in S&T, which falls 79 percent.

Table 1. Rotary-wing aviation shifts from procurement to fleet modification and MV-75 development

Figures in $ millions. Source: FY27 Army budget justification books (Aircraft Procurement, Army; RDT&E, Army).

The budget leaves the future of attack aviation open. The Army is not buying AH-64s and has no significant RDT&E investment in a successor aircraft. Either the mission is moving to UAS, or an announcement on a reconnaissance and attack strategy is coming. AUSA is the likely venue for the answer.

The plan accepts two risks. First, the Army is betting that MV-75 delivers on schedule. Its record on new combat platforms argues for caution: Comanche, Future Combat Systems, and FARA were all canceled before fielding. If MV-75 slips, the Army will need existing systems to fill the gap, as it did when it turned to an off-the-shelf wheeled howitzer after Ukraine showed the M777 could not survive on a modern battlefield. That is an opening for firms with fielded products.

Second, the near-elimination of rotary-wing S&T means the Army is not funding the technology for the generation after MV-75. Either the Army believes rotary-wing aviation is nearing the end of its run, or it expects industry to fund that S&T on its own.

UAS: A Strategic Shift to Attritable Systems

In UAS, the Army made a strategic shift toward attritable drones, with roughly $800 million in drone purchases through the Army marketplace between March and September 2026. Appropriated UAS procurement falls from $891 million to $483 million. However, marketplace orders sit outside the appropriation. If FY27 marketplace orders simply match the FY26, total UAS buying reaches about $1.3 billion, roughly $400 million above FY26 appropriated procurement. The other major change is splitting UAS between aviation and missile accounts, separating lethal launched effects from other UAS. In RDT&E, UAS is one of the few portfolios where S&T grew, and E&D more than doubled, reflecting the priority on fielding.

Table 2. Unmanned aerial systems spending shifts toward the marketplace and development

Figures in $ millions. Source: FY27 Army budget justification books (Aircraft Procurement, Army; Missile Procurement, Army; RDT&E, Army). Marketplace figure from Army reporting on Army marketplace orders.

This change in Army buying habits reflects two shifts in the market. First, the Army has segmented UAS spending into three lanes: programmatic UAS in the aviation account, lethal launched effects in the missile account, and small and expendable drones through the marketplace. Second, the largest share of that spending now sits in the marketplace, outside traditional acquisition programs. That move puts money behind the Army’s call for attritable systems, since Group 1 and 2 UAS and launched effects are expendable by design, and it makes the operator, not the program office, the customer.

The marketplace is the most interesting business case and the least certain. Some of the $800 million surge likely reflects units buying an initial basic load now that procurement is easy. Three questions will determine whether that demand is durable: how long the initial spike lasts, whether the Army places restrictions on units buying from the marketplace, and what the steady-state demand signal becomes. Two developments point toward growth: several federal agencies now have marketplace access, and 23 countries have signed memorandums of intent to buy through it.

What It Means for Industry

Across portfolios, the FY27 budget sends one consistent signal: the Army is trading long-term investment and legacy procurement for capability it can field now. Some portfolios reinforce that signal. Others, such as attack aviation, leave it ambiguous.

The larger question is the Army’s long-term vision for S&T. Does the burden shift to industry, or do falling S&T dollars signal where the Army sees legacy equipment lines approaching obsolescence?

Reading these signals correctly requires line-item analysis by experienced warfighters and industry analysts. BCE’s team will be at AUSA to talk through where those signals point for your business.

Next in the series: Scoring Army Acquisition Reform at One Year.