The new security challenges, in particular the challenges stemming from the wave of terrorist attacks and massive use of biological threats in September 2001, require novel ways of organizing and modernizing military forces. In the beginning of the Twenty First century militaries have to perform a broader spectrum of missions and tasks in cooperation with other agencies and other countries. For a country in transition, the search for effective modernization is complicated by resource constraints, lack of experience in market environment and relevant organizational culture. This article describes the application of common principles in modernizing Bulgarian military. It describes defense reform requirements with emphasis on the necessity to introduce rigorous defense resource management. The major challenge is to implement organizational and procedural changes, essential for the creation of a transparent, flexible acquisition process, compatible with acquisition systems and practices of NATO and EU member countries. The article provides details on the main elements of the new acquisition planning, listing current priorities and presenting an ongoing force modernization study. It covers also the role of research and development in modernization, as well as potential national and international cooperation activities.