Does this rule still exist?
This requirement has its origins in the 1986 Packard Commission recommendations. You can find it as a regulatory requirement in paragraph E18.104.22.168 of the DoD Directive 5000.01.
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" E1.1.26. Streamlined Organizations. The Department of Defense shall use a streamlined management structure in the acquisition system, characterized by short, clearly defined lines of responsibility, authority, and accountability. In no case, shall there be more than two levels of review between a PM and the MDA."