Can DIUx Spark Acquisition Reform at the Pentagon?

How can the Defense Department ensure that it is getting the innovations its engineers are developing to soldiers in the field without too much lag time? It can look to Silicon Valley.

That was the verdict of Ellen Lord, undersecretary of defense for acquisitions, technology and logistics, who said that the DOD’s Defense Innovation Unit Experimental (DIUx) could serve as the exemplar for reforming the department’s procurement policies. DIUx serves as the Pentagon’s conduit to Silicon Valley and helps the DOD get easier access to commercial products that help solve national defense problems.

Speaking at a Senate Armed Services Committee hearing on Dec. 7, Lord said that the DOD wants to take the DIUx model and spread it across the Pentagon as the department looks to cut down on procurement times, save money and boost innovation.

“Our goal is to look at where we've had successes with DIUx, with SCO [the Strategic Capabilities Office] ... because we think that they’ve demonstrated the right behaviors,” Lord said, according to FCW. “We’re looking at what the Rapid Capabilities Offices have done.”

Lord’s comments come at a crucial time for the DOD, which is reorganizing its research and development and acquisition divisions. As FedScoop reports: “In February, the Office of Acquisition, Technology and Logistics will divide to become the Offices of the Undersecretary of Defense for Research and Engineering, and the Undersecretary of Defense for Acquisition and Sustainment, as required by the 2017 National Defense Authorization Act.”

“And frankly,” Lord added, “as we organize AT&L into A&S and R&E, what we're doing is basically trying to scale the behaviors, the processes or the lack thereof that we’ve seen in these different groups.”

Lord will take over as undersecretary for acquisition and sustainment after the split.

The Benefits of the DIUx Model

Former Defense Secretary Ash Carter launched DIUx in August 2015, but the unit stagnated and in May 2016 Carter launched DIUx 2.0, with new leadership under Raj Shah, a former U.S. Air Force F-16 pilot who served as special assistant in the Office of the Secretary of Defense. Shah also worked for several Silicon Valley tech firms, including Palo Alto Networks. The unit opened its first office in Google’s hometown of Mountain View, Calif., and opened outposts in Boston and Austin, Texas, in July and September 2016, respectively.

As of Sept. 30, 2017, according to the unit’s fiscal 2017 fourth-quarter report, DIUx had awarded roughly $184 million for 59 pilot contracts and two follow-on production contracts in the areas of autonomy, artificial intelligence, human systems, IT and space.

DIUx notes that it “awarded each pilot contract through a process that usually takes 90 calendar days from first contact with a company in regard to a specific DOD problem.” The majority of funding for these pilot projects comes from DIUx’s DOD partners (i.e., the military departments, combatant commands, the Office of the Secretary of Defense and DOD agencies). And for each dollar DIUx spends on a pilot project, the DOD partner typically spends about $4. Production contracts are funded entirely by DOD partners.

Lord said that she and Shah have discussed “how we can take the success they’ve had at DIUx” and build on it, particularly in using other transactions authorities — which allow for the funding to go to rapid prototype research and development projects — to bring small, innovative contractors into the Pentagon’s procurement processes.

Citing Lord, FCW reported that DIUx “has secured 60 contracts with startups using other transaction authorities to circumvent the traditional acquisition process, but that there were funding restraints regarding the Small Business Innovation Research (SBIR) program.” Lord did not provide any specifics on the restraints.

The goal is to get innovative technologies to soldiers in the field faster. “You basically have a flowchart and you use the simplest methodology possible to get things on contract so we’re not held up in this ‘do loop’ where you want to do something and you can’t get it on contract,” Lord said, FedScoop reports.