Despite Pentagon outreach, small tech firms say military contracting poses big challenges

Silicon Valley executives are voicing frustration and concern about the length of time it takes for contracts to work their way through the government.

"We have a serious, serious problem with the contracting officers, with the purchasing," John De Santis, chairman and CEO of HyTrust, said during a panel discussion at the Atlantic Council on April 19. He called for a better approach to contracting and acquisition, adding that "80 percent of the effort is just trying to figure out how we are going to get this paid for, and that is driving us nuts."

So far, entrepreneurs are being cautious about the Defense Department’s Silicon Valley outpost, known as the Defense Innovation Unit Experimental (DIUx).

"There are a lot of inefficiencies, more than what you think," De Santis said. Getting DOD or other agencies interested is not necessarily the hurdle -- it's the timing issue that has executives frustrated.

Gary Gysin is president and CEO of Liquid Robotics, a commercial company that started in part because of the U.S. Navy. It designs and manufactures solar-powered autonomous ocean robots that can collect data and communication. He was one of the first 10 CEOs with whom Defense Secretary Ash Carter spoke after DIUx was launched.

"I don’t think it’s [a question of] training the existing contracting officers and fixing the current procurement system today because that’s going to take a long time [and] it is designed for big things," Gysin said.  He added that companies like his that want to help the government and military cannot always afford to wait the process out. "If we were not a commercial company [with private-sector customers] we would have been dead long ago."

He added that many Silicon Valley companies that work with the government do it out of patriotism because "it just takes a long time."

Gysin said it took him three months to get a meeting with a high-ranking DOD official, which shows how hard it is for new companies to break into the Pentagon network. He added that once a startup does get in, it must then address concerns about intellectual property and funding issues.

Mylea Charvat, CEO and founder of Savonix, said that although the meetings with DIUx are good, not much solid comes from them.

"We've had a lot of meetings where we talk, [but] no decisions get made," said Charvat, whose company makes a mobile cognitive assessment and brain health platform. She added that timing is important, and many Silicon Valley executives remain skeptical about whether any real change can come out of DIUx.

Timing is also something competitors and adversaries can turn to their advantage. Panelists said their companies can and will sell to foreign countries rather than wait for the U.S. government to come through because business must continue. And for Silicon Valley executives who are from military families or have children serving in the military, that can be a hard decision to make.

Congress has also expressed concerns about DIUx efforts.

On April 19, the House Armed Services Committee's Emerging Threats and Capabilities Subcommittee released its version of the defense spending bill, and it restricts funding for the Pentagon's Silicon Valley outreach. "The committee is concerned that outreach is proceeding without sufficient attention being paid to breaking down the barriers that have traditionally prevented nontraditional contractors from supporting defense needs, like lengthy contracting processes and the inability to transition technologies," the bill states.

Meanwhile, DOD officials are planning to open additional DIUx offices outside Silicon Valley to reach more people in the industry. During a visit to the area earlier this year, Carter said, "I really mean the 'X' in experimental. We need to keep trying, iterate, see what works. But part of it is products that we can use. Part of it is connections to technology that we would not otherwise have."