The Pentagon’s innovation shop wants more influence in 2023

The U.S. military can’t deal effectively with China’s moves in the Pacific unless it improves its ties with tech firms, the head of the Pentagon’s innovation arm said.

“Any type of adversarial activity in the INDOPACOM [area of responsibility] is probably going to occur on a timeline where we won't be able to generate solutions organically and the department,” said Mike Madsen, the acting director of the Defense Innovation Unit. “We need to have that in-place relationship with the commercial ecosystem to get those solutions as quickly as possible.”

After Russia invaded Ukraine, for example, DIU contractor Capella Space was able to use its satellite imagery to observe Russian forces. “We were able to use that commercial, widely available technology, put it out there to the world and say, ‘hey, look…here is the photographic evidence that's available to anyone to see that’,” Madsen said. 

Deepening and expanding relationships across the defense and military is a top priority for the agency this year, especially as the pace of war—and the preparation for it—virtually demands the Pentagon use existing commercial technology wherever possible.

In its drive to forge and deepen Pentagon-tech industry ties, the agency has opened an office in Chicago and is boosting its regional presence. One event targeted North Carolina, yielding a seven-fold increase in submissions of proposals from companies in the state and about $4 million in contracts, Madsen said.

“So while we don't have an office in North Carolina by doing these regional outreaches from our offices, we're still able to get the benefits of getting the best technology across America, not just focused on the traditional tech centers, but rather finding the best technology across the country,” the acting director said.

Just under half of DIU prototyping contracts yield products that go on to be used by the military services or other Defense agencies, according to its annual report, released Wednesday. 

Such products meet three criteria: “the technology has to work, there has to be a contract mechanism in place by our DOD partner and there has to be funding available for that technology,” Madsen said. 

In fiscal year 2022, DIU turned 17 prototype contracts into products ordered by other Defense agencies to the tune of $1.3 billion. That doubled its 2021 effort and brought DIU’s total to 52 follow-on contracts to 48 companies worth a total of $4.9 billion. Sixteen of those technologies have become programs of record. The agency awarded 81 new prototype contracts worth about $205 million in fiscal 2022. 

This year, DIU wants to bump that transition rate to 60 percent. To do so, the office is trying to spread the word among DOD program managers about its commercial tech options inAI and machine learning, autonomy, cyber and telecommunications, human systems, space, and energy.

“We're working with the PEOs, the program executive offices, across the department so that we can be part of their acquisition strategy development,” Madsen said. “So that we can advocate in great detail, what is available in the commercial sector, what is the current state of the art of all those technology areas that we can pull in. And develop on ramps much, much earlier in the process.”

DIU is also working with the Pentagon’s office of Cost Assessment and Program Evaluation, or CAPE, to look at what’s needed and what’s available before budgets are constructed. That collaboration could illuminate DOD’s current commercial tech investment, funding needs, and where scaling tech could help. That more synchronized effort could help the Defense Department modernize faster. 

“Before we even get into budget development, just looking at the strategic portfolios and understanding what the current state of that commercial technology is, how that can play into that funding part of it as well,” Madsen said. “So we're getting involved much much earlier in that process to gain the benefits for scaling then on the backside of it.”