From Unmanned Systems Magazine: Military looks to startup world to speed technological innovation

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Recognizing the need to revitalize its procurement process, the Pentagon established a fast-track organization two years ago that would accelerate delivery of critical new technologies and systems to its warfighters. 
 
Under the office of the Undersecretary of Defense for Research and Engineering, the new Defense Innovation Unit, known as DIU, would serve as a direct pipeline to connect military customers with non-traditional businesses. 
 
Its creators made a conscious initial choice not to locate DIU too close to the Pentagon’s flagpole, and the mainstream contracting and procurement machine in its shadow. Rather, the agency opened its first office at Mountain View, Calif., in Silicon Valley, expanding to Cambridge, Massachusetts, in July 2016 and then Austin, Texas, all before hanging a fourth shingle in Washington, D.C.  
 
These locations provide rich pools of brainpower and investment capital that might otherwise go unnoticed, DIU’s creators believe. While traditional military procurement could take months, DIU already boasts that one new contract agreement took a mere 31 days to finalize. Though this is the exception to the rule, DIU still is aiming to streamline the process so that deals are done within 60 days. 
 
“The DOD [Department of Defense] stood us up to leverage the significant amount of investment and capabilities happening not within the realm of traditional contractors, but rather on the open commercial market,” says Orin Hoffman, who serves as DIU’s expert in autonomy and robotics. 
 
Hoffman says the Boston area, where he is based, was chosen because it is home to a significant robotics and artificial intelligence “ecosystem.” He sees his job as leveraging the relationships among the small and big companies there and the military services and departments that could use both the hardware and software innovations they have to offer. 
 
“DIU is looking to lower the barrier of entry [for] companies that otherwise do not have DOD incentives because of all of the rules and regulations that slow down the award for any contract,” says David Rothzeid, an Air Force major who serves as the agency’s director of acquisition pathways. 
 
“It’s simple to state, but difficult to execute,” Hoffman says. “It’s important to note that with a lot of what is occurring in the commercial space, especially with start-up companies, building relationships is essential.” 
 
The agency takes a deliberate and competitive approach to its mission, Rothzeid says. The process entails having companies produce what are known as solution briefs, which address capability gaps among military services and agencies. 
 
“We try to match the best of technology vendors to address those capability gaps, in order for us to develop very specific contracts,” Rothzeid says.  
 
Companies that can be as small as two-person garage shops are constantly developing new capabilities but are wary of sharing them publicly, for fear of having their ideas appropriated and marketed by someone else. 
 
“It is fairly common for a company in the early stage to develop products in what they call ‘self mode,’ in order to get a head start in the marketplace,” Hoffman says. “But for us to be able to decide what technologies to invest in, we need to know what’s being developed at that edge of innovation.”
 
For this reason, Hoffman says, DIU prefers to work with these so-called “off companies.” The agency serves as a launch customer for them whenever warranted, providing funding for prototype developments. It can negotiate agreements between small companies and military users that protect smaller developers’ intellectual property. 
 
“A key element in our model is to convince these companies to work with the Defense Department. Respect for trade secrets is critical,” Hoffman says. 
 
Prospective vendors who visit the DIU web site, diux.mil, will find an easily navigable menu that outlines how to work with the agency. It provides the names of companies who had success through the process, and lists the key areas of expertise that are in high demand within the U.S. armed forces: 
 

  • AI – putting machine-learning capabilities to use for “operational impact.”
  • Autonomy – incorporating systems that can operate by themselves or interact with human operators at scalable levels, or mitigating threats posed by adversaries’ autonomous systems.
  • Human systems – particularly in the realm of force protection. Survivability, and biomedical training play key roles. 
  • Information technology – managing the flow of information and making it accessible and useful to warfighters.
  • Space – ensuring that access to satellites and other assets is available on demand, and facilitating data transfer. 

 
“As far as tangible benefits, there has been a number of project successes, ranging from the way the Air Force does software development, to the fielding of counter-UAS capabilities,” Hoffman says. 
 
It is important to note, Hoffman says, that DIU is doing more than merely investing in companies that produce prototype systems. Interaction with companies is only the first step. The process requires working closely with the military program offices to change and adapt their typically linear development process. Figuring out how to use rapid, iterative commercial-design development and fit it into an atypical acquisition program is a significant challenge, he says. 
 
“But it is as important a part of our charter as anything else,” Hoffman says.
 
Because there are always areas within the armed forces that experiment with innovation, Hoffman believes DIU will remain a permanent and evolving fixture within the Pentagon hierarchy. When a new technology or process emerges and proves successful, it presumably would make the transition into the individual services’ program offices for further refinement before moving out into the hands of soldiers, sailors, airmen and Marines. DIU, then, would move on to the next innovation challenge. 
 
“From a robotics perspective, I’d note that DOD is entering a challenging time — where we introduce increasing levels of autonomy and AI into hardware systems,” Hoffman says. 
 
Innovations should continue to proceed in hardware, Hoffman says, but software would need to advance at a comparable pace.
 
“This is challenging from a programmatic as well as user-focused design perspective,” Hoffman says. “As we look at the next challenges in unmanned systems, it will become increasingly important for DOD to embrace not just these technologies, but also the commercial processes — to field effective capabilities to the warfighter.” 
 
Two years into its existence, DIU has shown some remarkable successes, Rothzeid says. Companies that compete in its solicitation process are growing in number. Repeat contract awards are an indicator of its efficacy, as are the increases in demand signals coming the agency’s way from within DOD organizations. Third-party investors are catching wind of this, and becoming more willing to invest in these enterprises. This private equity functions as a force multiplier in relation to the dollars the Pentagon puts into investment, which ultimately saves taxpayer dollars. 
 
Techstars
 
The need for quicker procurement has led the Air Force to follow its own route toward a more efficient process. The service established a relationship with Techstars, the Boulder, Colo.-based business-accelerator firm, in order to help resolve the issue. 
 
“The Air Force noticed in the past few years that commercial industry was accelerating past them,” says Warren Katz, managing director of Techstars’ Air Force autonomous technology accelerator program. 
 
“The Pentagon was realizing that adversaries can buy [new technologies] off the shelf, simply avoiding an acquisition system that is antiquated and ponderous,” Katz says. 
 
The Air Force watched Techstars work with very select groups of small startup companies, liked what it saw, and entered a one-year agreement to collaborate in bringing what these businesses had to offer to the force. The Air Force’s AFWERX, which fosters technological innovation, serves as the umbrella organization. (The acronym stands alone and does not represent an abbreviation for a phrase name.)
 
Techstars’ approach provided a welcome respite for the Air Force’s cumbersome SBIR (Small Business Innovation Research) program, Katz says. 
 
“Companies became addicted or dependent upon SBIR grants and never actually commercialize their research or their product, because the money comes too easily. It creates welfare recipients that DOD doesn’t want to have,” Katz says. 
 
In collaboration with AFWERX, Techstars is in the process of implementing a series of changes aimed at running a sweep around the SBIR process. 
 
The first phase, now under way, entails changing SBIR funding to $50,000 for 90 days, down from $150,000 per year. By shrinking the time, the hope is to award a contract within 30 days instead of six months. 
 
The second phase, which is still under development, would change SBIR contracts into commercial product purchase orders, Katz says. As of now, they tend to be labor contracts, which require small businesses to establish the same time sheets and financial reporting systems as larger corporations must — something they simply do not want to do.
 
“This has multiple benefits. It gets small businesses out of [the perception that they must function as] defense contractors. It interfaces with the way a company sells to everyone else in the world,” Katz says. 
 
The third phase, also in the planning stage, would establish some form of open-contract mechanism that would allow a DOD customer to buy a product directly and without waiting for a competition among vendors to take place. 
 
“A company can wire-transfer the money from their budget to [the business], with an open purchase order. It’d be the money of the customer or user, out of their own budget, paying for the product,” Katz says. 
 
As it unfolds, the process is being closely watched by other military agencies and other entities of the federal government as well, Katz says. 
 
“All the other services see this and want to copy it, changing the SBIR program forever,” Katz says. “And it’s much more appealing for non-traditional providers. It looks and smells much more like their corporate clients.”

Above: Air Force officials and startups meet at a Techstars event. Photo: Techstars. Below: The Defense Innovation Unit's Orin Hoffman discusses DIU at AUVSI's Defense. Protection. Security conference in 2018. Photo: AUVSI

The Defense Innovation Unit's Orin Hoffman discusses DIU at AUVSI's Defense. Protection. Security conference in 2018. Photo: AUVSI