WASHINGTON — The Pentagon’s Defense Innovation Unit Experimental (DIUx) has now awarded $100 million in funding for 45 pilot programs, and the group expects to transition its first demonstrator program to higher-rate production before the end of the year.
That is up from the total at the end of March, when the unit claimed 25 projects for a total of $48.4 million — a significant increase that a DIUx official admitted means the group is “further along than we ever imagined.”
DIUx was formed in early 2015 by then-Secretary of Defense Ash Carter, but after a year of stagnation, relaunched in late May 2016 under the leadership of Raj Shah, a former U.S. Air Force F-16 pilot and special assistant in the Office of the Secretary of Defense who worked for a variety of Silicon Valley tech firms.
Shah has managed the office to greater success, to the point where DIUx has won support from both the Hill and leaders of the military services.
That doesn’t mean there haven’t been roadbumps along the way. For instance, Shah said in March that he expected to transition programs to military service earlier this year, a timeline that has now shifted. But overall, the group has managed to deliver to a level most had not expected, especially when it lost the patronage of Carter.
Or as Chris Kirchhoff, a managing partner with the group, put it to Defense News: “I think that we’ve all been surprised at how much progress we’ve made.”
Kirchhoff says DIUx was set up to prove a theory — that the Pentagon could develop closer ties with the tech sector by being located in technological hubs like Silicon Valley; Boston; and Austin, Texas. And now, “we’ve proven the theory.”
According to the most recent quarterly report for the group, DIUx has been able to award pilot contracts roughly three months after receiving responses to solicits. For each dollar that DIUx puts in, the “customer” — aka the service interested in the program — kicks in four or five dollars.
And because the Pentagon is not going to be able to fund these companies on their own, DIUx has focused on scouting out firms that have serious investors behind them. The group claims the private sector has invested roughly $1.8 billion in the 37 companies supported by DIUx. Notably, DIUx says seven of those companies “have been able to raise roughly $720 million in subsequent rounds of funding, partially due to their work with DoD.”
While it seems assured the group will continue to exist and be supported in the future, there are some questions about where it will live. Currently, DIUx directly reports to Secretary of Defense Jim Mattis, a holdover from the Carter days.
But under a new reorganization plan submitted by the Pentagon Aug. 1, DIUx will be folded into the new office of the undersecretary of research and engineering — a move that will see its reporting fall roughly four levels from where it is now.
Kirchhoff downplayed the shift, saying, “What we’re focused on is making sure we can accomplish our mission. As long as we can accomplish our mission, we’re excited.” But analysts have raised the concern that DIUx may find itself dragged away from innovative ways of doing business and into the more traditional defense acquisition system.
Speaking to reporters Aug. 2, Shanahan downplayed any potential issues: Shah is “just dynamite,” and that the goal is not for DIUx to be ”subsumed” in the new system but rather, to spread their capabilities and processes to the rest of the Under Secretary of Defense, Research and Engineering team.
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.
