10 years in, the Defense Innovation Unit needs to pivot

Tom Temin: And I guess what you’re saying is they’ve kind of got to grow up now that they’re building or buying quantities of what it is a prototyped. Then there’s a little bit more to making sure they’re buying the right thing. Is that essentially what’s going on?

Bill Russell: Yeah, exactly. So this is the last phase. If you think about 2015, DIU 1.0, that was, hey, let’s create the connections with the big commercial companies that have cutting edge technologies, whether it’s in Silicon Valley, other locations. 2.0 was really about proving the model. Let’s get some prototypes underway. Let’s show they can really meet a military need and get it to the customer and do it quickly. And what we found in the report is DIU was able to prove that concept. They got 450 different awards to companies to develop prototypes, a good number of those made it into production. So it showed the model worked. 3.0, which is really where the department has gone in 2024 and beyond, is just what you said, OK, let’s take this concept and then we’re really going to scale it for rate production. And let’s try to meet not just any military need, but let’s try to meet the big game-changing needs that get to the National Defense Strategy. So things like protecting the homeland, deterring attacks, being able to win major conflicts and that sort of thing. And as you mentioned, so now what we did the work. DIU has a good plan and it’s really just setting some of these performance metrics and milestones that are going to help them quickly gauge the progress that they’re making and course correct as needed.

Tom Temin: And is that idea 3.0, is that their word or is that GAO’s word?

Bill Russell: That’s DoD’s word. The third version. It’s really taking, in their words, the lesson of the model that they proved in 2.0, right? Picking innovative commercial companies, figuring out a way to quickly prototype things and then scale it. So one of the things that they’re doing in 3.0 is to take things that worked well, such as the Commercial Solutions Opening where basically they would put out a pitch to industry. Here’s the kind of stuff we were looking for and companies were able to do really stream down proposals, 10-15 pages, to show what they could do and DIU is able to quickly make awards for prototypes, right? And then have a pretty fast time frame for DoD scales, 12 to 24 months to deliver something. So now it’s taking all of that, but then doing it where you’re getting to full-rate production on some of these solutions.

Tom Temin: And are they still using other transaction authorities or do they have to move to regular FAR procurements to go to scale with some of these companies?

Bill Russell: These are largely OTAs. And the one advantage of it is once you get the prototype award, if one of the military departments wants to pick it up, you don’t have to compete again. You have an on-ramp right into the production side of things.

Tom Temin: And by the way, is there any evidence that these now becoming military technologies at scale are developing into a competitive market for the same thing or are there still intellectual property issues such that the original prototype still got the rights to that?

Bill Russell: Well, I think the scale is there. We’ve seen in 2024, the funding that DIU had available went up to almost $1 billion from where it had been with 100 million, 200 million before that. So I think the opportunities are there. It seems like they’re getting a lot of participation from companies. And there may be names for some of these solutions that become the new defense contractors. The opportunities are there to really grow.

Tom Temin: We’re speaking with Bill Russell. He’s GAO’s director for contracting and national security acquisitions. And so you found then that they need to have mature metrics basically to make sure that what they are buying at scale with OTA is what the military actually needs.

Bill Russell: That’s right. The performance metrics data to see how these things are doing and so you can make adjustments to the process as needed. The other facet as DIU has moved from being within research and engineering up to a direct report to the Secretary of Defense, it’s also gained new responsibilities for managing the whole defense innovation ecosystem. So every military service has some kind of innovation organization. There’s AppWorks, NavalX, just to name a few. And so DIU is now responsible to coordinate all of those activities and make sure that companies are getting to the right place, to the right customer, know about the right opportunities. And so we had a few other recommendations to help shore up that foundation as they’re getting that process in place, basically to enhance the collaboration across all of those groups.

Tom Temin: And how should they do that? I mean, is it a word-of-mouth type of thing and exchange of memos? And, I mean, how do you collaborate? I mean, the Defense Department is a big place. I don’t even think DIU’s in the Pentagon, is it?

Bill Russell: Yeah. So it’s in the Pentagon.

Tom Temin: It’s not at the Mark Center or something.

Bill Russell: Not in the Mark Center that I know of. The key is really just how you’re going to hold some of these entities accountable for the collaboration, right? So if you’re going to do this I’m going to do that. Where do we get back together and compare notes to make sure it was accomplished? That was one. The second is not a memo, but certainly writing down this structure, right? Who, what, where are their responsibilities, the roles and capturing that in a way so everybody’s on the same page literally.

Tom Temin: Right. And just give us an example of something that might have gone from prototype recently to that full-scale production because you’re not talking tanks and fighters, that kind of thing. It’s all stuff we’ve never seen before.

Bill Russell: That’s right. So DIU organized in certain technology spaces, think about AI, space, autonomous systems, cyber. One of the examples we highlight in our report, it was a unmanned undersea vehicle. So that can be used to scan the ocean floors and do all kinds of things. That’s one that made it through the prototyping phase. But there are quite a few. There was one, Harmonious Rook, which has a great name.

Tom Temin: Sounds like a band down at the Old Opry.

Bill Russell: Yeah, exactly. But it was looking at capable commercial solutions to help detect disruptions to GPS and other things like that. So very innovative. Lots of new concepts coming to the fore.

Tom Temin: And are most of the contracts and the deals going to, in fact, companies that are new to DoD?

Bill Russell: A lot of them are. But the small, nontraditional companies that are getting the prototype awards.

Tom Temin: Is DIU, do you think, in danger of becoming just another acquisition arm?

Bill Russell: I don’t think so. Right now, one of the things that they did with 3.0 is to go embed staff with the different combatant commands, as well as more connections with the military department. So I think they’re getting the real time capability needs that they can use to offer new solutions to industry they go for.

Tom Temin: And are they advantaged by the fact that they don’t have to be engaged in the whole Planning, Programming, Budgeting and Execution process reform, of which has been proposed in depth, but nothing’s really happened. And that’s what hampers DoD and so many other areas, they say.

Bill Russell: Right. Yeah. No, DIU is in a position where like the Commercial Solution Openings and the OTAs, they have a sort of a fast-track process, right, where you can quickly get offers, make selections and then hopefully deliver capabilities within a year or two.

Tom Temin: All right. And so what was the reaction to the recommendations? Do they also sense they need to mature their metric measurements and their collaboration?

Bill Russell: Yes. The DIU concurred with all of our recommendations. And some of them, they were already thinking about metrics and how they’re going to measure success, because I think that’ll be important, especially for 3.0. They agree and as they’re standing up that innovation community, they had been thinking about ways to structure it. So I think they were supportive of all the observations that we had.

Tom Temin: And so far, there’s no signs yet that the new administration has got DIU in its target?

Bill Russell: Now, we stopped the audit work at the end of the year. So we’ll monitor the developments through the recommendations and other actions as it goes forward.