WASHINGTON — The Pentagon is set to award the first contracts to come out of its outpost in Silicon Valley, a top department official told Defense News Thursday.
Stephen Welby, Assistant Secretary of Defense for Research and Engineering, said he was encouraged by the progress made at the Defense Innovation Unit-Experimental (DIUX), a group set up by Secretary of Defense Ash Carter to serve as a conduit between Silicon Valley and the Department of Defense.
"I'm funding some projects with [DIUX]," Welby said. "I expect those to be awarded here in the next week or two. You're going to start to see that deal flow coming."
"There are other folks in the department that are engaged with them. We expect to see folks under contract as a result directly of a DIUX relationship," Welby added.
Although he did not go into detail about what firms would be going under contract, Welby did indicate the agreements are "small" by Pentagon standards.
"We're going to procure some commercial software and evaluate it," he said. "We're going to put a few things into an operator's hands and ask, 'If I gave you this commercial item, what could you do with it?' But that's the kind of experimentation we wanted it to be. It's not a major defense acquisition program."
Although announced in April of 2015, DIUX did not open until Aug. 15 of last year. Since then, the group has met with "hundreds" of companies, according to a DoD factsheet, but has drawn criticism from some in Washington that it has yet to produce tangible results.Hence, the handing out of actual contracts serves as something of a milestone,
However, Welby and other Pentagon officials believe DIUX is most valuable as a way for DoD and the Valley to have an open channel to communicate ideas back and forth.
"That dialog is not measured merely in number of contracts signed, is my point," Welby said. "I think DIUX has been very successful in having that conversation. It's difficult to put a metric on that."
The challenge for DIUX is not just in finding non-traditional companies to work with, but also to guide them through the acquisition system — one often described by Pentagon, industry and Hill leadership as too slow and antiquated. Welby called the challenge of Silicon Valley firms interested and moving through the system "a valid concern."
"Many of these companies are operating on timelines that are faster than our traditional acquisition timeline," he said. "If you're a company with a six-month horizon, you're in early stage funding, you can't wait for us. While we do due diligence and put you through a formal process it takes six months, even if you really wanted to buy it, to get to the first conversation. They've moved on."
However, Welby expressed hope that there are alternative ways to fund the DIUX programs that would allow the process to speed up, and said he has been talking with Claire Grady, the Director of Defense Procurement and Acquisition Policy, about "mechanisms we can use to accelerate" the process.
That includes a $30m fund, included in the fiscal 2017 budget request submitted last month by the Obama administration, the Welby says comes with a "relatively broad description" of how it will be spent.
"If I can find a [Pacific Command] demand signal for a commercial idea but no resources to make it happen, I could at least get the first year of that engaged while they build that into the budget, so companies aren't waiting on the budget process," Welby said, adding that his team has been talking with the professional staff of the defense committees about protecting that fund when the Hill turns in its own budget proposal.
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.