The Pentagon should expand the role of the Defense Innovation Unit — and increase its budget — to help more non-traditional companies navigate the Defense Department’s bureaucracy, according to a new report from DOD’s technology advisory board.
The Defense Innovation Board’s report, released Jan. 13, offers suggestions for how the Pentagon can broaden the pool of companies it works with to include firms, small and large, that have not typically been part of the defense industrial base. The board, chaired by billionaire Michael Bloomberg, recommends the department give DIU — its innovation arm — a more central, sherpa-like role in helping new vendors work with the Pentagon.
DIU already serves as a hub to guide nontraditional firms trying to sell to the military services, and its influence in the defense innovation ecosystem has grown significantly over the past few years. In 2023, Defense Secretary Lloyd Austin elevated the organization to report directly to his office. Then, in fiscal 2024, Congress boosted its budget to $983 million – a major increase for the small office.
DIU now plays a key role in major DOD initiatives, such as the Replicator drone program, and is charged with coordinating the many innovation entities dispersed throughout the services.
However, the report argues, DIU’s staffing and infrastructure don’t match the scope of its task. Members of the panel, which includes business executives and former Pentagon leaders, say the organization needs a bigger budget.
“DIU is well-positioned to continue catalyzing the DOD’s future engagement with non-traditional vendors,” the report states. “However, DIU still requires additional staffing and infrastructure to provide an end-to-end ‘concierge service’ for non-traditional vendors at scale.”
As part of the cross-service, sherpa-like role that the Defense Innovation Board envisions for DIU, the organization would focus on helping companies develop rapid prototypes and transition them to production, helping firms determine where to invest as they look to deliver capabilities at a larger scale.
Elsewhere in the report, the board offers broader recommendations for President-elect Donald Trump’s incoming national security team. The board recommended Trump’s administration train program offices to change the way they work with nontraditional vendors and to reduce “burdensome, confusing” contracting processes.
The board further suggests that the Pentagon craft a plan to buy and field between five and 10 “game-changing” capabilities by the end of 2027. They recommend the Defense Department secure funding from Congress to support its plan and leverage organizations like DIU and the Office of Strategic Capital to coordinate and help finance the effort.
“The DoD must … dramatically accelerate its efforts to field a focused set of emerging capabilities essential to preventing Chinese overmatch during this decisive decade,” the board said in its report. “This requires a fundamental shift from past initiatives and approaches to prototyping and procuring game-changing technologies – including adopting new partnership models, scaling successful initiatives, and disrupting the service research labs.”
Courtney Albon is C4ISRNET’s space and emerging technology reporter. She has covered the U.S. military since 2012, with a focus on the Air Force and Space Force. She has reported on some of the Defense Department’s most significant acquisition, budget and policy challenges.
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