DIU’s director tried to overcome a calcified defense innovation system. It beat him. Now what?

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April 5, 2022 NATIONAL HARBOR, Maryland – Michael Brown, director of the Defense Innovation Unit, participating in the Future of Naval Innovation panel at the Navy League’s Sea-Air-Space Exposition. (U.S. Navy photo by Eric Anderson)

Everyone in Washington seems to agree the Pentagon needs to change how it does acquisition — and yet, the system never seems to change. The latest to exit DC after trying is Mike Brown, who retires this week as the head of the department’s commercial technology office. In a new op-ed, Bill Greenwalt of AEI argues that Brown may have been doomed from the start, and wonders whether DoD really is ready for acquisition modernization. 

This upcoming Friday is Michael Brown’s last day as the Director of the Defense Innovation Unit (DIU). Over his four-year term, the former Symantec CEO was given a hard lesson in the ways of Washington.

Tasked with trying to access the tantalizing fruits of Silicon Valley for DoD, Brown made slow but steady progress, as outlined in the group’s annual reports [PDF]. These victories were hard earned, considering DIU was actively undermined from its inception seven years ago. It has suffered from a lack of funding and flexibility that limited non-traditional experimentation and the scaling of technologies, an acquisition bureaucracy stuck in a 1970s mindset, and monopolistic entrenched defense companies supported by government advocates who continue to put up roadblocks to the emergence of any SpaceX-like new entrants that could threaten existing weapons franchises.

And yet, Brown was able to do enough that when the Biden administration came into office, he was nominated for the department’s top acquisition job — only to have to withdraw when the Inspector General’s office said that ruling on an incredibly thin complaint filled by an ex-DIU employee could take up to a year to investigate.

In his waning days of his government service, Breaking Defense published an interview with Brown in which he described “a critical lack of support from Pentagon leadership” that hindered his ability to bring new innovation into the Pentagon. That statement should set off alarm bells for anyone who believes reform is needed at the department.

DoD leadership seems to believe that rather than effectively use DIU, it can continue to conduct “innovation theater” and check the box on its non-traditional private sector outreach through misguided efforts such as a singular focus on the Small Business Innovative Research (SBIR) program. The just-under $2 billion that DoD spends on SBIR in miniscule, thinly spread tranches is a trifling amount compared to the $400 billion that venture capitalists have recently spent on innovation, the $150 billion in “dry powder” that is still waiting to be invested, or the $1.8 trillion private equity industry that is a barely tapped resource for DoD. Those multi-trillion-dollar sources of finance and innovative companies are what DIU was established in the first place to leverage, but unfortunately it looks like DoD would rather spend its time on low-end $100,000 SBIR projects that rarely, if ever, transition into useful capability.

RELATED: Lawmakers propose changes to SBIR as program renewal deadline nears

The exasperated throwing in of the towel by Brown should be a wakeup call after his years of frustration dealing with a system that is just not conducive to change. The lack of champions to disrupt the status quo is demoralizing, and the resulting costs to US national security will be profound and immense.

Here’s the important thing: this was not how 2022 was supposed to unfold. DoD was given broad acquisition authorities in 2015 and 2016 through the leadership of the Senate and House Armed Services Committees — Sens. John McCain and Jack Reed, and Reps. Mac Thornberry and Adam Smith — specifically so that new capabilities could be developed and deployed to counter our growing defense technological inferiority. I should know: as a key staffer for McCain during these negotiations, I had a front-row seat as we crafted the language.

The establishment of DIU was a complementary effort to these reforms. Established by then-Defense Secretary Ash Carter in 2015, DIU (then DIUx) would be the bridge to the creative destruction, decentralization, and the innovation incentives residing in the non-defense portion of the private sector. It was no accident that DIU reported directly to the secretary, in order to escape the torrent of bureaucracy and corrupting influences that underline the defense acquisition system. In hindsight, DIU was probably given a death sentence several years later when Secretary Jim Mattis moved it from a direct report to being under the Undersecretary for Research and Engineering (R&E).

Now, the downgrade in importance of DIU seems to be continuing, with the current Pentagon’s approach to finding a new DIU director that speaks volumes about how the organization is currently valued.

An absolutely nonsensical formal notice and application process, reminiscent of how to fill a GS-9 analyst position, was recently announced by R&E to fill the spot. Past DIU directors were individually recruited by the administration and hired using the Highly Qualified Expert exemption to federal personnel rules. No substantive CEO type is going to fill out an SF-171 equivalent or send in his or her resume to apply for a government job. It’s enough to make one wonder if the convoluted search process isn’t set up specifically so that the types of people that will respond are precisely the ones who will be uniquely unqualified for the job. It boggles the mind that the Biden administration doesn’t know a single good Silicon Valley veteran that it can reach out to directly and entice into serving.

All of this has consequences. DoD, through its neglect, is turning its back on the disruptive opportunities from the commercial and non-traditional innovation sector. We are not innovating at speed, and the forces of the acquisition status quo are winning. Rather than go where the innovation is, DoD is doubling down on a bureaucratic, risk-averse, and time-intensive system that puts us at greater risk to being outmaneuvered if China continues to embrace commercial technologies and dominate advanced manufacturing.

RELATED: Pentagon’s tech chief promises stronger budget, support for DIU

In light of the Department’s actions, our last best hope may reside in Chinese President Xi Jinping’s own shift away from the private sector to favor his party bureaucracy and bring back communistic state planning and control. If he moves quickly in that direction, it could then level the playing field by destroying innovation on the Chinese side as well. Needless to say, wishing for the Chinese to become better communists should not be the default US defense innovation strategy.

Secretary Carter had a good idea with DIU, but he and his successors underestimated what it would really take to partner with Silicon Valley and non-traditional commercial industries and never expended the political capital to overcome the inevitable countervailing forces to reform. The takeaway, unless dramatic change occurs: If you are an innovative, non-traditional venture capital backed company, it is time to recognize that you will never be able to compete and scale up in the defense market because of DoD practices. So why bother? It’s not about acquisition or contracting authorities any longer. Congress reformed those. Now, it’s about DoD culture, using those authorities, and a history of not encouraging competition.

For now, we can only thank Mike Brown for his service and wish he would have had a dozen like-minded political appointees and military leaders supporting him over the years. A great opportunity was missed. The Pentagon can’t afford more such mistakes.

Bill Greenwalt, long the top Republican acquisition policy expert on the SASC, also served as deputy defense undersecretary for industrial policy. A member of the Breaking Defense Board of Contributors, he’s now a fellow at the American Enterprise Institute.





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