As part of his pitch last week to strengthen relationships between the Defense Department and technology innovators in Silicon Valley, Defense Secretary Ashton Carter on Friday said that his department needs to make it easier for start-up firms to work with DoD.
Pointing out that the Pentagon’s and the federal government’s acquisition bureaucracy is large and “a rather slow and stodgy buyer,” Carter said that this favors companies that “know ho to deal with bureaucracy…over ones that have the best technology. That’s wrong.”
“And so we need to lower the walls to entry (for) start-up companies and also give them a path to success,” he said in an interview that was podcast by the Menlo Park, Calif.-based venture capital firm Andreessen Horowitz. “They don’t want to end up sold to a big company. That’s one exit for many of them but for a lot of people who are starting new companies they don’t want to be owned by anyone, they don’t want to be controlled by anybody else. They want to be on their own and they want to grow on their own. We need to open that pathway for them.”
One channel between DoD and Silicon Valley that Carter discussed last Thursday during a speech at Stanford Univ. kicking off his visit to the California tech corridor is the establishment of a new Defense Innovation Unit-X that the Defense Department will establish there “to strengthen the existing relationships and build new ones, help scout for breakthrough and emerging technologies, and function as a local interface node for the rest of the department.”
In the Friday interview, he elaborated further on the role the DoD Silicon Valley office could play, saying “its point is to teach us how to welcome these VC companies to market to us and teach them how to deal with us and open up that channel so that we have a richer relationship with the world of technology that we’ve had for decades.”
“I want them to market to us,” Carter said, adding, “I need to make us compatible.”
The X in the forthcoming Defense Innovation Unit stands for experimental and Carter said there will be several pilot projects as part of this. In his Stanford speech he mentioned one, an investment in the independent, non-profit venture capital firm In-Q-Tel, which works with the intelligence community to fund innovative technologies. The purpose of the In-Q-Tel investment is to leverage their relationships “and apply their approach to DoD,” he said.
Carter said he has no idea where exactly the pilot projects will lead, adding that’s fine “because it means that we’ll stay smart, we’ll stay innovative and that what we need to do and I think we can match our approach to the approach of the really bright people out here.”
Loren Thompson, a defense industry consultant and national security analyst with the public policy firm The Lexington Institute, wrote in article published Monday in Forbes online, that while in the past when DoD reached out to technology companies in California it was to aerospace companies that were “heavily dependent on government largesse for their success.” That isn’t the case any longer, he argues.
Thompson lists five reasons why Silicon Valley won’t be interested in partnering with DoD, including lousy operating margins for defense contractors compared to the commercial technology sector, intellectual property protections, “stifling” regulations, a federal bureaucracy “incapable of embracing the commercial practices that made places like Silicon Valley innovation hubs,” and the realization that the “real customer is a political system” that will cast aside “cost efficiency and operational suitability…to the imperative of getting reelected.”
The Clinton administration also promoted acquisition reforms meant to take advantage of commercial technology but “That strategy was quickly forgotten once the money started flowing again after 9-11, and that’s what will happen this time around too, a new threat will materialize and policymakers will realize they don’t need to change their stripes to keep up,” Thompson said. “That’s one reason defense executives aren’t worried they will lose market share to Silicon Valley.”