Congress Withholds Pentagon Innovation Funding in Defense Spending Bill

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Defense Secretary Ash Carter visits Facebook in Silicon Valley, Calif. (U.S. military photo)Funding for the Pentagon’s new innovation cells will have their budget slashed by 75 percent until Defense Secretary Ash Carter delivers a report to Congress on the future of the Defense Innovation Unit Experimental (DIUx).

The Congressional scrutiny comes as many question whether Carter’s Pentagon innovation initiative will survive under the Trump administration. The Defense Department had requested $45 million for DIUx in the fiscal 2017 National Defense Authorization Act.

“The conferees are concerned that investments made by DIUx to-date were not focused on rapid delivery of much needed game-changing technologies,” legislators wrote in the conference report released Wednesday.

Legislators want Carter to issue a report detailing where DIUx plans to open additional hubs. Carter has already opened offices in Silicon Valley, Boston and Austin to improve the Defense Department’s relationships with commercial companies in those tech hubs.

Congress threatened to restrict DIUx’s funding last year, but the Pentagon’s innovation cell ended up announcing $36 million worth of contacts in the fourth quarter of last year. DIUx leaders said they expected to spend another $65 million on 22 contracts as part of their Commercial Solutions Openings program.

Like last year, Congress criticized DIUx for not making significant acquisition program changes to make it easier for small businesses to do business with the military.

“The conferees remain concerned that in the department’s rush to try something new, defense leaders have not taken the time to determine how effective recent organization and management changes are before seeking a rapid expansion of resources,” according to the conference report.

The Commercial Solutions Openings Program was a new initiative last year that Carter said was established in response to scrutiny that not enough had been done to help companies navigate Federal Acquisition Regulations. DIUx officials simplify the application process to allow small businesses to receive funding in one month.

“The conferees remain cautiously optimistic that the changes to the organizational structure and functions of DIUx could become important tools for the Department of Defense to engage with new and non-traditional commercial sources of innovation,” according to the NDAA conference report.

Trump’s transition team continues to mull over who will take over for Carter after Trump takes office in January. Two retired Marine generals look like the current favorites of the Trump Transition Team – Gen. James Mattis and Gen. John Kelly. Mattis led U.S. forces in the Iraq and Afghanistan wars in 2010 as the head of U.S. Central Command. Kelly led U.S. military efforts in South America as the head of U.S. Southern Command.

Neither one has obvious ties to the tech industry like Carter. Both would also need an exception from Congress to take the job since neither has been retired for the required seven years.

Despite the Congressional scrutiny, DIUx is likely receive full funding like it did last year, but its long term future remains a question.

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