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FY 2023

ANNUAL
REPORT

LETTER FROM THE
DIRECTOR

In 2015, former Secretary of Defense Ash Carter founded the Defense Innovation Unit (DIU) — then DIUx — as part of a broader strategic initiative to maintain U.S. technological superiority in the face of a shifting threat landscape. While traditional development and acquisition pathways will most likely get us where we need to be technologically by somewhere in the 2030s, the urgency and imperative of today dictate that we must leverage commercially derived technologies that exist right now. Those technologies will continue to evolve at an ever-accelerating rate to meet the relentless demands of billions of consumers around the world and the enterprises that serve them. We find ourselves at a tipping point: The Department of Defense (DoD), Congress, the interagency, and the commercial sector all recognize that the time to accelerate the application of commercial technology for strategic impact is upon us. In response to this critical mass, Secretary of Defense Lloyd Austin realigned DIU as a direct report this past April and charged our team with developing a plan to scale DIU's impact.

In its earliest stage of development, or "DIU 1.0," the primary focus was to build a much-needed bridge between the Department and the commercial technology sector. Success during this first phase was measured simply by the volume of interest and engagement from both sides. The second phase of DIU, "DIU 2.0," proved that the model of leveraging "dual fluency" talent and flexible acquisition tools; building relationships within the commercial sector; and delivering critical capabilities to the warfighter within weeks or months, rather than many years, works. DIU has since cultivated a reputation as an acquisition pioneer by exercising the Other Transaction (OT) authority to rapidly aquire and tailor relevant commercial technology. This has yielded more than 450 prototype OT contracts, 62 of which culminated in commercial solution transitions to the warfighter. Importantly, these prototypes have attracted more than $68B of private investment, deepening a broad set of enduring relationships with the investment community.

DIU 3.0 is all about applying the capability developed during DIU 2.0 with the focus, speed, and scale necessary for strategic effect. The DIU 3.0 approach relies on the expertise we have cultivated up to this point and stems from more than 300 discussions with key national and international stakeholders from government, industry, and academia. Under DIU 3.0 — which Secretary Austin approved in August, and parts of which Congress codified in the 2024 Fiscal Year National Defense Authorization Act (NDAA) — we are working closely with our partners in the Combatant Commands, the Services, and across the DoD to amplify operational needs, break down systemic barriers for scaling commercial technology, and above all, deliver strategic impact that helps ensure the United States can deter major conflict or, if forced to fight, win. These efforts are already well underway and are reflected in this year's annual report — a true testament to the DIU team's commitment and skill and to that of our teammates across the Department, interagency, Congress, allies, partners, and teammates in the public and private sectors.

Thank you to the DIU team for all of your hard work and achievements in FY 2023. It is a privilege to serve alongside you in support of this critical mission. Finally, thank you to our stakeholders and partners across the Department, the commercial sector, the investment community, Congress, academia, our international allies and partners, and the broader defense innovation network for your continued support and dedication to our national security.

As we build upon this momentum in FY 2024 and beyond, everything we do at DIU — and across the public and private defense innovation community — will be measured against our ability to generate strategic impact. Together, it is our job to break new ground and to take the prudent risks necessary to reduce the strategic and operational risks facing our nation and the warfighters whose job it is to defend it. The time to deliver is now. I have never felt more confident in our ability to address this imperative, and I look forward to working together on the critical mission before us.



Douglas A. Beck

Director, Defense Innovation Unit

Senior Advisor to the Secretary of Defense

YEAR IN REVIEW

BUILDING ON THE MOMENTUM

Change was a constant for DIU throughout FY 2023. DIU gained a new director, Doug Beck, and crafted a new blueprint for commercial technology integration across the DoD. Perhaps the most significant shift was the Secretary of Defense's decision to realign DIU as a direct report. This move is a recognition that the DoD must scale its use of readily available commercial technology to stay ahead of our competitors. Building on this momentum, Congress designated DIU as a Principal Staff Assistant through the the FY 2024 NDAA, further codifying DIU's role as a direct advisor to the Secretary of Defense and as the principal liaison for the Department to the commercial technology sector, and to investors around the world.

Ninety days after the realignment and appointment of Director Beck, DIU submitted to the Secretary of Defense its "DIU 3.0" plan, which outlines the critical shift in focus, action, and resourcing that DIU will undertake to deliver with the focus, speed, and scale required for strategic effect. DIU 3.0's eight mutually reinforcing lines of effort (LOEs) are designed to support the National Defense Strategy (NDS) and to reflect the Secretary's three priorities to defend the nation, take care of our people, and succeed through teamwork. Each LOE builds on the momentum generated since DIU's inception in 2015 and directly addresses the systemic challenges that have hampered commercial technology adoption within DoD. The Secretary of Defense approved this plan Aug. 31, 2023.



Delve deeper below to explore the annual reports of our sister organizations, the National Security Innovation Network and the National Security Innovation Capital.

PERFORMANCE & METRICS

Accelerating DoD's Adoption of Commercial Technology

DIU's latest performance metrics show a compelling narrative of resilience, growth, and strategic excellence. In FY 2023, DIU posted 33 new solicitations to our website and received a total of 1,768 commercial proposals, an 8% increase from the prior year, even as DIU acted to focus more aggressively on fulfilling the most strategic requirements for maximum value. The average number of proposals received jumped from 45 in FY 2022 to 54 in FY 2023. This led to 90 prototype contracts — up from 81 in FY 2022 — with a total value of $298M. DIU transitioned 10 commercial solutions, bringing the cumulative transition rate to 51%.

$502.2M

total value of prototype OT contracts awarded to commercial companies

$5.5B

total value of production OT (or other) contracts awarded to commercial companies

Since FY 2016, DIU has awarded 450 prototype OT contracts to commercial companies and has directly facilitated the successful transition of 62 prototype contracts for 57 unique vendors into follow-on contracts across the federal government. These amount to $5.5B in contract ceiling awards backed by $19.1B of private capital.

In FY 2024 and beyond, our organization will refine its metrics framework to align closely with new strategic objectives, ensuring a comprehensive evaluation of our impact on mission partners within the DoD. These updated metrics will emphasize not just outputs, but the strategic value and long-term outcomes of our initiatives, providing a more accurate assessment of our strategic effect.

What is a Transition?

A commercial solution transitions when the prototype successfully completes and results in a production or service contract with a DoD or U.S. government entity. A transition enables the DoD to field a product or solution in an operational environment for service member use.

GRAND TOTAL OF

451 AWARDS

AT $1.7B

Obligated Prototype Funding By Portfolio (June 2016 - September 2023)

Volume of Activity (Throughput) FY 2016 - FY 2023

Proposals Received

Prototypes Awarded

Transitioned Awards

$502.2M

Total $502.2M
Obligated Prototype Funding Breakdown (FY 2022)

Transforming Military Capabilities And Capacity

Widespread technology adoption is necessary to transform military capabilities and capacity. DIU prioritizes projects that can address DoD-wide operational needs.


  • DIU Defense Innovation Unit CCMDs
  • USAF United States Air Force
  • CCMDs Combatant Commands
  • USSF United States Space Force
  • USA United States Army
  • USCG United States Coast Guard
  • USMC United States Marine Corps
  • OSD/Other Fourth Estate & Other US Gov
  • USN United States Navy

Strengthening The National Security Innovation Base

In FY 2023, DIU received vendor submissions from all 50 states. Between June 2016 and September 2023, DIU awarded 450 OT Prototype contracts (+18%) across 389 unique vendors (+19%) with a total value of $1.7B. Additionally, since 2016, DIU has made contract awards to 27 foreign-based companies (+42%), with a total award value of $75.9M (+130%).

  • Top Ten States
  • Other States With Awards
  • Submitted Proposals
Domestic Prototype Awards (FY 2016 – 2023)

Florida

Number of Contracts: 15

Amount Obligated: $41.3M

DIU Contracts by State (Top 10)

State Number of Contracts Amount Obligated
California 160 $639.3M
Colorado 11 $109.6M
Florida 20 $55.9M
Massachusetts 22 $60.9M
Maryland 11 $10.7M
New York 12 $36.8M
Pennsylvania 11 $41.9M
Texas 21 $76.2M
Virginia 54 $237.8M
Washington 20 $55.9M

International Prototype Awards (FY 2016 – FY 2023)

State Number of Contracts Amount Obligated
Australia 7 $48.6M
Canada 5 $3.2M
France 1 $4.9M
Israel 2 $2.0M
Norway 1 604.0K
Portugal 1 $1.2M
Spain 1 $1.4M
Sweden 1 196.7K
Switzerland 1 207.3K
United Kingdom 7 $13.6M
Grand Total 27 $75.9M

Contract Award Recipients by Business Type

38%

Were First-Time DoD Vendors

87%

Were Non-Traditional

80%

Were Small Businesses

TRANSITIONED PROJECTS

  • DIU recognizes that companies and investors view production contracts as a critical indicator of whether DoD is serious about modernizing with commercial technology and whether there will be recurring revenue from the Department. This is why DIU closely tracks transitions from prototypes to fielded capabilities through follow-on, multi-year contracts, such as
  • Production OTs, Indefinite Delivery/Indefinite Quantity (IDIQs), Blanket Purchase Agreements, and listings on the General Services Administration (GSA) schedule. In FY 2023, a total of 10 technology solutions transitioned to a DoD end-user, raising our cumulative transition rate from 47% at the end of FY 2022 to 51%.

AIR LOGISTICS OPTIMIZATION (ALO)

Artificial Intelligence & Machine Learning

DoD currently uses a manual process to plan and schedule logistical movements across the globe in all domains. Factors such as vehicle capabilities, personnel, cargo priorities, maintenance constraints, and weather are weighed manually to meet mission taskings, creating scheduling challenges. To optimize energy use across aircraft, the C3 AI ALO application uses information such as sensor and mission data to create prediction models that help DoD leaders establish more efficient flight protocols, lowering fuel consumption without compromising combat capability. The application has increased the accuracy and reliability of fuel consumption predictions, which can reduce the impact of fuel emissions on the climate by enabling more efficient fuel use.

BLUE UNMANNED AERIAL SYSTEMS 2.0

Autonomy Portfolio

Access to secure, trusted, and reliable small unmanned aerial systems (sUASs) is essential to national defense. The majority of affordable and capable commercial drones are manufactured overseas while Section 848 of the FY 2020 National Defense Authorization Act (NDAA) prohibits the use of parts produced in covered countries. The Spirit by Ascent Aerosystems is a compact, all-weather, coaxial sUAS. It is modular, allowing for various battery and sensory configurations, with an open-source software stack and includes custom payload integrations. The Spirit can be used for ISR, precision delivery, communications relay, and target identification.

BLUE UNMANNED AERIAL SYSTEMS 2.0

Autonomy Portfolio

Access to secure, trusted, and reliable sUAS is essential to national defense. The majority of affordable and capable commercial drones are manufactured overseas while Section 848 of the FY 2020 NDAA prohibits the use of parts produced in covered countries. The Freefly Systems Alta X was originally created for professional filming and can be used for ISR. It is a versatile multi-rotor aircraft designed around open architecture, endurance, and payload capacity. It can be folded to half its deployed size for easy transportation by a single operator.

COLLABORATIVE TACTICAL AUTONOMY FOR NETWORKED AIRCRAFT

Autonomy Portfolio

Existing standoff weapons fly pre-planned routes but encounter highly dynamic environments, leaving them vulnerable to sophisticated air defense systems. To improve the efficacy and survivability of our long-range weapons, a minimum level of autonomy must be incorporated into their design. This solution provides collaborative mission autonomy algorithms, or agents, that command large numbers of long range air vehicles (weapons, sensors, etc.) in order to penetrate contested airspace in a survivable and effective manner, reacting in real-time to changes in the environment or losses in forces.

CYBER THREAT TELEMETRY

Cyber & Telecommunications

The DoD lacks insight into the commercial threat intelligence databases that enable real-time analysis and decision-making by cyber operators. As part of an ongoing series of projects that started with Cyber Threat Intelligence in 2017, this project expands on existing CYBERCOM efforts to maintain situational awareness of threat activity with a solution that would augment threat intelligence feeds with non-traditional and non-IT-based cyber data sets. Spycloud is one of four vendors that successfully demonstrated integration of their platform into military cyber operations and into the U.S. government communities of interest. The capability is easily scalable to other government teams within the cyber operations communities due to the lightweight nature of the software delivery mechanisms and the training and engineering loads required to operate the toolset. The other two prototype participants are on track to transition within the next fiscal year.

CYBER THREAT TELEMETRY

Cyber & Telecommunications

The DoD lacks insight into the commercial threat intelligence databases that enable real-time analysis and decision-making by cyber operators. As part of an ongoing series of projects that started with Cyber Threat Intelligence in 2017, this project expands on existing CYBERCOM efforts to monitor threat activity with a solution that would augment threat intelligence feeds with non-traditional and non-IT-based cyber data sets. CA Services is one of four vendors that successfully demonstrated integration of their platform into military cyber operations and into the U.S. government's communities of interest. The capability is easily scalable to other government teams within the cyber operations communities due to the lightweight nature of the software delivery mechanisms and the training and engineering loads required to operate the toolset. The other two prototype participants are on track to transition within the next fiscal year.

NATIONAL CAPITAL REGION - INTEGRATED AIR DEFENSE SYSTEM (NCR-IADS)

Artificial Intelligence & Machine Learning

The NCR's security is, in part, protected by an air defense system that monitors aircraft through a network of visual and infrared cameras. These cameras are at the end of their service life and are becoming increasingly difficult to sustain. In just 18 months, Teleidoscope provided an AI-based visual recognition and identification system to replace the current systems. These new systems provide a greater than 10x increase in capability compared to the existing systems. The timeline for fielding the improved camera system was accelerated by several years by a $16.77M funding award via the Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) Fund in May 2023.

SMALL-CLASS UNMANNED UNDERWATER VEHICLE (SCUUV)

Autonomy Portfolio

The U.S. Navy's mine countermeasure (MCM) fleet is rapidly approaching the end of its service life, and the Navy is seeking to leverage autonomy with new sensors and modularity that allow for continuous improvements. Huntington Ingall Industries prototyped and delivered small form-factor unmanned undersea vehicles with open architecture and modularity principles for subsystems. The HII REMUS 300 will replace the MK 18 Mod 1.

ADVANCED TACTICAL COMMUNICATIONS (ATC)

Space Portfolio

The DoD lacks access to small, lightweight, multi-band Software Defined Radio (SDR) solutions for the warfighter at the edge. This solution provides digital cloud connectivity through multi-band communications that is end-user device (EUD)-agnostic, easy to use, affordable, and fully integrated into DoD and other government cloud network ecosystems.