Guide to the Defense Innovation Unit, its CSO process, OTA authority, and how to move from prototype to production with the DoD.
The Defense Innovation Unit (DIU) is a unique organization within the Department of Defense established to accelerate the adoption of commercial technology and emerging innovations into the military. Located in Mountain View, California (in the heart of Silicon Valley), DIU reports directly to the Deputy Secretary of Defense and operates with remarkable autonomy compared to traditional DoD organizations. DIU's mission is to identify promising commercial technologies, rapidly prototype solutions to military problems, and transition successful prototypes to operational use within the military services.
What makes DIU fundamentally different from traditional DoD acquisition is its willingness to work with non-traditional defense contractors, startups, and commercial companies. DIU explicitly seeks innovative companies that may have never worked in defense before. DIU uses Other Transaction (OTA) authority, which provides significantly more flexibility than traditional FAR/DFARS contracting, allowing for faster development cycles, more innovative approaches to problem-solving, and different contract terms.
DIU operates across multiple focus areas that change periodically but typically include: Artificial Intelligence and Machine Learning; Autonomous Systems; Biotechnology; Cloud Computing; Cybersecurity; Data Analytics; Advanced Materials and Manufacturing; Directed Energy; Hypersonics; and Quantum Computing. DIU identifies military challenges in these areas and seeks commercial solutions that could be adapted or scaled for military use.
The organization is relatively small compared to traditional DoD, with a team of technical experts, program managers, and transition specialists. DIU's goal is not to build long-term relationships as a traditional contractor, but rather to identify solutions, validate them through prototyping, and then hand off to military services for operational deployment and sustainment. This means DIU provides an opportunity for companies to prove their technology works for DoD missions and then transition to larger contracts with individual military services.
DIU has successfully transitioned numerous technologies into DoD use. Companies that have worked with DIU range from established defense contractors to AI startups, cybersecurity firms, and advanced manufacturing companies. Successful transitions have moved from DIU prototype contracts to production orders worth hundreds of millions of dollars.
Other Transaction (OTA) Authority
DIU's primary contracting tool is Other Transaction authority, which allows for greater flexibility than traditional FAR/DFARS contracts. OTA agreements are not subject to standard federal acquisition regulations, which means DIU can establish contract terms that are more suitable for commercial technology development. OTA agreements can have fixed prices, cost-reimbursable terms, or hybrid approaches. DIU structures OTA agreements to align contractor and government incentives for success.
The Proposal and Selection Process
DIU accepts proposals on a rolling basis through multiple mechanisms. Companies can submit unsolicited proposals describing their technology and how it addresses a DIU focus area or DoD challenge. DIU also releases periodic Requests for Solutions (RFS) that describe specific military problems and seek commercial solutions. Additionally, DIU hosts pitch events, engages at industry conferences, and conducts outreach to identify promising companies.
The review process for DIU proposals is relatively fast by government standards. Promising proposals are typically reviewed within 4-8 weeks. DIU technical experts evaluate proposed solutions based on technical merit, feasibility, cost, and potential impact on military operations. Unlike traditional DoD, DIU decisions are made by technical experts rather than by lengthy formal source selection processes.
When DIU selects a company for prototyping, the contract is typically structured as a Phase 1 (feasibility) and Phase 2 (prototype development and demonstration) effort. Phase 1 contracts are usually 3-6 months and $200K-$500K. Phase 2 contracts are typically 12-24 months and $2-5 million, though larger prototype contracts are possible. Throughout the engagement, DIU maintains close technical collaboration with the contractor, often embedding DIU team members in the contractor's development effort.
Transition to Operational Deployment
The ultimate goal of any DIU engagement is transition to operational use. Successful prototypes are demonstrated to relevant military services (Navy, Army, Air Force, etc.). If a military service determines the technology addresses their needs, they take over the technology and fund further development, production, and deployment. This handoff from DIU to military services represents the biggest opportunity for contractors.
DIU has developed specific transition processes. In some cases, military services fund Phase 3 contracts to further develop and scale the technology. In other cases, military services integrate the technology into existing programs of record. The most successful DIU companies are those that understand how to work with military services to integrate their technology into DoD operations.
Timeline from Proposal to Production
A typical DIU path from initial proposal to operational deployment looks like: Proposal submission; Review and decision (1-2 months); Phase 1 prototyping (3-6 months); Phase 2 prototype development (12-24 months); Military service evaluation and transition decision (2-6 months); Production and deployment (1-3+ years depending on the technology). Total timeline from proposal to operational deployment is typically 2-4 years, significantly faster than traditional DoD acquisition.
Artificial Intelligence and Machine Learning
DIU has invested heavily in AI/ML technologies with applications across defense. Recent initiatives have focused on natural language processing for intelligence analysis, computer vision for autonomous systems, predictive maintenance using machine learning, and AI-enabled decision support systems. Companies with AI expertise in areas like video analysis, sensor fusion, or predictive analytics have significant opportunity with DIU.
Autonomous Systems and Unmanned Vehicles
DIU is working on autonomous ground vehicles, aerial systems, and autonomous swarms for military applications. This includes both tactical autonomous systems for specific missions and autonomous vehicles for transportation and logistics. Companies developing autonomous platforms, autonomous control software, or autonomous perception systems are relevant to this focus area.
Biotechnology and Synthetic Biology
DIU is exploring biotech applications for defense, including rapid diagnostics, bioproduction, and biotechnologies relevant to military health and personnel protection. This is an emerging area for DIU and represents opportunity for biotech companies seeking to apply their technologies to military problems.
Cloud Computing and Modern IT Infrastructure
DIU has actively pursued cloud computing solutions to modernize DoD IT infrastructure. Successful cloud transitions have demonstrated how commercial cloud providers can support DoD workloads while maintaining security and compliance. This has led to major transition opportunities, including expansion across DoD services.
Cybersecurity and Secure Communications
DIU has worked on advanced cybersecurity solutions, secure communications technologies, and zero-trust security architectures. Companies developing innovative cybersecurity tools, threat detection systems, or secure communications protocols have opportunity with DIU.
Advanced Manufacturing and Materials
DIU has explored advanced manufacturing techniques (3D printing, additive manufacturing, etc.) and advanced materials relevant to military applications. This includes lightweight composites, high-strength materials, and manufacturing processes that could reduce costs or improve performance of military systems.
Directed Energy and Hypersonics
These emerging technology areas represent high-interest focus areas for DIU. Companies with expertise in directed energy weapons, hypersonic vehicle design, or hypersonic flight control systems are relevant. These are typically more sensitive areas requiring security clearances and classified work.
Step 1: Understand DIU's Mission and Focus Areas
Before approaching DIU, thoroughly understand the organization's mission and current focus areas. DIU's website lists active focus areas, recent success stories, and information about the organization. Understanding DIU's emphasis on rapid prototyping, technology transition, and commercial innovation will help you position your approach appropriately.
Step 2: Map Your Technology to Military Problems
DIU doesn't just want interesting technology; they want solutions to specific military problems. Map your technology to military challenges. How does your AI/ML solution improve military decision-making? How does your autonomous system enable new military capabilities? How does your cybersecurity innovation protect military networks? Making this connection clear is essential.
Step 3: Prepare an Unsolicited Proposal or Respond to RFS
You can submit an unsolicited proposal to DIU describing your technology and its military application. The proposal should be concise (typically 10-20 pages), technically clear, and focused on the problem your technology solves rather than a lengthy technology description. Alternatively, monitor DIU's Requests for Solutions (RFS) and respond to those that align with your capabilities. RFS documents describe specific military problems and what DIU is seeking.
Step 4: Prepare for DIU Evaluation
DIU evaluates proposals based on: Technical merit and feasibility of the proposed solution; Relevance to military operations and strategic challenges; Cost-effectiveness compared to alternative approaches; Company's ability to execute the prototype; Market potential and transition likelihood. DIU may request meetings to discuss your proposal and better understand your team and capabilities before making a decision.
Step 5: Position for Phase 1 Feasibility Contract
If DIU is interested in your technology, they typically start with a Phase 1 feasibility contract ($200K-$500K, 3-6 months) to demonstrate technical feasibility and begin prototype development. This Phase 1 is an opportunity to prove your technology works and build credibility with DIU before larger Phase 2 investments.
Step 6: Excel in Phase 1 and Prepare for Phase 2
Success in Phase 1 leads to Phase 2 contracts ($2-5 million+, 12-24 months) where you'll develop a working prototype and prepare for transition. In Phase 2, DIU becomes more deeply engaged in your development process. Expect site visits, technical reviews, and close collaboration with DIU engineers.
Step 7: Plan for Military Service Engagement and Transition
Throughout your DIU engagement, keep the transition to military services in mind. Understand which military service (Army, Navy, Air Force, SOCOM) is the primary customer for your technology. Engage with that service's program managers and advocates. Understand their requirements, acquisition timelines, and how your technology fits into their plans. The best DIU companies actively manage the transition to military services.
Step 8: Prepare for Phase 3 and Production
If a military service commits to transition your technology, DIU funding typically ends and military service funding begins. Phase 3 contracts may be funded by the military service for further development and integration. Production contracts with the military service follow if the technology proves successful. Being prepared to scale from prototype to production is critical.
Step 9: Build Long-Term Defense Relationships
Even after DIU engagement ends, maintain relationships with the military service that adopted your technology and with DIU. Military service contracts for sustainment, upgrades, and future capabilities may follow. DIU may identify new applications of your technology in other military services or focus areas. Long-term success comes from building lasting relationships with DoD.