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The Pentagon is doing AI innovation right by letting companies bring ideas with 'wires hanging out' to the table, industry insider explains


Soldiers of the 157th Infantry Brigade, First Army Division East, take advantage of the Dismounted Soldier Training System.

  • The Department of Defense released its artificial intelligence strategy in February, writing that it is working toward "the creation of a force fit for our time." 
  • To accelerate the pace of innovation, the Pentagon is increasingly relying on Other Transactions Authority (OTA) contracts, creating more prototyping, research and development opportunities.
  • "What they're allowing us to do through the OTA process is they're creating an environment where it's okay to innovate," a Raytheon senior solutions architect told Business Insider.
  • OTA prototyping jumped from $1.4 billion to $3.7 billion, with the number of awards rising from 248 to 618, between 2016 and 2018, the Government Accountability Office revealed in a recent report.

The Department of Defense is giving its industry partners room to make mistakes, explore, and innovate in the field of artificial intelligence through the use of non-traditional contracts, an industry expert explained to Business Insider in a recent interview.

AI is not like the atomic bomb, but it is a revolutionary enabler, something like electricity, and it is being intensely explored by both the US and its great power rivals.

The US military is striving to make advancements in AI for "the creation of a force fit for our time," the DoD Artificial Intelligence Strategy released in February says, adding, "We cannot succeed alone."

One of the ways the Pentagon is bypassing the bureaucracy that has traditionally been a hindrance to rapid innovation is Other Transactions Authority (OTA) contracts.

The defense department is increasingly using this type of contract, a special agreement for department prototyping, research, and development projects, to make forward progress in new areas.

Between 2016 and 2018, OTA prototyping jumped from $1.4 billion to $3.7 billion, a recent Government Accountability Office (GAO) report revealed. The number of OTA prototyping contracts increased nearly 150 percent from 248 to 618.

Illustration of a soldier in a simulated training environment enabled by AI and augmented reality advancements

"What they're allowing us to do through the OTA process is they're creating an environment where it's okay to innovate," Corey Hendricks, senior solutions architect at Raytheon, recently explained to Business Insider.

"It's okay for us to bring them the latest technology advancements that haven't gone through the rigor of extensive testing," he added, explaining that DoD has "allowed us to bring them a prototype where there might be a couple of wires hanging out, if you will, but they can see a roadmap where this is a viable product."

Hendricks characterized the OTA approach as a "fantastic change" from the traditional contracting process, which put a lot more restrictions on innovation.

This contracting option, which has been around for decades but has recently been expanded, gives industry more freedom to address obstacles to AI development, such as computing and communications.

Raytheon, a leading defense contractor, is currently looking into the use of AI and machine learning for US military training, specifically simulated training environments and real-time analysis.

"It also brought a large corporation like Raytheon closer to small businesses," he further explained. "It really does cultivate that culture of innovation."

The GAO revealed in its recent report that 88 percent of the OTA contracts awarded since 2016 went to companies with which the Pentagon has not traditionally done business with, including many small businesses.

While more extensive use of OTAs is an improvement, it remains to be seen how DoD intends to move past the preliminary innovation and prototyping stages to the mass production of new technologies.

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