Inspector General complaint alleges DIU Director Michael Brown’s agency used federal hiring tools to hire friends, but office says it’s competing for talent.
The Department of Defense Inspector General is looking into allegations that a Biden nominee tapped to be the Pentagon’s chief acquisitions officer circumvented federal hiring regulations during his tenure at a DOD technology incubator.
Michael Brown was nominated April 2 by the White House to be the under secretary of defense for acquisition and sustainment. Since 2018, Brown has led the Pentagon’s Defense Innovation Unit, or DIU, a Silicon Valley-headquartered agency that former Defense Secretary Ash Carter established in 2015 during the Obama administration to speed innovations from the private tech sector to DOD.
In a formal complaint to the Pentagon’s inspector general, Bob Ingegneri, who resigned as DIU’s chief financial officer in May 2020, identified a half-dozen employees, including himself, who he said had received special treatment, such as having job descriptions specifically tailored to their skillset to eliminate other applicants.
A defense official familiar with the matter said Wednesday the IG is investigating the complaint but had not yet decided to launch a formal investigation.
Ingegneri also alleges other potential violations, including that DIU leadership was “continually adding funds to a firm-fixed-price contract” in order to direct raises to specific employees at private companies working with the office.
In interviews with Defense One, Ingegneri explained what motivated him to file a complaint that put his own hiring into question.
“At the time of my hire I didn’t know I was receiving special treatment,” Ingegneri said on Wednesday. “DIU always tries to get around government rules and regulations instead of operating within them. I believe in duty, honor, country and integrity first, service before self, and excellence in all we do. I believe these are lacking in DIU.”
Since it was established with just a handful of employees, DIU has grown to a staff of 62 civilian and military personnel who have vetted thousands of commercial bids to create innovative solutions for the defense department. For example, the latest DIU solicitation seeks corporate solutions to hybridize the military’s fleet of tactical vehicles and reduce their fuel consumption.
But hiring and management decisions made by Brown may have run afoul of federal regulations, according to the IG complaint filed by Ingegneri. The claims in the complaint were corroborated by a second person familiar with those decisions at DIU, who spoke to Defense One on the condition they not be identified.
Instead of hiring technology liaisons via temporary federal rotations, under a classification called highly qualified experts, or HQEs, Ingegneri said that for a few hand-picked personnel, DIU offered permanent government employment “by-name, [instead of] competed; intentionally circumventing government processes and putting obstacles in place to ensure only our friends are selected,” according to his complaint.
The circumvention defeated the purpose of rotating in new leadership and connections at DIU to generate fresh ideas and ties to non-traditional technology vendors, said the person familiar with the IG complaint.
“When you shortcut the system, those people who should have the opportunity at those positions aren't given the opportunity,” they said.
Of the 62 employees at DIU, 36 are military personnel, either active duty, reservists or members of the National Guard. Among the 26 civilians on staff, only six were hired through the federal competitive hiring process, said DIU spokeswoman Johanna Spangenberg Jones, while 10 joined through direct hiring authority and 10 were hired as HQEs, according to data provided by DIU.
DIU was provided a copy of the allegations for comment, which Ingegneri had also emailed to Brown and others prior to his May 2020 resignation.
Mike Madsen, DIU’s director of strategic engagements, did not comment on the specifics of the complaint, but said the agency used a variety of federal hiring tools to be competitive with the private sector.
“Defense Innovation Unit leverages a variety of U.S. government and DOD competitive and direct hiring authorities to attract the expertise needed to execute its unique mission, in order to provide the speed and agility not always available to DOD in today’s competitive hiring landscape,” Madsen said.
DIU recently brought on a new director tasked specifically to “help us continue to identify the diverse, talented staff to meet tomorrow’s emerging technology needs,” he said.
“DIU has put together a competitive, requirements-based review process for all potential DIU candidates that requires an interview with at least three DIU leaders and a scoring process.”
In a phone interview, Ingegneri confirmed to Defense One that he had been contacted by a Department of Defense Inspector General investigator last week. Ingegneri filed his complaint in November, then reached out to the IG again after Brown’s nomination was announced earlier this month.
“The reason I resigned was, I truly believe in the mission of DIU,” Ingegneri said. “But the way we go about it internally ate away at my moral compass. I needed to get out.”
The person familiar with the complaint corroborated Ingegneri’s allegations and said that the agency had become a place to hire or contract with friends, not necessarily the person or skill set most needed by the agency.
“There is no strategic vision,” the person familiar with the DIU IG complaint said. “It’s mainly driven by people that they like.”
“They think that they’re here to operate outside of the government,” the person said. “You can’t operate outside the government within the government. Technology-wise, to bring that outside expertise in? Absolutely. But not for other things. Not for money, not for personnel hires, not for any of that stuff because there’s laws and rules that cover that.”
In the complaint, Ingegneri also alleges employees at some of the firms that had contracts with DIU, and who had connections to the agency’s leadership, “reached out to government leads stating that they do not make enough money.”
“Next thing you know, the DIU leadership is going to the company, asking for that person to get a raise,” the person familiar with the complaint said. “But we have firm-fixed-price contracts. So there’s no way to do raises on those types of contracts, unless you change the terms of the contract, which they have tried to do a couple of times.”
DIU has come under increased scrutiny from Congress over the last several years for awarding the bulk of its contracts to California-based firms. Its leadership is almost all white males.
A former congressional staff member who was familiar with DIU’s funding said that when lawmakers approved DIU’s now $105 million budget, “we have been very clear … that it is not to be abused by bringing in retired colonels,” the former congressional staff member said.
Overall, the former staff member said DIU had done a good job of bridging the gap between the Pentagon and the private sector, but that the agency is favoring coastal cities and not reaching out to middle America.
“How do we expand it outside of those three perceived technology hubs?” the staff member said, citing DIU’s Silicon Valley headquarters and satellite sites in Austin and Boston. “Flyover country is largely ignored.”
Ingegneri said even if Brown is confirmed, he hoped that by speaking out it would bring attention and change to DIU.
“DIU is pushing the limits and is probably crossing the line,” Ingegneri said in the complaint. “Again, DIU's mission is awesome. The people are awesome. We just need to change the culture.”