Recent budget cuts have forced Defense Department and Defense Intelligence Agency officials into a bind when working with small businesses and entrepreneurs.

The Pentagon wants to encourage additional small business purchases, but leaner budgets make it riskier to take chances on entrepreneurs who don't have the track records of the larger defense companies, said Dan Donley, the chief innovation officer at the Defense Intelligence Agency.

On the other hand, Donley said leaders at the DIA realize the smaller, more agile companies could possibly develop the next generation solutions to the U.S. military's most challenging problems at a cheaper cost.

"The government is moving in two different directions. Because of austerity, the government is more tightly controlling business. History has told us that every time you do that ... you can't adapt," Donley said. "Other circles see that because of austerity the entrepreneurs are a different way of doing things."

Donley was one of many DIA and Defense Department program managers who met with about 100 entrepreneurs and small business leaders Wednesday in Arlington, Va., at Tandem NSI's Deal Day to explain the government contracting process and highlight areas where the Pentagon needs new ideas and innovations.

Patrick G. Carrick, director of the Air Force Office of Scientific Research, outlined a few of those fields highlighting hypersonics, biosensing of magnetic fields and superconductivity as areas where the military is focused.

"Hypersonics is hot right now," Carrick told the crowd of entrepreneurs referring to the engines that engineers are developing to travel up to speeds of Mach 5 and above. He said scientists are also researching biosensing of magnetic fields in order to develop navigational tools for troops traveling through regions where GPS signals might be blocked.

The Defense Department often depends on research from universities and national research labs, but Carrick said it could also be areas where the military leans on the work of entrepreneurs.

Wednesday's Deal Day was one of the first events hosted by Tandem NSI, an organization stood up to help entrepreneurs and small businesses offer their work to the government, specifically national security agencies. Tandem NSI was stood up in February after receiving a $500,000 grant from Virginia by way of the Virginia Federal Action Trust Fund.

The founder, Jonathan Aberman, who also runs Amplifier Ventures, said the Washington D.C. region could compete with Silicon Valley if entrepreneurs can effectively tap into the wealth of government contracts in the region, especially in fields like cyber security or 3-D printing.

Space X founded by Elon Musk is an example of a relatively new company started by an entrepreneur that tackled one of the military's most difficult challenges -- space travel -- and created affordable options for the Pentagon.

David Harris, SpaceX's deputy general counsel, spoke at the Deal Day event. He told the entrepreneurs in attendance that plenty of road blocks exist within the military's acquisition process for small businesses, but the pay off can sometimes be worth it. SpaceX's recent lawsuit against the Air Force to open up competition for more satellite launches is an example of those roadblocks.

Program managers for the Defense Advanced Research Projects Agency said the Pentagon still needs to make progress in attracting small businesses outside the typical defense industry. Mike Geertsen, a DARPA program manager, said many entrepreneurs in Silicon Valley have no idea how the military posts available contracts online.

Donley said the DIA has developed a new website called Needipedia to try and address this problem. It's a website that tries to draw out the numerous acronyms often found in the military contract requests that come in the form of Requests For Proposals (RFPs) and Broad Agency Announcements (BAAs).

"Most people on the West Coast don't even know what Fed Biz Ops is," said Geersten, referring to the website where RFPs and BAAs are posted.

-- Michael Hoffman can be reached at mike.hoffman@monster.com