The No. 1 Reason Tech Firms Won’t Work With Defense Department

The Defense Department is making a big push to attract companies in Silicon Valley like Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB), but venture capital firms are warning fledgling companies to stay away, said an Air Force acquisition official.

The number one reason why tech firms are leery of working with the Pentagon is overseas trading restrictions, Camron Gorguinpour, the director of transformational innovation for the Air Force, told IBD.

Many tech firms are worried that if they do DOD work, they won’t be able to sell their technology overseas or will have to jump though several hoops before getting permission — issues that traditional defense contractors like Lockheed Martin(NYSE:LMT) and Northrop Grumman (NYSE:NOC) face.

But the Pentagon is looking at ways to relax some restrictions as it hopes to build better relationships with Silicon Valley, Gorguinpour said in an interview at an Air Force Association event.

Lockheed shares climbed 1% to close at 204.76 in the stock market today. Northrop shares dipped 0.4% to 166.78. Apple shares rose 0.6% to end the day at 115.00. Facebook shares edged up 0.5% to 94.41.

Silicon Valley and the Pentagon have been at odds recently, especially after Edward Snowden’s leaks pertaining to government surveillance.

Those strains added to the already vast cultural differences between the two sectors — the slow moving, rigid, formal Pentagon and the rapidly developing, informal, creative tech firms.

The Pentagon has tried to bridge the divide by opening an office in Silicon Valley as it looks to beef up its cybersecurity and build advanced weapons more quickly.

Last month, Defense Secretary Ash Carter announced funding for the Flexible Hybrid Electronic Institute in San Jose, Calif., led by the FlexTech Alliance. It’s a consortium of 162 companies, universities and nonprofits that includes Apple, Applied Materials (NASDAQ:AMAT), Hewlett-Packard (NYSE:HPQ),Boeing (NYSE:BA), Lockheed, and General Motors (NYSE:GM).

He also visited LinkedIn‘s (NYSE:LNKD) headquarters to find out how the Pentagon can compete for new employees in tech. In an earlier trip to Silicon Valley, Carter met with Facebook officials.