Pentagon slashes cloud contract
Faced with criticism over how it awarded a contract to move agencies to the cloud, the Pentagon on Monday slashed a deal awarded to an Amazon partner, cutting the amount from nearly $1 billion to no more than $65 million, while dramatically limiting the scope of work.
When the Pentagon awarded the $950 million contract to Herndon, Va.-based Rean Cloud last month it was immediately hit with criticism for showing favoritism to a partner of Amazon Web Services, or AWS, which industry officials fear has an inside track on the Pentagon’s cloud computing work. (Amazon founder Jeff Bezos owns The Washington Post.)
Moving its computing systems to the cloud has become a priority for the Pentagon, which says it will allow it to innovate faster at a time when it fears it is losing its technological edge over potential adversaries, such as China.
The move to curtail the value of Rean’s contract by more than 90 percent comes just two days before the Pentagon is set to host what’s known as an “industry day,” a chance for companies interested in bidding on the Pentagon’s cloud computing contract to hear from government procurement officials.
And it follows weeks of criticisms from some in industry that the procurement wasn’t being handled properly — claims that Pentagon officials strongly denied. Those criticisms peaked last month when Rean won the $1 billion contract to migrate defense agencies’ systems to the cloud. Rivals said it made no sense to pick a company to migrate the services, when the ultimate cloud provider had not yet been chosen.
In response to the Rean award, Oracle filed a bid protest with the Government Accountability Office last month that called the procurement “an egregious abuse” of the procurement process for a contract it charged was “shrouded in secrecy.” And it argued that Rean “serves as a front for AWS” and that its close relationship to Amazon Web Services created a conflict of interest.
Industry officials also lamented the fact that the Pentagon did little to announce the award to Rean, which largely became public when the company issued a news release touting the contract.
Officials with Rean and Amazon Web Services, which already holds a $600 million contract to provide cloud services for the CIA, did not immediately respond to requests for comment.
Last month, Rean founding partner Sekhar Puli said that while the vast majority of the company’s federal work has been with Amazon Web Services, this contract was specifically worded to allow his company to work with any cloud provider that agencies might ask for.
“There is a perception that this is an Amazon contract, but there is little to no truth on that because we were very careful on wording the contract to say it could work with any cloud service provider,” Puli said. “We are not deciding on what cloud the customer should be on. They can pick any cloud they want and our platform would support all of that.”
But since the Pentagon has not yet awarded the larger contract, estimated to be worth billions of dollars over many years, for the Pentagon’s cloud system, it shouldn’t have awarded such a large contract to start moving its systems to the cloud, rivals argued.
“If in fact you’re going to have an open competition and an industry day to have a multivendor opportunity for the cloud, then how does it makes sense to spend a billion dollars to move to Amazon’s cloud before you’ve made the decision of what cloud you’re moving to?” Oracle Senior Vice President Ken Glueck said at the time. “You would think they’d pick what cloud they want to go to first then decide what migration service system needed to move, if any.”
On Monday, the Pentagon backed away from its initial award, saying in a statement that after reviewing the contract it decided “the agreement should be more narrowly tailored” so that Rean would build a prototype service for a single agency, the U.S. Transportation Command, instead of many different agencies within the Department of Defense.
The Pentagon was also criticized because the $950 million contract was awarded by an arm of the Pentagon, known as the Defense Innovation Unit experimental, created to harness the technology and innovation of Silicon Valleytype companies that have traditionally shied away from Pentagon work.
The procurement, a followon to a smaller competed contract, was awarded under what is known as an Other Transaction Authority, a way for the Pentagon to procure goods and services quickly, without being subject to the bureaucratic federal acquisitions process. But industry officials said that a $1 billion award under that authority was unusually high.
Bill Shook, a government contracting attorney who has represented Microsoft as well as firms that work with Amazon Web Services, said Rean should not have been eligible for an Other Transaction Authority contract because cloud services are already available in the commercial market.