Single-Source Cloud Effort Triggers Concerns of Waste, Monopoly

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By Sam Skolnik

The recent Defense Department request for information about how best to acquire cloud computing services is causing contractors and several trade groups to issue stern warnings about the potential effects of choosing just one cloud provider.

The most dramatic possible impact: If DOD decides to work with only one company to re-engineer a new cloud framework — as the CIA has done — the Pentagon could scrap billions of dollars in existing cloud contracts.

The issue may be reaching a head with CSRA, an IT services contractor that in June was awarded a three-year, $498 million contract to provide DOD with a private cloud infrastructure under the milCloud 2.0 program.

Now, CSRA is being forced to prepare for the possibility that milCloud 2.0, which its CEO called a “game-changer” for the company, may be ended.

“It would be a massive mistake to go to a single cloud provider,” George Batsakis, CSRA’s executive vice president and chief growth officer, told Bloomberg Government.

If DOD decides to go that route, “it would be tough for us, and bad from a business standpoint,” he said.

Industry Input

Contractor trade groups including the Professional Services Council (PSC), the Coalition for Government Procurement, and the IT Alliance for Public Sector (ITAPS) decried DOD’s RFI because they said it appeared to be leaning toward a single-provider approach, which could net one company as much as $10 billion in profits and freeze out other would-be providers.

“We are concerned with reports regarding a single-award cloud contract for the Department Enterprise, as well as possibly canceling all awarded DOD cloud contracts leaving the Department with only one cloud solution,” Trey Hodgkins, ITAPS senior vice president for the public sector, wrote Nov. 17 to Ellen Lord, DOD’s undersecretary for acquisition, technology, and logistics.

At issue is the idea that contractors have interpreted the words “solution” and “award” (singular) to mean DOD is leaning toward a single cloud provider.

“DoD is seeking targeted industry input on how best to approach and structure the planned solicitation to acquire a modern enterprise cloud services solution that can support unclassified, secret, and top secret information,” the Oct. 30 RFI says, noting that “a contract award is planned for fiscal year 2018.”

All three contracting groups responded to the RFI by warning that effective monopolization of cloud services — instead of using several companies’ cloud services for various Pentagon agencies, components, and functions — could limit DOD’s ability to take advantage of technological innovations offered through the commercial marketplace.

This, in turn, could hinder cybersecurity protections, they argued.

64 Responses

The Pentagon is planning to issue a cloud contract award in the fourth quarter of fiscal 2018, or between July 1 and Sept. 30 of next year, Commander Patrick Evans, a DOD spokesman, told Bloomberg Government in a written statement.

DOD plans to hold at least one industry day and also aims to release a draft solicitation for industry comment, Evans wrote.

The agency has received 64 “comprehensive and informative” responses so far to the RFI, Evans wrote. Most contained proprietary information, and none is available for public disclosure. “DoD is using the RFI responses as part of its market research to inform the acquisition process,” he wrote.

DOD officials including Defense Secretary James Mattis visited tech company representatives in Silicon Valley and Seattle this summer, spurring the formation of the Defense Department Cloud Executive Steering Committee.

“While technological modernization has many dimensions, I believe accelerating the Department of Defense’s adoption of cloud computing technologies is critical to maintaining our military’s technological advantage,” DOD Deputy Secretary Patrick Shanahan wrote in a Sept. 13 memo to top Pentagon brass.

DOD’s need for the RFI and for the adoption of new cloud solutions could lead to cost savings for the Pentagon, McLean, Va.-based federal contracting consultant Jon Etherton told Bloomberg Government.

“DOD really has been pushing to streamline and reduce costs to better support the war-fighting mission,” Etherton said.

‘Game-Changing Capability’

There is precedent for a multi-tentacled federal behemoth to contract with single cloud provider.

The CIA and 15 other intelligence agencies enlisted Amazon Web Services in 2013 to build a computing cloud on CIA premises through a 10-year, $600 million contract.

Since then, Amazon has been building cloud capability across several classification levels, including sensitive, secret, and top secret. Amazon unveiled its AWS Secret Region cloud for the CIA and other intelligence agencies this month.

An Amazon spokeswoman declined to answer a list of questions, referring Bloomberg Government to a Nov. 28 AWS conference in Las Vegas, in which the CIA’s director of digital futures, Teresa Smetzer, praised Amazon’s work for the agency as “game-changing.”

“[F]or the first time, we have a common set of tools, a constant flow of the latest technology, and the flexibility to scale rapidly to meet mission demands,” Smetzer said, according to a press account. “This is a game-changing capability.”

Winning the Day

Several companies — including AWS, Alphabet Inc.'s Google, and Microsoft Corp. — possess worldwide cloud infrastructure, and could benefit if DOD decides to take the single-provider route, Batsakis said.

Contractor trade groups and individual companies such as CSRA said they want DOD to engage with commercial cloud contractors. But to be most effective, the emphasis must be on “contractors,” plural, they said.

“DoD should acquire cloud services and deploy cloud capabilities where necessary, such that DoD organizations have the ability to migrate their services and capabilities to another (cloud service provider) later,” PSC officials wrote in a memo to Shanahan in response to the RFI. “Otherwise DoD could face challenges of vendor lock-in that limit future innovation and increase costs.”

Batsakis said DOD should maintain a “hybrid cloud” environment that uses a mix of on-premises, private cloud, and third-party public cloud services.

He said he believes DOD will decide not to engage with only a single cloud provider — that the strength of the arguments against it will win the day.

Successful completion of the milCloud 2.0 contract should be seen as important to DOD, Alan Chvotkin, PSC’s executive vice president and counsel, told Bloomberg Government. “I think it would be a mistake to trash that contract and start over,” he said.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bgov.com

To contact the editor responsible for this story: Daniel Ennis at dennis@bgov.com

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