The Pentagon’s official website for DEOS, the Defense Enterprise Office Solution.
WASHINGTON: It’s a good news, bad news Friday for General Dynamics Information Technology.
SOURCE: DoD estimated contract value over 10 years (5-year base contract & five years of options)
The good? GDIT gets to keep the contract for DEOS, the Defense Enterprise Office Solution, which will move legions of users to cloud-based Microsoft Office 365 software. That news must come as a relief after 14 months of delay, caused by losing bidder Perspecta’s protests against the original August 2019 award. (Formally, that award went to CSRA LLC, but GDIT bought the company after it submitted its bid). That said, while the Pentagon has now reaffirmed the award, Perspecta could still sue and ask a judge to overturn it.
The bad? Buried in the last paragraph of today’s General Services Agency announcement that the government has “re-awarded” the DEOS contract to GDIT, there’s a new, much lower estimate of its potential value. In August 2019, the Defense Department estimated DEOS could be worth up to $7.6 billion over 10 years (a five-year base contract plus five years of options). Today, it estimates DEOS’s potential 10-year value at just $4.4 billion – a reduction of 42 percent.
That news won’t be so welcome at General Dynamics. Nor is GDIT the only major government contractor that must be wondering whether a Pentagon cloud mega-contract it won will ever materialize.
The Pentagon’s plan to consolidate many — but not all — of its 500-plus cloud contracts into a single Joint Enterprise Defense Infrastructure (JEDI). Note the suggestion that the single “pathfinder” contract for JEDI might evolve into multiple JEDI contracts.
Like GDIT, Microsoft won a multi-billion-dollar Pentagon cloud contract last year, the Joint Enterprise Defense Infrastructure, estimated to be worth up to $10 billion over 10 years. Like GDIT, Microsoft then suffered through a long delay after a losing bidder, Amazon, sought to overturn the award. Like GDIT, Microsoft was re-awarded the contract by the Pentagon this fall. Unlike GDIT, Microsoft hasn’t seen its contract value shrink – but JEDI remains on hold while the Pentagon seeks to reverse a court order freezing it, a legal process which will take at least until December.
“You have to wonder about the government’s strategy with its continued focus on these winner take all 10 year procurements,” AEI defense acquisition expert Bill Greenwalt told me, “especially in an environment such as cloud, where technology and solutions are changing rapidly.”
Bill Greenwalt
“This looks like another one of those examples that you want to scratch your head and question why our procurement process works the way it does,” said Greenwalt, a veteran of acquisition reform battles in the Pentagon and on the Hill. “No one looks like real winners here. GDIT lost potential revenue and, I would expect, profit. Perspecta just lost out. The government lost out on time, but I would also expect in innovation and service quality, as something has to give when you force a contractor to almost cut its price in half.”
Greenwalt wasn’t the only exasperated observer.
“Why is it so hard to award cloud contracts?” one industry expert asked me. To be specific, the expert added, the issue is big cloud contracts. The Defense Department says its various services and subcomponents have more than 500 clouds. But the Pentagon’s attempts to consolidate cloud computing keep running aground.
“It seems to me as long as you keep the scope narrow and the customer focused, they’ve got plenty of them out there,” the source said. “The challenge seems to be getting something DoD-wide.”
In the DEOS case specifically, the government accidentally leaked confidential pricing information from Perspecta’s bid to GDIT. That potentially unfair advantage set off the initial protest. With JEDI, the issue was conflicts of interest, ranging from DoD employees with Amazon connections to President Trump, who has a vendetta against Amazon owner Jeff Bezos. In both cases, big ambitions ran afoul of seemingly basic mistakes in process.
Charles Tiefer
“They seem to be unable to adapt the well-understood procurement processes, well understood traditional procurement processes, to the new cutting edge-cloud contracts.” said congressional counsel turned law professor Charles Tiefer.
With DEOS in particular, “I’m amazed [that] they shrunk the contract from the original $7.6 billion to $4.4 billion,” Tiefer told me. “Did their IT needs shrink? Or, more likely, are they cutting their losses on this bungled contract?”
The GSA and DoD didn’t provide any specific reasoning for either re-awarding the contract to GDIT or cutting the value, and both agencies declined to comment for this article. All we have so far is a press release saying that, after the protest, “GSA elected to take corrective action, amended the solicitation, received and evaluated new quotes, and made an award to the vendor that was determined to provide the best value to the government.”
Corrected Nov. 2. The original version of this article referred to “CRSA LLC,” a typo. The actual name of the company is CSRA, as stated in the corrected version of the article above.
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