US Government IT Contracts Are Too Big to Even Start, Let Alone Fail

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4Q 2021 | IN-6306

This paper provides an insight on US government IT contracts and how they are so large that litigation surrounding their awarding to companies can grind them to a halt. We ask if this is right and how it can be prevented.

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Double Digit Billion Dollar IT Contracts Awarded

NEWS


The United States’ National Security Agency (NSA) handed out two multi-billion dollar contracts over the summer of 2021. The largest, codenamed “WildandStormy” is reported to be worth ten billion US dollars and was awarded to Amazon Web Services (AWS). Details of the timing of the contract award are sketchy but as the deal came to light in early August 2021, the contract was almost certainly awarded prior to that given that the sole competitor bidding against AWS was Microsoft. Microsoft filed a bid protest with the Government Accountability Office (GAO) on the 21st of July 2021. These two bidders are no strangers to litigation when it comes to government IT contracts; in late 2019, when the ten billion-dollar JEDI (Joint Enterprise Defense Infrastructure) cloud modernization contract was awarded to Microsoft by the Trump administration, Amazon immediately challenged the contract award as illegal. In July 2021, after nearly two years of litigation and after failing to even get started the US Department of Defense (DOD) cancelled the JEDI contract. The ten-billion-dollar national defense solution that JEDI was intended to provide is now two years further away from delivery. The real cost of that delay will only be known to DOD insiders, as Pentagon officials have described the project as critical to advancing the US military’s technological advantage over adversaries and given the size of the spend, the impact of the delay will be significant.

Losing Party Challenges Cost Big, What Is the Alternative?

IMPACT


Considering the size of the IT contracts that the US government is awarding, is it any wonder that losing parties are mounting legal challenges?

In the case of the JEDI contract, Amazon brought a lawsuit against the DOD that claimed political bias influenced the awarding of the contract. To many people, any unfair bias should warrant a challenge, but is it right that these challenges can prevent a time sensitive project of significant national interest from being delivered?

One of the problems the US government and the DOD is facing is the sheer complexity and scale of the IT solutions they require. In the not so distant past, a new or joint government initiative would have been considered to deal with such headaches but present-day thinking is that outsourcing to a single entity is the most efficient way of dealing with a complex technical problem. But that means awarding one all-encompassing, administration-spanning contract that is likely to attract legal and political challenges.

One solution would be splitting these large and complex solutions up into components, putting them out to tender, selecting best of brood, then connecting them, and making them work seamlessly together. It would require a huge and coordinated effort, but surely this is something that a government can achieve?

Return Of The JEDI

RECOMMENDATIONS


The JEDI project has been replaced with a new DOD cloud initiative, the Joint Warfighter Cloud Capability (JWCC). With the JWCC, the DOD have stated that it will be a multi-cloud/multi-vendor Indefinite Delivery-Indefinite Quantity (IDIQ) contract. With reference to the original JEDI project, the DOD explained that the multi-cloud approach was necessary due to “changes in user requirements to leverage multiple cloud environments to execute mission” and that “a new way-ahead is warranted to achieve dominance in both traditional and non-traditional warfighting domains”.

It is understood that initially only AWS and Microsoft meet the DOD’s Cloud Service Provider (CSP) requirements, although “other cloud service providers may be considered” and that “additional market research that we're doing between now and mid-October this year will enable us to be able to engage those vendors directly”. It is understood that those CSP’s are Google, Oracle, and IBM. We should expect to learn more by mid-October regarding who has been invited to tender for the contract, and an announcement regarding those who have won a slice of the contract is expected in April 2022.

It appears, with this latest announcement, that the DOD wants to make progress with its project to advance the US military’s technical capabilities, but it has also recognized that to maintain that progress it may need to break the contract down to share amongst multiple CSP’s. Awarding the unlimited contract to multiple CSP’s will serve to avoid supplier risk, diversity of suppliers will also provide technical agility, and give everyone at the table a stake that can be scaled up, or down, at will. Perhaps this approach will give the US government and the DOD the leverage it needs to prevent legal challenges and get on with the business of building complex technical systems to protect the country.

When considering the hyperscaler market, will we now start to see the hyperscalers working more closely together? Will smaller domestic and global contracts be structured in a similar fashion to the JWCC contract, to alleviate supplier risk and build in technical agility? As it would mean that the competing service providers would need to integrate closer with each other whilst at the same time competing for more of the available revenue, this can only deliver better value for the consumer.

 

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