• 5 teams competing for contract worth as much as $6.3 billion
• Pressure to `buy American’ could sway choice of lone winner

The U.S. Postal Service, struggling to stem billions of dollars in losses, is drawing close to a decision on a massive new contract to replace its aging mail trucks.

The agency is road-testing five prototype “Next Generation Delivery Vehicle” models for a contract worth as much as $6.3 billion -– a mix of American and overseas-based companies including defense contractor Oshkosh Corp., India-based auto maker Mahindra, and a team of Ohio-based electric vehicle manufacturer Workhorse Group Inc. and VT Hackney, part of a Singapore-based engineering company.

The stakes are high for the contractors and the Postal Service as it seeks to propel itself into the future.

“Postal trucks are so iconic to American suburban life,” Christoph Mlinarchik, a government contracts expert and owner of the consulting firm www.ChristophLLC.com, told Bloomberg Government in a written statement. “This is a high-visibility contract that you simply have to get right.”

The so-called “Next Generation Delivery Vehicles” would phase out the 163,000 trucks designed more than a quarter-century ago by Grumman and Chevrolet. The agency is planning to issue a single award for 180,000 new vehicles that each will cost between $25,000 and $35,000, for an estimated total revenue take of between $4.5 billion and $6.3 billion.

Wanted: Next-Generation Postal Truck, No Driver Required

A LIKELY WINDFALL

The five prototype finalists also include a bid from American-based defense contractor AM General LLC, and a team effort from a Turkey-headquartered Karsan Automotive and Morgan Olson out of Michigan.

The Postal Service could decide to open the process to other companies at the last minute – though it more likely will remain limited to the five prototype teams, according to a lawyer monitoring the process.

The Next Generation contract will far outpace the largest payment the Postal Service reported making in fiscal 2017: $1.6 billion to provide express air transportation to FedEx Corp., according to Bloomberg Government’s Postal Service contracts dashboard.

Rich Ansell, a marketing executive with Mahindra Automotive North America, declined comment. Calls and emails to representatives of each of the six other companies went unanswered.

Workhorse CEO Steve Burns said recently he expects the Postal Service to make its decision by the end of 2018, according to news accounts. Award timing could be key for Workhorse, which, as it attempts to move toward profitability, this month announced a new common stock public offering to raise funds.

LONGER AND TALLER

From fiscal 2018 through 2028, the Postal Service predicts it will spend an average of $821 million per year for vehicles, “primarily driven by a multi-year acquisition of new delivery vehicles starting in fiscal year 2019,” according to a June 2018 report from the Government Accountability Office.

The Postal Service will pay for the new trucks out of its revenues from package deliveries and postage stamp sales.

By today’s standards, the Postal Service submits, the current trucks are unsafe, too small, and burn too much fuel.

On the surface, the new trucks look somewhat similar to the current boxy white models, with their eagle logos and blue-and-red stripes remaining.

Inside, they’ll be significantly different. The Next Generation vehicle – expected to have an 18-to-20-year life cycle – will include airbags, anti-lock brakes and air conditioning, features car buyers have long taken for granted. They’ll also be longer and taller than the current model, with a minimum 1,500-pound payload capacity, 100 pounds more than the current trucks.

The Postal Service also is open to a new truck that uses alternative fuels and energy sources, to save money and be better environmental stewards.

If the agency picks its lone all-electric choice – the VT Hackney/Workhorse bid – the agency is potentially looking at saving hundreds of millions of dollars in gas alone. In 2014, the agency reportedly spent almost $540 million on fuel.

At the same time, the agency is pursuing autonomous technology, which also promises to reduce fuel costs.

“The U.S. Postal Service’s goal is to obtain and operate vehicles that will help us provide reliable and efficient delivery services for customers and honor our commitment to reduce the environmental impact of our fleet, while meeting needs of our employees to best do their jobs safely,” Postal Service spokesman David Partenheimer told Bloomberg Government in a written statement.

BUYING ‘AMERICAN’

Part of the calculus for the Postal Service as it decides which bid to choose will be whether to “Buy American,” as President Donald Trump has urged federal agencies to do.

Agency officials will weigh Trump’s trade policies, and may feel his sting if they make a choice the White House doesn’t like, says Tim Cooke, chief executive officer of ASI Government, a federal acquisition consultancy.

“They’re liable to face a backlash if the award goes to one of the foreign-based companies – a big political backlash,” he told Bloomberg Government.

The key will be how the agency “balances the need for new technology and efficiency with a challenging political environment,” Mike Vernick, a partner with Hogan Lovells in Washington and head of the firm’s government contracts practice group, said.

Complicating factors further is the fact that some bidding companies and teams don’t fall cleanly into the “American” or “foreign” baskets. Though Mahindra is based in India, for example, the company soon will begin making off-road vehicles in a plant outside Detroit.

“In federal contracting, what ‘made in America’ means is often a complex question,” Vernick told Bloomberg Government.

‘DUMBER AND POORER’

The Postal Service has been awash in red ink as online correspondence has eaten away at first-class mail and the agency has been forced to reassess complicated relationships with package carriers FedEx, United Parcel Service Inc. and especially Amazon.

The Postal Service has hemorrhaged $63 billion-plus since 2007, including $1.5 billionin the fiscal quarter ending in June.

Postmaster General and CEO Megan Brennan has blamed the agency’s revenue losses on being forced to adhere to a flawed way of doing business mandated by Congress.

Critics cite different factors. The Post Office made a poor deal by charging too little to deliver Amazon packages, Trump alleged last year. He slammed the agency on Twitter for allowing Amazon to dupe it into becoming “dumber and poorer.”

The post Postal Service Prepares to Splash Out Big Bucks for Mail Trucks first appeared on Federal News Network.

This content is provided by Bloomberg Government.

The General Services Administration is considering creating a governmentwide contracting vehicle for services related to manned and unmanned systems, potentially consolidating billions of dollars annually that now flow through hundreds of contracts.

“GSA is embarking on gathering market research to determine whether there is a need for a government wide contract vehicle for operations, readiness, maintenance, integration, and development of manned, optionally manned, and unmanned platforms, as well as support functions for these platforms,” GSA press secretary Pamela Dixon confirmed in an Aug. 29 email to Bloomberg Government.

The program, known simply as “ATLAS,” is being spearheaded by GSA’s Federal Systems Integration Management Center, or FEDSIM. According to its website, FEDSIM manages $14 billion in total active contracts.

Earlier this year, GSA appointed Mike Donaldson, a 25-year veteran of federal acquisition services, to head up emerging programs at FEDSIM. Until recently, Donaldson was listed as “ATLAS Director” on FEDSIM’s website.

GSA hasn’t yet finalized the scope of the new program, but based on Dixon’s comments, it could potentially deliver a wide range of services supporting the government’s fleet of civilian and military land vehicles, ships, and aircraft. If that’s the case, ATLAS’s scope could be extensive.

The post GSA Planning New Governmentwide Contract for Unmanned Vehicles first appeared on Federal News Network.

Contract spending has grown by almost 6 percent per year over the past five years as federal agencies relied increasingly on governmentwide contract vehicles and simplified acquisition procedures. Bloomberg Government has identified five important spending trends that developed from fiscal 2014 through 2018.

Federal contract spending grew at a rate of about 5.8 percent annually between fiscal years 2014 and 2018. The $560 billion in federal contract spending in fiscal 2018 is the highest level since fiscal 2010, when it hit $562 billion.

The trend suggests that efforts to slow federal discretionary spending — such as the Budget Control Act, which began imposing annual spending caps in 2013 — are having less of an effect as the Trump administration boosts defense spending. Spending could remain above $550 billion in fiscal 2019 and beyond. From fiscal 2008 through 2012, annual contract spending averaged $542 billion.

Federal spending has surged on governmentwide acquisition contractsthat agencies use to buy information technology — to $15 billion in fiscal 2018. The trend suggests that agencies are relying more on GWACs each year to satisfy IT purchases and modernize legacy systems.

Federal spending on small businesses has risen in lockstep with overall contract spending, meaning that the share of federal dollars won by small businesses has remained relatively flat. From fiscal 2014 through 2018, small-business spending has hovered around 22 percent of the market.

Spending on indefinite-delivery contracts outpaced obligations on definitive contracts by about $34 billion in fiscal 2018. The share from fiscal 2014 through 2017 was just about evenly split.

Spending through simplified acquisition procedures (SAP), a government process for buying commonly acquired goods and services that fall below a certain price threshold, has inched up each year since fiscal 2014. In 2018, SAP spending reached the highest amount ever reported. The increase can be attributed to both threshold increases and the fact that SAP allows agencies to cut some red tape.

The post Federal Contract Spending Trends: Five Years in Five Charts first appeared on Federal News Network.

The current backlog of security clearance applications has prompted the Defense Department to seek out industry partners skilled in Agile development methods. The Pentagon wants a contractor to take over management of a new IT system designed to streamline the process for performing background investigations.

According to a request for information released in late December, the Pentagon is looking for vendors to provide “Continuous Development, Operations, and Support” for a soon-to-be-established program executive office that will serve as a governmentwide clearinghouse for security clearance investigations.

This comes as the Quantico, Virginia-based Defense Security Service, or DSS, prepares to take ownership of the process, absorbing responsibilities from the Office of Personnel Management as part of the Trump administration’s ongoing restructuring efforts.

The contractor’s primary responsibility will be to manage and scale newly developed IT platforms designed to automate aspects of the security clearance process, known as the National Background Investigation System, or NBIS.

(Scott McIntyre/Bloomberg)

The Defense Department plans to leverage Agile development and new technology to automate parts of the investigation process.

The solicitation requests information on vendors’ capabilities to provide support services and training for government end users, cybersecurity services to safeguard personal data stored in the system, and risk management and quality assurance functions. However, the RFI’s primary focus is on vendors’ experience applying Agile methods and tools to continuously deliver new software using short iterations, or “sprints.”

“We’ll be releasing new capabilities approximately every three months,” said NBIS program manager Heidi Cotter in a Dec. 18 statement. “We look forward to delivering a comprehensive capability that will modernize the entire background investigation system that can support not only the DOD but also other federal agencies.”

The government has yet to outline its acquisition strategy for Continuous Development, Operations, and Support or specify a ceiling value. Interested parties have until Jan. 18 to respond to the RFI.

TAKING A BITE OUT OF THE BACKLOG

The deployment of the NBIS in fiscal 2019 may mark a turning point in the way the government handles background investigations by shifting from periodic reassessments to a more automated, “continuous evaluation” approach.

In the past, OPM manually reassessed each clearance holder every five to 10 years, a time-consuming process that hampered its ability to vet new candidates. By April 2018, the backlog of security clearance applications pending a background check had reached an all-time high of 725,000.

However, that figure fell below 600,000 by December as the Pentagon assumed management of its own background checks and began to automate aspects of the process. In Dec. 12 testimony before the House Armed Services, Garry Reid, a senior Pentagon official specializing in intelligence and counterintelligence, described NBIS as a “critical enabler,” praising the role of automation in reducing the security clearance backlog and mitigating security risks.

“Our progress to-date would not have been possible without the robust continuous evaluation and automated records capabilities built over the past three years,” he said. These methods “significantly decrease the risk associated with periodic reinvestigations” and “have shown convincing results for early detection of security risks,” he added.

Reid said that DSS plans to expand the continuous evaluation program from the 1.1 million personnel currently enrolled to the entire population eligible for access to classified information by fiscal 2021 – about 4 million as of October 2017.

Others are more skeptical. “The current backlog and wait times add risk to government missions, contract performance, and the ability of both the government and contractors to recruit and hire the talent we need,” wrote David Berteau, president of the Professional Services Council, a Washington D.C. area group representing government contractors.

PSC and three other industry groups expressed support for legislation introduced by Sen. Mark Warner (D-Virginia) intended to streamline the security clearance process and promote continuous vetting practices. Warner’s bill did not pass in the Senate before the end of the 115th Congress, requiring that it be reintroduced in 2019.

WHAT’S AHEAD

In the coming months, the White House is expected to issue an executive orderformalizing DSS’s responsibilities for the governmentwide security clearance program and outlining a plan to merge its workforce and departmental assets with OPM’s National Background Investigations Bureau. According to a November report, the Pentagon plans to rename the combined organization the Defense Counterintelligence and Security Agency.

It’s likely that most of the restructuring will take place over the next two to three years. This gives DSS plenty of time to craft an acquisition strategy for its Continuous Development, Operations, and Support contract and issue an award by the end of fiscal 2020. Contractors should expect at least one industry day, at least one draft RFP, and a highly competitive contract.

Perspecta Inc., the Chantilly, Virginia-based Hewlett Packard spinoff, may be the presumptive front-runner. In June 2018, the Pentagon issued Perspecta a $49 million “other transaction” agreement (OTA) to build the prototype for a crucial piece of NBIS: its case management system.

Perspecta also holds one of four OPM contracts for clearance-related investigative field work through its subsidiary KeyPoint Government Solutions Inc., a contract that has generated $720 million since September 2016. The other three contracts are held by CACI International Inc. ($260 million), General Dynamics Corp. ($204 million), and Securitas AB ($167 million). All four contracts are set to expire at the end of fiscal 2021.

Chris Cornillie is a federal market analyst with Bloomberg Government.

The post Pentagon Seeks Agile Fix for Federal Security Clearance Backlog first appeared on Federal News Network.

This content is provided by Bloomberg Government.

The U.S. Department of Defense has 150 active “other transaction” agreements, or OTAs, on its books, which combined have generated $5.8 billion in spending to date, according to a Bloomberg Government analysis. With a combined ceiling value of $48 billion, these contracts represent key revenue streams for defense contractors and consortia, even if they generate only a fraction of that total over the next two decades.

For years, the Pentagon has looked for ways to streamline the process of acquiring emerging technologies. Lately, OTAs have proven a popular approach. OTAs allow defense agencies to quickly award small research and prototyping contracts to nontraditional suppliers without the need to engage in a months-long competitive bidding process.

Because OTAs aren’t subject to traditional acquisition regulations, they carry a greater risk of project failure, as well as a greater risk of fraud, waste, and abuse. For that reason, Pentagon officials have sought to control these risks by keeping the size of awards low and by being transparent about OTA spending.

To help subscribers understand government spending using OTAs, Bloomberg Government has created a market definition that captures these types of transactions. According to BGOV data, the Pentagon obligated $2.1 billion toward OTAs in fiscal 2017, a 50 percent increase above the previous year’s figure. The U.S. Army accounts for more than half of the Pentagon’s OTA spending, with $3.7 billion in total obligations since fiscal 2014.

ACTIVE OTA AGREEMENTS

An analysis of all 150 active contracts shows that the Pentagon awards OTAs to two types of recipients: either to companies directly, or through what’s known as a consortium, referring to a group of companies organized around issue-areas like electronic warfare or advanced manufacturing. Contracts awarded to consortia are typically then subcontracted to a member company or companies.

Of the $5.8 billion spent on active OTAs to date, about one-third ($1.9 billion) has been issued to individual companies, while about two-thirds ($3.8 billion) were through consortia or consortium management companies.

The single largest recipient of OTA funding is Analytic Services Inc., a holding company for Advanced Technology International (ATI), which manages more than a dozen consortia, including the Medical Technology Enterprise Consortium and the Information Warfare Research Project. The National Armaments Consortium, the most lucrative of ATI’s consortia, has generated $2.3 billion since fiscal 2014.

Also represented in the top five are three of the world’s largest defense contractors: Lockheed Martin Corp. ($350.5 million), Northrop Grumman Corp. ($271.8 million), and Boeing Co. ($259.1 million). These figures represent OTAs awarded directly and do not account for revenue these and other firms receive indirectly through consortia. The amounts they receive through consortia may be substantial and are not publicly reported.

This illustrates why some experts are concerned that OTAs offer large contractors a way to build revenue streams in a way that is unconstrained by most acquisition regulations. This would seemingly conflict with the original intent of offering the Pentagon a way to solicit innovation from nontraditional defense suppliers.

An ATI spokesperson told Bloomberg Government that the Pentagon prohibits it from publicly disclosing how OTA revenues are divided among members of its consortia, but said that the process is both fair and transparent.

“The growth in the number and size of consortia speaks to the confidence in the OTA consortium model by the Government and industry partners using the model,” the spokesperson said. “We do not believe there is a lack of transparency as we routinely aggregate and report at the same, or greater, level of detail than traditional FAR contracts.”

Bloomberg Government has identified more than two dozen consortia representing hundreds, if not thousands, of companies are now angling for Pentagon OTA awards in areas ranging from countering weapons of mass destruction to advanced submersibles.

In contrast to the smaller, shorter OTA agreements the Pentagon reaches with individual contractors, consortium contracts more closely resemble broad agency announcements (BAAs) in that they remain open for years or even decades, and can be worth billions. The total ceiling value of OTA contracts held by consortia or their management companies, such as ATI or the Consortium Management Group Inc., is currently $45 billion, compared to just over $3 billion for OTAs awarded directly to contractors.

In the last two and a half years, the Pentagon has awarded ATI three OTA contracts with ceiling values of $10 billion, one for the Medical Technology Enterprise Consortium, one for the National Armaments Consortium, and one for the Countering Weapons of Mass Destruction Consortium. Although none of the three has yet surpassed even 1 percent of their ceiling values, each one could generate billions over the course of their 10-20 year lifespans.

Similarly, there is $3.2 billion of the original $5.5 billion left on a separate ATI contract for the National Armaments Consortium, which doesn’t end until in March 2022. More than 90 percent of the two $2 billion contracts (here and here) awarded to the Consortium for Command, Control, Communications, and Computer Technologies (C5) is up for competition between now and April 2027.

With substantial values remaining on active consortium contracts and the possibility of additional contracts in future years, small or midsized companies may want to consider joining consortia as an alternative way to bring their prototypes to the federal market.

The post A Closer Look at the Pentagon’s $2 Billion a Year OTA Pipeline first appeared on Federal News Network.

The Defense Department lost out on $28 billion at the end of fiscal 2018 because it let authority to spend the funds expire, according to a report by its inspector general on results of the Pentagon’s first-ever audit.

Money appropriated by Congress expires if it isn’t spent within certain time frames and typically can no longer be used for new spending, according to the IG report.

The Defense Department said that the $28 billion spans five years, starting in fiscal 2013.

“Lost in the wording of the IG report is the fact that the $28 billion actually began expiring in fiscal year 2013,” Pentagon spokesman Lieutenant Col. Joe Buccino said in an e-mailed statement. “The total amount expired is over a five-year period. This is less than one percent of the department’s budget over that time period.”

For example, money in procurement accounts is available for three years, research accounts for two years while money in personnel and operations and maintenance accounts expires after one year.

The Pentagon also faced a unique quandary in fiscal 2018: too much money and too little time to spend it. The Pentagon was funded through stopgap measures for a good chunk of fiscal 2018 before Congress and the White House struck a deal to provide $700 billion for national security, most of which goes to the Pentagon.

The Pentagon’s failure to spend almost $28 billion as revealed by the audit report could hamper its case for more money in fiscal 2020 as a divided Congress will consider the budget request scheduled for Feb. 4. Lawmakers and President Donald Trump also will need to come to an agreement to lift spending caps set to trigger in fiscal years 2020 and 2021. Additionally, Trump is at loggerheads with congressional Democrats over using Pentagon money to build a wall at the southern border.

SAUL LOEB/AFP/Getty Images

The Pentagon fails its first-ever financial audit.

Failed Audit

The Defense Department announced in November that it had failed its first-ever audit as investigators found weak information technology security that could endanger weapon inventories and equipment mislabeled in far-flung warehouses. Auditors found no evidence of fraud in the review of finances that Congress required, even as they flagged a laundry list of problems, including uncontrolled access to computer systems and listing functioning rocket motors as out-of-order, according to Pentagon Comptroller David Norquist, who is now acting deputy defense secretary.

“The road to a clean opinion is not short; it will not happen immediately,” said Glenn Fine, the acting Pentagon inspector general. “Continued progress requires sustained effort and attention throughout the Department.”

In its audit report, the IG said that financial management of inventory and military readiness could be improved if the deficiencies identified are corrected. For example, 107 rotor blades used for Blackhawk helicopters made by Lockheed Martin Corp.‘s Sikorsky unit couldn’t be used but remained on inventory records, one aircraft door wasn’t included in inventory records, 24 gyro electronics for military aircraft included in the inventory records were in a disposal status, and 20 fuel-injector assemblies for Blackhawk helicopters didn’t have supporting documentation to demonstrate which military service owned the assets.

Costly Investigation

Pentagon and congressional leaders expected the Defense Department to fail its first-ever audit, covering $2.7 trillion in assets and $2.6 trillion in liabilities. The Defense Department spent almost $1 billion on the audit, including $413 million on executing the audit in fiscal year 2018, about $406 million on audit remediation, and $153 million on financial system fixes, according to a fact sheet provided by the Pentagon.

(Updates first and third paragraph to reflect Defense Department statement)

The post Pentagon Whiffed on Spending $28 Billion as Time Ran Out first appeared on Federal News Network.

Security risks and concerns about excessive complexity were among the factors leading the Pentagon to choose a single-award contract for its Joint Enterprise Defense Infrastructure (JEDI) cloud contract, a Government Accountability Office ruling reveals.

The GAO on Nov. 19 published a 19-page decision ruling against Oracle Corp.’s JEDI bid protest, five days after issuing a news release explaining its decision.

GAO said that none of the three legal challenges raised by the Redwood Shores, Calif.-based database giant were supported. The government’s top watchdog ruled that the Defense Department’s decision to seek a single vendor for JEDI was consistent with federal acquisition regulations, that the department has provided reasonable support for certain JEDI requirements, and that there is no basis for claims of conflict of interest between the Pentagon and Oracle competitor Amazon Web Services LLC.

Bloomberg Government has analyzed the key issues raised by GAO’s decision to assess how they may affect the future of the JEDI acquisition and its upcoming legal challenges.

1. The Pentagon’s single-award approach was driven by concerns about limiting IT complexity.

In testimony before the GAO, Tim Van Name, deputy director of the Defense Digital Service (DDS), explained that the Pentagon’s departmentwide adoption of cloud computing would be “pretty technically complex,” citing the need to integrate a variety of legacy systems and bring the federal IT workforce up to speed on cloud computing.

“Doing that for a single solution provided to the Department by either a vendor or a team of vendors is a big lift already. Trying to do that for multiple solutions, with the Department operating as the integrator, would be exceedingly complex. And I don’t think we would be successful,” Van Name said.

The contracting officer overseeing JEDI, Chanda R. Brooks, determined that issuing multiple awards wouldn’t offer the Pentagon more favorable terms and pricing or provide benefits that would outweigh the costs of administering multiple contracts. According to Brooks, issuing multiple awards would “introduce technical complexity in a way that jeopardizes successful implementation and increases costs.”

2. The Pentagon determined that a single cloud would be more secure than a multi-cloud environment.

As experts have observed, when evaluating a single cloud against a multi-cloud environment, it’s necessary to weigh the risks of creating a single point of failure against that of multiplying the number of seams and access points, where cloud environments are most vulnerable.

The Pentagon determined that the multi-cloud approach posed the greater risk: “While security of data within a single cloud is largely standard and automatic, managing security and data accessibility between clouds creates seams that increase security risk,” Brooks wrote in her decision.

She said that moving data across clouds “requires complex manual configuration that is prone to human error and introduces security vulnerabilities” and that “systems in different clouds, even when designed to work together, require complex integration.”

3. The Pentagon plans to run 80 percent of its applications in JEDI.

The Pentagon’s goal “is for the JEDI Cloud to host 80 percent of current DoD applications,” according to a Sept. 24 memorandum. For months, defense officials have insisted that JEDI will be only one of several programs in its cloud ecosystem, albeit the biggest one. Though that may be the case, this is a clear signal of just how central JEDI is to the Defense Department’s IT strategy over the next decade.

What isn’t clear at this stage is which applications will be migrated to JEDI entirely, which ones will operate out of DOD-managed data centers or other cloud programs, and which ones will resemble a hybrid of the two – with government data residing on-premises and JEDI responsible for performing functions such as data analysis or backup. The Pentagon estimates that JEDI will represent about 20 percent of its IT infrastructure budget, according to a statement from spokeswoman Heather Babb.

4. GAO upheld the Pentagon’s ability to contract for services that haven’t been invented yet.

Oracle asserted that the Pentagon failed to comply with federal acquisition requirements requiring all single-award contracts worth more than $112 million to specify all services being delivered and offering them at firm fixed prices. The company stated that “because the RFP does not identify all of the specific tasks that may be performed,” it is impossible to offer a firm fixed price on them. This renders JEDI invalid, Oracle argued.

This raises an important question about the government’s acquisition of emerging technologies. With cloud computing a rapidly evolving field, it’s possible that by the end of JEDI’s 10-year lifespan, the winning vendor will deploy services that haven’t yet been invented. How can the Pentagon request firm fixed prices on services that don’t yet exist?

The Defense Department addressed the question by requiring bidders to submit a catalog of cloud services at firm fixed prices, while specifying that any new service added to that catalog would also need to be set at a firm fixed price equivalent to what it charges its commercial customers. GAO upheld the Pentagon’s approach, concluding that Oracle’s argument “would effectively preclude the award of a significant portion of IDIQ contracts.”

5. The Pentagon investigated at least two individuals for conflicts of interest based on past interactions with Amazon Web Services.

The GAO report notes that the Pentagon identified two employees – referred to only as the ‘“Chief of Staff” and the “Digital Service Expert” – with potential conflicts of interest stemming from previous interactions with Amazon Web Services LLC, a company seen as a front-runner for JEDI. After investigating, however, contracting officials determined that neither one unduly influenced the JEDI procurement.

The Chief of Staff had been previously employed by Washington consulting firm SBD Advisors, which counted AWS among its top clients. Several reports suggested that former SBD employees, including the Chief of Staff, may have influenced the acquisition in AWS’s favor. However, defense officials concluded his role was “ministerial and perfunctory in nature” and that he did not participate in the decision-making process.

The Digital Service Expert had been employed by AWS prior to his role with DDS, where he performed market research on potential JEDI competitors. He recused himself from JEDI activities in October 2017 and was subsequently rehired by AWS. Oracle argued that he might have provided AWS with nonpublic information that could give it a competitive edge.

GAO affirmed the Pentagon’s conclusion that there was no evidence of bias. However, GAO asserted that Oracle had the right to revisit the matter in a post-award challenge to JEDI, “[i]n the event the agency’s subsequent actions provide a basis for protest.”

Chris Cornillie is a federal market analyst with Bloomberg Government.

The post Five Takeaways from GAO’s JEDI Decision Denying Oracle first appeared on Federal News Network.

The Defense Information Systems Agency is planning major upgrades to the Pentagon’s classified and unclassified networks, according to twosolicitations released Nov. 15. The move represents a key technical milestone that will enable the department’s shift to cloud computing.

DISA may issue two or more contracts supporting a new requirement called Department of Defense Network (DoDNET) Services, which will deliver network operations and management, engineering, cybersecurity, and other support services, as well as capabilities such as software-defined networking.

Although the term “cloud” appears only once in each solicitation, the DoDNET Services contracts are intended to provide defense agencies with a stepping-stone to the CSRA-built MilCloud 2.0 and other Pentagon cloud programs.

“DOD is committed to providing the warfighter with an information environment that transforms data into actionable information rapidly and efficiently,” Pentagon spokesperson Heather Babb wrote in a statement to Bloomberg Government. “That’s why we are accelerating the optimization of DOD’s IT infrastructure with a focus on cloud adoption and data center consolidation as part of DoD’s reform activities.”

DoDNET users will include more than 50,000 employees within the Pentagon’s “fourth estate,” referring to the group of civilian-led Pentagon agencies that includes DISA and the Washington Headquarters Services.

In May, then-acting Pentagon chief information officer Essye Miller directed all fourth-estate agencies to migrate their IT assets to the Pentagon’s MilCloud 2.0 environment. In late August, DISA posted a sources-sought for “rapid cloud migration” to MilCloud, but canceled it only two days later.

To be eligible for consideration, contractors must be certified to perform work on the Pentagon’s secret internet router protocol network (SIPRnet) and its unclassified network (NIPRnet). The Pentagon is placing special emphasis on experience with “rapid network provisioning using innovation and automation, process maturation, and thoughtful cost reduction methodologies,” according to the solicitation.

One contract will be open to all competitors, while the other will be set aside for a certified Historically Under-utilized Business Zone, or HUBZone, business. DISA has not yet released ceiling values for either DoDNET Services solicitation. Based on the scope of work to be performed, Bloomberg Government projects that the first contract could be worth $100 million or more. The second could be worth $10 million to $100 million. The deadline to respond to both solicitations is Dec. 7.

Although DoDNET Services will focus on fourth-estate agencies, it may foreshadow additional network modernization opportunities across the Pentagon in preparation for enterprise-scale cloud programs, such as the Joint Enterprise Defense Infrastructure, or JEDI, program.

Chris Cornillie is a federal market analyst with Bloomberg Government.

The post DISA Seeks Network Upgrades Ahead of Pentagon’s Cloud Move first appeared on Federal News Network.

The Air Force is partnering with the General Services Administration on a fast-track buying procedure to acquire a cloud-based development platform for artificial intelligence and “internet of things” applications.

In a solicitation posted Jan. 8, an Air Force joint program led by AFWERX, its in-house technology incubator, joined by the Air Force Research Lab and Air Force Space and Missile Systems Center, announced it was seeking a commercially available development-to-operations (DevOps) platform-as-a-service (PaaS) solution.

The platform will help the Colorado-based Air Force Space Command accelerate the process of building, testing, and deploying software and ingesting new data sources in an effort to improve Air Force tracking of satellites and other objects in orbit, according to the posting.

To streamline the process, the Air Force has tapped GSA’s Federal Systems Integration Management Center (FEDSIM) to help it navigate an accelerated acquisition method known as a “commercial solutions opening,” or CSO.

“Given the availability of innovative and commercial solutions in the market, the Commercial Solutions Opening (CSO) solicitation methodology was selected as the acquisition strategy to maximize competition from both non-traditional and traditional government industry partners,” a GSA spokesperson wrote in a statement to Bloomberg Government.

DIU PAVES THE WAY FOR CSOS

The Defense Innovation Unit (DIU), the Pentagon’s Silicon Valley-based outpost, pioneered the CSO as a way to connect government with nontraditional technology suppliers. Like other transaction agreements (OTAs), CSOs enable agencies to bypass the traditional solicitation process by negotiating small contracts to support limited prototyping projects. Instead of a months-long, multistage acquisition process, a white paper and technical demonstration is often all a company or consortium needs to submit before the government can enter into a contract.

From fiscal 2016 through 2018, DIU used CSOs to establish pilot programs valued at a combined $249 million with more than three dozen commercial technology companies.

After a bruising controversy in 2018 in which the Pentagon was forced to scale back and then terminate a $950 million follow-on contract to REAN Cloud LLC, the Pentagon issued new guidelines requiring sign-off from senior leadership on purchases greater than $100 million.

In November, DIU opened a new round of CSO funding for a period of five years. To avoid the problems it faced with REAN Cloud, this time the solicitation specified that the government and its company partners may “negotiate a follow-on production contract or agreement, without the need for further competition” – in effect, paving a way to shift promising projects directly from prototype to production.

GETTING INTO THE CSO GAME

DIU isn’t the only government organization using CSOs. In 2018, the Defense Intelligence Agency, Naval Sea Systems Command, Army Materiel Command, and the Department of Homeland Security all launched their own CSO programs. FEDSIM also announced its intent to become a broker to help other agencies with commercial acquisitions in May.

“GSA is evaluating the use of Commercial Solutions Openings as another acquisition method for innovative and commercial solutions,” the agency told Bloomberg Government. “GSA has developed this pilot program to explore how private sector commercial acquisition approaches, outside the normal Federal Acquisition Regulations requirements, can be used as a viable, more efficient, and more effective procurement solution.”

The Air Force first partnered with FEDSIM in August to choose a commercial provider for “technology accelerator services” that will identify and recruit emerging dual-use technology companies operating in the education and training, autonomous systems, artificial intelligence, and space technology industries.

The January CSO for DevOps PaaS represents the service’s deepest collaboration to date. According to the solicitation, the platform “will address multiple use cases for the national security space enterprise,” outlining requirements in four key areas:

• Big data analytics: Solutions should be able to connect to potentially millions of geographically dispersed sensors and process incoming data in near real time.
• Artificial intelligence/machine learning: Vendors should have a track record of implementing AI/ML learning programs to drive decision making.
• Integration with legacy software: Vendors should be experienced in integrating PaaS tools with legacy tools and programming languages.
• Flexibility of deployment: Solutions should be portable across multiple environments, either in on-premises servers or in the cloud.

Interested parties have until Jan. 18 to submit a five-page brief describing their technology, its ability to meet the Air Force’s requirements, and their company’s financial stability. Promising submissions will be invited to present a product demonstration via videoconference the week of Feb. 4.

Chris Cornillie is a federal market analyst with Bloomberg Government.

The post Air Force Taps GSA to Fast-Track Cloud Platform Buy first appeared on Federal News Network.

The General Services Administration is pushing forward a plan that could enable government contracting officials to start buying everyday products more easily using online marketplaces run by companies like Amazon.com Inc. or Walmart Inc. Critics say this will enable agencies to bypass federal acquisition regulations and will adversely affect competition.

GSA released a proposal Dec. 4 that outlines its strategy to bring commercial e-commerce platforms to government. It calls for establishing a pilot program involving multiple e-commerce providers, aimed at gathering data and identifying best practices. Purchases would be capped at the government’s $10,000 threshold for micropurchases. Some acquisition regulations do not apply to purchases valued below that threshold.

The agency hopes to field a prototype commercial e-commerce portal by the end of the 2019 calendar year, said GSA administrator Emily Murphy at a Dec. 12 industry day.

GSA set a Dec. 21 deadline for submitting responses to its request for information. Officials will spend the coming weeks digesting industry comments and summarizing months of market research. In the last year, the government released multiple RFIs and met with 75 companies for one-on-one demonstrations, according to GSA deputy commissioner Laura Stanton. GSA will publish its findings in a March report to Congress.

Throughout the process, officials have stressed the importance of working with multiple e-commerce providers to ensure a competitive process, perhaps seeking to head off criticism that the initiative’s primary beneficiary will be Amazon. By some estimates, about half of Americans’ online retail purchases will flow through the Seattle-based e-commerce giant in 2018.

“We are not looking for a proof of concept with one provider. There needs to be multiple e-commerce marketplaces for this to be successful, for this to accomplish its purpose,” said Jeff Koses, a senior procurement executive with GSA’s Office of Government-Wide Policy. According to Koses, the government will cancel the solicitation and “take several steps back” if it receives only a single acceptable bid.

Air Force Pilot Program

In September, Bloomberg Government reported on an Air Force program that authorized procurement officers at six bases around the country to make small purchases using Amazon’s business-to-business marketplace, in addition to other government-run portals.

According to an official close to the program, the Air Force spent roughly $500,000 with Amazon since the program began in January 2018. Participants reported that Amazon offered competitive pricing, an easier buying process, and higher-quality transactional data compared with government supply schedules.

GSA confirmed to Bloomberg Government that it had met with Air Force representatives to discuss the pilot program’s progress and gather lessons learned as part of its market research process. However, GSA stressed that, unlike the Air Force, its plan would mandate multiple commercial providers.

Still, not everyone is quite on board with the plan. Roger Waldron, president of the Coalition for Government Procurement, in a Dec. 7 column raised several “critical issues” relating to how the proposal will handle compliance with unique government requirements, the ownership of data collected by marketplace providers, cybersecurity and supply chain risks, and possible organizational conflicts of interest.

“These issues are important and represent fertile ground for collaboration between GSA, [the Office of Management and Budget], customer agencies, and industry. Such engagement increases the potential for program success,” Waldron said.

Chris Cornillie is a federal market analyst with Bloomberg Government.

The post GSA Forges Ahead With Commercial E-Commerce Plan first appeared on Federal News Network.

In the Fiscal 2019 Government Contracting Playbook, Daniel Snyder, deputy director of Government Contracts Research for Bloomberg Government, will be sharing five trends to monitor for 2019.

The post Fiscal 2019 government contracting playbook first appeared on Federal News Network.

In fiscal 2018 Congress was notified of about $37.4 billion in sales to European countries. The next-biggest region, with $22.1 billion, was the Middle East, which was the top destination in fiscal 2017 and fiscal 2016. In fiscal 2015, the Asia-Pacific region held the top slot.

U.S. defense contractors closed foreign arms deals worth $55.6 billion in fiscal 2018, according to the head of the Defense Security Cooperation Agency, Lt. Gen. Charles Hooper.

President Donald Trump’s pressure on NATO members to spend more on defense, combined with regional fears of Russian aggression, may have contributed to Europe’s 2018 shopping spree.

BGOV’s dashboard is based on the State Department’s notifications to Congress about potential military sales, which are compiled by the Defense Security Cooperation Agency. Congressional notifications are required for any potential sale that exceedscertain dollar thresholds.

The 2018 FMS figures differ from Hooper’s number tallying closed deals because deliveries and payments may not take place for a number of years. The notifications data is useful for gauging trends in the level and types of equipment being sold to various countries and regions.

The highest-value European notification was for a $10.5 billion sale to Poland of an Integrated Air and Missile Defense (IAMD) battle Command System (IBCS). The main contractors on this project are Raytheon Co., Lockheed Martin Corp., and Northrop Grumman Corp. The next-largest notification in Europe was for 34 Lockheed Martin F-35 Joint Strike Fighter aircraft to Belgium for $6.53 billion. The largest single notificationfor the year wasn’t in Europe. It was a $15 billion sale to Saudi Arabia for Lockheed’s Terminal High Altitude Area Defense (THAAD) system.

COMMERCIAL SALES

Foreign military sales aren’t the only way foreign nations acquire military equipment made in the U.S. Foreign governments as well as other approved entities, such as law enforcement agencies, may purchase certain categories of military equipment through the Direct Commercial Sales (DCS) program. These deals are made directly with a contractor and are licensed by the Office of Defense Trade Controls at the State Department.

DCS licenses are summarized annually in what’s known as a Section 655 report, named for the section of the Foreign Assistance Act that requires it, by category of equipment and destination country. In fiscal 2017 the total exported value of equipment through DCS was about $3.1 billion. Saudi Arabia was the top destination, with about $682 million in shipped goods. There is no publicly available data on which companies provided the equipment, exactly what the equipment was, and which entity in the destination country received the equipment.

The post Europe Is Top Destination for U.S. Arms Sales in Fiscal 2018 first appeared on Federal News Network.

IBM may be positioning itself to compete against cloud heavyweights Amazon Web Services LLC, Microsoft Corp., and Google Inc. IBM, a longtime leader in mainframe computing, was arguably a late entrant to the commercial cloud market and has struggled to match the market leaders’ investments in infrastructure and new tools for IT professionals.

In Red Hat, IBM believes it’s found a foothold into a cloud market that remains largely up for grabs: “hybrid” cloud computing, which involves maintaining on-site control of data and sensitive assets while using the cloud for cheap, scalable computing resources. Buying Red Hat will make IBM “the world’s #1 hybrid cloud provider,” according to a statement from chair and chief executive officer Ginni Rometty.

The deal is, in essence, a $34 billion bet that IBM’s legacy customers – federal agencies among them – aren’t ready to fully outsource their IT infrastructure and cede administrative control of their data to “public” cloud providers like AWS. Its success will depend on whether IBM can sell its customers on Red Hat’s cloud management tools, or whether its competitors can pivot there faster.

IT’S ALL ABOUT CONTAINERS

At the heart of the acquisition is a Red Hat software tool called OpenShift. OpenShift is Red Hat’s version of a popular open-source tool called Kubernetes used to deploy and manage software applications in flexible packages known as “containers.”

Containers bundle an application along with the code libraries and other resources they need to run, while decoupling them from the need to run on a specific operating system. They’re a major innovation, because they enable software developers to build applications that can plug into on-premises data centers or cloud environments interchangeably (a concept known as “portability”) rather than forcing developers to write two versions of the same application – a key barrier to cloud adoption.

The challenge is that containers are difficult to maintain and secure, requiring organizations to invest in tools like OpenShift. By acquiring Red Hat, IBM becomes the de facto gatekeeper to one of the world’s most popular container management platforms.

THE DEAL’S IMPACT ON FEDERAL CLOUD

It’s hard to argue that the federal cloud market was at the forefront of IBM’s strategy, compared to the exponentially larger enterprise cloud market, but the deal could prove especially profitable in the federal space.

That’s because agencies tend to be good fits for hybrid cloud solutions: they’re not only risk-averse with their data, they’re often working with legacy systems that are decades old, making them more challenging to update for a cloud environment.

With most agencies in the midst of multiyear digital transformations, IBM’s ability to deliver on-premises or cloud infrastructure optimized for Red Hat platform-as-a-service (PaaS) could help it attract interest from existing Red Hat users and capture federal contracts that might otherwise be destined for AWS.

Red Hat’s presence in the federal marketplace has ballooned in recent years as federal agencies have shifted gears to embrace open-source software development. It’s difficult to determine Red Hat’s footprint in the federal government since it is a software provider, rather than a prime contractor. Bloomberg Government aggregated all government transactions that list “Red Hat” or “OpenShift” the contract title or requirements to provide a rough estimate.

The data indicates that fiscal 2018 was Red Hat’s biggest year in federal sales, at $131 million to date, with the Defense Department yet to report the majority of its fourth-quarter obligations. The Pentagon has been Red Hat’s largest government customer by far, accounting for 50 percent of its revenue over a five-year period.

Certainly the Pentagon, and its $36 billion annual IT budget, represents a prime target for IBM. The Armonk, New York-based IT giant has generated at least $300 million in Pentagon revenue in each of the last three fiscal years. Based on its experience building an on-premises cloud for the Army, a contract that has generated $23.8 millionsince fiscal 2016, IBM set its sights on bigger prizes, including the Pentagon’s highly coveted $10 billion Joint Enterprise Defense Infrastructure, or JEDI, cloud contract.

Does the Red Hat deal give IBM a better chance of winning JEDI? Almost certainly not, given that the deadline to submit bids has come and gone. In the race for JEDI, IBM appears to be clinging to the hope that the Government Accountability Office (GAO) will sustain its bid protest, or those filed by Oracle Corp., and the Pentagon will agree to reverse course in favor of a hybrid cloud or multi-cloud strategy. Even then, IBM would face stiff competition for a limited number of spots.

But with dozens of cloud contracts currently under development across the federal government, and hundreds more systems likely to shift to the cloud over the next decade, IBM is at least giving itself a fighting chance.

The post What IBM’s $34B Red Hat Deal Means for Federal IT first appeared on Federal News Network.

GSM-O II, the follow-on to the single-award GSM-O contract that has generated nearly $1.9 billion for Leidos Holdings Inc., is the focus of this week’s Bloomberg Government Top 20 Opportunities.

The contract will continue to provide IT and telecommunications services to keep the Department of Defense (DOD) Information Network (DODIN)/Defense Information Systems Network (DISN) operational. DODIN/DISN is the agency’s all-encompassing information and communication technology system. It involves everything necessary to collect, store, disseminate, and manage information on demand to joint warfighters, policy makers, and support personnel worldwide.

Services under the GSMO-O II contract will include operating and sustaining the network, defending the network, providing access to new customers, monitoring network health, restoring service if necessary, and implementing improvements to existing capabilities.

The agency released a second draft RFP on June 25, and the government expects to host site visits at both DISA Global Operations Command East (at Scott Air Force Base in Illinois) and West (at Hill AFB, in Utah) on Nov. 6 through 9. Final proposals are due on Nov. 11. An award is scheduled in June.

The GSM-O contract has averaged about $265 million in obligations each year since it was established in fiscal 2012, reaching its $336 million peak in fiscal 2016, and its lowest level, $12 million, in fiscal 2013. Leidos took over management of the contract after it acquired Lockheed Martin’s Information Systems & Global Services division in August 2016.

What’s Ahead

DISA increased the value of GSM-O II to $6.5 billion from $4.6 billion on GSM-O. The increased ceiling value will allow for additional services, such as:

• Cybersecurity and computer network defense initiatives..
• Supporting initiatives that have been or will be integrated into the DODIN/DISN, including those migrating from GSM Engineering, Transition, and Implementation (GSM-ETI) and GSM-Projects and Support (GSM-P&S).
• Stand-alone and companion network activities, such as those supporting the Missile Defense Agency.
• Emerging activities that deliver a more efficient approach to agency-wide network operations and sustainment.

The post DISA Releases $6.5 Billion IT Final Request for Proposal: Top 20 first appeared on Federal News Network.

The General Services Administration is considering creating a governmentwide contracting vehicle for services related to manned and unmanned systems, potentially consolidating billions of dollars annually that now flow through hundreds of contracts.

“GSA is embarking on gathering market research to determine whether there is a need for a government wide contract vehicle for operations, readiness, maintenance, integration, and development of manned, optionally manned, and unmanned platforms, as well as support functions for these platforms,” GSA press secretary Pamela Dixon confirmed in an Aug. 29 email to Bloomberg Government.

The program, known simply as “ATLAS,” is being spearheaded by GSA’s Federal Systems Integration Management Center, or FEDSIM. According to its website, FEDSIM manages $14 billion in total active contracts.

Earlier this year, GSA appointed Mike Donaldson, a 25-year veteran of federal acquisition services, to head up emerging programs at FEDSIM. Until recently, Donaldson was listed as “ATLAS Director” on FEDSIM’s website.

GSA hasn’t yet finalized the scope of the new program, but based on Dixon’s comments, it could potentially deliver a wide range of services supporting the government’s fleet of civilian and military land vehicles, ships, and aircraft. If that’s the case, ATLAS’s scope could be extensive.

The federal government spent about $16.7 billion on vehicle support services in fiscal 2017, according to a Bloomberg Government estimate. The Pentagon accounts for almost 90 percent of that total. However, that spending is notoriously fragmented across hundreds of contracts, including the Navy’s SeaPort Enhanced and the Air Force’s BIG SAFARI.

It’s possible the program is intended to centralize that spending in an effort to manage governmentwide demand and take advantage of standardized labor rates, as agencies have in areas such as information technology.

A previous version of this article stated that FEDSIM manages the OASIS contract. OASIS is managed by the Office of Professional Services and Human Capital Categories.

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