The Washington PostDemocracy Dies in Darkness

Contract award spurs concerns Amazon might have inside track to big cloud deal

A Pentagon decision to award a cloud computing contract worth up to $950 million to a company that partners with has triggered worries that the online giant may have the upper hand in a far larger competition to shift systems to the Web.

The Defense Department has made it a priority to move technology to the cloud, a massive undertaking it hopes will allow it to innovate faster in an age when algorithms are as important as weapons. The cloud computing program, one of the most important IT contracts in years, could be worth billions of dollars over many years.

The Pentagon has said it plans to hold an open competition for the work but has declined to say whether it will select more than one company, leading industry officials and members of Congress to openly fret that Amazon might walk away with a winner-take-all prize.

Those fears intensified this week when a Herndon, Va.-based company called Rean Cloud was awarded a single, five-year contract to migrate the systems of the U.S. Transportation Command and other defense agencies to the cloud. Rean markets itself as an Amazon partner, meaning it specializes in services associated with Amazon’s Web services company. (Amazon founder Jeffrey P. Bezos owns The Washington Post.)

The award led rivals to question why the Pentagon would award a contract to migrate services when it has yet to select the ultimate cloud provider.

In an interview, Oracle Senior Vice President Ken Glueck said the $950 million migration contract was like hiring a moving company, packing up the truck and heading down the road before you know what house you’re going to live in.

“If in fact you’re going to have an open competition and an industry day to have a multi-vendor 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?” he said. “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.”

Rean Cloud founding partner Sekhar Puli said that while nearly all of the company’s federal work has involved Amazon, the company has worked with Microsoft, Oracle and other major cloud providers in serving private-sector customers.

“There is a perception that this is an Amazon contract, but there is little to no truth on that,” Puli said. Customers “can pick any cloud they want, and our platform would support all of that.”

Amazon initially declined comment but later said in a statement: “Stripping out the Old Guard FUD” an Amazon Web Services spokesperson said in an email, referring to the acronym for fear, uncertainty and doubt, “the facts are that this was competitively bid and REAN Cloud won. ‎AWS has always encouraged the government to openly consider the best options for their missions and constituents, and we will continue to advocate for open competition.”

Industry suspicions were fanned earlier when the Defense Department published online a document justifying a sole-source award to Amazon Web Services for an Air Force cloud contract. The Pentagon later said that no contract was awarded for that work and that the justification document has been withdrawn because “it had been posted in error.”

AWS already holds a $600 million contract to provide cloud services for the CIA.

Another curious sign? Initially, Rean’s news release noted in its first sentence that the company is “an Amazon Web Services Premier Partner.” That was later deleted to say only that Rean is a “global systems integrator.”

Rean’s contract was awarded by the Pentagon’s Defense Innovation Unit Experimental office, a California-based agency created to help the Defense Department better work with Silicon Valley-type companies, which have traditionally shied away from government work.

The procurement, a follow-on 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.

“They basically squashed the timeline together, which would have been months or years, to literally days,” Puli said.

In a statement, a Pentagon spokesman, Navy Cmdr. Patrick Evans, said that the Rean contract was separate from the broad Pentagon-wide effort that is being overseen by the specially appointed Cloud Executive Steering Group.

“The CESG continues to interact with offices across the Department to understand lessons learned and best practices for accelerating cloud adoption,” Evans said. “There has been no change in strategy for the CESG. The CESG’s plans to hold an industry day in early calendar year 2018 and pursue a full and open competition remain unchanged. It is anticipated that an industry day announcement will be made soon.”

Some members of Congress have said they expect the contract to be competitively bid.

“Right now, they need to get onto the cloud with speed,” said Rep. Ro Khanna (D-Calif.), who represents part of Silicon Valley. “They feel an urgency, and I understand why. So I don’t want to slow down the process. But I do want to make sure we’re transparent, so we don’t get locked into a monopoly provider.”