The Pentagon on Monday abruptly walked back a nearly $1 billion cloud computing agreement its Silicon Valley outpost had signed only a month earlier, saying officials had determined the terms of the arrangement were excessively broad.

The $950 million other transaction agreement (OTA) with Herndon, Virginia-based REAN Cloud, and brokered by the Defense Innovation Unit-Experimental (DIUx), was supposed to have made the company’s services available to the entire Defense Department. But the deal will now be capped at $65 million, and its only authorized user will be U.S. Transportation Command.

“After reviewing the production agreement, the department has determined that the agreement should be more narrowly tailored to the original scope of the prototype agreement, which was limited to USTRANSCOM applications,” Col. Rob Manning, a Pentagon spokesman said. “We applaud DIUx’s efforts to advance the department’s initiative to accelerate adoption of cloud technologies.”

REAN’s relationship with DoD began last year, when it began helping TRANSCOM migrate its legacy systems as part of a mandate by its commander, Gen. Darren McDew, to move all of its logistics applications to the cloud.

Much of the preliminary work was conducted under a more traditional OTA in which the scope is limited to prototypes. But using authority Congress recently granted DoD to carry those prototypes forward into production OTAs without any further competition, DIUx decided to make the same REAN services available to all the military services and Defense agencies, a step the Pentagon decided was too far beyond the original intent of the prototype.

The deal DIUx announced in February was only the third production OTA the organization had signed since its official launch in 2016, and came just two weeks before the quiet departure of Raj Shah, who had served as its managing partner for the past two years.

The REAN OTA is separate from another large cloud computing contract currently being worked on by DoD’s Cloud Executive Steering Group. The department has revealed few details about its plans for what it has termed the “JEDI” (Joint Enterprise Defense Infrastructure) initiative, but plans to do so Wednesday at an industry day in Arlington, Virginia.

Also on Monday, the Defense Information Systems Agency announced that its MilCloud 2.0 service had attained a key security approval, another major step toward DoD’s adoption of commercial cloud computing.

The provisional authorization for what DoD classifies as “impact level 5” data means accreditors have determined the service offering to be secure enough to handle the most sensitive types of non-secret information.

Officials have previously said they expect MilCloud 2.0, which is operated entirely by a private vendor (CSRA) but housed within DISA’s computing centers, to achieve a PA for secret (level 6) data by the end of the year.

Read more of the DoD Reporter’s Notebook.

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