10 BILLION DOLLARS and other reasons why contractors feel so much angst around DoD’s JEDI program

Larry Prior, the former CEO of CSRA, recently described the excitement around the Defense Department’s Joint Enterprise Defense Infrastructure (JEDI) contract like watching a “battle of the titans” square off and is leading to “high drama” across the federal market.

But what Prior didn’t answer—maybe on purpose—is why do so many contractors care about the $10 billion cloud contract?

Which led me to ask several other industry experts a similar question: Why is there so much angst over JEDI?

Now I know, it’s worth $10 billion. But really it’s ONLY a ceiling of $10 billion over 10 years so at most DoD will spend $1 billion a year. How many contract vehicles actually reach or come near the estimated ceiling? Few, if any.

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Add to that the fact Deputy Secretary of Defense Pat Shanahan said JEDI would account for only 15-to-20 percent of all DoD cloud spending. That means 75-to-80 percent still is up for grabs. You can follow the bouncing cloud RFP ball to the Defense Information System Agency’s $8.8 billion Defense Enterprise Operations Solutions (DEOS) contract, to the Air Force’s Enterprise-as-a-service plans, to the Navy’s Next Generation Enterprise Network (NGEN) and so on. Bloomberg Government found recently that DoD will spend about $2 billion on cloud services in fiscal 2018 and that figure only will grow in 2019 and beyond.

Taking all of this together, the military will spend billions of dollars on cloud services over the next decade and there will be plenty to go around. Right? That seems to be the pragmatic and logical conclusion?

Well, not so fast say several industry experts.

“Any time you have a contract that is potentially that large in such a competitive market where the perception is ‘winner take all,’ that causes angst to begin with. And most contracts like JEDI are multiple award so anything that could be market limiting would cause angst,” said Stan Soloway, a former Defense acquisition executive, and now president of Celero Strategies. “The perception is that JEDI is the tip of the cloud iceberg. I believe based on conversations I’ve had, JEDI represents the first step toward an alternative DoD cloud policy where they want to ride the commercial cloud.”

Soloway said companies are nervous if DoD is riding a commercial cloud wave and it doesn’t include them.

Contractors marking their territory

Ok, so change is hard for contractors?

Well, not exactly said Ray Bjorklund, the president of Birchgrove Consulting and a former DoD acquisition official.

Bjorklund, who worked on and sees similarities with the Defense Information Systems Network (DISN) procurement in the late 1990s, said for many vendors it’s a matter of VHS vs. Betamax or Westinghouse vs. Edison Electric where the fight was over alternating current or direct current.

“Cloud is much like a utility with the expectation of instant on, immediate connectivity and certainly in case of JEDI when you look at military operations that are dispersed around the globe, accessibility of information is most valuable,” he said. “DoD is looking for a way to further connect all platforms and applications, and now platforms and apps don’t necessarily talk to each other, but having this one pool of data where all of it can be exchanged, that is a really good notion.”

Bjorklund said even though DoD expects there will be other cloud solutions in the future, JEDI is the initial big one.

“If it’s a single award and it gets traction with users who get comfortable, that single award may lead to increasing proprietary technology and make it more difficult for other cloud vendors to integrate with this cloud and also with the platforms and apps,” he said. “DoD already is establishing some degree of interoperability based on technical specifications for solutions. But to have this uneasiness about long term where there will be increasingly levels of proprietary technology that will be difficult to break without a lot of breakage.”

So, it’s all about being first one in and marking your territory?

Well, given that DoD already has cloud instance from Microsoft, from Google, from Salesforce, IBM and so many others. That can’t be the cause of the angst.

Not so fast says one former DoD official, who requested anonymity because their company still does business with the Pentagon.

The former official said the way the Pentagon and its leadership, including Ellen Lord, the Undersecretary of Defense for acquisition and sustainment, and Chris Lynch, the director of the Defense Digital Service, have talked about their desire to move to a single cloud and that creates angst. The fact that many in industry consider the procurement “wired” to Amazon Web Services is why JEDI is tormenting industry.

“Comments that a single cloud was needed or DoD couldn’t get interoperability, data, machine intelligence caused everyone in industry to be suspicious of this effort from the start,” the former official said. “Many were convinced from the start that the goal from technologists of JEDI has been to get a contract with AWS and get access to their secret region that was funded by intelligence community.”

The former official said the angst continued to increase when the certain specific requirements in the RFP and performance work statement seem to be AWS-centric.

“The requirement to have three copies of your infrastructure is an approach AWS has taken from the beginning. The requirement to have three-way replication so your data is not lost is an AWS feature,” said the former official. “The other one around tactical requirements and the description of capability sounds a lot like Amazon’s snowball capability that it created to move data around and now turned it in to a deployable cloud of sorts. I’m not sure how it can be used to build forward deployed cloud so it has not solved DoD’s problem, but it’s where DoD wants to go.”

Value of JEDI is so high

So then the angst is about not having a level playing field where all vendors can compete equally?

If you read Oracle’s initial pre-solicitation bid protest, one of its major complaints is the anti-competitive nature of the RFP.

But wait one more time. Another industry official, who is following JEDI closely and requested anonymity because their company does business with DoD, said the angst comes down, in part, to the contract being worth $10 billion.

“There is school of thought that this is $10 billion and everyone wants to be part of it. It’s a lot of money. We know today that it’s hard to switch clouds so it’s not like you are in AWS one day and move to Google the next day. The reality of that happening is not strong and you’ve got to have a compelling reason. It’s not easy to switch like cell phones are, and then you have train people in the new cloud too, which will hinder people from switching,” the expert said. “The fact is DoD is being vocal about not wanting a multi-cloud approach is bad. If you look at all experts, multi cloud is the future. There are tools to help manage multi cloud.”

The industry source said it would be hard for Microsoft, Google, Amazon, IBM or any vendor to tell their board of directors they lost out on a $10 billion contract with DoD.

“It’s not a great conversation to have,” the expert said. “And if it is like the CIA Amazon Web Services C2S cloud and everyone else is locked out, that is a bad situation, and why people are nervous.”

So given all of these reasons, industry has pretty good reason for being up in arms over JEDI.

Part of this is DoD’s own fault due to its inability to communicate its real goals for cloud. And part of this is industry’s own idiosyncrasies when it comes to large contracts and needing to be part of every one of them.

The former DoD official said they remember similar angst among contractors during the bidding of the Navy-Marine Corps Intranet, which ended up being more than a $10 billion contract.

“JEDI seems unique. There is so much investment by companies, both spiritual and financial,” the source said. “There is much more of a pre-award information campaign that started last year. Companies believe if they do not get a piece of this, they may be concerned about losing their jobs or leaving the DoD market entirely.”

The official said based on their experience what is most likely to happen JEDI will end up being more for development purposes and less for legacy systems, and then the other programs like DEOS will begin to address the older  applications.

DoD has pushed back the due date for the award and the Oracle protest continues to hang over JEDI so industry will continue to watch this battle of the titans for a few more months and we can watch their angst continue to grow.