The Defense Department’s $10 billion JEDI cloud services contract is a new story with an old plot.
The Pentagon awarded the frequently delayed deal to Microsoft on Oct. 25. The DoD Jedi contract — with its big price tag, high-profile technology and contentious nature — recalls a much earlier coveted and controversial government IT contract. The DoD awarded its AFCAC 251 program, once the center of attention in federal IT circles, way back in 1988. AT&T captured the deal.
Consider the parallels between the two contracts. AFCAC 251’s projected value, though not of a JEDI magnitude, was impressive. Industry pundits lauded the contract as among the largest federal IT deals of all time, with a potential value of nearly $1 billion. An emerging technology angle was also present: Unix-based minicomputers, and the deal was seen as an important endorsement of that operating system. Coincidentally, the DoD awarded AFCAC 251, like the JEDI contact, on a Friday in late October. I remember, because I was waiting for the DoD to fax the announcement that Friday afternoon and my editors were rather impatiently waiting for me to file the story.
AFCAC 251 never lived up to its potential, however. The long procurement cycle and additional delays due to post-award contract protests meant the technology was at least 18 months out of date when the contract was finally opened for ordering. AT&T had bid its line of 3B2 Unix minicomputers. But when orders for those machines finally arrived, the general consensus at the time was the deal never got close to the $1 billion ceiling.
AFCAC 251 wasn’t the only federal IT megacontract that didn’t quite live up to its billing. A string of similar deals exposed the government’s cumbersome IT acquisition process and an inability to deliver up-to-date technology. The less-than-stellar contracting practices led to federal procurement reform in the 1990s. The upshot: agency buyers would eventually be able to purchase PCs and other hardware via credit card, using vehicles such as the General Services Administration Schedule 70 contract.
Against that backdrop, the DoD JEDI contract seems like a step back to the megacontract era. It’s far too early to determine whether the contract will reach the $10 billion milestone or fall short. In the meantime, it’s important to note that JEDI is an indefinite delivery/indefinite quantity (IDIQ) contract, as was AFCAC 251. An IDIQ contract gives the winning vendor the ability to sell products or services, but provides no assurance customers will actually hit the contract’s spending ceiling. The Pentagon guarantees $1 million for JEDI’s two-year base contract period, and anticipates an estimated $210 million in spending during that period. The contract could run up to 10 years, if DoD exercises all of its options.
Another consideration: JEDI isn’t the only cloud pact in town. Microsoft faces other cloud services competitors for the government’s dollar. And that competition seems likely to increase.
“The Department continues to assess and pursue various cloud contracting opportunities to diversify the capabilities of the DoD Enterprise Cloud Environment,” according to a Pentagon statement. “Additional contracting opportunities are anticipated.”
Add to all this the potential for a contract protest from AWS, and there’s more than a little uncertainly around JEDI. We’ll know in a few years whether the DoD JEDI contract follows the megacontract script or creates a new narrative.