Pentagon Says Cloud Winner Must Stay Ahead to Extend Contract

(Bloomberg) -- The winner of the U.S. military’s competition for broad cloud computing services will be evaluated after an initial two-year contract for how well it’s kept up with industry innovations including on cost, data transfer, security and compatibility among systems, Pentagon officials said.

“You have to be performing well, but what we want to be looking at is where is the market?” Pentagon Chief Management Officer Jay Gibson told reporters Monday. “If you haven’t kept up with the market then, arguably, how well are you performing?”

Rivals are complaining that the Defense Department’s winner-take-all approach for the cloud contract -- which will provide online data storage for its 3.4 million users and 4 million devices -- favors Inc., the biggest supplier of such services. They’ve said there’s little chance the department will start all over with a new provider after the initial two years.

The two-year award, tentatively scheduled for September, will provide two options that could extend it for eight more years.

But Gibson said the priority is “the ability to stay current” in the fast-evolving market for remote platforms. “There would be multiple options available for us at that two-year period,” he said.

While companies that win defense competitions with options usually are awarded the extensions, Robert Daigle , the Pentagon’s director of independent weapons costs analysis, said Monday that “the department could start a new acquisition process to acquire a second or a third provider” because it “does not want to be locked in.”

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