GAO sustains Oracle's protest against REAN Cloud production agreement

The Government Accountability Office has ruled in favor of a protest from Oracle America against the Defense Department's award of an other transaction agreement to REAN Cloud, potentially further dialing back what was once a nearly $1 billion deal.

In a May 31 press release announcing its decision, GAO said it sustained Oracle's contention that DOD did not follow the preconditions for awarding a follow-on production OTA to REAN Cloud without competition.

DOD originally awarded REAN Cloud a follow-on production agreement with a ceiling of $950 million in February. The agreement, facilitated by the Defense Innovation Unit Experimental, followed prototype work REAN Cloud had done in transitioning U.S. Transportation Command to a cloud computing environment, according to DOD. The original production agreement was to be made available to all DOD organizations.

But after uproar sparked by REAN Cloud's partnership with Amazon Web Services, which is competing for a separate DOD cloud contract, the Pentagon quickly scaled back the production agreement to just $65 million and limited the services to TRANSCOM.

Now, GAO is recommending DOD cancel the agreement outright and either re-compete the contract, prepare "appropriate justification required by the Competition in Contracting Act of 1984 to award a contract without competition; or review its other transaction authority to determine whether it is possible to comply with the statutory preconditions for entering into a production OTA," according to the press release.

In recent years, Congress has expanded DOD's ability to use OTAs, which are not subject to the Federal Acquisition Regulation. The agreements are seen as a better way to work with commercial companies and streamline deals.

But the REAN Cloud controversy has prompted some backlash against what some view as a misuse of OTAs.

The report accompanying the House Armed Services Committee's fiscal year 2019 defense policy bill specifically criticizes DOD's award to REAN Cloud, stating that while the agreement may have been scaled back, Congress "remains concerned about the department's failure to provide a comprehensive explanation for how such a large-scale award was made unbeknownst to senior department officials, and why the award was later reduced."

As a result, lawmakers are urging DOD "to exercise greater prudence and transparency when employing OTA to prevent misuse and abuse," according to the report. "The committee also urges the department to reiterate through established guidelines that OTA is not a means for circumventing appropriate use of the Federal Acquisition Regulation, and that full and open competition should be used to the maximum extent practicable to maintain a sense of integrity, fairness, and credibility in the federal procurement process."