GAO wants GSA to reopen e-mail contract

The Government Accountability Office wants the General Services Administration to reopen the competition for its cloud computing contract after it sustained protests involving the location of data centers and unclear language in the solicitation.

Technosource Information Systems of Annapolis, Md., and TrueTandem of Reston, Va., protested the language in the request for quotations, arguing that the solicitation’s provision requiring vendors to locate their data services in “designated countries” unduly restricts competition. They said the requirement has no basis in law or regulation, and there is no legitimate need for it, according to the GAO ruling issued Oct. 17.


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“We conclude that GSA has failed to proffer an adequate explanation for limiting non-U.S. based data centers to those countries listed as designated countries in accordance with the [Trade Agreements Act], and we sustain the protest on this basis,” GAO wrote.

A "designated country" is a World Trade Organization Government Procurement Agreement country, a Free Trade Agreement country, a least developed country, or a Caribbean Basin country.

GAO said GSA should amend the RFQ to reflect its actual needs concerning non-U.S. data center locations. It also sustained a protest against a term that needed clarification.

GAO said GSA should allow companies to submit new proposals or make revisions.

GSA issued the RFQ on May 9 to establish a SmartBUY blanket purchase agreement of GSA Schedule 70 contract holders for cloud computing services, including, specifically, e-mail as a service. The competition ended July 8, although the two companies’ protest filing occurred beforehand.

GAO wrote that GSA has offered various justifications for the data center location requirements.

GSA argued the government has a need to know where its data resides and transits. When government data crosses national borders, it could bring up rights to access to the data.

GSA also said it was a compromise between information security and free trade.

Finally, in another hearing with GAO, GSA said the solicitation had originally limited data center locations to the continental United States, but that the Office of Management and Budget and the U.S. Trade Representative considered the limitation restrictive of trade.

GAO wrote that by applying GSA’s interpretation, cloud services could be provided by firms incorporated or headquartered in non-designated countries, such as China, simply because they will be using data servers located in a designated country. It is not apparent that such a result would be consistent with the Trade Adjustment Assistance program.

Reader Comments

Tue, Oct 18, 2011 ERIC CHO Sterling VA

OUTSOURCING OF FEDERAL CONTRACT SERVICES?
In the above decision, GAO states—
“A plain reading of FAR § 25.402(a)(2) dictates that the origin of services is determined based on the country in which the firm proving the service is legally established, not on the location from which the service is ultimately provided.”
GAO has determined that the federal contracting officers must now solely look at where federal contractors are incorporated and NOT where they will provide services, for the purpose of determining TAA compliance.
Considering 2/3 of federal contract spending is for services acquisition, this is likely to have significant implications. I’d like make a few obvious observations—
1) Now that the rule is clear, US-incorporated contractors could outsource their labor to non-designated countries with cheap labor and obtain a tremendous competitive advantage over contractors employing US workers;
2) Any foreign service provider could comply w/ TAA by incorporating in the US and perform all services off-shore;
3) Normally in legal disputes, when there is ambiguity in regulatory interpretation, other legal sources, such as underlying statute or legislative intent, are considered. In this decision, such attempt is absent; and
4) When one claims ‘A then B,’ it does not mean ‘not A then not B.’ It appears GAO overlooked this simple logic in footnote 6.

Tue, Oct 18, 2011

Reality check time- continuity of operations and data security trump trade agreements. If they can't outsource email without running afoul of agreements that were never intended to apply to government operations, they should either change the agreements, or keep the work in government data centers.

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