Another VMware contract draws protests from competitors

Another licensing agreement between the military and VMware is under fire from competitors who say the contract is too broad and cuts off competition.

The protests against an Army agreement with VMware are similar to an agreement that DISA tried to sign with VMware earlier this year. DISA nixed the $1.6 billion agreement after protests were filed by Amazon Web Services, Citrix Systems Inc., Minburn Technology Group and Nutanix.

While the Army agreement is much smaller at $40 million a year, a look at the procurement documents raise similar competition concerns. So far, protests have been filed by Citrix and Nutanix with the Government Accountability Office. They filed with GAO after losing protests they filed directly with the Army.

The Army agreement with VMware, through a blank purchase agreement held by partner Carahsoft, was awarded in July after the Army issued a justification document explaining why they needed to issue a task order against the BPA without going through a competitive process.

While significant portions of the justification document are redacted, it is clear that the agreement is critical for ongoing Army operations such as the Warfighter Information Network-Tactical and the Army data center consolidation initiative.

A source told me that the Army was in desperate need of services such as patches, maintenance and other software support for its VMware products after the DISA enterprise license agreement fell through earlier this year.

The new Army’s contract meets that need and describes a single contract line item number for VMware software assurance and global support services.

But at the end of August, the Army – by way of the Army Contracting Command at Rock Island, Ill. – issued a modification to the contract, and that modification apparently is what has drawn the ire of Citrix and Nutanix.

The modification does two things: It adds 20 products to the agreement, which allows for the purchasing of new licensing. So, the scope of the agreement has grown beyond simply offering maintenance, updates and support.

The second thing is that it opens up the use of the agreement to any agency at the Defense Department.

In essence, it pretty much does what the now defunct DISA enterprise licensing agreement was trying to do earlier this year.

Citrix and Nutanix have declined to comment and an VMware spokesman issued a statement: "VMware is extremely proud of the technology support we have provided to the U.S. Army, who has have achieved significant cost savings and return on investment through their use of VMware technology. We look forward to our ongoing partnership, supporting their critical mission.”

Much like the objections to the DISA agreement, the Army contract apparently runs afoul of VMware competitors because of the broad scope of virtualization products it covers.

If the Army agreement had stuck to server virtualization products – where VMware is by far the dominant player in the market – it is doubtful that others would have objected.

But the agreement’s scope pushes into other virtualization areas such as the desktop and storage – the strong suits for Citrix and Nutanix, respectively – where either someone besides VMware is the dominant technology vendor or no dominant technology vendor has been established.

From looking at the procurement documents, I’d speculate that the protests will argue that the agreement gives VMware an unfair advantage because it gives government buyers a quick and easy way to access VMware products without having to consider competitive products.

The agreement also is for three years and, with an aggressive sales force working the agreement for that long, it would likely give VMware a nearly insurmountable lead in those disputed virtualization areas.

It is curious to me the path the Army has taken with this contract. It started as what looks like a reasonable move for the Army to gain access to VMware maintenance and updates. But several weeks later, they morph it into a much broader agreement that obviously has stepped on the toes of VMware's competitors.

Given the similarities to the DISA ELA that was cancelled, I think there is a chance the Army will follow a similar path and the service will pull the award. If that happens, GAO will dismiss the protests.

If the Army decides to fight for the contract, the battle will continue through GAO. The protests were filed on Nov. 30, and a decision is expected on March 9.