Rean's OTA contract draws scrutiny

There is a bid protest involving an Other Transaction Authority award that the market should be paying attention to.

When Rean Cloud LLC won a cloud contract in March from the U.S. Transportation Command, what caught most people’s attention was that it was worth $950 million. It has since been drastically reduced to $65 million.

This contract has gotten a lot of attention because Rean is a small business and is primarily a reseller of Amazon Web Services, though Rean does offer other cloud service providers.

But let’s put AWS aside because this contract has another wrinkle that shouldn’t be ignored.

The USTRANSCOM contract was an Other Transaction Authority award, which means that it falls outside the usual rules and regulations of procurement. OTAs have grown in usage over the last few years or so.

They are designed for research and development and prototyping of items and services not considered commercially available. It also is seen as a quick way for agencies to get from concept to production.

After Rean won the award, Oracle filed a bid protest with the Government Accountability Office.

GAO doesn’t have jurisdiction to hear a protest of an OTA award, but it does have authority to review whether an agency has properly used the Other Transaction Authority. And that apparently is what Oracle is questioning.

Oracle’s attorney didn’t respond to a request for comment.

DOD’s decision to scale back the $950 million award to $65 million might help USTRANSCOM make the case that an OTA award is proper. A $950 million contract would have been open to anyone at DOD, so it would be hard to argue the cloud services being sold aren’t commercial.

Being restricted to one command and one that is pushing the envelope in migrating services to the cloud might be an easier argument to make.

We’ll be watching to see if Oracle decides to withdraw its protest, but I hope not because as OTA grows the market will need decisions like this one to understand where the boundaries are.

GAO has not ruled on many OTA contracts. The most recent one is from 2016 and involved the Transportation Security Administration’s decision to use OTA as it developed the Pre-Check screening program.

In that case, GAO ruled in TSA’s favor and said that it could use OTA for work to develop Pre-Check. One of the reasons was because TSA was able to clearly explain why it needed to use OTA.

Because it was OK to use OTA, GAO said it couldn’t rule the other complaints MorphoTrust raised about the solicitation being ambiguous and otherwise defective. Because it was OTA, GAO lacked the authority.

If the use of OTAs continues to grow and their size grows -- as many expect -- I won’t be surprised if we see more complaints about them falling outside of the usual procurement processes.

As I said, this is one case that bears watching for multiple reasons.