Microsoft's federal shop folds into Azure cloud business

Microsoft is restructuring the team responsible for its federal business and aligning that organization under the Azure cloud segment.

In an email to employees last week, the global software giant said the Microsoft Federal unit led by Rick Wagner will become part of the Microsoft Azure engineering organization under the stewardship of Jason Zander.

Microsoft’s pursuit and win (at the time) of the Defense Department’s JEDI cloud infrastructure contract taught the company the importance of being able to deliver highly customized solutions to the government, said the email written by Microsoft's Chief Commercial Officer Judson Althoff.

“Our experience has also taught us the tremendous value of bringing our engineering team and our U.S. federal business unit closer together,” Althoff wrote. “Doing so allows us to be more responsive to our customers’ distinct needs and make breakthroughs in terms of our product portfolio.”

The restructuring becomes effective Oct. 1, the day after Toni Townes-Whitley leaves Microsoft from her current role as president of U.S. regulated industries that includes the bulk of public sector business.

ZDnet first reported the restructuring as well as Townes-Whitley’s departure.

In his email to employees, Althoff said the new organization will help the company deliver innovations that are tailored to the federal government’s specific needs.

The change also aligns with the company's "One Microsoft" approach for addressing customer needs across boundaries.

“We should work together across teams and subsidiaries in their interest,” Althoff said.

However, all signs at this point indicate Microsoft will not make any other changes.

“Given the U.S. federal government’s unique role, presence across several industries, and how we work to serve its needs, these changes apply to the U.S. federal government alone,” Althoff wrote.

Posted on Sep 13, 2021 at 10:59 AM0 comments

Lessons from 9/11 and reasons for optimism

Tomorrow (Saturday) marks 20 years since the Sept. 11 terrorist attacks and that fateful day still looms large in our nation’s psyche.

With the anniversary coming so close to the less-than stellar withdrawal from Afghanistan, there has been more soul-searching than with past anniversaries.

Whether we agree with the premise or not, I’m sure we’ve all seen the articles about how the terrorist attacks brought out the worst in America. Many have drawn a downward line from Sept. 11 and that initial spark of unity to Jan. 6 when our nation’s divisiveness was on full display.

I’m not going to argue that one way or another. I tend to be an optimist so my view isn’t that dark. But it also isn’t the first time America has shown a dark side by taking actions that in hindsight are so obliviously wrong. Remember, we put Americans of Japanese descent in internment camps during World War II.

But nearly 3,000 people were killed on Sept. 11, 2001 and threats still exist from groups and countries that want to do us harm. So it is worth looking back a little on what the terrorist attacks meant and what they still mean.

I’m not qualified to give a geopolitical analysis but I’ll share a few observations.

Lesson 1: Keeping striving for ways to break down technological barriers

I talked with a lot of executives and government officials in the weeks and months following the terrorist attacks. One thing still stands out to me is how quickly the government was able to identify the individual terrorists, including where they had lived and where they took flight training.

“If you look at what we knew about these terrorists within 24 hours, the data was already out there,” Renny DiPentima told me at the time. Retired today, at the time he was president of SRA International.

The problem was the data resided in different systems that didn’t share or talk to each other. It was a huge challenge then and despite the advent of cloud computing and open source, sharing is still a challenge today. We must do more.

Lesson 2: Focus on common goals and not the agency or company name on the business card

The government had plenty of councils and groups already in place before the terrorist attacks. This was after all nearly a decade after the Reinventing Government initiative of the Clinton administration.

But the terrorist attacks added new energy to efforts to breakdown silos and get people across agencies and between industry and government to talk to one another more. The creation of the Homeland Security Department brought together 22 agencies involved in security. The Federal CIO Council became even more active.

Industry groups such as ACT-IAC (then known as the Federation of Government Information Processing Councils), AFCEA and the Professional Services Council have increasingly become platforms for industry and government cooperation.

But there is still so much more that can be done today. Human nature continues to get in the way. People often don’t want to share. The question of “what’s in it for me” can loom large.

The Jan. 6 attack on the Capitol Building has laid bare the challenges that remain when it comes to cooperation. That was a failure of people and leadership, not technology.

Lesson 3: Leaders lead; be a leader

In the past 18 months, we’ve faced three watershed events that have shaken us in ways similar to the terrorist attacks: The COVID-19 pandemic, the murder of George Floyd and the Jan. 6 attack on the Capitol.

In some ways, the country has reacted admirably but in other ways we’ve fallen short. The country hasn’t reacted in the unified manner that followed the terrorist attacks. Perhaps that’s because the “enemies” are domestic and not foreign. But that doesn’t make it right.

Government contractors have set some good examples over the last year by supporting diversity and inclusion efforts and paying greater attention to employee health, physical and mental, during the pandemic.

Companies have a historic opportunity to provide leadership because we can’t solely rely on the government to address these issues. It takes both.

How you lead your company and the values and examples you set for your employees has never been more important. It means something to the country as well as to your success.

Lesson 4: Why I’m optimistic

A lot of the coverage of the 20th anniversary of the terrorist attacks has focused on the negative, and I’m not so naïve that I don’t see the dark side. But we can’t just look at one side to the exclusion of the other.

Many challenges remain and some are worse today than 20 years ago. Afghanistan may well become a safe haven for terrorism again.

But I’m optimistic because we don’t give up. The technological strides of the last 20 years have been impressive -- cloud computing, artificial intelligence and open source to name a few. They are changing how we live and work for the better.

The government contracting industry has grown and matured. A lot of wealth has been created, but that’s not a bad thing. The private sector is now indispensable to government operations and that means a growing pipeline of new technologies and innovation.

Like the past, the future will be messy and contentious. We’ll make mistakes but we’ll keep trying to make things better. We really don’t have a choice.

Posted on Sep 10, 2021 at 2:53 PM0 comments

Bluestone backs cBEYONData

Bluestone Investment Partners has acquired a majority stake in technology and professional services firm cBEYONData, whose management also retained an ownership interest in the firm and will continue to run the company.

Terms of the deal announced Thursday were undisclosed. This transaction is keeping with Bluestone’s strategy of requiring smaller firms that are ready to grow into the middle tier of the market. Bluestone Managing Partner John Allen describes the firm’s strategy in this Project 38 podcast episode from April.

CBEYONData specializes in business processes, cloud migration and enablement, business intelligence, data analytics and project and program management support. The company has focused on agency chief financial officer-type executives.

The company developed a proprietary software offering that it calls the CFO Control Tower, an on-demand solution for financial reporting and business process automation.

For Bluestone, its investment in cBEYONData is the seventh transaction since the launch of an investment fund focused on smaller businesses in March 2020. Past deals include CTI, Intrepid and Continental Mapping Consultants.

David Schmidtknecht, co-founder of cBEYONData, said the company now has access to more resources that will help expand its offerings and “deliver on the evolving needs and expectations of the federal government CFO community.”

Monument Capital Partners provided banking services to cBEYONData.

Posted on Sep 10, 2021 at 12:30 PM0 comments

Our new look

By now, I’m sure you’ve noticed that we’ve launched a refreshed look for the Washington Technology website. We believe you'll find it cleaner and easier to use.

Websites tend to suffer from something similar to mission creep. You need an extra button so you add it. A box for X, Y, or Z is needed so you add it. Priorities shift as well, so something else gets added.

Things that get added tend to not get removed even when they no longer serve a needed function.

For example, at one time a top priority was to get people to sign up for our daily newsletter, so we had a button for that. Then our business model shifted to a paid membership. A new button was needed for folks to sign up. Another button was added so people could manage their membership.

Then a couple years ago we launched the Project 38 podcast. You guessed it: another button was added for that.

Things got cluttered, so cleaning things up was a major goal. Instead of two rows of navigation at the top of the page with I believe 15 different items, we are now down to a single row with seven choices that have drop down menus.

One complaint I had long had about our website is that we didn’t have a way to easily keep important stories at the top of the news well. We have now have spot for a single lead story and three other important stories.

We want to be able to keep these stories at the top for more than just a single news cycle instead of getting pushed down the news well. That means something like Guidehouse’s acquisition of Dovel Technologies announced this week will stay at the top instead of getting pushed down by other items.

We do have some kinks to work out, such as sizing art and photos so we can add more color and interest to the page. That will get fixed quickly.

The launch has little to do with our recent acquisition by GovExec. The refresh has been in the works for a while. But we did want to get it out before it got lost as we dive into other back office and infrastructure integration tasks.

There are some other features I’d like to add, but I’m going to be more intentional this time around to avoid that mission creep. I don’t want us to be cluttered up all over again by this time next year. I'm sure our new owners will have some ideas as well.

But for now I'm very satisfied with this cleaner look. Let me know if you have any questions.

Posted on Sep 09, 2021 at 11:44 AM0 comments

NCI expands AI work with Centers for Medicare & Medicaid Services

NCI Information Systems is continuing its long-time relationship with the Centers for Medicare & Medicaid Services with a five-year, $112 million extension of the Comprehensive Error Rate Testing contract.

The extension allows NCI to expand the use of its artificial intelligence solutions including robotic process automation and machine learning for monitoring, measuring and reporting on improper payments under Medicare Fee For Services program.

NCI has supported the CERT program for 20 years.

“As federal agencies continue to embrace artificial intelligence and machine learning technologies, they will become more efficient and enable their workforce to focus on more mission-critical work,” said NCI CEO Paul Dillahay.

NCI will help CMS with the selection and review of Medicare FFS claims to determine whether each claim was paid properly under Medicare coverage, coding and billing rules. Total and partial payment errors are used to calculate and report the improper payment rate to Congress as part of the Health and Human Services Department's annual financial report.

Posted on Sep 09, 2021 at 11:44 AM0 comments

Guidehouse to acquire Dovel Technologies

Dovel Technologies' run in the federal market is entering a new phase with the Wednesday announcement that it is being acquired by Guidehouse.

Guidehouse is looking to bolster its offerings in health, human services and public safety. This transaction is another example of a middle-tier player being acquired by a larger buyer, in this case the Veritas Capital-backed Guidehouse platform.

Terms of the deal were not disclosed, but Guidehouse said it expects annual revenue to hit $2 billion after the deal closes. In a February analysis, credit ratings agency Moody's Investor Service estimated Guidehouse's revenue for 2020 at around $1.55 billion 

Dovel is adding at least $400 million in revenue to that total, considering their acquisition AceInfo Solutions in 2020 pushed that number to $300 million. Dovel is ranked No. 69 on the 2021 Washington Technology Top 100 with $356.8 million in prime contracts to mark its debut on the list. Our Top 100 doesn’t measure subcontracting revenue, so the overall sales figure is likely higher.

Guidehouse CEO Scott McIntyre called the Dovel deal a “strategic step in our journey to create the next generation global consultancy.”

Dovel touts having significant experience in public health, research and IT capabilities.

“With complementary strengths in Guidehouse’s focus areas, together we will be well positioned to continue delivering innovative solutions to tackle some of the most complex challenges facing government and commercial clients, while building resilience into important missions and services,” McIntyre said in a company announcement.

Both companies expect to close the transaction by the end of this year.

Guidehouse was launched in 2018 with its current brand and identity after Veritas acquired that business, formerly the U.S. public sector arm of PricewaterhouseCoopers.

In August 2019, Guidehouse spent $1.1 billion to acquire Navigant for a greater presence in highly-regulated commercial markets. That deal doubled Guidehouse’s revenue to about $1.3 billion, split relatively evenly between the government and private sectors.

Dovel also is owned by private equity. Macquarie Capital acquired that company in 2019 and steadily taken it up the food chain of the federal market's middle tier. 

The company has since captured some larger contracts thanks to the acquisition such as this $135 million Federal Emergency Management Agency award.

Dovel has also made some strategic hires along the way to bring in large business experience, such as the appointment of Chief Growth Officer Hitesh Vahistha from Perspecta and Chief Human Resources Officer Kelly Demaitre from CACI International

A series of top-level leadership transitions have also taken place in recent years. Paul Leslie became CEO in 2011, when Dovel had about 50 employees. Griggs came onboard five years later as chief operating officer and then became CEO in 2019, with Leslie moving to the executive chairman role.

Leslie retired earlier this year and was succeeded by Sudhakar Kesavan, formerly the longtime CEO and chairman of ICF.

The announcement of the acquisition by Guidehouse indicates that at least some members of the Dovel management team will move over, along with the other 1,800 employees.

“Through the integration of our two firms, our employees will experience an innovative and collaborative environment with expanded growth opportunities, while our combined clients will access a wider array of expertise, tools, and technologies,” Griggs said in the company announcement. “We look forward to this new chapter together.”

Houlihan Lokey acted as financial adviser to Dovel alongside Macquarie. Cooley LLP served as legal counsel. Milbank LLP and Covington & Burling LLP both acted as legal counsel to Guidehouse and Veritas. Avascent supported Veritas and Guidehouse with buyside due diligence work.

Posted on Sep 08, 2021 at 10:07 AM0 comments

Microsoft adds to NSA cloud protest

Unsurprisingly, Microsoft continues to pursue its protest of a $10 billion National Security Agency cloud computing contract that went to rival Amazon Web Services.

Microsoft recently filed a supplemental protest with the Government Accountability Office that continues its argument that the NSA made a mistake in choosing AWS.

The original filing hit on July 21 and the supplemental filing was made on Sept. 2, which indicates Microsoft is responding to the NSA’s report on its protest.

Once an agency is notified that a protest has been filed, they have about 30 days to send GAO a written report on the procurement and the process they want through. The agency also provides information they believe refutes the allegations made by the protestor.

Microsoft is required to respond to the agency report. But the company has taken an extra step in making a supplemental filing to its protest.

That means that there was something in NSA's report or in the documents the agency provided to GAO that triggered additional responses by Microsoft.

Of course, that doesn’t mean that Microsoft is more likely to prevail. But all of that indicates this fight is going to go on.

One other possibility is that the new protest filing by Microsoft might raise concerns with NSA and pressure the agency to take a corrective action.

Given the NSA is the customer, it is not surprising that we're not hearing much more about this classified contract.

What we do know so far is that it is worth up to $10 billion and goes by the dramatic name of “WildandStormy.” Other details are scarce, but this contract fits a bigger pattern across the intelligence community of moving more data and applications to the cloud.

WildandStormy will likely replace the on-premise based GovCloud environment. Already underway and separately is a multiple-award effort known as Commercial Cloud Enterprise or C2E, of which Microsoft and AWS hold positions on alongside three other cloud hosting providers.

Although Microsoft filed a supplemental protest, the original protest filing on July 21 is the starting point for a decision. The due date of Oct. 29 remains GAO’s deadline for a decision.

If GAO rules against Microsoft, I’d expect Microsoft to take the next step and go the U.S. Court of Federal Claims. If GAO rules in Microsoft's favor, we’ll have to see what the recommendation is. It isn’t automatic that AWS will go to court if the decision goes in Microsoft’s favor.

Watch this space because this fight is far from over.

Posted on Sep 08, 2021 at 1:56 PM0 comments

Fourth quarter spending gets hot

If it’s September, that means that the annual fourth quarter spending spree is reaching its apex.

Just look at these examples from the Pentagon's awards digest from Friday, Sept. 3:

  • A $46 billion Air Force award to 55 companies.
  • An $800 million Navy award shared by five companies.
  • A $421.6 million Missile Defense Agency sole- source award to Northrop Grumman for booster vehicles.

Including those three awards, there are a total of 26 contract announcements. The first three days of September saw the Defense Department and military service branches announce 69 contract awards and several saw multiple winners.

We also see an uptick in the number of contract modifications and exercised options that are announced. These are happening as agencies push through contract obligations before the budget year ends on Sept. 30.

For example, the Friday digest shows that Raytheon Technologies received a $736.6 million modification from the Navy for propulsion system parts and support. That work came through the Pratt & Whitney business, which was part of the old United Technologies Corp. that merged with Raytheon last year.

Lockheed Martin received four modifications or exercised options from the Navy worth about $320 million.

But don't be fooled: these are not rushed awards.

You don’t put out a potential 11-year, $46 billion contract on a whim. The Air Force contract called out earlier has 55 winners and includes several familiar names: Booz Allen Hamilton, Sierra Nevada, Kratos Defense & Security Solutions, General Dynamics, Raytheon and Northrop Grumman to name a handful.

The Air Force will use that contract to buy digital engineering and model-based systems engineering, agile processes, open systems architecture, and enterprise analytics.

Fifty-eight companies submitted bids, which means three were not selected for an award. The contract runs through to Sept. 6, 2032.

Separately: Booz Allen, CACI International, Science Applications International Corp., Capstone Corp. and 22nd Century Technologies won seats on a large Navy contract for enterprise IT services. Services include architecture, portfolio management, and legacy systems sustainment related to the MyNavyHR system.

Seventeen companies bid on that contract, which has a base value of $556 million over five years. The ceiling value is $800 million if the Navy exercises the option to extend for another year.

All of the awards mentioned here are large examples, but the majority of spending in the fourth quarter is much smaller and quicker.

We often do see those until the quarter is over and we can look back. So look for more analysis and data from us once the year closes.

Posted on Sep 07, 2021 at 1:52 PM0 comments

Is DHS about to modernize its financial systems? Maybe.

The Homeland Security Department may have closed the final chapter on a pair of blanket purchase agreements that it wants to put in place to modernize and consolidate its financial management systems.

“May” is the operative word here as both BPAs have been wracked with bid protests and legal challenges. The systems integrator portion known as DHS Enterprise Financial Systems Integrator was finally resolved in April, when the Government Accountability Office denied a protest by Creoal Consulting.

DHS now has made three awards for the software portion with CGI Federal, Carahsoft, and Mythics as the winners of that $3 billion BPA. The award came after the U.S. Court of Federal Claims denied a protest by Savantage, which challenged DHS' approach of using two contracts for the program.

Formed in 2003, DHS is itself a consolidation of 22 different federal agencies and other components. Each component essentially had and many still have their own financial management system. DHS wants to create an enterprise-wide financial management system.

The systems integration portion is worth $1 billion and went to the following companies :

  • Accenture
  • CACI International
  • CGI Federal
  • CSRA (now part of General Dynamics)
  • Deloitte Consulting
  • IBM
  • Savantage

According to Deltek data, no task orders have flown through any of the BPAs since they were awarded. But systems integration work is impossible without the software vehicle in place. Perhaps we may see some activity now.

But there is still a chance, though likely slim, that we’ll see other delays from a new protester. Seven companies in total bid on the software portion.

Posted on Sep 07, 2021 at 1:27 PM0 comments

GAO rules conflict of interest tainted $500M Navy jammer competition

An apparent conflict of interest on the part of the winning company led the Government Accountability Office to recommend the Navy conduct an independent review of the requirements contract for its Next Generation Jammer.

We earlier reported that the Navy was conducting a review of its decision to pick L3Harris over Northrop Grumman for the $500 million contract, but details did not become available until GAO released a public version of its decision Friday (today).

A second decision for the classified portion of the jammer project went against Northrop. That decision hasn’t been released and may not given its nature.

Northrop Grumman and L3Harris were in a fly-off of sorts to test concepts for the Next Generation Jammer, which will sit as a pod under the EA-18 Growler aircraft. The technology allows the craft to engage in electronic warfare.

The publicly-released GAO decision includes allegations Northrop raised about a Navy employee that developed specifications for the jammer at the same time he negotiated with L3Harris for a job there.

Northrop argued the Navy did nothing to mitigate this conflict, and that L3Harris should be disqualified and found ineligible for the award.

The Navy apparently admitted the person was negotiating for a job with L3Harris as he was developing specifications for the contract. But the Navy argued the situation had no impact on the decision to choose L3Harris.

The Navy said that person had a limited role developing the contract specifications and was interviewing for a job in a different L3Harris division, not the one bidding on the jammer.

But GAO disagreed and found that this person’s actions “created the appearance of an unfair competitive advantage in favor of L3Harris and that the agency’s consideration of the conflict was unreasonable,” the audit agency wrote in its ruling.

That person worked for the Navy from 2013 to 2019 as an electrical engineer and was familiar with both companies' designs for the jammer. He even attended working group and design status meetings with both contractors. He helped develop the evaluation criteria.

When offered the job with L3Harris’ space business, he went to the Navy’s ethics counsel and was told no post-government employment ethics opinion was needed. But another Navy employee talked to him about recusing himself.

After accepting the job, he was told to have no more contact with either team but did continue to work on the solicitation's specs. He left a few weeks later.

GAO's decision describes how deeply involved he was with the development of the solicitation and in evaluating prototypes both companies were working on in the fly-off portion of the competition.

Usually when GAO finds that this kind of conflict of interest, it recommends the contractor be eliminated from the competition. But GAO said it isn’t “feasible or desirable” to eliminate L3Harris in this case.

Instead, GAO recommends an independent review and then for discussions to reopen with the bidders. But if the review finds that the Navy’s requirements have changed, then the service needs to ask for revised proposals.

A simpler solution could be to just continue the fly-off. L3Harris was only tapped to build eight jammer pods as a step toward a full order more than 150.

Why not award a contract to Northrop and let them build eight, then evaluate them against each other?

Posted on Sep 03, 2021 at 6:37 PM0 comments

SAIC reports growth but COVID risk continues

In their second quarter call with investors, Science Applications International Corp. management highlighted two parts of the company's strategy that were on display during the quarter: acquisitions and technology development.

But COVID remains a wild card for the company’s growth outlook.. The company reported 3.8-percent organic growth and said its acquisitions are fueling that.

“Our acquisition of Halfaker and Associates is off to a good start performing well and providing immediate access to strategic health sector customers,” SAIC CEO Nazzic Keene told analysts in a Thursday evening conference call. SAIC closed that $250 million deal in July.

On the technology front, Keene wanted investors to know about the success of its CloudScend suite of integrated cloud and digital tools. That solution is used to migrate legacy systems to cloud environments.

The example Keene used for investors was one project for the Army, where SAIC moved 90 applications to a cloud environment using CloudScend.

For SAIC's fiscal second quarter that ended July 30, SAIC reported $1.8 billion in revenue versus $1.7 billion for the same period last year. Earnings before interest, taxes, depreciation and amortization margin (EBITDA) rose to 10.1 percent from 9.5 percent for the quarter.

SAIC’s backlog also grew 25 percent to $24 billion. 

For its fiscal 2022, SAIC projects annual revenue between $7.3 billion and $7.4 billion. That is a slight upward adjustment from the first quarter.

Keene said she is pleased with the company’s performance, though some of the analysts pushed her and Chief Financial Officer Prabu Natarajan on what the analyst felt were weaker organic growth projections.

Natarajan said SAIC expects its work on this $3.6 billion software and systems engineering contract with the Army to ramp up in the second half of the company's fiscal year. 

COVID continues to have an impact on SAIC’s business to the tune of between $30 million and $35 million a quarter, Natarajan said. For the entire fiscal year, the impact is estimated at about $125 million.

One gauge is SAIC’s logistics business, which usually accounts for $10 million-to-$15 million in revenue a week. Right now, that business is right in the middle at $12.5 million-to-$13 million.

Natarajan said that when the logistics business is back closer to $15 million, then “we’re probably seeing the last effects of COVID."

Because of the negative impact that COVID could have on the ramping up of contracts such as the Army program, SAIC is being cautious in its growth projections for the entire years.

“I think we have good visibility,” she said. “What we don’t have and most people don’t is the dynamics around COVID and the impacts you can see on a near-term basis.”

Posted on Sep 03, 2021 at 10:51 AM0 comments