Cloud Computing

VA terminates $36 million cloud deal with HP

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The Department of Veterans Affairs has terminated its five-year, $36 million cloud computing contract with HP Enterprise Services, citing a material change in the agency's requirements.

The deal, signed in November 2012, was to eventually move 600,000 VA employees to Microsoft government community cloud e-mail and calendaring services. Yet only test accounts -- no actual users -- from VA actually made it to the cloud, despite the agency having the capabilities in place to do so.

Those test accounts have since been removed by VA, according to a statement from the agency to FCW.

"VA has decided to terminate the cloud email contract for the convenience of the government," a spokesperson for the agency said.

A contract terminated out of convenience means the cancelation was not the contractor's fault and was driven by changes in VA's requirements, the spokesperson clarified. As such, the now-dead deal will cost VA about $150,000 for services performed, plus what could be a sizeable termination settlement.

VA officials declined to elaborate on the changes made to agency requirements.

It is unclear how VA, the second-largest agency in government behind the Department of Defense, will proceed regarding its enterprise e-mail system. VA had envisioned its move to the cloud long before the November 2012 deal, releasing its first request for information document in February 2011.

"VA is determining next steps in regards to its enterprise email system," the spokesperson said.

HP Enterprise Systems, which acted as a systems integrator in leading the implementation of Microsoft Office 365 for the agency, also declined to go into detail on the circumstances, but an HP spokesperson confirmed the contract's termination to FCW.

And while no officials from VA agreed to comment publicly to FCW on the deal's demise, a key VA leader has publicly voiced doubt about the cloud before.

In November -- after the agency announced its cloud deal with HP Enterprise Services – VA's Deputy CIO for Architecture, Strategy and Design, Paul Tibbits, told an audience at 1105 Media's Enterprise Architecture Conference that he questioned the cost-effectiveness of moving to the cloud.

Tibbits was not discussing this project in particular, but rather stressing the broader need for real use cases and hard-nosed business assessments. "It is not 100 percent clear that expenses go down if we jump into the cloud," he said. "The revenue stream is up there in neon lights, we have got to figure out if that is going to save us money or not."

Note: This story was updated on July 16 to add HP's confirmation of the contract termination.

About the Author

Frank Konkel is a former staff writer for FCW.

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Reader comments

Sun, Sep 1, 2013

"The IG final got one right". Good call. Ask Region 1 about how bullet proof data centers are, then ask the facility directors after the outage that just happened.

Tue, Aug 20, 2013 The IG final got one right!

Wow, stunned this one didn't get more play here. With all that certain folks invested in basking in the limelight, I would have thought it would garner a lot more in this, the VA’s defacto anonymous opinion portal. The good news is that the ruling should have lasting effects government wide because those items cited by this IG group should have to be considered as any other government agency tries to cut their nose off to spite their face when trying to save a few dollars. Not that it saves any money – it never does – but somebody is made to look good in the eyes of some congressman, so it’s allowed to move forward. Let’s hope the next agency that tries this is forced to address this IG’s opinion and ruling. I hope the next item on the IG’s list will be private data centers. They are a problem waiting to happen.

Mon, Jul 22, 2013 VABum

VA OIT leadership is in shambles and currently undergoing a lot of restructuring as well as a changing of the guard so to speak. Hopefully, they will pull it together someday...but then I have always been called an optimist.

Fri, Jul 19, 2013 OccupyIT's #1 FAN

No, Bob. It is federal agency. Back door access is a given. Every employee acknowledges this under terms of employment. The problem is that VA OIG will lose visibility into the transactions of suspected felons and other miscreants. The email transactions are required to effectively prosecute. Ironically, this concern predates PRISM. When someone commits fraud within the VA, IG needs legitimate access to prosecute them. As taxpayers WE WANT THIS. With 325,000 FTEE there will always be some who want to rip us off. Bummer, huh? The bottom line is that VA IT once again thought they knew better than their customers, and acted to make it look like they embraced the cloud. IF they were serious, Vista , their flagship EHR would run there today. IF it could do encyption that is. Jerry Davis exposed all that, though.

Fri, Jul 19, 2013 Bob

Could this be because of the NSA PRISM news? We know now that Public Cloud servers such as Office 365 servers have backdoor access.

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