Cloud Computing

VA terminates $36 million cloud deal with HP

Cloud computing icon

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.

FCW in Print

In the latest issue: Looking back on three decades of big stories in federal IT.


  • Anne Rung -- Commerce Department Photo

    Exit interview with Anne Rung

    The government's departing top acquisition official said she leaves behind a solid foundation on which to build more effective and efficient federal IT.

  • Charles Phalen

    Administration appoints first head of NBIB

    The National Background Investigations Bureau announced the appointment of its first director as the agency prepares to take over processing government background checks.

  • Sen. James Lankford (R-Okla.)

    Senator: Rigid hiring process pushes millennials from federal work

    Sen. James Lankford (R-Okla.) said agencies are missing out on younger workers because of the government's rigidity, particularly its protracted hiring process.

  • FCW @ 30 GPS

    FCW @ 30

    Since 1987, FCW has covered it all -- the major contracts, the disruptive technologies, the picayune scandals and the many, many people who make federal IT function. Here's a look back at six of the most significant stories.

  • Shutterstock image.

    A 'minibus' appropriations package could be in the cards

    A short-term funding bill is expected by Sept. 30 to keep the federal government operating through early December, but after that the options get more complicated.

  • Defense Secretary Ash Carter speaks at the TechCrunch Disrupt conference in San Francisco

    DOD launches new tech hub in Austin

    The DOD is opening a new Defense Innovation Unit Experimental office in Austin, Texas, while Congress debates legislation that could defund DIUx.

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.

Show All Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group