Amazon CIA cloud row: US judge slaps down IBM as 'manipulative', inferior

Big Blue thwacked for attempts to game the $600m bidding process

The United States Court of Federal Claims has dished the dirt on why IBM lost out on a strategically crucial CIA cloud contract to Amazon Web Services, and this dirt is pungent.

A court opinion [PDF] published today revealed why the US government picked Amazon over IBM for a $600m CIA cloud, why it felt IBM's protest was on shaky ground, and how IBM attempted to "manipulate" the procurement process to its favor.

Amazon was awarded the contract on February 14, 2013. IBM formally protested this decision, claiming its offer should be reconsidered because Big Blue staff had failed to properly understand a key data-processing requirement.

But, far from not understanding that requirement, the court opinion indicates IBM grasped the requirement yet decided to submit a flawed proposal to give itself a chance to force a second evaluation if the contract went to AWS, as it did.

The contentious section asked the parties to price up a fault-tolerant cluster of 1,000s of commodity servers running a MapReduce scatter-gather job on about 100TB of data with a 100 per cent duty cycle.

In other words, the CIA wanted Amazon and IBM to cost out a cloud cluster that would run MapReduce continuously for a year so spies could prod large chunks of data.

Both IBM and Amazon appeared to understand this in their initial bids, and submitted plans to do so, Judge Thomas C. Wheeler wrote in his court opinion.

When it came to submitting its final official bid for the CIA contract, something curious happened: IBM handed in a "dramatically different interpretation" of the MapReduce cluster specification, by pricing out an analytics tool that would execute a single 100TB processing run.

"There is no explanation in the record for this drastic IBM pricing change," the federal court ruled.

IBM's pricing dramatically reduced the apparent cost of its bid, but to effectively evaluate it against Amazon, which had priced out a full-year cost of a cluster, the government had to scale up IBM's cost to cover a 12-month period. It was this calculation that IBM subsequently disputed.

"It is obvious that when IBM deviated from its initial approach, it did so as a way to manipulate the situation in its favor," the court ruled. "Such gamesmanship undermines the integrity of the procurement process."

In its second bid for the CIA contract, IBM said its cloud would cost $93.9m in total over five years, versus Amazon's $148.06m. But new figures show a different story, though: IBM had set its guaranteed minimum cost per year at $39m, whereas Amazon put forward $25m. Big Blue also wanted a clause in its contract to let it restructure the agreement in the second year if the spies didn't meet this minimum annual payment.

Though IBM bowed out of the procurement, and issued a statement saying it had withdrawn its bid "in light of the government's recent submissions emphasizing its need to move forward on the contract," the company is pushing on with its cloud schemes by prioritizing recent acquisition SoftLayer, and applying for various crucial certifications to let it run federal workloads.

But the court opinion paints a picture of a company trapped in the old, cosy world of interminable procurement contracts with fuzzy pricing schemes. Now that Amazon has come along, IBM has apparently resorted to a series of tricks to try and get itself plugged into the federal government, rather than competing on merit.

"Even if IBM’s arguments regarding the price evaluation and modified solicitation requirement were persuasive, it remains implausible that there would be any effect on the outcome of the procurement," the court opinion states. "AWS's offer was superior, and the outcome of the competition was not even close."

IBM disagreed with the opinion, and in a statement email to El Reg, Big Blue said: "IBM respectfully but strongly disagrees with the court's unwarranted assertions. Our position remains the GAO's [Government Accountability Office's] findings were appropriate and the contract should have been rebid."

When contacted, Amazon beamed in a missive that it was "pleased that the legal process has validated the CIA's selection of AWS to assist the CIA with this transformative project to implement proven, innovative commercial cloud technology. AWS presented the Agency with the superior and best value solution. We look forward to a successful relationship with the CIA."

Though IBM may have lost this round, its new lavishly funded and fact-lite ad campaign does claim its cloud "powers 270,000 more websites than Amazon". Just not anything as big as Netflix. Or Reddit. Or Amazon.com. Or, well, the CIA. ®