Procuring Cloud Services

A&T suggests that the Government consider alternate pricing strategies for reasons outlined below.

1. Use a Time & Materials (usage-based) pricing model: Why? Because AWS bases costs on usage that will fluctuate from month to month and because AWS has reduced prices 56 times in 10 years. It is to the Government’s distinct disadvantage to require a firm fixed price (FFP) contract since doing so precludes the Government from taking advantage of savings as usage fluctuates and of reduced prices.

Flexibility and control: This approach allows the government flexibility to take advantage of dynamic, competitive cloud pricing and provides control over capabilities and costs

2. Alternative to FAR12.207 stipulation (a) about firm-fixed price procurement: Some COs point to FAR12.207 (a) to stipulate a FFP contract. However, clauses (b)(1) and (c)(1) offer time-and-materials and indefinite delivery options. We suggest that in fact with cloud, the Government really procures a service that it consumes as it would a “utility” (e.g., electricity or gas) and not as a fixed product (e.g., a printer or software license).

3. Challenges for the Government with FFP cloud contracts: Given that a FFP contract poses significant risk for the vendor because it cannot control Government use in a self-provisioning environment, the fact is precipitating two results that the Government wants to avoid: 1) some vendors raise prices to protect against the risk of consumption that they cannot control or 2) some simply do not bid FFP contracts, thereby limiting competition or prompting “fair opportunity” circumstances in which too few vendors bid.

4. Use a limited number of CLINs: We suggest that the Government limit CLINs to broad categories such as “Compute”, “Professional Services” (PS) and “Managed Services” (MS) “Cloud Support”, “Cloud Training”, or “Cloud Marketplace” for several reasons:

  • AWS now has 89,000 CLINs in its catalog, which is growing very rapidly—it was 25,000 2 years ago
  • Government users may change product services (i.e., provisioning) at will to scale up and down

Hence, if the Government requires a CLIN for every product detail under a firm-fixed price model, it becomes nearly impossible for Government procurement officials and the reseller to keep the contract inventory up to date.

Below we offer brief descriptions of five suggested CLINs. Simple, effective service categories include:

A. Cloud Services: Provision a CSP account for a certain dollar amount tied to a full menu or catalog of commercially-available CSP services. This provides the Government with a wide array of services and provides the proper level of fiscal constraints tied to budgetary mandates. For example, Amazon EC2 – Computing; Range—X-Small to XX-Larger Services (with a Not-To-Exceed (NTE) amount and language that outlines the process to implement NTE billing controls.

B. Professional Services (PS) and Managed Services (MS): Here we offer a succinct overview on PS and MS:

  • PS Activities: Design, assess assets, migrate, configure, implement, optimize, and govern
  • MS Activities: IT support; log data, and user management; app support; monitoring; and security

C. Cloud Support: Access to technical support engineers for app development or dev/ops and experienced customer service staff who help customers get the most from the products and features available.

D. Cloud Training: To help customers gain the skills, knowledge, and expertise to design, deploy, and manage applications on a cloud platform.

E. Cloud Marketplace: A forum for customers seeking products from 3rd-party vendors to supplement workloads and cloud requirements (e.g., AWS Marketplace Marketplace enables cloud customers to streamline the software procurement, licensing and configuration process, allowing software to be procured in minutes.

Available Contracting Methods

Type Contract Name & Number
State & Local Government