IT-acquisition reform remains an area of ongoing concern for Federal agencies and government contractors.  Indeed, as we previously discussed, the GAO has added IT Acquisitions and Operations to its bi-annual list of programs it identifies as posing a high risk for fraud, waste, abuse, and mismanagement.  Strengthened by Congress’ passage in December 2014 of the Federal IT Acquisition Reform Act (“FITARA”), OMB has implemented several initiatives to reduce redundancy, improve efficiencies, and lower costs with respect to the government’s procurement and management of IT resources.  However, a recent Department of Defense (“DoD”) Inspector General (“IG”) audit report analyzing one of these initiatives—the Federal Data Center Consolidation Initiative (“FDCCI”) —highlights the ongoing struggle that Federal agencies face when seeking to execute IT reform.  If DoD responds to this audit report by stepping up its efforts under FDCCI, one result could be increased opportunities for IT contractors offering cloud computing and other services.

Through the FDCCI, OMB set a goal of closing 40 percent of Federal data centers by the end of FY 2015 in order to reduce Federal agencies’ energy and real estate footprints and to achieve cost savings by streamlining data management systems.  Initially, OMB defined a data center “as any room greater than 500 square feet in [an] area devoted to data processing, and meeting a . . . classification defined by the Uptime Institute.”  Subsequently, OMB broadened this definition of a data center to include any “closet, room, floor or building for the storage, management, and dissemination of data and information.”  When issuing final guidance regarding FITARA, OMB reminded agencies of the importance of FDCCI and the need to update OMB on their efforts to achieve FDCCI’s goals.

The DoD IG audit report found that as of the end of FY 2015, DoD had closed only 568 of the 3,115 data centers that DoD reported to the Data Center Inventory Management system.  This closure rate of 18 percent fell well below the OMB’s goal of closing 40 percent of Federal data centers by the end of FY 2015 and renders DoD off course to meet its internal goal of closing 60 percent of data centers by the end of FY 2018.  According to the audit report, DoD missed the 40 percent goal because the DoD CIO did not revise DoD’s data center closure plans to reflect OMB’s expanded definition of data centers.  The DoD IG also found, among other things, that the DoD’s CIO was not enforcing the agency’s requirement that DoD installations may not operate more than one installation processing node (“IPN”)—a data center that provides services to a local installation that cannot be provided through a centralized data center.

The DoD IG recommended that DoD revise its data center consolidation strategy to account for the OMB’s broader definition of data centers.  The report also recommended that the DoD CIO review installations with multiple IPNs and better enforce the IPN consolidation requirement.  DoD agreed with these recommendations, noting that it is “integrating its approach for data center consolidation and cloud computing into a single ‘compute and storage strategy.’”

The DoD IG’s audit report highlights the struggles that Federal agencies are experiencing in implementing IT acquisition reform, particularly with respect to the OMB’s FDCCI.  The IT contracting community should remain cognizant of areas in which their support may ease the burden of IT acquisition reform.  For instance, DoD’s suggestion that it will continue its efforts to meet FDCCI’s goals through cloud computing may present contractors with an opportunity to provide cloud solutions to reduce redundancy and increase efficiency.  Indeed, estimates suggest that Federal agencies will spend $6.7 billion on cloud computing services in FY 2016, which represents approximately 8.5 percent of Federal IT spending.  The portion of IT spending attributed to cloud services has been forecasted to grow to 50 percent of IT spending by 2018.  This growing emphasis on cloud computing demonstrates that IT contractors could have a unique opportunity to ease the burden of IT reform—and help Federal agencies meet their goals—by offering cloud-based data-management solutions and related cybersecurity and other services.