IBM $265M software fraud case moved forward by DC appeals court

A former senior sales representative for IBM, who says the company used a false audit to pressure the IRS into a $265 million software license agreement, may reargue his case in D.C. District Court, the Circuit Court decided Tuesday.

Paul Cimino appealed his False Claims Act (FCA) case against IBM to the higher court, which found the District Court was wrong to fully dismiss his complaint in October.

The FCA holds companies liable for fraud against the government and allows whistleblowers like Cimino to prosecute that fraud on the government’s behalf, in return for 10% to 30% of the money recouped. The federal legislation has existed since 1863.

“On the facts alleged at the pleading stage, along with the reasonable inferences drawn from those allegations in Cimino’s favor, we find Cimino plausibly alleged that, but for IBM’s false audit, the IRS would not have entered into the license agreement,” wrote Judge Neomi Rao in the court’s opinion. “Whether Cimino can prove those allegations remains to be seen.”

Cimino said the IRS paid between $23 million and $30 million annually for IBM software from 2007 to 2012. When it became clear the IRS would only seek a license agreement extension for the software it was using, IBM conducted an audit looking to charge the agency compliance penalties for overuse, he said.

Deloitte performed the audit but only found about $500,000 in penalties, so IBM included software licenses on discontinued servers as being in constant use to bring that number up to $292 million, Cimino said.

Adam Kravitz, then an IRS senior manager, rejected the audit, but IBM came back with a $91 million figure in November 2012 that he also rejected, Cimino said.

IBM waited until Kravitz was on vacation to approach other IRS officials like his boss, then-Deputy CIO Jim McGrane, threatening legal action over the penalties, but offered to waive them in return for renewing the software license agreement, Cimino said.

The IRS took the deal and even extended the license another six months for $16 million in 2015, nearly two years after Cimino first filed his complaint.

The government conducted a four-year investigation based on Cimino’s complaint but declined to intervene. So IBM moved to dismiss the case in District Court. That court did on the grounds that Cimino never said the IRS accepted the audit’s findings and that it was implausible the IRS “sat idly by” and paid for the software knowing fraud was possible.

But when Cimino appealed his case, the government filed in support the second time.

In reversing the lower court’s dismissal, the Circuit Court found Cimino didn’t say IRS officials accepted the audit but “came close.”

“[T]he IRS may have felt obligated to pay until it received a legal determination that it was relieved of the agreement’s terms,” Rao wrote.

Cimino also said IBM disguised the penalties the technology company presented to McGrane as an $87 million fee for prospective licenses and support it never delivered, a plea the District Court also dismissed. The Circuit Court upheld that dismissal on the grounds Cimino never said when IBM made those claims, who made them and simply believed the services hadn’t been rendered.

Cimino’s lawyer did not respond to a request for comment by publication time.

The case returns to District Court for further proceedings, and IBM could owe up to $10,000 per claim and treble damages if found to have committed fraud.

An additional wrinkle in the case is that Rao also wrote a concurring opinion. It says that although the FCA imposes liability for fraudulent claims, the act does not explicitly state anything about fraudulently induced contracts. Congress “easily could have employed more expansive language” had that been its intent, Rao wrote.

“The plain meaning of the FCA, the Supreme Court’s recent FCA decisions, and the lack of clarity in the precedents recognizing fraudulent inducement are all reasons for reconsidering, in an appropriate case, whether fraudulent inducement is a separate cause of action under the FCA,” Rao wrote.

Army launches personnel records app

The Army has launched its first app that allows soldiers to access personnel records without the need for a Common Access Card.

Called the Integrated Personnel and Pay System-Army (IPPS-A), the app is available on Apple’s App Store and is expected to have roughly 1 million users among active-duty personnel and members of the Army National Guard and Reserve by December when the third update of the app.

It will serve as a modern hub for the Army’s human resources system, allowing users to send in help requests on personnel matters, updating records and monitoring personnel actions.

“The IPPS-A mobile app is a force-multiplier. Access and situational awareness of personnel transactions will be delivered at your fingertips, giving the total Army more transparency than ever before,” said Col. Gregory Johnson, IPPS-A functional management division chief.

It’s the first paperless app where soldiers can connect to Army HR systems and avoid a trip into a personnel office. It will also be available from the Google Play store. Android users can also download the app through the Army Training and Doctrine Command App Gateway.

The app claims to have “the same level of sophistication and security that secure banking and personal service apps have today,” according to its website.

The Federal Procurement Data System shows several companies having contracts for work related to the app, including Booz Allen Hamilton, ASM research, IBM and others.

Pentagon office left military designs for body armor, vehicle gear open to hackers, watchdog finds

The office in charge of the U.S. military’s 3D printing left designs for defense technology vulnerable to theft by hackers and adversaries, according to a watchdog report made public on Wednesday.

If left unfixed, the security gaps could lead to a number of nightmare scenarios, including adversaries stealing military designs, compromising Department of Defense networks or even introducing flaws into design data that could make its way into battlefield products, the report’s authors concluded. Designs included blueprints for protective body armor, tactical vehicle gear, weapons systems brackets and prosthetic body parts, according to the report.

The report found that officials were unaware that the systems connected to local networks and the internet. Because the systems were miscategorized, the office failed to conduct a risk assessment required by the department altogether. Officials also failed to monitor removable media entering the systems.

The security gaps would have left a plethora of entry points for hackers. As DHS’ Cybersecurity and Infrastructure Security Agency warns, removable media such as USB drives provide hackers an inexpensive and portable way to infect computers with malware.

Although the Defense Department’s chief information officer disagreed with several recommendations, actions planned by individual offices sufficiently meet the intent of the recommendations, according to the office of the Inspector General. The DoD office in charge of the components manufacturing agreed to update all computer operating systems to the most recent version required by the DoD.

Pentagon officials also missed basic maintenance on systems, including failing to patch a 2019 vulnerability that would have allowed attackers to use unauthorized access to a single computer to jump into others within the network, according to the report. Of the 46 computers attached to the printing tools, 35 hadn’t been updated for more than five years putting the computers and printers connected to them at risk.

Part of the problem was that individuals working with the technology failed to understand how the printers, which the military has ramped up investments in over the past five years, differed from traditional production tools.

“Navy FRC‑SW engineers stated that they treated the AM systems as other manufacturing machines, such as milling and welding machines that did not require consideration of cybersecurity,” the report noted.

The report recommends that the DoD chief information officer require the systems to establish and immediately implement security controls.

Air Force opens bidding for $4.8B NOVASTAR contract vehicle

The Air Force has published a request for proposals for services related to research, development and sustainment of hardware and software capabilities to support the Department of Defense and intelligence community.

The proposed vehicle is called NOVASTAR and will employ about six vendors on an indefinite-delivery, indefinite-quantity contract worth up to $4.79 billion over its 10-year term. It will consolidate roughly 25 separate contracts under one larger acquisition vehicle.

According to a notice on the Sam.gov website, the National Air and Space Intelligence Center requires contract support for intelligence production through collection, planning, processing, analysis dissemination, and archiving.

The solicitation comes a year after the service issued a request for information for the contract vehicle. Proposals are due by Aug. 31.

Earlier this month, the Air Force announced it would issue an IDIQ contract for IT and technology services for an operations center that is dedicated to flying a squadron of drones.

That contract has a $750 million ceiling and would be to service network and data curation for the Remotely Piloted Aircraft (RPA) Squadron Operation Center Enterprise at Joint Base Langley-Eustis. 

DHS procurement chief Correa to retire

Department of Homeland Security Chief Procurement Officer Soraya Correa is set to retire from the government.

Correa will step down from the role at the end of July, a spokesperson at DHS confirmed.

She has held the role at DHS since January 2015 and steps down after 40 years in federal acquisition management. During her tenure in the role, Correa has been one of the preeminent thought leaders in federal acquisition reform and injecting innovation into procurement, particularly through the launch of the Procurement Innovation Lab at DHS.

In a 2019 podcast, discussing the importance of acquisition to IT modernization, Correa told FedScoop: “The role of procurement is the same whether it’s with IT modernization or supporting the overall mission of the department. We’re really there to enable folks to deliver on their mission. So when it comes to IT modernization, what we’re trying to do is collaborate and cooperate with our partners in [the Office of the] CIO, help them find the right solutions to meet their needs, try to understand what it is that they’re trying to modernize, how they’re trying to go about it, what are some of the complexities, what are some of the issues they have, what kind of flexibilities do they need, how are they going to fund these things, so that we can devise the right procurement strategy to meet their overall needs.”

Before working at DHS, Correa was associate director of the U.S. Citizenship and Immigration Services (USCIS) Enterprise Service Directorate, a role in which she was responsible for delivering identity, immigration status and employment authorization information.

Earlier in her career she has also held leadership positions at federal agencies, including the Naval Sea Systems Command, General Services Administration, NASA, and Immigration and Naturalization Service.

DHS has yet to appoint an acting chief procurement officer.

Federal News Network first reported Correa’s retirement announcement.

Argonne’s machine-learning work may help ease US microchip shortage in time

Argonne National Laboratory researchers have used machine learning to rapidly optimize the application of thin films to semiconductors, a move that may eventually help ease the microchip shortage in the U.S.

The researchers spent a couple of months developing machine learning (ML) algorithms and custom software capable of finding the ideal conditions for achieving high, stable film growth in the least time and then refined the scalable process in a two-year project.

Researchers currently perform atomic layer deposition (ALD), the formal name for the process, by placing samples in a chemical reactor and then removing them to take measurements. But Argonne‘s new, closed-loop system can conduct experiments, learn from the results and suggest new experiments all on its own.

“I think that what we have learned from this project, and from other similar projects, is that there is a lot that you can do with machine learning to address problems involving manufacturing,” Angel Yanguas-Gil, a principal materials scientist at Argonne, told FedScoop.

Image and sound processing and text generation and mining still dominate ML projects, but researchers are increasingly applying the technology to others that require domain-specific knowledge and making similar breakthroughs, Yanguas-Gil said.

Argonne’s ALD breakthrough can help manufacturers save time and money creating nanoscale films, as thin as one atom, to electrically insulate components of semiconductor devices, microchips, solar cells and lithium batteries. During ALD two chemical vapors called precursors adhere to a surface inside a chemical reactor to create the film layer.

But researchers must get precursor chemistry, reactor design, temperature, pressure, and dose timing precisely right. That’s no easy feat with device architectures going 3D — meaning films can’t just layer but also need to infiltrate high aspect ratio features like memories using patterning — and getting smaller. 

The Defense Advanced Research Projects Agency‘s Electronics Resurgence Initiative views techniques like ALD and atomic layer etching as foundational to developing leading-edge nodes in the semiconductor industry, which the U.S. wants to do to regain a competitive edge over China in everything from microchips to exascale computers.

Argonne funded its ALD work through its Laboratory Directed Research and Development project, which is focused on accelerating emerging technologies in areas like manufacturing before transferring them to the private sector.

Yuangas-Gil was part of an interdisciplinary team that included ALD and ML experts and was focused on developing leading-edge, super-fast nodes that require more ALD steps to produce and incorporating new materials not part of the standard portfolio. ML can experiment with new materials a hundred times faster in a lab, Yuangas Gil said.

While the global microchip shortage was one “inspiration” behind Argonne’s work, it’s a “longer-term” problem that using ML to optimize ALD won’t alone solve, he added.

Industry has already expressed interest in Argonne’s work, and companies that have the proper tools could replicate the closed-loop, ML system and be testing new capabilities within a week of development.

“The good thing is that everything that we’re doing can be done with commercial equipment,” Yuangas-Gil said. “It’s just a matter of putting it together.”

Microsoft: ‘We respect and accept’ DOD decision to move on from JEDI

Microsoft has said that it will “respect and accept” a decision by the Department of Defense to scrap the $10 billion Joint Enterprise Defense Infrastructure (JEDI) procurement contract and instead proceed with a new multi-vendor cloud acquisition for the U.S. military.

In a blog post on Tuesday, Toni Townes-Whitley, Microsoft president of U.S. regulated industries, said that the company understands the Pentagon’s rationale and that it would continue to support them with technology JEDI would have provided.

Amazon Web Services said also in an emailed statement that it understood and agreed with the government’s decision to scrap the contract.

“The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward,” said Microsoft’s Townes-Whitley. “The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well.”

Townes-Whitley continued: “The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform. Amazon filed its protest in November 2019 and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward.”

She was writing after the Pentagon earlier today announced its decision to move on from the program.

A spokesperson for AWS said: “Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement,” maintaining the company’s stance that political foul play led to Microsoft’s award, though that allegation was never proven.

“Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions,” they added.

Along with the cancellation, the DOD announced a new direction for its enterprise cloud effort called the Joint Warfighter Cloud Capability (JWCC), a multi-cloud, multi-vendor contract. The department intends to solicit proposals from Microsoft and Amazon Web Services through the contract as “as available market research indicates that these two vendors are the only Cloud Service Providers (CSPs) capable of meeting the Department’s requirements,” the release states.

The Pentagon will also engage industry more broadly in its procurement process to determine whether any other U.S.-based hyperscale vendors can also meet the DOD’s requirements.

This story was updated to include comment from Amazon Web Services.

DOD cancels $10B JEDI contract

The Pentagon announced Tuesday it has canceled the $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud procurement, nearly two years after awarding the contract to Microsoft.

In a release, the Department of Defense said it has “initiated contract termination procedures” for the JEDI contract and is planning to replace it with a new contract that better fits the department’s cloud needs today. “The Department has determined that, due to evolving requirements, increased cloud conversancy, and industry advances, the JEDI Cloud contract no longer meets its needs,” it said.

The move comes after the department has been hinting for months that it might have to move in a different direction than planned with JEDI if the contract continued to be held up in court. Amazon has protested the award of JEDI to Microsoft since late 2019.

Acting DOD CIO John Sherman told reporters Tuesday that while JEDI was conceived in 2017 with “noble intent,” it was “developed at a time when the department’s needs were different and our cloud conversancy less mature.”

Microsoft said in a blog post after DOD’s announcement that it will “respect and accept” the decision. As the department finalizes termination of the contract, it may owe Microsoft some money under the initial task order it awarded.

With the cancellation of the JEDI procurement, Amazon’s protest of the contract in the Court of Federal Claims will soon follow suit. In a statement, the company maintained its belief that political interference led to Microsoft’s win, an allegation that was never ruled upon but at least held enough water for the court to decide to continue hearing the case earlier this year.

“We understand and agree with the DoD’s decision,” said a company spokesperson. “Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement. Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”

Goodbye JEDI, hello JWCC

Now the DOD is headed in a new direction with its enterprise cloud effort, launching the Joint Warfighter Cloud Capability (JWCC) — a multi-billion-dollar, multi-cloud, multi-vendor contract. The department intends to solicit proposals from at least Microsoft and Amazon Web Services through the contract “as available market research indicates that these two vendors are the only Cloud Service Providers (CSPs) capable of meeting the Department’s requirements,” the release states.

The department will also engage industry more broadly over the next several months in its procurement process to “determine whether any other U.S.-based hyperscale CSPs can also meet the DoD’s requirements,” the release says. “If so, the Department will also negotiate with those companies.”

The initial plan is to make awards to vendors around April 2022.

Sherman said he had plans to immediately contact other top cloud providers IBM, Google and Oracle to see where they could potentially fit into the department’s plans.

The DOD has a variety of existing vehicles to work with each of these cloud providers in place, like milCloud 2.0 and others, but Sherman said there’s “nothing to the extent and reach that the enterprise capability we’re seeking to acquire from this will provide through JWCC — truly from the headquarters to the tactical edge in all three security levels at scale.”

As the DOD launches into the new JWCC procurement effort, it’s shying away from getting too caught up on a specific price tag, at least from the start. Sherman said it will be in the billions but a specific figure will be decided upon later, referencing how much of the discourse around JEDI was fixated on its $10 billion ceiling. The new contract is also noticeably shorter than JEDI at five years total — a three-year base with two one-year options.

While the continued protests of JEDI undoubtedly impacted DOD’s decision to cancel it, Sherman said even if it had gone into operation as intended after award, “we would have been having this multi-cloud discussion right about now anyway” due to the evolving needs of the department.

He added that he wouldn’t call JEDI “in any way a mistake.”

“We’re now in 2021, not in 2018, and the factors surrounding all this have evolved and so must we in our approach,” Sherman said, pointing to needed support to enable Joint All-Domain Command and Control and the department’s new Artificial Intelligence and Data Accelerator initiative. He later added: “The landscape has continued to shift during the timeframe, both on the private sector side with the cloud service providers, as well as how our users have become more conversant on some of the cloud capabilities.”

Sherman said that every day that DOD goes without this enterprise cloud capability is a wasted opportunity, or “day too long.”

“If we’re talking about body armor, other protective gear, hypersonic weapons or whatever we need to win our future fight, so goes it for JWCC,” he said, equating them in importance to the larger warfighting mission of the department.

Marine Corps targeting completion of wargaming center for summer 2023

Construction of a new wargaming center that will test future battle strategies and tech for the Marine Corps will be completed by the summer of 2023, the service has announced.

To accommodate wargames that will incorporate a range of future battlefield scenarios, the facility will include new modeling and simulation, visualization, immersive and analytical tools, according to a news release. The facility was first envisioned by then-Commandant Robert Neller in 2017 to help the corps’ “ability to make analytically-informed decisions” about its weapons and capabilities.

Located in Marine Corps Base Quantico, Virginia, the center is slated to open in 2024 and should be fully equipped by 2025.

“This facility is a big deal to us,” said Lt. Gen. Eric Smith, deputy commandant for the Marine Corps Combat Development and Integration. “There are a bunch of officer candidates training right now who have no idea what is going on here today. But they will benefit [from this facility].”

The facility intended to give senior leaders a more immersive understanding of what future battlefields may look like, and what capabilities future Marines will need. The Marine Corps has been on a journey to remake its force design to focus on deterring great power conflict by relying more on long-range precision fires, unmanned systems and advanced reconnaissance technology — all tech that the corps plans to test in a virtual scenario at the wargaming facility.

“These tools will enable wargame participants to work through complex problems or develop fully informed, data-enabled decisions to support the Marine Corps planning process,” said Sharleene Prieur, acting program manager of the Marine Corps Systems Command’s Wargaming Capability Program Office.

Huntington Ingalls to acquire cybersecurity, R&D company Alion for $1.7B

Shipbuilding defense contractor Huntington Ingalls will pay $1.7 billion to acquire cybersecurity and research and development company Alion.

In a statement, Huntington said the deal would allow it to expand its work to support Navy simulation and training work, as well as operations that support military intelligence, surveillance and reconnaissance.

The company added that the transaction is expected to expand Huntington’s technical solutions division, which was launched in 2016 to focus on cybersecurity and autonomous systems. Alion has a $3 billion contract backlog and employs 3,500 staff, of whom 80% have security clearance.

Huntington Ingalls provides professional services to the government and private sector and is also the largest military shipbuilding company in the U.S. It has expanded its cybersecurity and digital intelligence practice amid growth in the demand for such services from the federal government.

Commenting on the transaction, Huntington President and CEO Mike Peters said: “Today’s announcement, coupled with our previous investments in leading edge technologies, such as cybersecurity and autonomous systems, reflects our commitment to stay on the cutting edge of critical, high-growth national security solutions and generate significant long-term value for our shareholders.”

The transaction is likely to close in the second half of 2021, subject to regulatory approval.