VMware, Carahsoft to Settle Government IT Contract Dispute for $75.5M

VMware and Carahsoft will pay a $75.5 million settlement to resolve allegations that they had overcharged the government and violated the False Claims Act.

The allegations were around misrepresenting commercial pricing practices and overcharging the government for VMware software products and related services, according to the Department of Justice.

VMware is the well-known virtualization giant while Maryland-based Carahsoft is IT provider to local, state, and federal government.

Government IT is undergoing an evolution to cloud, and VMware has a big play in the federal space. There's a lot of activity going on and sometimes deals go sour. The US Defense Information Systems Agency recently cancelled a $1.6 billion, five-year cloud contract with VMware that spanned various military branches following protests from other cloud competitors. The reason for cancelling was around the bidding process or lack thereof for the deal.

False statements were allegedly made in the sale of VMware products and services under Carahsoft’s Multiple Award Schedule (MAS) contract between 2007 and 2013.

Carahsoft's MAS contract gives it access to the broad federal government IT marketplace. However, MAS requires commercial pricing disclosures to make sure that government entities are getting a fair deal.

The MAS program means prospective vendors agree to disclose commercial pricing policies and practices to the General Services Administration in exchange for the opportunity to gain access to the broad federal marketplace. The MAS is heavily coveted as it allows a vendor to sell to any government purchaser through one central contract. However, commercial pricing must be accurately represented both before and after MAS is awarded.

“Transparency by contractors in the disclosure of their discounts and prices offered to commercial customers is critical in the award of GSA Multiple Award Schedule contracts and the prices charged to government agency purchasers,” Dana Boente, US Attorney for the Eastern District of Virginia, said in a statement.

During negotiations with GSA, those seeking an MAS contract have to provide “current, accurate, and complete” disclosures of all discounts offered to commercial customers. After the MAS contract is awarded, vendors need to continue to disclose changes in their commercial pricing, including improved discounts offered to commercial customers.

GSA said it will continue to look into all allegations of false claims in its contracts.