FBI raid on Carahsoft raises concerns over federal supply chain consolidation through reseller model

The FBI and Defense Criminal Investigative Service's recent raid on Carahsoft Technology Corp.’s headquarters has sparked concerns about the stability of the federal technology supply chain and the value-added reseller (ITVAR) model specifically. FedNewsNetwork Executive Editor Jason Miller pens a piece for the site noting Carahsoft’s market penetration across federal agencies, holding $1.4 billion in contracts in 2023 for 10,000 govcons, VARs, and system integrators.

Technology companies dependent on Carahsoft for federal sales are questioning their business strategies, fearing disruptions should the company face legal consequences. They’re also likely seeing firsthand for the first time how problems with one OEM can affect critical Q4 sales execution. As one source told Miller, “If they stop processing orders, even if for a day, we will lose money.”

In an interesting note on background, an “industry source, who has been involved in civil False Claims Act cases in the past” said typically DOJ meets with Carahsoft, and eventually, Carahsoft writes a check.

The raid highlights the concentration of risk inherent with the ITVAR model, in which manufacturers sell through intermediaries, and may prompt a reevaluation of some of federal procurement’s barriers to entry. We hear that regularly, but what generally follows is more and conflicting regulation. Congress has also begun investigating the limited number of contractors available for critical IT systems, among other areas.

In a separate piece, Bloomberg reports Carahsoft founder Craig Abod is a billionaire (with $1.1). The Bloomberg article ends with this: “Within hours of the FBI agents descending on Carahsoft’s offices, Abod was pushing for new business on the social media platform X.”