Network Setup - Is DHCP required - VSM shows - Not Ready

I am setting up vCD 5.5 as a test for a project.

After installing and configuring vCD and VSM, I created a vApp from a Windows 2008 Server ova.

After it was deployed, I noticed that the vApp VM network ip was set to a 169 address via DHCP.

I also noticed in the same 169 address in the Network Virtualization screen on VSM (attached).

I can’t recall during the vCD configuration if I missed a step for setting up the network pools to not enable DHCP. 

I do not have a DHCP server in this setup. Is DHCP required?

It appears I have to reconfigure something to prepare the cluster in order to have the “Not Ready” Status update to Ready in Network Virtualization screen on VSM ?

thanks