Pentagon awards $10B cloud computing deal to Microsoft

WASHINGTON — The Pentagon awarded its controversial $10 billion cloud computing business to Microsoft Friday evening, spurning a bid from Amazon, which had been expected to win the contract. President Donald Trump had expressed opposition to giving the lucrative award to a company led by Jeff Bezos, a regular target of his ire.

The announcement comes after an intense lobbying effort and a lawsuit filed by some of America’s biggest tech companies, who accused the military of favoring Amazon in a process that has dragged on for more than a year. During that time, Trump and other administration officials made it clear that they did not want the contract to go to Amazon. Federal acquisition laws forbid politicians, including the president, from influencing contract awards.

Amazon Web Services, or AWS, pioneered the lucrative cloud computing business more than a decade ago and currently holds a leading 48 percent market share, according to market-research firm Gartner. Microsoft is the second largest with a 15.5 percent share.

The cloud computing contract, known as JEDI, is not only the military’s largest information technology contract award in history, but also is expected to lead to other business across the federal government. Amazon was openly described by competitors and industry analysts as a clear front-runner due to its years of experience handling classified data for the CIA. The military also gave the company its highest data management certification. Microsoft’s designation was one step below Amazon’s.

Few thought Microsoft would beat out Amazon for the massive contract, and legal analysts said the president’s role in the procurement will almost certainly become the subject of litigation.

“It’s crystal clear here that the President of the United States did not want this contract to be awarded to one of the competitors,” said Franklin Turner, an attorney with the law firm McCarter & English. “As a result its fairly likely that we will see a number of challenges that the procurement was not conducted on a level playing field.”

“Microsoft should expect a near-term war, here,” Turner said. “It’s a virtual guarantee that Amazon is going to pull out all the stops to check the government’s math on this one.”

In a statement announcing the award, the Defense Department said: “The acquisition process was conducted in accordance with applicable laws and regulations.”

All parties, the statement said, “were treated fairly and evaluated consistently with the solicitation’s stated evaluation criteria.”

“We’re surprised about this conclusion,” Amazon spokesman Drew Herdener said in a statement. “AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion.”

Microsoft spokesman Frank Shaw declined to comment. The company had initially been opposed to the idea of awarding such a massive contract to a single company, arguing such an approach would hamper innovation. “We believe the best approach is one that leverages the innovations of multiple cloud service providers,” the company said early last year.

The JEDI contract is the Defense Department’s approach to address the outdated, patchwork of computer systems that are frequently specific to an agency. U.S. military officials said earlier this year that the current disjointed approach has hindered the sharing of intelligence and made it difficult for military agencies to adopt artificial intelligence technology.

Rival nations, meanwhile, are investing deeply in those capabilities.

The contract calls for the military to use a technical infrastructure, known as cloud computing, where customers rent services from companies such as Amazon and Microsoft, rather than purchasing the hardware and software to operate in their own data centers. The design of the technology allows customers to tap into massive farms of servers as they need to. And because the tech giants manage the technology, it runs the latest version of software and is thought to have the highest level of security.