Pentagon cancels disputed contract with Microsoft

The Pentagon said Tuesday it canceled a disputed cloud-computing contract with Microsoft that could eventually have been worth $10 billion. It will instead pursue a deal with both Microsoft and Amazon and possibly other cloud service providers.

“With the shifting technology environment, it has become clear that the JEDI Cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD’s capability gaps,” the Pentagon said in a statement.

The statement did not directly mention that the Pentagon faced extended legal challenges by Amazon to the original $1 million contract awarded to Microsoft. Amazon argued that the Microsoft award was tainted by politics, particularly then-President Donald Trump’s antagonism toward Amazon founder, Jeff

Bezos, who stepped down Monday as the company’s chief executive officer. Bezos owns The Washington Post, a newspaper often criticized by Trump.

The Pentagon’s chief information officer, John Sherman, told reporters Tuesday that during the lengthy legal fight with Amazon, “the landscape has evolved” with new possibilities for large-scale cloud computing services. Thus it was decided, he said, to start over and seek several vendors.

Sherman said JEDI will be replaced by a new program called Joint Warfighter Cloud Capability and that both Amazon and Microsoft “likely” will be awarded parts of the business, although neither is guaranteed. Sherman said the three other large cloud service providers — Google, IBM and Oracle — might qualify, too.

Microsoft said in response to the Pentagon announcement, “We understand the DoD s rationale, and we support them and every military member who needs the mission-critical 21st century technology JEDI would have provided. The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward.”

Amazon said it understands and agrees with the Pentagon’s decision. In a statement, the company reiterated its view that the 2019 contract award was not based on the merits of the competing proposals “and instead was the result of outside influence that has no place in government procurement.”

Oracle, which had earlier sought the JEDI contact but didn’t make it to the final round, declined comment Tuesday. IBM and Google didn’t immediately respond to requests for comment.

Amazon jumped 4.7% while Microsoft shares were little changed.