Pentagon delays award of $10 billion cloud contract
The Pentagon said Thursday that it is delaying the award of a hotly contested $10 billion contract for cloud computing services for the military until the secretary of defense, Mark Esper, can review the matter.
The announcement came two weeks after President Trump said he would be looking “very seriously” at the contract process, based on what he called “tremendous complaints” from competitors of Amazon, which has been seen as the top contender for the contract. Trump has frequently attacked Amazon, whose founder and CEO, Jeff Bezos, owns the Washington Post.
The postponement comes after months of jostling, including lawsuits and accusations of illicit influence. The contest, for one of the biggest federal information technology contracts in history, had come down to Amazon and Microsoft, after Oracle and IBM had been eliminated.
Redwood City’s Oracle in particular has continued to fight a legal and lobbying battle to prevent or delay the award, including lobbying the White House and persuading friendly members of Congress, including Sen. Marco Rubio, RFla., to weigh in with the president.
Other members of Congress have said there should be no further delay, arguing that the United States is already lagging behind other countries in applying the latest cloud technology to military enterprises.
Amazon Web Services, the company’s powerhouse cloud operation, virtually invented cloud computing and has pro
“We have not lobbied the White House directly to intervene.” Ken Glueck, an executive vice president at Oracle
vided services to the CIA for years. That history was widely seen as giving Amazon the inside track for the Defense Department contract, called Joint Enterprise Defense Infrastructure, or JEDI.
“Secretary Esper is committed to ensuring our war fighters have the best capabilities, including artificial intelligence, to remain the most lethal force in the world, while safeguarding taxpayer dollars,” Elissa Smith, a Pentagon spokeswoman, said in a statement.
Saying that Esper would be “looking at” the program, she added, “No decision will be made on the program until he has completed his examination.”
In a brief interview, Smith declined to say how long the examination was expected to take or what it would involve. Nor would she say whether Trump or his aides had discussed the contract with Esper or other Pentagon officials.
On Sunday, Smith had offered a fullthroated defense of the contract, issuing a statement saying the Pentagon “reasonably evaluated and equally treated all offerers.” She said Pentagon officials “have always placed the interests of the war fighter first and have acted without bias, prejudice or selfinterest. The same cannot be said of all parties to the debate over JEDI.”
The contract has become a signature prize for cloud computing companies, given the scale of the project and the prominence of the customer. In addition to the bids from Amazon, Microsoft, IBM and Oracle, Google initially was interested. It pulled out amid employee opposition to military work, though many analysts said it was unlikely to win the project because it lacked the right security credentials.
IBM and Oracle both unsuccessfully challenged the Pentagon’s decision to award the contract to a single large cloud provider, rather than dividing it up among several companies, as other large enterprises have increasingly been doing. They argued the singleprovider approach improperly favored Amazon, the largest cloud provider.
Oracle in particular led the opposition, with unsuccessful cases before the Government Accountability Office and the United States Court of Federal Claims, where a judge ruled last month that the process had been properly reviewed.
In April, the Pentagon determined that only Microsoft and Amazon, the two largest cloud companies, had the ability to deliver the project.
Amazon declined to comment on the news of Esper’s review.
Oracle has claimed that the award process unfairly favored Amazon and argued that Esper ought to review the contracting process as part of his assumption of his new role.
“This is of such a level of controversy and importance that he is going to have some ability to weigh in,” Ken Glueck, an executive vice president at Oracle, said this week.
“We have not lobbied the White House directly to intervene,” he said, adding that the company wanted the Pentagon to “change course.”
But the Defense Department dismissed Oracle’s allegations, noting that a judge had overruled the company’s claims.
“The alleged conflicts had no impact on the integrity of the procurement,” Smith said Sunday.