Defense secretary will review $10 billion cloud contract
The Pentagon said Thursday that it was delaying the award of a hotly contested $10 billion contract for a new generation of computing services for the military until the secretary of defense, Mark T. Esper, could review the matter.
The announcement came just a week after Esper’s confirmation and two weeks after President Donald Trump said he would be looking “very seriously” at the contract process to move the military to a cloud- computing system. Trump said his concern was based on what he called “tremendous complaints” from competitors of Amazon Web Services, the division of the merchandising giant seen as the all-but- certain winner of the contract.
The development was evidence of how what began as a technological competition to remake the military’s aging, often incompatible computer systems now seems to have taken on a political and possibly personal element driven by Trump, who has frequently attacked Jeff Bezos, the founder of Amazon who also owns The Washington Post. When angered by the paper’s coverage, Trump often refers to it on Twitter as the “Amazon Washington Post.”
Experts on federal contracting say it is extremely rare for a president to intervene in a contract competition and improper to do it for political reasons.
Esper’s decision to postpone the award could upend one of the fiercest lobbying battles in Washington in years, one that has been marked by charges of conflicts of interest, secret efforts inside the Pentagon to favor Amazon, lawsuits and accusations of illicit influence. In public and private, Trump has questioned why Bezos should profit from one of the biggest leaps in Pentagon technology in decades.
Last week CNN reported that a graphic about the contract had made its way to Trump. The graphic, alleging an Amazon “conspiracy” to create a 10year monopoly on Pentagon cloud computing, was put together by Oracle, a Silicon Valley firm with extensive Pentagon computing contracts.
Oracle, along with IBM, was eliminated from the initial bidding after Pentagon review groups concluded that the two companies did not have the needed infrastructure to run such a complex cloud-computing operation.
It is unclear whether those companies may now be back in the bidding. Until Esper’s decision to review the contract was announced Thursday, the only competitors left were Amazon and Microsoft, both of which have experience handling classified cloud- computing projects. The only debate had appeared to be whether Amazon would win the entire contract, or split it with Microsoft, a division of effort many in the Pentagon opposed.
Amazon already runs the cloud- computing effort at the CIA, and its experience there was one reason it was considered a favorite for the far larger project at the Pentagon. Microsoft was seeking to keep its crosstown competitor in Seattle from gaining a huge advantage; Oracle, which was slow to make the conversion to cloud computing, was seen by many in the industry as seeking to slow the contract award to give it time to catch up.
Oracle in particular has continued to wage a legal and lobbying battle to prevent or delay the award, persuading friendly members of Congress, including Sen. Marco Rubio, R-Fla., to weigh in with the president.