The Pentagon on Friday chose Microsoft over Amazon to provide cloud computing services potentially worth $10 billion after President Donald Trump and members of Congress complained the competition was stacked in Amazon's favor.
The decision on the lucrative contract — which is likely to remain a flash point if the loser protests the decision with the government or considers mounting a legal battle — comes just days after Defense Secretary Mark Esper recused himself from the decision-making process because his son works for one of the previous competitors.
"The acquisition process was conducted in accordance with applicable laws and regulations. The process cleared reviews by the GAO and Court of Federal Claims," the Pentagon said in a statement Friday night announcing the award. "All offerors were treated fairly and evaluated consistently with the solicitation's stated evaluation criteria. Prior to the award, the department conferred with the DOD Inspector General, which informed the decision to proceed."
Amazon said it was "surprised" by the decision, but declined to say if it would be filing a protest.
"[Amazon Web Services] is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion," a spokesperson for the company said in a statement. "We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”
Microsoft did not immediately have a statement to provide.
It's unclear what impact President Donald Trump's criticism of Amazon and its founder Jeff Bezos had on the final contract decision. Trump allegedly told former Defense Secretary Jim Mattis that he wanted to "screw" Amazon by denying them the contract, according to a book by former Mattis aide Guy Snodgrass that is set to be released next week.
Whether Amazon protests will depend on what the company hears when it receives a briefing from the Pentagon on the agency's decision making on why it selected Microsoft, according to Andrew Hunter, a former Defense Department acquisition aide and current senior fellow at the Center for Strategic and International Studies.
"If it wasn’t close, then Amazon may not protest. If it was close, I think they are pretty likely to protest given all the unusual activity on this procurement," Hunter told POLITICO. "My guess is that this competition came down to price."
The winner-take-all project is intended to establish a common computing and data storage system that will allow the military to achieve some of its most advanced technology objectives, including integrating onto the battlefield more artificial intelligence capabilities, which require massive amounts of processing power and storage that are provided by a sophisticated cloud. The program will also allow for secure information sharing across the Defense Department, so warfighting intelligence can be seamless shared among different platforms like drones, aircraft or ships.
The Joint Enterprise Defense Infrastructure program, better known as JEDI, could be extended for 10 years and be worth up to $10 billion if all contract options are exercised.
But it is almost certain that Microsoft's selection will not be the final word for a program that has been politically fraught and the target of a series of court challenges and other formal protests.
“There is really no downside to protesting, except perhaps the ill will it might generate by causing additional delay,” said Tom Spoehr, the director of the Heritage Foundation’s Center for National Defense. “Given all the effort that the companies have put into their bids, a protest would not be surprising.”
The competition went through several phases before Amazon and Microsoft emerged as finalists over Oracle and IBM Corp., which were among the initial bidders.
Oracle took the Pentagon to court in December after it was cut from the competition, alleging that the Defense Department unfairly limited competition by tailoring the JEDI requirements to Amazon's proposed solution.
Oracle also claimed in its lawsuit that Deap Ubhi, a former Pentagon employee who worked for Amazon, unfairly influenced the competition. In July, however, a federal judge ruled in favor of the Pentagon and also concluded that Oracle's initial proposal did not meet the contract requirements. Oracle announced in August that it would appeal that ruling to the U.S. Court of Appeals for the Federal Circuit, but has not yet formally filed the appeal.
Oracle separately filed a protest in August 2018 with the Government Accountability Office, which also concluded that the Pentagon’s procurement process was fair.
While Oracle has been the most vocal critic of the program, IBM Corp. also filed a protest with the Government Accountability Office in October 2018 arguing that the Pentagon should select multiple winners instead of structuring the competition as winner-takes-all.
"IBM has long raised serious concerns about the structure of the JEDI procurement," IBM spokesperson Adam Pratt said in July. "We continue to believe that the Department of Defense and our men and women in uniform would be best served by a multicloud strategy."
President Trump, who has been engaged in a public spat with Amazon founder Jeff Bezos, accusing the billionaire of using his ownership of The Washington Post to attack him, took a personal interest in the JEDI competition ahead of the contract being awarded.
In July he asked officials to review the contracting process after both members of Congress and companies themselves complained to the president that the bidding process was not open and competitive.
“I’m getting tremendous complaints about the contract with the Pentagon and with Amazon,” Trump said on July 18. “Some of the greatest companies in the world are complaining about it, having to do with Amazon and the Department of Defense, and I will be asking them to look at it very closely to see what’s going on.”
The public spat between Trump and Bezos extends beyond this defense procurement. Trump has attacked the billionaire on Twitter for paying too little in taxes and ripping off the U.S. Postal Service.
Lawmakers on both sides of the aisle also urged the president to get involved to ensure the competition was fair and the Pentagon would be getting the best deal possible. For example, about a dozen members of the House GOP caucus, who are not members of the House Armed Services Committee, sent a letter in July asking the president to delay the program until the Pentagon had finished investigating the fairness of the competition.
Those who serve on the committees that oversee the military, however, tend to disagree. Two Democrats — Sen. Mark Warner (D-Va.) and Senate Armed Services Committee ranking member Sen. Jack Reed (D-R.I.) — wrote a similar letter to the Pentagon in August asking Defense Secretary Mark Esper to protect the program from political pressure and keep it moving forward. Four Republican members of the House Armed Services Committee, including ranking member Mac Thornberry, also sent a letter to Trump in July asking the president to allow the program to continue without interference.
“While it is understandable that some of the companies competing for the contract are disappointed at not being selected as one of the finalists, further unnecessary delays will only damage our security and increase the cost of the contract,” the GOP lawmakers wrote in the letter.
In response, Defense Secretary Mark Esper announced shortly after taking over the Pentagon’s top job that he was personally reviewing the program, saying that he wanted to get up to speed on the major procurement through a series of learning sessions with Defense officials. During a series of listening sessions, Esper realized how contentious the program truly was and removed himself from the decision-making process because his son worked for IBM. Instead, he delegated the authority to Deputy Defense Secretary David Norquist.
For good measure, the Pentagon's inspector general also conducted its own review, which began in August. The Pentagon said it had consulted with the inspector general before issuing the award and was told it could move forward.