What is Project JEDI? The $10 billion Pentagon project Trump is holding up

Daniel Howley
Technology Editor

A battle for one of the military’s largest technology contracts came to a screeching halt this week as newly appointed Defense Secretary Mark Esper announced an examination of the program and the bidding process behind it.

Dubbed the Joint Enterprise Defense Infrastructure, or Project JEDI, the program calls for a 10-year, $10 billion government contract to go to a single company that will serve as the exclusive cloud computing provider for the United States Department of Defense. The project is seen as a means to pull the DoD into the modern computing age and ensure it can use technologies like artificial intelligence.

But the JEDI contract, which was expected to be awarded to either Amazon (AMZN) or Microsoft (MSFT), has faced intense scrutiny — including from lawmakers who say the bidding process has been unfair.

President Donald Trump previously raised concerns about Amazon’s involvement in the bidding process, saying he received complaints from other tech companies, including Oracle and IBM, because the contract calls for a single firm to assume control of the project.

Now the program, which was set to be awarded in the coming weeks, has been put on hold.

“Secretary Esper is committed to ensuring our warfighters have the best capabilities, including artificial intelligence, to remain the most lethal force in the world, while safeguarding taxpayer dollars,” DoD spokesperson Elissa Smith said in a statement. “Keeping his promise to Members of Congress and the American public, Secretary Esper is looking at the Joint Enterprise Defense Infrastructure (JEDI) program. No decision will be made on the program until he has completed his examination.”

So what exactly is Project JEDI, and why is there so much controversy surrounding the program? Here are your answers:

What is Project JEDI?

Project JEDI is the Department of Defense's plan to modernize its infrastructure so everyone from employees in the U.S. to soldiers on the frontline can access and manipulate data and support innovations in artificial intelligence at the speed of modern enterprises.

President Donald J. Trump participates in a Missile Defense Review announcement at the Pentagon, in Arlington, VA, 1-17-19. Image: Getty

According to the DoD's statement of objectives for Project JEDI, the department "requires an extensible and secure cloud environment that spans the homeland to the global tactical edge, as well as the ability to rapidly access computing and storage capacity to address warfighting challenges at the speed of relevance."

In other words, the department's current systems are fragmented and slow the decision-making process within the DoD both at home and abroad. The idea is to create a cloud-based system that the DoD could easily deploy to ensure the U.S. maintains its military superiority over adversarial countries.

Who were the front-runners?

Before the project was put on hold, there were two front-runners for Project JEDI's $10 billion contract: Amazon and Microsoft. Amazon is the world's largest cloud provider with 31.7% of the market in 2018, according to Canalys. Microsoft accounts for 16.8%, while Google has just 8.5%.

The DoD released its final request for proposal (RFP) for JEDI in July 2018, after receiving what it says were 1,500 comments and questions on previous RFPs.

But Amazon and Microsoft weren't the only companies with an interest in Project JEDI. Oracle (ORCL) and IBM (IBM), which are also players in the cloud market, were among a number of firms that sought to get a piece of JEDI's $10 billion contract. In the end, though, Amazon and Microsoft, which have a slew of data centers stationed throughout the world, and a history of working with the government, came in as the two finalists, the Pentagon said in April.

Amazon founder and Washington Post owner Jeff Bezos and U.S. Secretary of State John Kerry deliver remarks during the opening ceremony of the newspaper's new location January 28, 2016 in Washington, DC. Source: Getty

To put the size of that contract in perspective, Microsoft reported that it made $11.4 billion in revenue through its intelligent cloud division in Q4 2019. If Microsoft wins the DoD contract, it would make nearly as much as the entire cloud division does in a quarter through just one contract.

Despite its own sizable cloud business, Google hasn't been a part of the RFP process for Project JEDI. According to Bloomberg, Google believed Project JEDI could compromise its corporate values. That move came shortly after the company let a Pentagon AI drone program deal lapse, following protests by Google employees.

A biased bidding process?

Amazon's position as one of the front-runners in the battle for that contract, however, has put a large target on its back.

Oracle filed a pre-award protest in the United States Court of Federal Claims saying that the DoD's request for proposals specifically favored Amazon and Microsoft. But Senior Judge Eric Bruggink shot down that claim. The company also said that a former Amazon employee went to work at the Pentagon before going back to Amazon, biasing the bidding process.

Outside of those issues, multiple firms including Oracle, IBM, and Microsoft have come forward to say the DoD shouldn't use a single cloud vendor for JEDI.

In an article for RealClearDefense, Oracle executive vice president Kenneth Glueck excoriated the DoD, writing,"Nothing is stopping DoD from immediately negotiating cloud contracts with multiple hyper-scale cloud vendors today. This will let the market bring the best solutions to the varied constituencies and missions of the DoD."

Justin Cappos, associate professor of computer science and engineering at New York University, concurred with the idea that a single cloud solution is out of the norm, explaining that there's a reason that so many companies use multiple cloud vendors. It's simply safer.

BELLEVUE, WA - DECEMBER 3: Microsoft CEO Satya Nadella addresses shareholders during Microsoft Shareholders Meeting December 3, 2014 in Bellevue, Washington. The meeting was the first for Nadella as CEO. (Photo by Stephen Brashear/Getty Images)

Even Microsoft has criticized the DoD's plan to use just a single cloud vendor. Microsoft's Leigh Madden, general manager of its defense and national security arm, told TechCrunch in 2018 the company wants to win the contract but noted that 80% of businesses use multiple cloud vendors rather than a single offering.

In a statement to Yahoo Finance, a Microsoft spokesperson said, "We believe our over 40-year partnership with the DoD, in conjunction with our unique and differentiated enterprise cloud capabilities from the homefront to the tactical edge, best supports the DoD in advancing its mission and accelerating the speed in which they achieve the return on their cloud investments. We look forward to competing for the JEDI cloud contract and continuing to provide the DoD with our latest commercial innovations.”

Amazon didn't provide comment prior to publication.

Trump enters the equation

It's not just companies that are pushing back against the DoD's decision to use a single vendor or against its decision to name Microsoft and Amazon as finalists. Last month, Sen. Marco Rubio (R-FL) called on National Security Advisor John Bolton to force the DoD to delay awarding the Project JEDI contract until "all efforts are concluded in addition to evaluating all bids in a fair and open process in order to provide the competition necessary to obtain the best cost and best technology for [the DoD's] cloud computing needs."

According to NBC News, Senator Chuck Grassley (R-IA) and Representative Tom Cole (R-OK) have also expressed concern about the contract.

More recently, Trump has said that companies including IBM and Oracle have reached out to complain about the bidding process for JEDI. At the time Trump said he would look into the matter, and now Esper is holding it for review.

It's also worth noting that Trump has not been a fan of Amazon, as it is was founded by Jeff Bezos who also owns The Washington Post, which has written stories critical of the president.

According to the Wall Street Journal, Glueck has been heavily lobbying the White House, even going so far as to link Amazon’s bid to former Defense Secretary General James Mattis and Obama administration officials in an effort to raise the ire of Trump.

At least four members of the House Armed Services Committee have pushed back against any potential delays in rewarding the cloud contract to either Amazon or Microsoft. According to NBC News, four Republican lawmakers have said that any further delay could hurt the U.S.'s capabilities against adversarial nations such as China.

This story was originally published on July 23, 2019 and updated on Aug. 2, 2019.

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Email Daniel Howley at dhowley@yahoofinance.com; follow him on Twitter at @DanielHowley.

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