The latest reports reveal that the Department of Defense (DoD)) is canceling a controversial $10 billion cloud computing contract. This contract was awarded to Microsoft (MSFT) over Amazon (AMZN) under the Trump administration.
The department said on July 6 that it has decided to cancel the Joint Enterprise Defense Infrastructure (JEDI) contract that had been awarded to Microsoft. But, it aims to seek new solicitations for an updated Joint Warfighting Cloud Capability (JWCC) contract from Microsoft and Amazon.
JEDI contract would have meant that Microsoft would create a cloud storage system for sensitive military data and technology, including artificial intelligence. The storage would serve the Department of Defense and might have resulted in revenue of nearly $10 billion over 10 years.
Microsoft won the JEDI contract in 2019 over Amazon resulting in a major controversy. The Microsoft win surprised most of the industry experts who saw Amazon as the stronger candidate to get the contract. Amazon Web Services (AWS) is majorly regarded as the market leader in the cloud computing sector.
The Pentagon watchdog finds that the Defense Department behaved appropriately although it does not rule on White House influence on controversial cloud contracts. In that context, Amazon filed a suit with the US Court of Federal Claims contesting that decision. It said that the Microsoft selection was politically motivated by former President Trump’s dislike of the then Amazon CEO Jeff Bezos. Trump also dislikes the Washington Post, which Bezos owns.
In March last year, the department stated that it wanted to re-evaluate its decision to award the entire contract to Microsoft. Today, the Defense Department wants to cancel the contract entirely and solicit bids for a new and updated contract from Amazon and Microsoft.
The Defense Department said in a press release that it had decided to cancel the contract:
“due to evolving requirements, increased cloud conservancy, and industry advances.”
Due to that development, the JEDI contract does not meet its needs anymore. The department now wants to solicit proposals from Amazon Web Services and Microsoft. Furthermore, it is ready to accept proposals from other Cloud Service Providers that have the capacity to meet the DoD’s needs.
In a July 6 blog post, Microsoft acknowledged that it understands the DoD’s rationale for canceling the contract and strongly defended its technology stating that it the best suited for the job. Their post said:
“The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well. Because the security of the United States through the provision of critical technology upgrades is more important than any single contract, we respect and accept DoD’s decision to move forward on a different path to secure mission-critical technology.”
Amazon Web Services said in an official statement that it agreed with the DoD’s decision. However, it noted some concerns connected to the original process of awarding the contract. A spokesperson mentioned in the statement:
“We understand and agree with the DoD’s decision. Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement.”
Amazon was thought to be the frontrunner in the race to win the Pentagon contract before Trump vowed to take a ‘strong look’ at the deal. As a huge chunk of the suit filed with the US Court of Federal Claims to contest the eventual decision by DoD, Amazon accused Trump of launching some “repeated public and behind-the-scenes attacks” against the firm in a formal protest.
In the ensuing court battle, Amazon requested permission to get testimony from Trump and former Defense Secretary Mark Esper to support its claim that it lost the lucrative cloud contract due to political interference. Amazon said in a February statement:
“President Trump has repeatedly demonstrated his willingness to use his position as President and Commander in Chief to interfere with government functions — including federal procurement — to advance his personal agenda. The question is whether the President of the United States should be allowed to use the budget of the DoD to pursue his own personal and political ends.”