Biden Rescinded The Pentagon's $10 Billion Cloud Deal
After Amazon filed a lawsuit challenging the Pentagon's decision under then-President Donald Trump, the contract was put on hold in late 2019.
On Tuesday, the US Defense Department canceled its $10 billion JEDI cloud-computing project, reversing a Trump-era award to Microsoft Corp and announcing a new contract that will likely include Amazon.com.
After Amazon filed a lawsuit challenging the Pentagon's decision under then-President Donald Trump, the contract was put on hold in late 2019.
Then-Amazon CEO Jeff Bezos was publicly chastised by Trump, who repeatedly criticized the company.
Microsoft and Amazon both closed at all-time highs, with the online retailer up 4.7 percent and the software company up a penny.
Software companies have been attempting to persuade the government and businesses that shifting computing work to their data centers was a safe move. They've presented a number of studies to back up their claim that cloud computing is secure.
In 2019, Amazon claimed that the Pentagon decision was riddled with "egregious errors," which it blamed on "improper pressure from Trump." According to a book published in 2019, Trump ordered the Defense Department to "screw Amazon" out of the JEDI contract.
The Defense Department re-evaluated the contract proposals in September and determined that Microsoft's submission was the best.
The Pentagon said Tuesday that Amazon and Microsoft are the only companies that can meet the department's requirements under the new Biden administration, but later added that they are reaching out to other cloud providers in the next three months to see if they can meet the government's standards as well.
Oracle Corp, Alphabet Inc's Google, and IBM Corp are among the top cloud providers.
The Pentagon hopes to award the first awards for its new Joint Warfighter Cloud Capability by April 2022. (JWCC).
Both Microsoft and Amazon are expected to win cloud contracts, according to John Sherman, the Defense Department's acting chief information officer. He stated that the situation was critical.
"I have to get this now — as soon as possible," Sherman said, "hopefully as soon as April."
Microsoft said in a statement that it expects to "continue to be successful as the Department of Defense selects partners for new work." According to Sherman, Microsoft could submit a termination bid to recoup the costs of the scrapped project.
Amazon Web Services (AWS), Amazon's cloud division, said it agreed with the Pentagon's decision to cancel the contract. The initial award, according to Amazon, was made "not on the merits of the proposals, but rather as a result of outside influence that has no place in government procurement." "We look forward to continuing to support the Department of Defense's modernization efforts and building solutions that help them achieve their critical missions," AWS said.
In April, a judge refused to dismiss Amazon's claims that the Trump administration tampered with the Pentagon's award to Microsoft, which had been put on hold indefinitely since February 2020.
The now-canceled Joint Enterprise Defense Infrastructure cloud (JEDI) contract was part of a larger digital modernization of the Pentagon aimed at making it more technologically agile, with a budget of up to $10 billion.
"We don't have an estimate yet," Sherman said, "but I wouldn't put my money on the $10 billion figure."
"This plan calls for a multi-cloud procurement to be conducted through a full and open competition as soon as early 2025. In the short term, however, we are confident that a direct award path is both necessary and appropriate in order to provide the force with much-needed enterprise cloud capabilities "Sherman remarked.
Senator Chuck Grassley, a Republican, praised the Pentagon's decision.
"The JEDI contract has been hampered by potential conflicts of interest, size, unnecessarily long delays, and its single awardee structure," Grassley said, adding that a new review process "will afford the program an opportunity for greater public trust and confidence."
