Pentagon Pauses $10 Billion Contract That Embroiled Amazon In Controversy

Aug 1, 2019
Originally published on August 2, 2019 12:01 pm

The Pentagon is hitting pause on a massive, first-of-its-kind cloud computing contract after President Trump cited critics' accusations of favoritism toward Amazon.

Mark Esper, the new defense secretary, is re-examining the project just weeks before the winner was expected to be announced. Amazon and Microsoft are the finalists for the contract, which is worth as much as $10 billion and will be as long as 10 years. The project is called JEDI, for Joint Enterprise Defense Infrastructure.

"No decision will be made on the program until he has completed his examination," Department of Defense spokeswoman Elissa Smith said on Thursday.

JEDI is a high-profile contract to collect and store sensitive military data and give U.S. war fighters access to cutting-edge technologies, like artificial intelligence. It has been one of the most controversial Pentagon technology contracts, with lawsuits, several investigations, rebukes and, most recently, Trump's interest in what is normally a bureaucratic contracting process.

The new examination is good news for Oracle and IBM, which have been knocked out of the bidding competition and unsuccessfully sued to block the award.

They and some Republicans in Congress have argued that the Defense Department should select multiple companies instead of a single winner. Critics have also accused the Pentagon and Amazon of having an unfairly cozy relationship, pointing to several Defense Department employees who have done work for Amazon's cloud business, AWS.

The Department of Defense, the Government Accountability Office and the Court of Federal Claims have reviewed the JEDI bidding process and allowed the contract to proceed. The Pentagon has also hit back that the criticisms were "poorly-informed" and "manipulative."

But these complaints have reached the ear of Trump, who has publicly expressed disdain toward Amazon CEO Jeff Bezos over Amazon's deal with the U.S. Postal Service and Bezos' personal ownership of The Washington Post, whose news coverage is a common target of Trump's criticism.

"I'm getting tremendous complaints about the contract with the Pentagon and with Amazon; they're saying it wasn't competitively bid," Trump told reporters on July 18. "I will be asking them to take a look at it very closely to see what's going on because I have had very few things where there's been such complaining."

Congressional letters have also been flying in recent weeks from Republicans who think that the JEDI contract is tainted — and Republicans who argue the delays in awarding it have already hurt the Pentagon's urgent technology needs.

Amazon, Microsoft and Oracle declined to comment on the re-examination of the cloud contract. Amazon, IBM, Microsoft and Oracle are among NPR's financial supporters.

"JEDI is probably the most important cloud deal ever," Wedbush Securities analyst Daniel Ives said. "This is the Pentagon moving to cloud, and any company that gets this — it's going to be a massive ripple effect for decades to come."

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All right. The Pentagon is hitting the pause button on a massive technology contract in which Microsoft and Amazon were finalists. And we should note both those companies are financial supporters of NPR. This JEDI contract is worth up to $10 billion over a decade. And the project has brought out drama of Washington proportions - lawsuits, investigations, rebukes and finally the interest of President Trump.

Here's more from NPR's Alina Selyukh.

ALINA SELYUKH, BYLINE: This Pentagon cloud contract brings out superlatives. It's the biggest of its kind, the first to bring modern computing technology anywhere - be it a desert or a submarine.

DANIEL IVES: Probably the most important cloud deal ever.

SELYUKH: That's Wedbush Securities analyst Daniel Ives.

IVES: This is the Pentagon moving to cloud. And any company that gets this - it's going to be a massive ripple effect for decades to come. I can't understate the importance of JEDI.



SELYUKH: ...That's the name of this cloud contract - Joint Enterprise Defense Infrastructure. You might think of a cloud as some server that safeguards your vacation photos. JEDI is sort of like that but for sensitive military data. It would unify the Pentagon's many disjointed networks. And more importantly, it would give American war fighters - anywhere - access to the most cutting-edge technology, like artificial intelligence.

Daniel Goure of the nonprofit Lexington Institute calls it simply a war cloud.

DANIEL GOURE: They're supposed to integrate and move the kind of information that war fighters can act on - whether it's a ship at sea, a soldier in the field, somebody running a satellite or a ballistic missile system.

SELYUKH: Start with these high stakes, add in the price tag of up to $10 billion and you set the stage for the drawn-out, dramatic saga that JEDI has become. Four tech giants put in bids - Amazon, Microsoft, IBM and Oracle - we should note all are NPR's financial supporters. Only Amazon immediately matched all of the Pentagon's security requirements. Amazon already had a contract with the CIA for its cloud business. And so the fight began.

Here's Andrew Hunter of the Center for Strategic and International Studies.

ANDREW HUNTER: The Department of Defense does millions of contracts every year, most of them do not involve this level of controversy.

SELYUKH: Oracle led the charge. Its target - Amazon, whose government business has been rapidly ballooning. Oracle accused Pentagon of tailoring the JEDI contract to favor Amazon. Its bigger argument was that the Defense Department should select multiple companies instead of just one. Hunter says, as long as the contract's requirements are all justified, it's not unusual for only one company to qualify.

HUNTER: The classic example is aircraft carriers. If you want a large aircraft carrier, there's only one shipyard in the world that can do that in Virginia.

SELYUKH: But then it got personal. Three Pentagon employees had previously done work for Amazon's cloud division. An Oracle lobbyist compiled a colorful flowchart of these alleged connections, labelling it a conspiracy. It circulated around Washington. Both the Defense Department and Amazon fought the allegations. The Pentagon even came out calling them manipulative speculation.

At least four separate reviews investigated the bidding process in the government and the Court of Federal Claims. All of them allowed the contract to proceed. But the complaints reached the ear of President Trump, whose disdain for Amazon CEO Jeff Bezos is no secret. In July, Trump told reporters he has gotten, quote, "tremendous complaints" about the Pentagon's handling of the contract.


PRESIDENT DONALD TRUMP: I will be asking them to look at it very closely to see what's going on because I have had very few things where there's been such complaining.

SELYUKH: And now Trump's ask for a close look is being answered. Newly installed Defense Secretary Mark Esper is re-examining the project, and the Pentagon says no decision will be made on JEDI until he's done. Before this, the contract was on the verge of being awarded, with Amazon and Microsoft the two remaining finalists. Alina Selyukh, NPR News, Washington.

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