Oracle Loses Court Challenge to $10 Billion Cloud Contract

Naomi Nix (Bloomberg) -- Oracle Corp. lost its legal challenge to the Pentagon’s $10 billion cloud contract on Friday, clearing the way for the government to award the contract to Amazon.com Inc. or Microsoft Corp.

Federal Claims Court Senior Judge Eric Bruggink dismissed the company’s argument that the contract violates federal procurement laws and is unfairly tainted by conflicts of interests.
Bruggink said that because Oracle didn’t meet the criteria for the bid, it “cannot demonstrate prejudice as a result of other possible errors in the procurement process.”

The decision is a major blow to Oracle, which risks losing a share of its federal defense business if the Pentagon awards the contract to another cloud company. The ruling also eliminates a headache for the Pentagon, which has been fending off challenges to its winner-take-all strategy in the cloud contract for more than a year.

Oracle fell 1% as of 10:51 a.m. in New York.

Oracle looks forward to “working with the Department of Defense, the Intelligence Community, and other public sector agencies to deploy modern, secure hyperscale cloud solutions that meet their needs,” company spokeswoman Deborah Hellinger said in a statement.

The Pentagon and Amazon Web Services, which were also defendants in the case, didn’t immediately respond to requests for comment.

In April, the Pentagon eliminated Oracle and International Business Machines Corp. from the competition, leaving Amazon and Microsoft as the final contenders. Dana Deasy, the Pentagon’s chief information officer, has said the Defense Department expects to make an award in August.

Oracle’s lawsuit, which was filed in December, alleged that the Pentagon’s minimum requirements for the contract as well as its decision to pick just one winner violated federal procurement laws designed to ensure competition. The government has said choosing just one winner for the deal would better enable it to consolidate its technology products.

The suit also claimed that the procurement has been marred by conflicts, including by ties between at least three former Defense Department officials and Amazon, which is considered a front-runner for the project. The government countered that the former employees were not major decision-makers in the project.