Amazon Plans Lawsuit Challenging Loss of Pentagon Cloud Deal

Naomi Nix (Bloomberg) -- Amazon.com Inc. has given notice that it will file a lawsuit challenging the Defense Department’s decision to award Microsoft Corp. a cloud computing contract valued at as much as $10 billion over a decade.

The e-commerce giant plans to lodge its complaint against the contract in the U.S. Court of Federal Claims, Seattle-based Amazon confirmed. The company’s challenge was earlier reported by the Federal Times. A representative for the Defense Department said the agency wouldn’t speculate on potential litigation.

Oracle Corp. is also mounting a legal challenge to the cloud contract, known as the Joint Enterprise Defense Infrastructure, or JEDI. The project is designed to consolidate the Defense Department’s cloud computing infrastructure and modernize its technology systems.

Amazon spokesman Drew Herdener said in a statement that the procurement was tainted by bias and evaluation deficiencies.

“It’s critical for our country that the government and its elected leaders administer procurements objectively and in a manner that is free from political influence,” he said. “Numerous aspects of the JEDI evaluation process contained clear deficiencies, errors, and unmistakable bias -- and it’s important that these matters be examined and rectified.”

The Defense Department is grappling with dueling allegations that political interference may have helped or hurt Amazon’s chances of winning the contract. Some lawmakers questioned whether U.S. President Donald Trump unfairly intervened in the process against Amazon. Trump has long been at odds with Amazon Chief Executive Officer Jeff Bezos, who also owns the Washington Post.

U.S. Defense Secretary Mark Esper told reporters at a news conference in Seoul Friday that he backed the decision-making process for the JEDI cloud computing contract.

“I am confident that it was conducted freely and fairly without any type of outside influence, and I’ll just leave it at that,” Esper said in response to a question on whether Trump had asked him to bypass Amazon.

Trump surprised the industry earlier this year when he openly questioned whether the contract was being competitively bid, citing complaints from Microsoft, Oracle and International Business Machines Corp.

A new book by Guy Snodgrass, a speechwriter to former Defense Secretary Jim Mattis, alleges that Trump, in the summer of 2018, told Mattis to “screw Amazon” and lock it out of the bid. Mattis didn’t do what Trump asked, Snodgrass wrote. Mattis has criticized the book.

Dana Deasy, the Pentagon’s chief information officer, said during his confirmation hearing in late October that to the best of his knowledge, no one from the White House reached out to any members of the JEDI cloud contract selection team.

Meanwhile, Oracle has alleged in court that former Pentagon employees with ties to Amazon may have structured the deal to favor Amazon. Oracle is appealing a July ruling from the U.S. Court of Federal Claims that dismissed its legal challenge to the cloud contract. Amazon offered at least two former Pentagon officials jobs while they were working on the procurement, according to the lawsuit.

The Defense Department in late October awarded the contract to Microsoft, an upset victory for a company initially viewed as a distant second to Amazon in the market for cloud computing services.

Amazon was also seen as the favorite for the Pentagon deal because it won a lucrative cloud contract from the Central Intelligence Agency and had obtained higher levels of federal security authorizations than its competitors.

Oracle and IBM waged a fierce lobbying and legal campaign over the decision to choose just one provider for JEDI, arguing it would imperil the Pentagon’s data and stifle innovation. Both companies were later eliminated from the competition.