The fight over the Pentagon’s $10 billion “war cloud” contract is entering a new phase after the Department of Defense (DOD) awarded the lucrative contract to Microsoft over rival Amazon in a shocking move.
All eyes are now on Amazon, which is seen as likely to take the fight over the Pentagon’s decision to court or before the government’s top auditing office.
Democrats and industry watchers are raising the possibility that the process was swayed by President Trump, who publicly called on the DOD to investigate the contract over the summer. Trump questioned if the process unfairly favored Amazon, long seen as the front-runner.
A challenge from Amazon’s cloud-computing arm, Amazon Web Services (AWS), involving allegations that the president improperly intervened in the contract process would be unprecedented. Some of the top federal contracting experts in the country told The Hill they can’t think of any similar case in recent history.
“We’ve had other contracts that have had major issues which were fought out in the public but none of which I’m aware where the president is alleged to have somehow tried to influence the procurement process,” Dave Drabkin, a former top procurement executive at the General Services Administration, told The Hill.
Steven Kelman, former head of the Office of Management and Budget’s Office of Federal Procurement and current professor of public management at Harvard University’s Kennedy School of Government, called the president’s involvement in a specific contract “extremely unusual, close to unheard of.”
“It’s against the norms and expectations of a system,” Kelman said.
For months, market analysts and tech experts predicted that Amazon would receive the highly sought-after contract, called the Joint Enterprise Defense Infrastructure (JEDI), noting Amazon is the No. 1 player in the cloud-computing space with an approximately 48 percent market share. The military has given AWS, which provides cloud-computing for the CIA, its highest data management certification.
Microsoft, which has a slightly lower data certification, is a close second in the cloud computing wars and has been stepping up its outreach to government agencies.
Kelman called Microsoft a “plausible” contender. But Friday’s news of the decision came as a shock to everyone watching the JEDI saga unfold. It appeared to also catch Microsoft by surprise. The company did not offer a statement until the next day.
“We brought our best efforts to the rigorous JEDI evaluation process and appreciate that DoD has chosen Microsoft,” Toni Townes-Whitley, Microsoft’s president of U.S. regulated industries, said in a statement.
The process has been mired in controversy.
Over the summer, Trump publicly questioned whether the JEDI contract was written with Amazon in mind, touting the argument that had been circulated for months by Amazon’s cloud-computing rival Oracle and a procession of Republican lawmakers.
During a news conference, Trump said, “I’m getting tremendous complaints about the contract with the Pentagon and with Amazon. They’re saying it wasn’t competitively bid.”
“Some of the greatest companies in the world are complaining about it, having to do with Amazon and the Department of Defense, and I will be asking them to look at it very closely to see what’s going on,” he added.
Meanwhile, Trump’s eldest son, Donald Trump Jr., has publicly referred to the JEDI contract as the “corrupt #BezosBailout,” claiming it was written to bolster profits for the Amazon chief. Several government investigations have cleared Amazon and the Pentagon of any allegations of bias or conflicts of interest.
Shortly after Trump made his remarks, newly appointed Defense Secretary Mark Esper opened up a review of the JEDI program in August, pumping the brakes on a process that was already stalled by an unsuccessful court challenge from Oracle and several government investigations.
The president’s public remarks about JEDI, paired with his open antagonism toward Bezos, has raised serious questions over whether Trump weighed in on Microsoft’s behalf in order to burn Amazon.
Last week, a speechwriter for former Defense Secretary James Mattis alleged just that, claiming in an excerpt of his upcoming book that Trump wanted to “screw” Amazon by giving the contract to another company.
“The President’s public comments about the JEDI contract have been well outside the norm,” Rep. Jim Langevin (D-R.I.) said in a statement to The Hill. “If the President in fact took additional steps to influence the contract award, that would be a deeply disturbing development.”
If Amazon decides to protest the bid, they’re likely to do so either in the U.S. Court of Federal Claims, the court that hears monetary claims against the government, or before the Government Accountability Office, the country’s top auditing body.
Franklin Turner, a top government contracting lawyer and partner with the law firm McCarter & English, said Amazon will face a “steep uphill battle” as it seeks to prove any nefarious conduct by the president.
It’s technically legal for a president to be involved in a federal contracting process, experts said, but it’s against well-established regulations for a contract award decision to involve any factors other than what is laid out in the original solicitation.
In order to prove wrongdoing in court under those rules, Amazon would have to prove Trump’s feelings toward Bezos factored into the Pentagon’s decision.
“The red flags here … are that it’s highly atypical for the president of the United States to express such clear disdain for a competitor in a major acquisition like this,” Turner said.
The protest process will likely hold up the contract for several more months, if AWS chooses to file a lawsuit or complaint.
Republican lawmakers have lobbied the Pentagon and White House with a flurry of letters and statements about the JEDI contract over the past several months. While members of the House Armed Services Committee warned against holding up the JEDI contract award process any further, top GOP lawmakers — most prominently Sen. Marco Rubio (Fla.) — called on Esper and Trump to freshly review the investigation over allegations that it unfairly favored Amazon.
In a July letter, Reps. Jim Banks (R-Ind.) and Paul Cook (R-Calif.), two members of the House Armed Services Committee, urged Trump to step back, claiming “further delays make DOD fall behind.”
“My stance hasn’t changed,” Banks said in a statement to The Hill on Monday. “DOD is already lagging to implement critical IT improvements. We cannot delay this program any further if we want to compete and win against our adversaries.
Republicans are finding themselves backed into a corner as the swirling allegations around the JEDI contract heat up. Several Republican lawmakers who have previously weighed in on the contract, including Rep. Mac Thornberry (R-Texas), the ranking member of the Armed Services Committee, declined to comment on Monday.
Meanwhile, Democrats are likely to pounce on any allegations of misconduct as they accuse the president of abusing the power of his office to spurn a rival.
The JEDI contract will allow Microsoft to develop cloud-computing infrastructure for the U.S. military for up to 10 years, ending in October 2029, though it begins at only two. And it’s a “paradigm-changer” for the company’s business, said Wedbush Securities equity analyst Dan Ives, as the top tech firms in the world duke it out over the “$1 trillion of cloud spending expected to happen over the next decade.”
With billions of dollars on the line and intense competition for the array of federal cloud-computing contracts that are certain to follow JEDI, Amazon is likely to fight hard.
“We’re surprised about this conclusion,” an AWS spokesperson said on Friday night. “AWS is the clear leader in cloud computing and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion.”