Although Microsoft was the surprise winner over Amazon for the Pentagon’s $10 billion cloud computing contract, the tech and retail giant is considering a court challenge built on suspicions that President Trump broke unwritten rules and intervened against it.
For months, Trump has been waging a one-sided Twitter feud with Amazon and its founder, Jeff Bezos, over its business and tax practices.
In August, Trump set the stage for a showdown over the contract by saying he would “seriously†look at intervening, which experts said would be highly improper in what is supposed to be a fair and unbiased process.
Bezos also owns The Washington Post, which has been aggressively covering the Trump White House and the president’s associates, including those named in the current House impeachment inquiry.
Trump, without offering proof, has repeatedly accused The Post of publishing “fake news†and has publicly attacked other media outlets.
Transforming old systems
The Pentagon’s contract, called the Joint Enterprise Defense Infrastructure project, or Jedi, is intended to modernize the Defense Department’s 20- and 30-year-old computer systems, which often fail to interact with each other, and transform them with a so-called enterprise cloud infrastructureOpens a new window .
Among other things, the Jedi system would vastly improve the Pentagon’s access to cloud-borne data from battlefields and other remote locations.
The battle for Jedi has often been a dog fight among the big tech firms that extended to courtrooms and cable television sets. Amazon was pegged the front-runner because its subsidiary, Amazon Web Services, leads the cloud computing industry and because it had landed a huge cloud contract to modernize the Central Intelligence Agency’s systems.
Google withdrew from the running last October, saying the project conflicted with its ethical principlesOpens a new window , after employees protested against another Pentagon contract involving artificial intelligence analysis of drone imagery.
Oracle and IBM lost out in earlier stages of bidding last Spring and launched court fightsOpens a new window , claiming that the process was rigged in Amazon’s favor. Microsoft stayed in the bidding and lobbied behind the scenes.
Over the summer, Trump tweeted that he had been receiving “enormous complaints†from big tech companies about the process and its likely award to Amazon.
In July, the White House instructed Defense Secretary Mark Esper to reexamine the bid process. In October, Esper withdrew on conflict of interest grounds his son works for one of the other bidders, IBM. The contract was announced on a Friday night, usually a slow time in the news cycle when most people are beginning their weekend.
Presidential pressure
Amazon began considering its options after saying it was surprised by the decision and that “a detailed assessment purely on the comparative offerings†would have led to a different outcome.
“It’s crystal clear here that the president .. did not want this contract to be awarded to one of the competitors,†Franklin Turner, an attorney with law firm McCarter & English, told The PostOpens a new window . “As a result it’s fairly likely that we will see a number of challenges that the procurement was not conducted on a level playing field.â€
Putting the deal in perspective, its value of $10 billion stretched over 10 years is relatively small compared with the income of Microsoft or Amazon, whose annual earnings run into the tens of billions of dollars.
In addition, the Pentagon is only committing to a base contract of two years with a $1 billion guarantee, with subsequent extensions available in chunks of several years.
Future business
So the real value of the contract is in what it could lead to in an ever-expanding enterprise cloud computing market – specifically, more business with the federal government.
Microsoft, which has said it “appreciates†the JEDI contract award, might now seem to be in the pole position to grab much of that work.
Dan Ives, analyst at Wedbush Securities, says in a note that the deal gives Microsoft “credibility†with other government agencies in need of cloud services, calling the win a “game changer†that will have a ripple effect on its cloud business for years.
Ives adds that the $10 billion figure is just a start and even though Microsoft was the victor this time, government cloud spending will benefit the entire cloud computing sector.
Other companies, including Amazon, Dell, IBM, Oracle and VMware, may well be rubbing their hands in anticipation of more contracts ahead.