Pentagon Delays Award of $10 Billion Cloud Computing Contract

The Pentagon said on Thursday that it was delaying the award of a hotly contested $10 billion contract for a new generation of computing services for the military until the secretary of defense, Mark T. Esper, could review the matter.

The announcement came just a week after Mr. Esper’s confirmation and two weeks after President Trump said he would be looking “very seriously” at the contract process to move the military to a cloud-computing system. Mr. Trump said his concern was based on what he called “tremendous complaints” from competitors of Amazon Web Services, the division of the merchandising giant seen as the all-but-certain winner of the contract.

The development was evidence of how what began as a technological competition to remake the military’s aging, often incompatible computer systems now seems to have taken on a political and possibly personal element driven by Mr. Trump, who has frequently attacked Jeff Bezos, the founder of Amazon who also owns The Washington Post. When angered by the paper’s coverage, Mr. Trump often refers to it on Twitter as the “Amazon Washington Post.”

Experts on federal contracting say it is extremely rare for a president to intervene in a contract competition and improper to do it for political reasons.

Mr. Esper’s decision to postpone the award could upend one of the fiercest lobbying battles in Washington in years, one that has been marked by charges of conflicts of interest, secret efforts inside the Pentagon to favor Amazon, lawsuits and accusations of illicit influence.

In public and private, Mr. Trump has questioned why Mr. Bezos should profit from one of the biggest leaps in Pentagon technology in decades.

Last week CNN reported that a graphic about the contract had made its way to Mr. Trump. The graphic, alleging an Amazon “conspiracy” to create a 10-year monopoly on Pentagon cloud computing, was put together by Oracle, a Silicon Valley firm with extensive Pentagon computing contracts.

Oracle, along with IBM, was eliminated from the initial bidding after Pentagon review groups concluded that the two companies did not have the needed infrastructure to run such a complex cloud-computing operation.

It is unclear whether those companies may now be back in the bidding. Until Mr. Esper’s decision to review the contract was announced on Thursday, the only competitors left were Amazon and Microsoft, both of which have experience handling classified cloud-computing projects. The only debate had appeared to be whether Amazon would win the entire contract, or split it with Microsoft, a division of effort many in the Pentagon opposed.

Amazon already runs the cloud-computing effort at the C.I.A., and its experience there was one reason it was considered a favorite for the far larger project at the Pentagon. Microsoft was seeking to keep its crosstown competitor in Seattle from gaining a huge advantage; Oracle, which was slow to make the conversion to cloud computing, was seen by many in the industry as seeking to slow the contract award to give it time to catch up.

Oracle in particular has continued to wage a legal and lobbying battle to prevent or delay the award, persuading friendly members of Congress, including Senator Marco Rubio, Republican of Florida, to weigh in with the president.

Mr. Rubio, whose political action committees got $5.35 million in 2015 and 2016 from Oracle’s founder, wrote that if Amazon was given the sole contract it would “result in wasted taxpayer dollars and fail to provide our warfighters with the best technology solutions.”

The senator said he was pleased by Mr. Esper’s scrutiny of the contract. “We must make sure it is a fair process & delivers what @DeptofDefense needs,” Mr. Rubio tweeted.

Other members of Congress have said there should be no further delay, arguing that the United States is already lagging behind other countries in applying the latest cloud technology to the military. The move to the cloud, they argue, is necessary for the Pentagon to make far greater use of artificial intelligence applications, in everything from logistics operations to targeting attacks using pilotless aircraft.

“We believe that it is essential for our national security to move forward as quickly as possible with the award and implementation of this contract,” four House Republicans, including Representative Mac Thornberry of Texas, the top Republican on the Armed Services Committee, wrote to Mr. Trump last month.

Amazon Web Services, the company’s powerhouse cloud operation, virtually invented cloud computing, and its services to the C.I.A. have largely been judged a success. That history was widely seen as giving Amazon the inside track for the Defense Department contract, called Joint Enterprise Defense Infrastructure, or JEDI, meant to evoke the galactic knights that did battle in the “Star Wars” series.

While Mr. Trump has often gone after Mr. Bezos as the owner of The Post, Amazon does not own the news organization; Mr. Bezos owns it in his personal capacity. But to Mr. Trump, one aide noted recently, there is no distinction.

Some conservative news media outlets, echoing the president’s hostility to Amazon, have spoken out against giving it the JEDI contract. Steve Hilton, a Fox News host, last month attacked the prospective contract award as “the Bezos bailout” and echoed Oracle’s claims about conflicts of interest.

Elissa Smith, a Pentagon spokeswoman, announced Mr. Esper’s decision to review the contract on Thursday afternoon.

“Secretary Esper is committed to ensuring our warfighters have the best capabilities, including artificial intelligence, to remain the most lethal force in the world, while safeguarding taxpayer dollars,” she said in a statement.

She said that Mr. Esper would be “looking at” the program, adding that he would not make a decision “until he has completed his examination.”

In a brief interview, Ms. Smith declined to say how long the examination was expected to take or what it would involve. Nor would she say whether Mr. Trump or his aides had discussed the JEDI contract with Mr. Esper or other Pentagon officials.

Amazon declined to comment.

On Sunday, Ms. Smith had defended the contract, issuing a statement saying the Pentagon “reasonably evaluated and equally treated all offerers.” Pentagon officials “have always placed the interests of the warfighter first and have acted without bias, prejudice or self-interest,” she said. “The same cannot be said of all parties to the debate over JEDI.”

She appeared to be referring to Oracle. The chart that was put in front of Mr. Trump sets out connections between Amazon and the Defense Department. It highlights employees who worked for the agency before moving into the private sector — but also includes a picture of Jim Mattis, the former defense secretary.

Oracle centered its legal challenge on one of the Defense Department employees, Deap Ubhi, who Oracle claimed may have unfairly influenced the process.

But a federal judge recently ruled that Mr. Ubhi was one of several “bit players” in the process and he “did not impact” the procurement. The court also found that Oracle simply did not have a competitive product that would have made it a viable contender for the contract.

The JEDI contract has become a signature prize for cloud-computing companies, given the scale of the project and the prominence of the customer. While Google was initially interested, it pulled out amid employee opposition to military work, though many analysts said it was unlikely to win the project because it lacked the right security credentials.

IBM and Oracle both unsuccessfully challenged the Pentagon’s decision to award the contract to a single large cloud provider, rather than dividing it up among several companies, as other large enterprises have increasingly been doing. They argued that the single-provider approach improperly favored Amazon, the largest cloud provider. IBM last month spent $34 billion to acquire Red Hat, a firm that integrates the use of multiple cloud providers, which may now make it a more viable competitor.

In April, the Pentagon determined that only Microsoft and Amazon, the two largest cloud companies, had the ability to deliver the project.

Oracle has claimed that the award process unfairly favored Amazon and argued that Mr. Esper ought to review the contracting process as part of his assumption of his new role.

“This is of such a level of controversy and importance that he is going to have some ability to weigh in,” Ken Glueck, an executive vice president at Oracle, said in an interview on Monday.

“We have not lobbied the White House directly to intervene,” he said, adding that the company wants the Pentagon to “change course.”

Be the first to comment

Leave a Reply

Your email address will not be published.


*