Mark Esper referees Pentagon JEDI war cloud deal after Trump Amazon attack

Defense Secretary Mark T. Esper took office last month with a land mine waiting on his desk: the massive Pentagon “war cloud” computing contract that has left him in a no-win situation.

Awarding the decadelong, $10 billion deal to front-runner Amazon likely will infuriate President Trump, who has made no secret of his disdain for the online retailing giant and last month vowed to take a “very strong look” at the bidding process.

But upending the cloud contract, which has been a top priority inside the Pentagon for years and which high-ranking military officers portray as a national security priority, would frustrate Defense Department officials and represent a rocky start for Mr. Esper, who was confirmed to the post just two weeks ago.

Insiders say the newly minted Pentagon chief, who announced last week that he would launch a formal review of the Joint Enterprise Defense Infrastructure (JEDI) program, will try to thread a needle between the opposing sides. The result, they say, could be a tweaked contract that may satisfy Mr. Trump while maintaining the momentum of one of the Defense Department’s most ambitious technological initiatives in decades.

“Given what the president has said, I think he has to do something different. But it might not have to be a lot,” said Mark Cancian, senior adviser at the Center for Strategic and International Studies and a former official in the Defense Department and the Office of Management and Budget. “The president has a tendency to complain … and then you renegotiate and it’s a little different, and all of the sudden it’s the greatest in the world.

“I don’t see a root-and-branch change here,” Mr. Cancian added. “They’ve been building to this for so long it would be hard to step back and throw it out and completely start over.”

The Pentagon says Mr. Esper, who is in the midst of his first international trip since his confirmation, was simply exercising due diligence in taking a fresh look at a contract with massive, long-term implications for his department.

“Keeping his promise to members of Congress and the American public, Secretary Esper is looking at the [JEDI] program,” Elissa Smith, Department of Defense spokeswoman, told The Washington Times. “No decision will be made on the program until he has completed his examination.”

The JEDI contract, originally scheduled to be awarded this month, would cover the storage and processing of huge amounts of classified Pentagon data, and the winner would be linked in an unprecedented high-tech partnership with the U.S. military. The cloud, its proponents say, would enable the immediate sharing of data to battlefields around the world and would greatly aid the U.S. military in virtually everything it does.

Only two companies, Amazon Web Services and Microsoft Azure, remain in the bidding. Oracle Corp. and IBM expressed interest in the original Pentagon proposal request, and Oracle has emerged as one of the most vociferous critics of the JEDI process.

Amazon, which holds a $600 million cloud contract for the CIA, was long viewed as the front-runner for the JEDI contract, but critics say the entire bidding process was marred by conflicts of interest. Pentagon officials are suspected of working behind the scenes with Amazon and structuring the contract in a way that favors the company owned by billionaire Jeff Bezos, who also owns The Washington Post, a newspaper that has been critical of the president.

Pentagon officials have vehemently denied claims of improper handling of the bidding process. A federal judge last month tossed complaints from Oracle, which argued that the process was rigged to favor Amazon Web Services.

Negotiating the politics

Although the Pentagon has weathered the storm of legal challenges, the politics around JEDI have complicated the situation for the president and Mr. Esper.

Some Republicans have urged the White House to intervene and demand changes to the contract. Specifically, they contend that JEDI should be renegotiated at a lower price and that, as Oracle has argued, the Pentagon should split the contract among several firms rather than using a winner-take-all approach.

Mr. Trump seems to have taken those arguments to heart.

“I’m getting tremendous complaints about the contract with the Pentagon and with Amazon. They’re saying it wasn’t competitively bid,” Mr. Trump told reporters last month. “And I will be asking them to look at it very closely to see what’s going on because I have had very few things where there’s been such complaining.”

But the JEDI contract dispute does not follow neat partisan lines.

A day after Mr. Trump went public with his doubts about JEDI, Rep. Mac Thornberry of Texas, the ranking Republican on the House Armed Services Committee, and three other Republican committee members wrote a letter imploring Mr. Trump not to get involved.

“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,” said the Republican House members, noting that their committee had conducted oversight of the JEDI contract from the beginning.

“While it is understandable that some of the companies competing for the contract are disappointed at not being selected as one of the finalists, further unnecessary delays will only damage our security and increase the costs of the contract,” the letter said.

But just days after the president’s comments, Mr. Esper revealed he was launching a review of the contract. It is unclear exactly how long the review will take or precisely what Mr. Esper may try to change, though he denied getting explicit orders from Mr. Trump.

“I need to make sure that the cloud that we build … that the process was done fairly, properly, it was competitively bid, and all those things, because I have a responsibility to the taxpayers to be a good steward,” he told reporters over the weekend. “I was not directed to do it. Again, I’m looking at all the concerns I’ve heard from members of Congress, both parties, both sides of the Hill. I’ve heard from people from the White House as well.”

Democratic lawmakers fear that Mr. Esper is succumbing to pressure from the White House. In a letter to the secretary this week, Sen. Mark R. Warner, Virginia Democrat, and Sen. Jack Reed, Rhode Island Democrat, railed against any political interference that could compromise the bidding process.

“There are already built-in mechanisms for independent review of potential conflicts of interest — some of which have already been used in the JEDI initiative,” the senators said. “We appreciate your desire to review this initiative as you take on your new role as secretary, but we urge you to resist political pressures that might negatively affect the implementation of sound acquisition practices and of the cloud strategy.”

Analysts say Mr. Esper could try to reduce the contract’s length, negotiate a better price, split JEDI among multiple companies or take other steps to modify the contract at the margins but maintain the overall agreement and implement it quickly.

Should White House officials try to elbow Amazon out of the deal entirely, the secretary would likely push back.

“The source selection is a sacred process, and it’s protected by statute. The president cannot interfere with that,” Mr. Cancian said. “I think Esper would see that as a red line.”