‘Blown up in their face’: Death of Pentagon war cloud contract sparks questions about Amazon’s power

With the Pentagon’s $10 billion virtual “war cloud” now dead, military officials and key lawmakers are left with a troubling question: Can a company as powerful as Amazon effectively dictate how the federal government does business in the 21st century?

Defense industry analysts say the drama surrounding the ill-fated Joint Enterprise Defense Infrastructure (JEDI) initiative — which played out in courtrooms and boardrooms as Amazon Web Services battled the Pentagon and industry rival Microsoft over the lucrative deal — has cast new light on the levers some megacorporations have at their disposal to influence government deals.

Amazon’s legal challenge held up the JEDI contract for well over a year, hamstringing the Pentagon’s effort to move vast amounts of classified data into a single virtual clearinghouse that troops on the ground and sailors at sea could access around the globe. Defense officials last week pulled the plug on JEDI and said they will pursue a multi-company cloud contract instead. The move will give both Amazon and Microsoft a bite of the apple.

In objecting to Microsoft’s award of the JEDI deal in late 2019, Amazon cast itself as the victim of blatant political interference by President Trump, a vocal critic of the company and its founder, Jeff Bezos. 

There is no doubt that Mr. Trump harbors disdain for the company, but defense industry specialists say the Pentagon has set a dangerous precedent by backing down in the face of a protracted and politically messy fight over Amazon’s legal claims. They say other companies that feel they have been cheated out of big contracts, for whatever reason, also could file claims.

“It’s frankly a crushing disappointment. It suggests to me that I don’t know how [the Department of Defense] goes about buying anything if their major acquisition efforts can be squashed by litigation, bureaucracy or industry recalcitrance,” said retired Army Lt. Gen. Tom Spoehr, now the director of the Center for National Defense at the conservative Heritage Foundation. “I’m a bit depressed about the future of cloud computing in the DoD unless they start to go like soccer teams — everybody gets a trophy.”

In many cases, Gen. Spoehr said, defense contractors shy away from lengthy contract disputes because they want to maintain friendly ties with the Pentagon in the hopes of winning future deals. The dynamic with a multiheaded corporate giant like Amazon, he said, appears to be radically different.

“DoD is a tiny small fry compared to their other business,” he said. “They almost don’t care if they create ill will.” 

In its public statements, Amazon has insisted that it is committed to working with the Defense Department on cloud computing for years to come.

Pentagon officials also dispute the notion that Amazon pursued a scorched-earth strategy in challenging Microsoft’s initial victory in the bidding. The demise of JEDI, officials said, won’t lead to any major changes in the contract process.

“The department is always evaluating … ways to streamline the procurement process to deliver better capability to the warfighter faster while being as cost efficient as possible,” Pentagon spokesperson Jessica Maxwell said. “However, at this time we are not planning any broad changes to the procurement process as a result of the JEDI procurement and its recent cancellation.”

In the time since the contract was awarded to Microsoft, officials say, the military’s cloud computing needs have evolved and a one-company deal, which officials long insisted was the safest and most cost-effective route, is no longer necessary.

“JEDI, conceived with noble intent … was developed at a time when the department’s needs were different,” acting Pentagon Chief Information Officer John Sherman told reporters on a conference call last week. “Our landscape has evolved, and a new way ahead is warranted.”

Lingering questions

Few believe the military’s cloud computing requirements have changed so drastically in the past 18 months or that the new delays will bring the Pentagon closer to its data goals. 

Another potential contributor to the death of JEDI may have been a recent ruling by the U.S. Court of Federal Claims. The court in April allowed Amazon’s accusations of political interference to move forward, meaning that if the Defense Department had stuck with JEDI in its original form, then Mr. Trump, former Defense Secretary James N. Mattis and other top officials could have been deposed under oath and forced to answer questions about their roles.

The Pentagon wanted to avoid such a scenario, Gen. Spoehr said.

“They’re just trying to put a good face on an acquisition decision that has blown up in their face,” he said. “Their needs have not changed a bit. They still need now exactly what they needed then.”

The Pentagon has steadfastly denied any political interference in its decision-making process for JEDI, despite Mr. Trump’s public comments and known hostility to Mr. Bezos, who also owns The Washington Post.

Amazon Web Services did not respond to a request for comment on whether its handling of JEDI may have set a troubling precedent for defense contracts or whether it is concerned about creating bad blood with Pentagon leadership. 

In a statement last week, company officials said they are prepared to work with the military on new cloud initiatives.

“Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever,” an Amazon spokesperson said in a statement. “We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”

But key lawmakers and Amazon’s industry rivals object to how the JEDI process played out.

In a statement last week, Microsoft officials said the government must reform its contract processes.

“When one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform,” said Toni Townes-Whitley, Microsoft’s president of U.S. regulated industries.

Meanwhile, some Republicans in Congress have their own questions. On the heels of news reports that internal Pentagon emails from 2018 showed officials nudging the contract toward Amazon, lawmakers say they want to know whether the company tried to exercise influence behind the scenes.

“It’s becoming more and more clear that Amazon used its market power and paid-for connections to circumvent ethical boundaries and avoid competition in an attempt to win this contract,” Sen. Mike Lee of Utah and Rep. Ken Buck of Colorado said in a joint statement.

“Now, more than ever, we need to ask Amazon, under oath, whether it tried to improperly influence the largest federal contract in history,” the two Republicans said.