Pentagon scraps troubled JEDI cloud contract amid battle with Amazon

The Pentagon on Tuesday formally canceled its $10 billion “war cloud” project and moved to terminate its contract with Microsoft as the U.S. military says it will now look to multiple companies to carry out a contract that has become a political and legal hot potato.

The move comes amid a major legal and political battle between the Defense Department and Amazon Web Services, which was passed over in favor of Microsoft for the 10-year deal. Amazon alleges that former President Donald Trump publicly and privately pressured the Pentagon to award the Joint Enterprise Defense Infrastructure (JEDI) deal to Microsoft because of his personal disdain for Amazon and its founder, Jeff Bezos.

The Pentagon has vehemently denied those accusations.

Tuesday’s decision may allow the Pentagon to sidestep what would’ve surely been a messy, protracted legal battle with Amazon, which filed a formal protest of the JEDI award almost immediately after Microsoft’s surprise victory in 2019. A recent federal court decision paved the way for Mr. Trump, former Defense Secretary James N. Mattis, and other top officials to face formal depositions as part of that lawsuit. It’s likely the case would have taken years to work its way through the legal system and would have resulted in the public release of internal Pentagon documents and private discussions between Defense Department leaders and former top White House officials.

That process also would have prevented the Pentagon from moving forward with its cloud initiative. By canceling JEDI, it seems likely the military can establish the program sooner than if it had chosen to continue battling Amazon in court.

Officials on Tuesday downplayed the idea that they are changing course strictly because of the legal fight.

Instead, Pentagon leaders said that the military’s needs have evolved since Microsoft won the JEDI contract in October 2019. Over the past 20 months, they said, the idea of using multiple companies to handle cloud computing needs has become more practical, appealing and affordable.

“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. “Our landscape has evolved and a new way ahead is warranted.”

But the JEDI program had been in development for years, with officials touting repeatedly the benefits of centralizing vast amounts of data in a single digital warehouse. The Pentagon issued its final requests for proposals in 2018, and ultimately Amazon and Microsoft were the only two companies left in the running.

Until recently, the Defense Department had insisted that one cloud system handled by one private-sector company was the most efficient and cost-effective approach.

But with JEDI now dead, Mr. Sherman said the Pentagon will begin a new cloud effort known as the “Joint Warfighter Cloud Capability,” or JWCC. Defense officials said they will seek proposals from “a limited number of sources,” specifically Microsoft and Amazon.

Those two companies, officials said, appear to be the only two firms “capable of meeting the department’s requirements,” though Mr. Sherman said the Defense Department will continuously evaluate whether other major cloud providers — including such top names as Google, Oracle and IBM — also may be able to grab a piece of the work.

Fighting in the cloud

While individual military services such as the Army have their own cloud systems, military-wide clouds such as JEDI and the new JWCC effort would offer unique capabilities. That type of all-encompassing cloud system would, for example, allow commanders from around the world to share real-time data with service members in the field in wartime.

The effort also will prove vital for artificial intelligence programs and other cutting-edge initiatives that depend on real-time data from a host of sources, Mr. Sherman said. AI programs in particular will need up-to-the-second connectivity with multiple sources, and a massive cloud that covers the entire U.S. military is viewed as the only way to accomplish that.

Pentagon officials and some private analysts have expressed alarm at the speed at which China is incorporating AI into its expanding military arsenal.

“Nothing right now does what is envisioned in JWCC,” Mr. Sherman said.

Microsoft said it remains committed to working with the Pentagon. But the company also took subtle shots at Amazon for its continued protest.

“We understand the DoD’s rationale, and we support them and every military member who needs the mission-critical 21st century technology JEDI would have provided,” Toni Townes-Whitley, Microsoft’s president of U.S. regulated industries, wrote in a blog post Tuesday afternoon. “The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well.”

“When one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform,” Ms. Townes-Whitley said. “Amazon filed its protest in November 2019 and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward.”

Amazon said it agreed with the Pentagon’s decision to scrap the project in its current form.

“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.”

Microsoft could seek to recover money from the Pentagon related to work already performed on JEDI. Mr. Sherman said those details are still being worked out.

Mr. Sherman also said that its new cloud plan will be something of a stopgap measure and that the Pentagon wants to establish a more permanent system by 2025.