Amazon Expected To Fight Pentagon's Decision On Microsoft For $10 Billion Contract

Nov 5, 2019
Originally published on November 5, 2019 8:53 pm
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Amazon is about to go to bat with the Pentagon. The company has lost to Microsoft in what could be described as the World Series of cloud computing, a massive defense contract called JEDI. And Amazon's loss came after months of delays, investigations and controversy, not the least of which was President Trump criticizing CEO Jeff Bezos. NPR's Alina Selyukh reports.

ALINA SELYUKH, BYLINE: It's Friday night, and Daniel Ives is at dinner. He's a tech analyst at Wedbush Securities, and he gets a text. Microsoft just won the most high-profile tech contract with the military.

DANIEL IVES: I almost fell off my chair because no one expected the timing would be this soon.

SELYUKH: Soon because bidding on JEDI was just recently put on hold. And the reason - the president asked for a new look at the contract.

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PRESIDENT DONALD TRUMP: So I'm getting tremendous complaints about the contract with the Pentagon and with Amazon. They're saying it wasn't competitively bid. This is going on...

SELYUKH: This was unprecedented. Presidents don't weigh in on camera about how military contracts should be doled out, but for JEDI, this was just the latest controversy. When the contract was first announced, Amazon was the only company that actually met all of JEDI requirements, so other tech rivals - IBM and Oracle - led a cantankerous campaign accusing the DOD and Amazon of cozy revolving-door relationships. These complaints went through multiple government reviews into federal court and eventually got the ear of President Trump. His disdain for Amazon and Jeff Bezos is well-known, particularly because Bezos owns The Washington Post, whose news coverage upsets Trump.

IVES: I mean, I've covered tech stocks for 20 years plus. I've never seen a deal this contentious.

SELYUKH: Politics aside, a major reason why JEDI is so contentious is because it's the biggest cloud contract ever - potentially $10 billion and 10 years of government business. JEDI is the project to move America's military to the cloud, unifying the Pentagon's many disjointed networks and giving U.S. war fighters access to cutting-edge computing technology like artificial intelligence anywhere in the world - a desert or a submarine. And remember, at the start of JEDI bidding, Microsoft seemed an underdog. Its cloud business Azure is a distant second to Amazon Web Services.

IVES: A year ago, there was an 80% chance Amazon was going to win the deal. They were popping the champagne, getting ready to win, but Microsoft did a phenomenal job of working their way back from a technology perspective.

SELYUKH: As JEDI dragged on and on, Microsoft caught up - for example, investing in AI and ways for troops to access it in far-flung places.

ANDREW HUNTER: Even as big as Amazon is, Microsoft is no slouch, so if they want to bid aggressively, they are completely capable of doing that.

SELYUKH: Andrew Hunter is a former DOD executive who's now with the Center for Strategic and International Studies. We should note that both Amazon and Microsoft are among NPR's financial supporters.

HUNTER: I very much expect that Microsoft's bid was the lower cost bid.

SELYUKH: A former Pentagon official familiar with the JEDI ideal told NPR that Microsoft's proposal was really good and was simply better than Amazon's. Quote, "they hit the ball out of the park." Still, Amazon is widely expected to appeal the Pentagon's decision, and hanging over this will be the bad optics of the president's public contempt for Amazon. Franklin Turner is a government contracts lawyer at McCarter and English, and he says big military contracts like JEDI have a detailed paper trail. And despite politics, that's what would normally be at the heart of Amazon's appeal.

FRANKLIN TURNER: The only thing that matters is how the government itself conducted the evaluation.

SELYUKH: He says unless President Trump's influence shows up in the paper trail, his opinion of Amazon should be treated as background noise.

Alina Selyukh, NPR News, Washington. Transcript provided by NPR, Copyright NPR.