Pentagon Cancels $10 Billion JEDI Contract with Microsoft, Will Restart Bid Process

A U.S. Navy information systems technician troubleshoots a server.
A U.S. Navy information systems technician troubleshoots a server in the data processing room of the USS America, November 25, 2017. (U.S. Navy/Mass Communication Specialist 3rd Class Vance Hand)

The Pentagon has canceled a multibillion-dollar, cloud-computing project with Microsoft after a legal dispute between the technology company and its main rival for the effort, Amazon.

The Defense Department says it will start over on the $10 billion Joint Enterprise Defense Infrastructure, or JEDI, cloud enterprise contract to streamline its systems over the next decade, officials said Tuesday.

It will consider Microsoft and Amazon for a replacement program, which the Pentagon considers as the “only Cloud Service Providers [CSPs] capable of meeting the department’s requirements," according to a statement.

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“The Department will immediately engage with industry and continue its market research to determine whether any other U.S.-based hyperscale CSPs can also meet the DoD’s requirements,” the statement said. The Associated Press reported the Pentagon’s latest endeavor will be known as Joint Warfighter Cloud Capability, and could consider vendors such as IBM, Google and Oracle.

The Pentagon is reliant on disparate computing systems that often have difficulty communicating with each other. The new cloud approach is meant to avoid siloed information, and allow large stores of data to be accessible and secure.

The contract was awarded to Microsoft in October 2019, beating out Amazon Web Services.

Amazon filed a lawsuit, protesting the decision with the U.S. Court of Federal Claims a month later.

The tech giants have been tied up in litigation ever since, delaying any progress the Pentagon wanted to make on modernizing its IT infrastructure.

Amazon has said that former President Donald Trump had undue influence on the contract, arguing his public bias against Amazon’s president and CEO, Jeff Bezos, could have swayed DoD’s final decision on the contract award. Bezos is the owner of the Washington Post, which was among the news outlets that covered a number of controversies in the Trump White House.

Last year, the Pentagon’s inspector general ruled the White House did not have any impact on the department’s final decision and reaffirmed its commitment to Microsoft. “The Department has completed its comprehensive re-evaluation of the JEDI Cloud proposals and determined that Microsoft's proposal continues to represent the best value to the government,” officials said in September.

But Deputy Defense Secretary Kathleen Hicks last month hinted the Pentagon was weighing new options surrounding JEDI, which also would have to be compatible with another burgeoning program known as Joint All-Domain Command and Control, or JADC2.

“The department must have an enterprise cloud solution approach in order to make the most of JADC2,” Hicks said during a DefenseOne tech summit event on June 21.

DoD on Tuesday said because of the ongoing delays, the current contract as it stands no longer meets its objectives “due to evolving requirements, increased cloud conversancy and industry advances.”

An Amazon Web Services spokesperson who contacted after this article's initial publication said the company applauded the Pentagon's decision to cancel its original contract with Microsoft.

"Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement," the spokesperson said in an email.

In a separate statement, Microsoft said it understands the Pentagon was put in a difficult spot given the legal battle, but it will pursue the new contract as an “even stronger competitor.”

“Because the security of the United States through the provision of critical technology upgrades is more important than any single contract, we respect and accept DoD’s decision to move forward on a different path to secure mission-critical technology,” the company said.

-- Editor's note: This story has been updated to include comments from Amazon.

-- Oriana Pawlyk can be reached at Follow her on Twitter at @Oriana0214.

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