$10B contract on hold

Pentagon puts $10B contract on hold after Trump swipe at Amazon

By JACQUELINE FELDSCHER

The Pentagon is slamming the brakes on its mega-competition to award a $10 billion cloud computing contract after President Donald Trump suggested the Defense Department might have rigged the contest in favor of Amazon, a frequent target of his criticism.

Defense Secretary Mark Esper, who assumed his post July 23, is now reviewing accusations of unfairness in the fiercely fought competition, the Pentagon announced Thursday, marking the president's latest incursion into the arcane world of Defense Department contracting. Oracle has reportedly waged an aggressive lobbying campaign to push back on the competition, now pitting Amazon against Microsoft, including talking with members of Congress and preparing a graphic that made its way to the president's desk.

"Secretary Esper is committed to ensuring our warfighters have the best capabilities, including Artificial Intelligence, to remain the most lethal force in the world, while safeguarding taxpayer dollars," Elissa Smith, a Pentagon spokesperson, said in a statement Thursday. "Keeping his promise to Members of Congress and the American public, Secretary Esper is looking at the Joint Enterprise Defense Infrastructure (JEDI) program. No decision will be made on the program until he has completed his examination."

The latest scrape once again pits Trump against Amazon, whose founder and CEO Jeff Bezos also owns The Washington Post and has become a growing powerbroker in the D.C. region.

The review is expected to delay the award of the JEDI contract, which the Pentagon had hoped to award in August. JEDI would give the Pentagon a single, secure cloud computing system for data ranging from personnel statistics to intelligence information, instead of the more than 500 clouds used by different parts of the military today.

The contracting process has been plagued by controversy that pre-dates Trump's involvement, including allegations by rival bidders that the competition unfairly favored Amazon because of perceived conflicts of interest. Companies have also raised issues with the Pentagon's decision to choose just one company for the contract, citing a lack of competition and security concerns. Four companies — Oracle, IBM Corp., Amazon and Microsoft — initially bid for the winner-take-all contract. Amazon and Microsoft are the only two finalists.

Amazon and Microsoft both declined to comment.

IBM, one of the losing competitors, issued a statement Thursday reiterating that the company "has long raised serious concerns about the structure of the JEDI procurement," adding that its position remains that the "men and women in uniform would be best served by a multi-cloud strategy."

Competitors have also taken issue with two meetings former Defense Secretary Jim Mattis had with high-ranking Amazon employees. The first was in March 2017, when Mattis met with Teresa Carlson, the vice president of Amazon Web Services, at a dinner in London, according to The Wall Street Journal. Mattis also met with Bezos in August 2017.

In July, a judge ruled in favor of the Pentagon, finding that Oracle did not meet the contract requirements. Oracle had also filed a protest with the Government Accountability Office, which found that the Pentagon’s procurement process was fair.

Late last week, the Pentagon shot back at Oracle in a fiery statement following the court decision, calling the contractor’s allegations “the subject of poorly-informed and often manipulative speculation.”

Despite the court ruling that the competition is fair, Trump recently asked officials to review the contracting process after companies competing against Amazon lodged “tremendous complaints.”

"They are saying it wasn't competitively bid," Trump said at the White House on July 18. "Some of the greatest companies in the world are complaining about it ... 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 has been such complaining."

White House aides have shown Trump a briefing slide created by Oracle’s top lobbyist that attempts to illustrate how the Pentagon unfairly favored Amazon in the competition, CNN reported.

The chart, which includes photos of current and past defense officials linked by hearts and dollar signs, is likely an attempt to appeal to the president’s animosity toward Amazon owner Bezos. Trump regularly blasts both Bezos and Amazon on Twitter and also routinely criticizes the Post for its coverage of his administration.

The president even mocked Bezos in January after the CEO became the subject of a National Enquirer expose on his marital troubles. “So sorry to hear the news about Jeff Bozo being taken down by a competitor whose reporting, I understand, is far more accurate than the reporting in his lobbyist newspaper, the Amazon Washington Post,” Trump tweeted.

While it’s highly unusual for a president to get involved in the details of specific Pentagon acquisition projects, it’s becoming standard practice for Trump. He inserted himself into contract negotiations for a batch of F-35 fighter jets to try to lower the price. He also weighed in on the Air Force One contract with Boeing.

Some members of Congress have urged the president to get involved in the contracting process for JEDI to ensure there is enough competition and that the Pentagon is getting the best deal possible. A group of representatives sent a letter to Trump on July 23, asking him to wait to award the contract until the Pentagon had investigated any potential conflicts of interest.

“As commander-in-chief, we know that you want both the best technology for our warfighters and the best deal for taxpayers,” the letter reads.

Others, however, urged the Pentagon to move forward so it can fast-track certain technologies, such as artificial intelligence, that will help it compete with China. Four Republican lawmakers last month asked the president to let the program progress, Reuters reported.

“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 letter signed by Rep. Mac Thornberry (R-Texas), the ranking member of the House Armed Services Committee.

Some outside experts agree a delay would harm national security. Tom Spoehr, the director of the Heritage Foundation’s Center for National Defense, told POLITICO a delay in the program would “just perpetuate the status quo.”

“It’s hard to capture the shortcomings of the status quo because people are living under it right now,” said Spoehr, who recently co-authored a paper urging the president to let the acquisition continue. “You delay the savings involved with a single cloud.”