Pentagon axes multibillion-dollar JEDI cloud-computing contract

The Pentagon on Tuesday axed a $10 billion cloud computing project after it became sidelined by a legal battle involving Amazon and Microsoft.

Both companies, however, will likely win deals from a new, multibillion-dollar, multivendor effort to create the Defense Department’s cloud capability.

“Today, the Department of Defense (DoD) canceled the Joint Enterprise Defense Infrastructure (JEDI) Cloud solicitation and initiated contract termination procedures,” the department said in a statement.

The Pentagon cited “evolving requirements, increased cloud conversancy, and industry advances,” as the reason for the termination, saying JEDI “no longer meets its needs.”

“JEDI, conceived with noble intent and a baseline now several years old, was developed at a time when the department’s needs were different and our cloud conversancy less mature,” Pentagon acting chief information officer John Sherman told reporters on a media call.

“In light of new initiatives along with changes in DOD and user requirements to leverage multiple cloud environments for mission needs, our landscape has evolved and a new way ahead is warranted,” he said.

Amazon for more than a year has contested the $10 billion contract awarded to Microsoft in October 2019.

The Pentagon has continually stressed its need for an enterprise cloud — meant to modernize its IT operations and house nearly all DOD systems except the most secretive — to connect war fighters with consolidated data that is currently stored in servers throughout military installations across the globe.

But when Microsoft was awarded the deal, Amazon, considered the front-runner in the competition, filed a lawsuit alleging the Trump administration interfered in the process. The company accused the administration of “improper influence,” claiming it unfairly steered the contract away from Amazon Web Services due to former President Trump’s frequent criticism of the company and its CEO, Jeff Bezos.

The Trump administration denied those charges, and the Pentagon maintained that Microsoft was simply best-equipped to create the DOD’s cloud infrastructure.

Microsoft and the Pentagon attempted to get work underway on the contract, but the U.S. Court of Federal Claims put a pause on the activity last year.

Then in April, the court decided not to dismiss a protest lawsuit filed by Amazon, and the DOD then announced it would review the project.

The Pentagon will now look to a new cloud effort, the Joint Warfighter Cloud Capability (JWCC), a multicloud/multivendor contract launched Tuesday. 

“The JWCC’s multicloud environment will serve our future in a way that JEDI’s single award, single cloud structures simply cannot do,” Sherman said.

But defense officials will only solicit proposals from Microsoft and Amazon Web Services, “as available market research indicates that these two vendors are the only Cloud Service Providers (CSPs) capable of meeting the Department’s requirements,” according to the Tuesday statement.

The Pentagon included the caveat that “over the next roughly three months” it will conduct additional market research and speak with all five U.S. companies that could provide cloud service on such a massive scale, known as “hyperscale providers,” to determine whether any of them could also meet the requirements, Sherman said.

If so, then “we will extend solicitations to them as well,” he said, adding that later Tuesday he will personally reach out to leaders at the five companies: Microsoft, Amazon, Google, Oracle and IBM.

In a statement posted to Microsoft’s official blog, the company said it has accepted the Pentagon’s decision to cancel.

“The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. … Because the security of the United States through the provision of critical technology upgrades is more important that any single contract, we respect and accept DoD’s decision to move forward on a different path to secure mission-critical technology,” wrote Toni Townes-Whitley, president of U.S. regulated industries at the company.

Microsoft also singled out Amazon in calling for changes on to how the Pentagon handles companies protesting contract awards, noting that “when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform.”

Townes-Whitley said the Pentagon’s decision “doesn’t change the fact that not once, but twice, after careful review by professional procurement staff, the DoD decided that Microsoft and our technology best met their needs. It doesn’t change the DoD Inspector General’s finding that there was no evidence of interference in the procurement process. And it doesn’t change the fact that the DoD and other federal agencies – indeed, large enterprises worldwide — select Microsoft to support their cloud computing and digital transformation needs on a regular basis.”

Amazon, meanwhile, said it understands and agrees with the DOD decision to cancel JEDI but again claimed the department awarded the contract “not based on the merits of the proposals” but as a “result of outside influence that has no place in government procurement.”

“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. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions,” an Amazon Web Services spokesperson said in a statement to The Hill.

Asked how much the litigation played a part in the shift to JWCC, Sherman said it was the technology and landscape changes in the time since the JEDI contract was first awarded that made the Pentagon reconsider its needs.

“The mission needs have been our primary driver on this,” he said. “In so far as the litigation is concerned, we’ve been at this for a few years now.”

The cost of the new contract “will be fleshed out in the coming months,” and the Pentagon expects the total value to be “in the billions of dollars” and last up to five years and act as a “bridge to our longer term approach,” Sherman said.

He noted that the Pentagon plans to send out solicitations to companies in mid-October, award direct contracts as soon as April 2022 and is aiming for a “full and open competition” for early 2025.

— Updated at 3:37 p.m.