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Amazon continues to spar with Pentagon, Microsoft over ‘war cloud’ contract

President Donald Trump (left) Microsoft CEO Satya Nadella (center) and Amazon CEO Jeff Bezos (right). (AP)

Two of the Pacific Northwest’s largest local companies, Microsoft and Amazon, have been competing for a $10 billion contract with the Department of Defense.

It’s called the Joint Enterprise Defense Infrastructure (JEDI) contract.

“Basically, it is a $10 billion, 10-year project to build out the Pentagon’s war cloud, to bring cloud technology to the Department of Defense and really help our war fighters come in to the next century with next generation technology,” GeekWire reporter Monica Nickelsburg explained on KIRO Nights.

“That’s what it is on paper,” she added. “But what it represents is the potential for billions of dollars in additional government contracts and a real reputational win for whichever company can land it.”

Microsoft’s bid was selected as the winner, though many expected Amazon would come out on top.

“Amazon is really the industry leader in cloud computing,” Nickelsburg said. “They were the first ones to really come up with this concept, and so they had a big lead over their rivals. Microsoft is narrowing that gap and certainly has a robust offering of its own, but the way that it was designed to go to one big cloud provider with special government certifications did make it seem like Amazon was the most likely candidate.”

Amazon believes they lost the bid unfairly, and is now challenging the decision.

“In their initial legal challenge that they brought over this decision, Amazon said that President Trump’s personal animus toward the company and its founder Jeff Bezos improperly influenced the outcome of this contest,” Nickelsburg said. “They said, basically, that all of the public statements he’s given at campaign rallies and in interviews where he really criticized the company and went after them showed that he improperly influenced the process because he, ultimately, is at the top of this government structure. And it’s impossible for the decision makers at the Defense Department to tune out that rhetoric. That’s Amazon’s claim.”

Amazon claims bias from Trump after losing ‘war cloud’ contract to Microsoft

Since then, Amazon has gone to court and filed an objection with the Department of Defense.

“Once we got a little bit more into the weeds and [Amazon was] able to actually see aspects of Microsoft’s bid, they raised a lot of questions about whether or not that bid was actually compliant with the guidelines that the Defense Department first outlined at the outset of this contest,” Nickelsburg said. “Amazon claims that Microsoft’s bid should have been thrown out because it wasn’t compliant, and they’re both taking recourse on that in the litigation, and then also in a private appeal to the Defense Department.”

The reasons Amazon provides as to why they believe the bid from Microsoft should be tossed out are pretty technical, Nickelsburg admitted, but one complaint is that Microsoft offered pricing that should have been disqualifying. Amazon thinks if they had been allowed to structure their offering the same way, then they could have been more competitive.

For now, the contract is not in play.

“A federal judge ordered Microsoft and DOD not to work on the contract until this is hammered out, and it could be a fairly long process,” she said. “Right now, we’re in a 120-day waiting period because Microsoft and the Defense Department were given the opportunity to go back and review one aspect of the bids.”

Amazon wants the entire thing to be reviewed, not just one aspect. So after this 120-day period, which will end in the summer, the bid will go back to the litigation process. Nickelsburg said the further delays could extend the process for months, possibly even another year, with additional arbitration.

Meanwhile, executives at Amazon and Microsoft are jabbing at each other via blog posts.

“Amazon is willing to throw elbows a little bit more, but Microsoft in the past few years has tried to really paint itself as this rising above it, kind of more magnanimous player in the technology industry,” Nickelsburg said. “… But they’re not pulling any punches this time around. Microsoft’s Frank Shaw published a blog post that accused Amazon as ‘trying to find a way to avoid the consequences of its own bad business decisions.'”

“Amazon accused Microsoft of posturing,” Nickelsburg added. “And it’s really, really interesting to watch this play out publicly because it’s not really the style of either company to get really granular in their criticisms like this.”

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This back and forth feels like a departure for both companies, but especially for Microsoft to be critical and aggressive in this way, Nickelsburg noted.

“I think what it reflects is the stakes, is that this contract is very, very important to both companies, not just because of the $10 billion,” she said. “But, like I said, because of the message that it sends to the wider world, to other government agencies and other business customers about their cloud offerings.”

Listen to KIRO Nights weeknights from 7 – 10 p.m. on KIRO Radio, 97.3 FM. Subscribe to the podcast here.

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