Judge Puts Brakes On Pentagon's Cloud Contract -- WSJ

Date : 02/14/2020 @ 8:02AM
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Judge Puts Brakes On Pentagon's Cloud Contract -- WSJ

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By John D. McKinnon 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 14, 2020).

WASHINGTON -- In a win for Amazon.com Inc., a federal judge ordered the Pentagon on Thursday to halt work on the massive JEDI cloud-computing contract awarded to rival Microsoft Corp.

Judge Patricia Campbell-Smith of the U.S. Court of Federal Claims issued a preliminary injunction to block the Pentagon from proceeding in response to a lawsuit from Amazon contending improper influence from President Trump.

Mr. Trump, a Republican, has blamed Amazon founder Jeff Bezos for unfavorable coverage of his administration in the Washington Post, which Mr. Bezos bought in 2013. The Post says its editorial decisions are independent.

Amazon, which recently sought to depose the president, said in its motion that Mr. Trump "made crystal clear -- both to the public at large, and by clear implication to senior [Pentagon] officials (including his political appointees) -- that he did not want his administration to award the contract to [Amazon]."

In a statement, the Pentagon said that the ruling further slows the enterprise cloud project, which has been under development since 2017.

"We are disappointed in today's ruling and believe the actions taken in this litigation have unnecessarily delayed implementing DoD's modernization strategy and deprived our warfighters of a set of capabilities they urgently need," the Pentagon said. "However, we are confident in our award of the JEDI cloud contract to Microsoft and remain focused on getting this critical capability into the hands of our warfighters as quickly and efficiently as possible."

Amazon's suit -- and Thursday's ruling -- could add to the questions being raised by critics about Mr. Trump's willingness to weigh in on government business.

In a recent statement, Amazon said that "President Trump has repeatedly demonstrated his willingness to use his position as president and commander in chief to interfere with government functions -- including federal procurements -- to advance his personal agenda...The question is whether the president of the United States should be allowed to use the budget of the DoD to pursue his own personal and political ends."

The president called last summer for an investigation of the Pentagon contract, before the award.

"I'm getting tremendous complaints about the contract with the Pentagon and Amazon," Mr. Trump said at the time. "I will be asking them to look very closely to see what's going on."

Mr. Trump also issued tweets in which he complained about the process. The White House didn't respond to a request to comment Thursday.

Amazon's complaint also cites a passage of a recent book by a former speechwriter for then-Defense Secretary Jim Mattis.

Author Guy Snodgrass wrote in the book, "Holding the Line," that Mr. Trump directed Mr. Mattis to "screw Amazon" out of the JEDI contract by blocking its chance to bid on the deal. "Mattis demurred," he said.

Steven Schooner, a George Washington University law professor, said the judge's ruling on Thursday is unusual and could bode well for Amazon's prospects.

"What is particularly significant is that...the court is signaling that it is more likely than not that the plaintiff -- here, Amazon -- has pled a case in which it appears to be entitled to a remedy and may ultimately prevail on the merits," Mr. Schooner said.

Amazon's cloud unit, AWS, was long considered the favorite to win the Joint Enterprise Defense Infrastructure, or JEDI, contract, which is valued at as much as $10 billion over the next decade.

The company's bid was clouded by conflict-of-interest allegations, however, which are still under investigation by the Pentagon's inspector general. Amazon filed suit to block the contract award in December.

The Defense Department recently filed a motion to dismiss several of Amazon's claims concerning Mr. Trump's alleged interference, contending that the company had waited too long to raise them.

Amazon didn't respond to a request to comment on Thursday.

In a statement, Microsoft said it was confident it would ultimately prevail and retain the contract.

"While we are disappointed with the additional delay we believe that we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require," Microsoft spokesman Frank X. Shaw said.

Development of the JEDI contract began in earnest in 2017 following a visit to Seattle and Silicon Valley by Mr. Mattis, who met with Mr. Bezos among others on the trip. As the JEDI proposal took shape, some potential bidders for the contract, including Oracle Corp., began to complain the contract was tailored specifically for Amazon.

Oracle executives and others also began digging into financial and other connections between Amazon and several then-Pentagon officials who had some involvement in various aspects of the deal.

Defense officials ultimately sided with Amazon, concluding the ties didn't affect the integrity of the procurement.

But the Pentagon ultimately ruled that Microsoft was more qualified for the job. Amazon eventually filed suit to block the contract in the U.S. Court of Federal Claims.

Joshua Schwartz, a co-director of George Washington University's government procurement law program, said Amazon still faces an uphill climb in its efforts to depose Mr. Trump.

But he said Amazon's complaint of undue political influence could lead the court to pay more attention to the company's separate allegations that the Pentagon unfairly changed some of its criteria for deciding the JEDI award.

Mr. Schwartz said the department might have been wiser to start the process over instead.

While companies often contest contract awards by the Pentagon and other government departments, it is rare that they then sue or secure a reversal of the initial decision, according to two lawyers not involved in this case.

A 2018 study by Rand Corp, a think tank, said courts had changed the previous decision in less than 10% of previous contested awards.

The last big case involving the Pentagon saw Elon Musk's SpaceX unsuccessfully challenge a longstanding contract award to a joint venture between Boeing Co. and Lockheed Martin Corp. for military space rocket launches.

Doug Cameron contributed to this article.

Write to John D. McKinnon at john.mckinnon@wsj.com

 

(END) Dow Jones Newswires

February 14, 2020 02:47 ET (07:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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