The Pentagon says it 'wishes to reconsider' the award to Microsoft of the $10 billion JEDI cloud computing contract (MSFT, AMZN)

Satya Nadella

The Pentagon on Thursday in a court filing said it "wishes to reconsider" its decision to award the $10 billion JEDI cloud computing contract to Microsoft.
Microsoft's win of the JEDI deal was seen as a huge upset: Amazon Web Services was viewed as the frontrunner throughout the entire bidding process — but lost out amid what Amazon says was interference from President Donald Trump, a frequent critic of Amazon and its CEO Jeff Bezos.
Amazon has challenged the decision in court, and a judge recently said the company would likely be able to prove the Pentagon made an error in the bidding process, and that the error likely affected the outcome.
The Department of Defense is asking the court to remand the case to "reconsider certain aspects of the challenged agency decision," but that it won't seek bids from any other companies.
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The Department of Defense on Thursday in a court filing said it "wishes to reconsider" its decision to award the $10 billion JEDI cloud computing contract to Microsoft, citing very specific challenges from Amazon on technical aspects of the Microsoft Azure cloud.

Amazon Web Services, the other frontrunner for the contract, has alleged in a lawsuit that the JEDI award process was unfairly biased amid President Donald Trump's frequent criticism of Amazon, and that Microsoft's Azure cloud didn't meet the technical requirements set forth by the Pentagon.

"We believe the Department of Defense made the correct decision when they awarded the contract," Microsoft spokesman Frank Shaw said. "However, we support their decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces."

"We are pleased that the DoD has acknowledged 'substantial and legitimate' issues that affected the JEDI award decision, and that corrective action is necessary," an AWS spokesperson said in a statement. "We look forward to complete, fair, and effective corrective action that fully insulates the re-evaluation from political influence and corrects the many issues affecting the initial flawed award."

In the filing, the Department of Defense says that its decision to seek a reconsideration of the deal comes "in response to the other technical challenges presented by AWS."

Specifically, the Pentagon is requesting the court remand the case to the Department of Defense for 120 days to "reconsider certain aspects of the challenged agency decision." The filing also indicates that the Department of Defense won't seek additional bids from any other companies, but that it will rather reassess Microsoft Azure versus Amazon Web Services in light of the specific technical points raised by Amazon.

In what appears to be a tacit admission that Amazon has a legal case, the Pentagon also said its motion is "in the interests of justice it will provide the agency with an opportunity to reconsider the award decision at issue in light of AWS's allegations."

The Pentagon also said it will propose that Microsoft and Amazon "file a joint status report" on whether the legal case should proceed.

Amazon has been fighting JEDI

The Pentagon awarded the $10 billion JEDI contract to Microsoft, in a stunning defeat for Amazon, whose Amazon Web Services — the dominant player in the cloud — was widely expected to win the project for building a massive platform that would store sensitive military and defense data. Amazon Web Services and Microsoft were selected as the two finalists in a contentious bidding process that initially included Oracle, IBM, and Google.

Amazon has challenged the decision in court. In a newly unsealed filing, Amazon claimed the bidding process was "incurably tainted" by political interference by President Donald Trump — evidenced, it says, by the Defense Department allegedly refusing to answer its questions.

Trump is a frequent critic of Amazon CEO Jeff Bezos and the Washington Post, which Bezos also owns.

A federal claims judge ordered work on the contract to stop while the case plays out. The judge also recently gave an indication that Amazon's challenge could be successful, writing in a that AWS can likely prove the Pentagon made an error in the evaluation process and that the error affected the outcome. Microsoft disagrees.

When the Department of Defense solicited bidders for JEDI, a requirement for one aspect of the proposal called "Price Scenario 6" was for online storage to be "highly accessible." Amazon alleges Microsoft's proposal did not meet that requirement.

Amazon alleges it should have been enough to eliminate Microsoft from the competition. The judge said Amazon is likely to be able to prove the DoD improperly evaluated Microsoft's proposal, and that Amazon's "chance of securing the award was not insubstantial absent the error."

"DoD does not intend to conduct discussions with offerors or to accept proposal revisions with respect to any aspect of the solicitation other than Price Scenario 6," the DoD said in the filing. "At this time, DoD does not anticipate clarifications being necessary on issues other than the offerors' online marketplace offerings."

Microsoft earlier this week told Business Insider its proposal does meet the requirement, and the DOD argues Amazon "seeks to elevate superficial labels over technical performance," and that if Microsoft's proposal didn't meet the requirement, neither did Amazon's.

Here's Microsoft's full statement from spokesperson Frank Shaw:

"We believe the Department of Defense made the correct decision when they awarded the contract. However, we support their decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces. Throughout this process, we've focused on listening to the needs of the DoD, delivering the best product, and making sure nothing we did delayed the procurement process. We are not going to change this approach now.

Over two years the DoD reviewed dozens of factors and sub factors and found Microsoft equal or superior to AWS on every factor. We remain confident that Microsoft's proposal was technologically superior, continues to offer the best value, and is the right choice for the DoD."

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