The US defense department (DoD) has canceled its $10bn Jedi cloud-computing project, pulling the Trump-era award to Microsoft Corp and announcing a new contract that pits the big software firm against rival Amazon.com.
The contract awarded by the Pentagon in late 2019 has been on hold after Amazon filed a lawsuit challenging the decision under then president Donald Trump. Trump publicly derided Amazon’s then CEO, Jeff Bezos, and repeatedly criticized the company.
Amazon said in 2019 the Pentagon decision was full of “egregious errors”, which it suggested were a result of “improper pressure from Trump”. The company cited a 2019 book that reported Trump had directed the defense department to “screw Amazon” out of the Jedi contract.
As recently as September the defense department re-evaluated the contract proposals and said Microsoft’s submission was the best.
John Sherman, acting chief information officer for the defense department, said he expects both Microsoft and Amazon will get cloud contracts. He said the need was urgent. “I’ve got to get this now – as soon as possible – starting hopefully as soon as April,” Sherman said.
Under the new Biden administration, the Pentagon initially said Amazon and Microsoft were the only companies that can meet the department’s requirements but noted later in a press conference that they were reaching out to other cloud providers in the next three months if they also meet the government’s standards.
Other top cloud companies include Oracle Corp, Alphabet Inc’s Google and IBM Corp.
Microsoft shares were down 0.5%, while Amazon traded up more than 4% and hit a record high after the news.
Microsoft said in a statement the company was confident it will “continue to be successful as the DoD selects partners for new work”. Microsoft could submit a termination bid to recover costs of the scrapped project, Sherman said. Amazon did not immediately comment.
The now-cancelled Joint Enterprise Defense Infrastructure Cloud (Jedi) contract was budgeted for as much as $10bn and was part of a broader digital modernization of the Pentagon aimed at making it more technologically agile.
“We don’t have an estimate yet, but I wouldn’t latch on to the $10bn figure,” Sherman said.
“This plan involves a multi-cloud procurement by a full and open competition perhaps as soon as early 2025. For the near term, however, we are confident that a direct award path is absolutely required and appropriate to enable us to bring urgently needed enterprise cloud capabilities to the force,” Sherman said.