Pentagon prevails in legal challenge to its JEDI Cloud contract

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A federal judge on Friday signaled the end of months of legal wrangling over the Pentagon’s controversial JEDI Cloud contract by ruling in favor of the Defense Department and rejecting the central claims in a bid protest lawsuit filed by Oracle America.

In a brief two-page ruling, Judge Eric G. Bruggink granted DoD’s motion for judgment, clearing the way for the department’s planned award of the up-to-$10 billion contract to either Microsoft or Amazon Web Services next month.

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Oracle and another bidder, IBM, had already been excluded from the competition because of “gate criteria” DoD established as part of the JEDI acquisition process. As part of its suit at the Court of Federal Claims, Oracle had challenged the rationality of the gates, arguing, in part, that they were based on arbitrary measures of various cloud providers’ service offerings.

But Bruggink found the department was within its rights to establish the gates, and Oracle was properly excluded from the rest of the bidding process.

“Because the court finds that Gate Criteria 1.2 is enforceable, and Oracle concedes that it could not meet that criteria at the time of proposal submission, we conclude that it cannot demonstrate prejudice as a result of other possible errors in the procurement process,” he wrote.

Likewise, the judge appeared to reject Oracle’s multiple claims that the JEDI acquisition was fatally tainted by alleged conflicts of interest involving three former DoD employees with connections to AWS.

“The contracting officer’s findings that an organizational conflict of interest does not exist and that individual conflicts of interest did not impact the procurement were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” he wrote.

The court plans to explain its reasoning behind the decision in more detail in a forthcoming opinion, Bruggink wrote.

The Defense Department, which plans to issue an award for the JEDI contract in late August, praised the decision.

“This reaffirms the DoD’s position: the JEDI Cloud procurement process has been conducted as a fair, full and open competition, which the contracting officer and her team executed in compliance with the law,” Elissa Smith, a Pentagon spokeswoman said in a statement. “DOD has an urgent need to get these critical capabilities in place to support the warfighter and we have multiple military services and combatant commands waiting on the availability of JEDI. Our focus continues to be on finalizing the award decision.”

Oracle officials did not immediately answer questions about the company’s next legal steps. But sources have previously told Federal News Network that the firm was likely to take the case to the U.S. Court of Appeals for the Federal Circuit if it suffered a loss at the Court of Federal Claims.

Amazon, whose attorneys had intervened in the lawsuit to defend the contract structure and push back against Oracle’s claims of conflict of interest, said in a statement that the ruling vindicated its position that the bid protest was “meritless.”

“AWS, along with our partner community, stands ready to support and serve what’s most important – the DoD’s mission of protecting the security of our country,” the company said. “The DoD deserves access to the best technology in the world and we are unwavering in our support to their mission.

Although the court ruling represents a major victory for DoD’s JEDI plans in a legal sense, the contract remains highly controversial in a political one. Multiple members of Congress have weighed in in recent weeks with requests that senior Defense and Trump Administration officials delay the contract award or amend the contracting strategy.

In a letter to National Security Advisor John Bolton on Thursday, Sen. Marco Rubio (R-Fla.) asked that he order the Pentagon to delay the contract award “to ensure a fair and open process.”

“This type of fiscal and time commitment should demand a procurement steeped in competition and conducted without bias toward any one vendor. However, DoD has used arbitrary criteria and standards for bidders,” Rubio wrote. “Even though 200 companies were initially interested, DoD instituted such a restrictive criteria that only four companies bid on JEDI. DoD then further used the arbitrary criteria to eliminate two of the bidders, IBM and Oracle, leaving only Amazon and Microsoft. And in the end, DoD plans to award this massive contract to a single vendor, even though multiple vendors would ensure continuing price competition and access to the latest innovations. ”

Sen. Ron Johnson (R-Wisc.) made a similar request two weeks earlier, citing a Federal News Network report which disclosed that the FBI and the DoD inspector general had begin inquiries on potential improprieties in the acquisition process.

“Given the significant amount of taxpayer dollars associated with this particular contract, I
respectfully request DoD to delay awarding this contract to any company until DoD OIG
completes its investigation,” he wrote in a letter to acting Defense Secretary Mark Esper. “If the investigation confirms the allegations of impropriety after the contract has already been awarded, it could significantly erode public trust in the fairness of the government procurement process and, if appropriate, may be very difficult to unwind a project
that is already underway.”

Friday’s ruling was the second unsuccessful challenge Oracle has filed to the JEDI procurement. In November, the Government Accountability Office denied a pre-award protest the company filed, finding that DoD was within its rights to set the contract requirements however it saw fit, particularly in light of JEDI’s national security implications.

In their arguments to the court, the government and AWS had argued that most of Oracle’s legal claims were moot because the company could not pass the gate criteria DoD had set out in the initial request for proposals. That fact, they said, was enough to show that Oracle could not have won the contract.

“Oracle’s odds of being awarded the JEDI contract are slim, even if the gate criteria it challenges were removed,” Justice Department attorneys wrote in a brief to the court last month. “Contrary to the suggestion in its supplemental brief, Oracle is not in the same class as Microsoft and AWS when it comes to providing commercial IaaS and PaaS cloud services on a broad scale.”

But Oracle had argued the key “gate” in question was irrational.  It specified the amount of storage and bandwidth each cloud competitor needed to be providing to commercial customers as of January and February 2018, so the department could be sure that JEDI would not make up more than half of the winner’s cloud business.

The company contended that if the size of its commercial customer base was measured just one month later — March rather than February — it would have cleared the first gate.

 

This story will be updated.

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