Microsoft wins DoD’s controversial JEDI Cloud contract

The highly-anticipated cloud computing contract will be worth more than $200 million in its first two years, Defense officials said. But the massive award still...

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The Defense Department said Friday evening that it has chosen Microsoft as the winner of its up-to-$10 billion JEDI Cloud contract. The procurement is one of the largest IT contracts in the federal government’s history, and has been the subject of intense controversy since its inception.

Defense officials chose the Redmond, Washington, technology giant from a field of two remaining bidders. IBM and Oracle had already been excluded from the competition for failing to meet the contract’s initial gate criteria.

Amazon Web Services, the other contender still standing as of this week, was widely seen as the favorite to win the 10-year award, and DoD had been accused by Oracle and others of improperly structuring the solicitation process in ways that favored AWS.

In defending its decision to make JEDI a winner-take-all contract rather than one that went to multiple awardees, DoD has frequently pushed back against characterizations of JEDI as a $10 billion opportunity. But in announcing the award on Friday, the department also released spending projections that nonetheless suggest it will be worth a substantial sum: It estimated the contract would generate $210 million worth of task orders in its first two years.

However, Pentagon officials were also quick to point out that JEDI is not the DoD’s only contracting vehicle for cloud computing services.

“Over the last two years the Department of Defense has awarded more than $11 billion across 10 separate cloud contracts,” the department said in a statement. “As we continue to execute the DoD Cloud Strategy, additional contracts are planned for both cloud services and complementary migration and integration solutions necessary to achieve effective cloud adoption.”

JEDI has been in the planning stages since the fall of 2017, when the department first convened a steering committee to begin sketching out how DoD would take an enterprise approach to cloud computing adoption.

And Friday’s contract award marks a major milestone in the JEDI saga, but is by no means the end of the process. After DoD debriefs AWS on why it wasn’t selected for the contract, the company will have up to 10 days to file a post-award bid protest if it chooses to.

Meanwhile, Oracle has been fighting a separate legal battle alleging that it was improperly excluded from the final selection process and that the entire procurement process was tainted by improper conflicts of interest and violations of procurement law. Both the Government Accountability Office and the Court of Federal Claims have ruled against Oracle’s attempts to force DoD to restart or restructure the contract, but an appeal is still pending before the Court of Federal Claims for the Federal Circuit.

And the Defense Department’s inspector general is conducting its own review of JEDI matters. Officials in that office have not disclosed the exact scope of their investigation, but it is believed to concern ethical missteps by multiple Defense officials involved in the JEDI contracting process.

In a separate statement Friday, the IG said its review so far has not found any evidence that would prevent DoD from making the contract award.

“The DoD OIG’s multidisciplinary team of auditors, investigators, and attorneys are close to completing the review of the JEDI cloud acquisition.  The DoD has consulted the DoD OIG, and we have shared our views on the JEDI acquisition and provided information on the status of our review,” according to the statement. “We hope to have a completed report of our findings by the end of November, which we intend to release publicly, to the maximum extent possible.”

DoD itself has acknowledged that there were some ethical problems, but officials have maintained they did not affect the outcome of the procurement.

Chandra Brooks, the JEDI program’s contracting officer, first referred the matter to the IG in April after conducting her own investigation. She found that Deap Ubhi and Victor Gavin, two former Pentagon employees who later took positions at AWS, had violated a section of the Federal Acquisition Regulation that requires officials to avoid conflicts of interest.

The internal investigation also found that Ubhi and Gavin may have violated laws that bar officials from gaining personal financial interest from their government positions; Brooks referred those matters to the IG.

If Friday’s award is able to withstand protests and legal challenges over the long haul, it would  further cement Microsoft’s position as a dominant cloud provider for the military.

In August, DoD and the General Services Administration awarded a $7.6 billion contract to General Dynamics Information Technology for another cloud project, Defense Enterprise Office Solutions (DEOS).

That contract, for email, collaboration and other office services, will rely on Microsoft’s Office 365 cloud platform, and a large proportion of its outlays will be passed from GDIT to Microsoft in the form of licensing fees. It too is the subject of a bid protest by Perspecta, a GDIT competitor.

AWS, however, already has a very large cloud business with DoD customers via smaller contracts with individual military services and task orders those military components can place via other agencies, such as GSA.

Just two months ago, DoD moved one of the largest business and logistics systems in the world — Navy ERP — to Amazon’s GovCloud. That action alone, at least so far, was the largest cloud migration in the history of the Defense Department.

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