Pentagon cancels JEDI Cloud contract after years of contentious litigation

Defense officials said Tuesday they were cancelling the multibillion dollar sole-source contract. In its place, they will launch a new acquisition process that'...

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The long, bitterly contentious saga over what was once envisioned to be one of the largest information technology procurements in the federal government’s history finally came to an end on Tuesday, as Defense officials said they would no longer pursue the JEDI Cloud contract.

In a statement, Defense officials said they had begun procedures to cancel the solicitation entirely, and to terminate the contested award to Microsoft.

“With the shifting technology environment, it has become clear that the JEDI Cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD’s capability gaps,” officials said.

In place of JEDI, DoD said it would pursue a new contract, called Joint Warfighter Cloud Capability (JWCC). That procurement – unlike JEDI – will be an indefinite-delivery/indefinite-quantity award that is expected to go to multiple vendors.

However, the department indicated it currently believes the only eligible bidders will be Microsoft and Amazon Web Services. That determination is subject to change, officials said, but as of now, is justified by the market research they conducted during the JEDI procurement, which found that they were the only two cloud providers capable of meeting the department’s needs. However, neither company is automatically guaranteed to win a spot on the new contract, the department said.

The Pentagon has not yet determined a total ceiling value for the new contract, but a fact sheet distributed to reporters said the new JWCC ID/IQ would be for up to five years, including a three-year base period and two one-year option periods. JEDI was originally awarded to Microsoft for up to 10 years, with a ceiling of $10 billion.

But even if the JWCC procurement goes off without a hitch, it’s not expected to begin delivering cloud services to the field for quite some time. DoD currently expects to issue a solicitation for the new contract in October, but the direct awards to Microsoft, AWS and potentially other companies won’t be made until next April at the earliest, John Sherman, the department’s acting chief information officer told reporters on a teleconference.

Sherman said he planned to call executives at all five U.S.-based “hyperscale” cloud computing companies on Tuesday to begin the process of determining whether DoD might extend JWCC bid invitations to other firms.

“We’re going to engage all of them directly, including Google, Oracle and IBM,” he said. “We want to fully hear their companies’ capabilities, and we’re going to be asking for artifacts and engagement to ensure that if they’re able to meet the level we need, that we get all that information and keep that door open through October. We can never control for every factor, but our openness is going to be critical.”

Despite the fact that it won’t begin delivering services until 2022, JWCC is only intended to serve as a “bridge” capability. Although it is likely to be worth several billion dollars in its own right, Sherman said it is mainly meant to fill a gap between now and 2025, when the department expects to launch yet another enterprise cloud procurement — this one with full and open competition.

“We have various types of cloud services, but nothing to the extent and reach of the enterprise capability we’re seeking to acquire,” Sherman said. “This will truly be from the headquarters to the tactical edge, at all three security levels, at scale. Nothing right now does what is envisioned in JWCC, particular for things like [Joint-all Domain Command and Control] and [the AI and Data Acceleration initiative]. The combatant commands, while not the only consumer, are our primary driver — to have something that reaches all the way across the enterprise. That’s why we need this.”

Defense officials said the cancellation of the JEDI award would be structured as a “termination for the government’s convenience.” So far, Microsoft has only been paid $1 million under the contract, but DoD will need to enter into negotiations with the company so that it can recover any of the costs it incurred in preparation to start delivering cloud services under the now-canceled contract.

In a statement, the company said it was sympathetic to the department’s decision to put an end to the protracted litigation.

“The decision today doesn’t change the fact that not once, but twice, after careful review by professional procurement staff, the DoD decided that Microsoft and our technology best met their needs,” Toni Townes-Whitley, Microsoft’s president for regulated industries wrote in a blog post. “Even though we couldn’t work directly with the DoD on JEDI while the protest was in the courts, the investments we’ve continued to make in support of the contract requirements ensure that Microsoft will be an even stronger competitor for future contracts.”

Amazon, meanwhile, said it agreed with DoD’s decision to cancel JEDI and start over.

“Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement,” Drew Herdener, the company’s vice president for communications said in an emailed statement. “We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”

Tuesday’s decision, though long in coming, was not altogether unexpected. As early as February, the department told Congress that it would have to “reassess” its enterprise cloud strategy if a federal court did not dismiss a key portion of Amazon’s lawsuit challenging the JEDI award. That part of Amazon’s case, which alleged improper political influence by Trump administration officials, would lead to protracted litigation and unacceptable delays, the department said at the time.

But in April, the Court of Federal Claims left Amazon’s lawsuit fully intact. And in court documents unsealed on Friday, Amazon attorneys alleged DoD was still improperly withholding myriad pieces of evidence from the procurement’s administrative record, including documents that the company believes would show evidence of impermissible anti-Amazon bias in DoD’s award to Microsoft.

And a new cloud strategy document, released last month, also appeared to foretell Tuesday’s decision. The strategy, which laid out DoD’s objectives for delivering cloud services to warfighters overseas, made no mention of JEDI or a single enterprise cloud, but did envision multiple commercial clouds working in tandem, including in tactical environments.

Tuesday’s announcement brings an end to a procurement process that’s been intensely contested almost since its conception in September 2017. The latest Amazon lawsuit has been underway since November 2019, and prompted a preliminary injunction when the Court of Federal Claims found Amazon was likely to win the case on the merits.

That decision prompted DoD to reevaluate the contract, but the department ultimately re-awarded the contract to Microsoft. Amazon maintains the second decision was also the product of bad faith and bias.

Before that, Oracle unsuccessfully sought to halt the procurement in a pre-award protest. The Court of Federal Claims and the Court of Appeals for the Federal Circuit both sided against the company, but it is still pursuing its case before the Supreme Court.

Even though the JEDI contract never ultimately delivered any capabilities, Sherman said the department does not regret structuring it as a single-award contract. That approach, he said, was the right decision considering the state of the cloud marketplace in 2018, when the initial RFP was issued.

“A couple years ago, or even a year or so ago, maybe it would have met our needs. But here in July of 2021, we determined that a single cloud, single award, does not meet our needs now and going forward. Even if JEDI had popped out of litigation last week, we would still need the new approach embodied in JWCC.”


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