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Pentagon nixes $10 billion JEDI cloud contract that Microsoft and Amazon were fighting over

The coveted deal will be replaced by a multi-vendor contract, and major tech companies will have to duke it out all over again.

Pentagon nixes $10 billion JEDI cloud contract that Microsoft and Amazon were fighting over
[Photo: Mlucas/iStock]
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In a surprising turn of events, the Pentagon has snatched the carrot away from Amazon and Microsoft, which were competing for a lucrative cloud-computing contract with the U.S. Department of Defense.

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The project, called Joint Enterprise Defense Infrastructure—or JEDI—was hatched years ago to modernize the Pentagon’s patchwork of computer systems, and was expected to be worth as much as $10 billion over 10 years. In 2019, the contract was awarded to Microsoft in a victory over cloud industry leader Amazon Web Services. But the decision was dogged by legal squabbles, with Amazon founder Jeff Bezos claiming that president Donald Trump thwarted Amazon’s bid due to personal dislike, over negative coverage of his administration by the Bezos-owned newspaper, The Washington Post.

Amazon filed a lawsuit challenging the award, delaying the project for nearly two years as the Defense Department’s inspector general investigated whether there was presidential influence. In September 2020, the department ruled that the contract was awarded legitimately, but Amazon followed up with further litigation lasting until as recently as May 2021, when a court rejected a motion from Microsoft to dismiss Amazon’s allegations.

Microsoft had yet to start work on JEDI when it was canceled earlier today. In a statement, the Defense Department said that “due to evolving requirements, increased cloud conversancy, and industry advances,” the JEDI contract would not be able to meet its needs. It will launch a new multi-vendor project in its place, called Joint Warfighter Cloud Capability, and it will solicit proposals from major firms to battle it out again.

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Meanwhile, the department and its branches, including the U.S. Army, Navy, and Air Force, await the delivery of new technology.

The move represents a big win for Amazon, which now has fresh chances at a federal deal. However, it’s a big loss for Microsoft, which will have to argue its case all over again and will likely end up sharing the multi-vendor contract. In a blog post, Microsoft took aim at its competitor: “The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when a company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform,” it wrote.

“We understand and agree with the DoD’s decision,” an Amazon spokesperson told Fast Company when reached for comment. “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 . . . We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”

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As of midday Tuesday, Amazon’s stock is up 4.75% and Microsoft’s is down 0.44%.