Microsoft spikes to record high after nabbing $10B Pentagon contract

Remigio Civitarese
Marzo 27, 2020

Late on Friday, word broke that the US Department of Defense had chose to award the massive 10-year, $10bn Joint Enterprise Defense Initiative contract to Microsoft.

"Given the stakes - not only the loss of up to $10 billion, but potentially being excluded from a lucrative business opportunity for as long as a decade - there doesn't seem to be much downside in Amazon protesting the award", said Steven L. Schooner, a professor of government procurement law at George Washington University.

Microsoft has said it will continue to pursue government and military work, despite objections from some employees. The company hasn't said whether or not it will appeal DoD's decision but a source familiar with the situation told GeekWire that Amazon is "evaluating its options".

But to grasp the larger implications, it's important to first understand what JEDI is, exactly.

After Judge Eric Bruggink dismissed its case amidst the previously pending contract period, Oracle is now appealing the decision alleging that Oracle couldn't be harmed during the JEDI contract and that the contract's requirements didn't accurately follow acquisition regulations in the DoD's decision to make the JEDI cloud a single award.

"We look forward to expanding our longstanding partnership with DoD", Microsoft's U.S. Regulated Industries President Toni Townes-Whitley said in a statement, calling the evaluation process rigorous. The system must be fortified with enhanced cyber defenses and robust encryption.

AWS also spent much of the a year ago litigating the requirements in the Pentagon's JEDI solicitation as a defendant alongside the Defense Department against allegations of improper conflicts among DOD officials that weighted the procurement in the favor of AWS.

The DoD's proposal also asks the vendor to provide tactical edge devices "that can be used "for the full range of military operations". Those devices are described as "durable, ruggedized, and portable compute and storage" as well as "modular, rapidly deployable data centers".

However, Friday's announcement that the contract would go to Microsoft instead is prompting questions about the company's future.

In a statement, the company said it was "proud" to be the choice of the Department of Defence and "satisfy the urgent and critical needs of today's warfighters".

Amazon CEO Jeff Bezos has been also steadily increasing his presence and influence in the area in the years prior, buying the Washington Post in 2013 and buying a home in Washington, DC, in 2016.

For over a year, the acrimonious contract award process for the Joint Enterprise Defense Infrastructure (JEDI) contract set off a showdown among Amazon, Microsoft Corp., Oracle Corp. and IBM Corp. and involved conflict of interest allegations, legal challenges and intense lobbying.

Nevertheless, on the heels of the president's comments, Defense Secretary Mark Esper said he meant to review the contract.

In a new book, the speech writer for former Defense Secretary Jim Mattis wrote that Trump called Mattis in the summer of 2018, and directed him to "screw Amazon" out of a chance to bid on the contract, according to the website Task and objective.

Schooner noted that AWS could work the clock in its favor to extend the dispute deeper into the election cycle, if it's taking the approach that politics influenced the decision.

Amazon Web Services was viewed as a likely frontrunner for the contract.

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