Why Microsoft lost $10 bln JEDI contract?

File photo shows the Pentagon in Washington.   | Photo Credit: AP

In October 2019, the U.S. Defense Department (DoD) awarded a controversial contract to Microsoft. As part of the deal, the Windows-maker would set up large cloud-computing systems for the Pentagon. The Joint Enterprise Defense Infrastructure, or JEDI, project was worth about $10 billion to Microsoft over a decade.

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The deal was a huge setback for another top bidder - - Amazon Inc - - which disputed the award saying that the Pentagon unfairly evaluated its cloud service and Microsoft’s proposals. It also noted that the former U.S. president Donald Trump’s criticism of Amazon and its founder Jeff Bezos had influenced Pentagon’s decision. Trump had earlier criticised Bezos for coverage of his administration in the Washington Post, which is owned by Bezos.  

The award was fraught with conflict-of-interest allegations and legal challenges for the Pentagon and Microsoft. Some Pentagon officials raised concerns over contracting with just one single-source vendor for a military unit. In January, the Pentagon said in a statement that “regardless of the JEDI Cloud litigation outcome, the Department [DoD] continues to have an urgent, unmet requirement for enterprise-wide, commercial cloud service.”

Amazon claws back

Four months later, the ecommerce giant’s bid to claw back the JEDI deal came back to life after a U.S. Federal Claims Judge Patricia Campbell-Smith rejected motions by the DoD and Microsoft to dismiss Amazon’s challenge of the contract award.

A few days after Judge Campbell-Smith’s decision, the DoD said it would review the project. Some lawmakers and experts suggested the Pentagon follow a multi-vendor approach for large cloud-computing contract as it would reduce the risk of litigation from excluded firms.

To put matters to rest, the DoD said on July 6 it cancelled the JEDI project citing “evolving requirements, increased cloud conversancy, and industry advances”. It noted that it continues to have unmet needs in cloud computing and is looking to fill the gaps at scale.

Replacement arrives

In light of new initiatives at DoD, evolution of the cloud ecosystem, and changes in user requirements to leverage multiple cloud environments to execute mission, “our landscape has advanced and a new way-ahead is warranted to achieve dominance in both traditional and non-traditional warfighting domains," said John Sherman, acting DoD Chief Information Officer.

Sherman said that a Joint Warfighter Cloud Capability project will replace JEDI, and that both Amazon and Microsoft are “likely” to be awarded contracts. He also added that IBM, Oracle and Google could also qualify under the new project.

“We understand the DoD’s rationale, and we support them and every military member who needs the mission-critical 21st century technology,” Microsoft said in response to Pentagon’s announcement.

The JEDI project began with the USD 1 million contract award for Microsoft, meant as an initial step in a 10-year deal that could have reached $10 billion in value. The new project is a five-year programme, and estimated value could be “in the billions”.


(With inputs from PTI)

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Printable version | Oct 17, 2021 8:32:37 PM |

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