Blue Origin hires advisory firm linked to messy JEDI contract process

After losing out on a multibillion dollar NASA contract for a lunar lander to SpaceX in April, Blue Origin has hired a high-profile strategic advisory firm named Pallas Advisors. These high-profile advisors have helped the company as it has gone on to protest the contract loss and eventually sue the space agency.

The founding partners of the Washington, DC-based advisory firm, Sally Donnelly and Tony DeMartino, are well-known to Jeff Bezos, the founder of both Amazon and Blue Origin. Both Donnelly and DeMartino previously worked as consultants to Amazon before taking jobs at the Department of Defense in 2017, during the Trump administration. There, they gained some unwelcome public notoriety.

At the Pentagon, Donnelly served as a senior advisor to Secretary of Defense Jim Mattis, and DeMartino worked as his deputy chief of staff. During their time in government service, both Donnelly and DeMartino became embroiled in the controversy surrounding the US Department of Defense award to Microsoft for the $10 billion Joint Enterprise Defense Infrastructure, or JEDI contract, for military cloud computing services.

The short version of the story is this: competitors in the JEDI contract fight say the pair left Amazon consultancy jobs to work for the Department of Defense in 2017, where they were in position to influence the development of the contract bidding process in favor of Amazon. Donnelly and DeMartino have denied that they acted improperly, and an Inspector General’s report largely cleared them. However, the controversy has recently gained new life as Congress investigates the matter.

The longer story

The alleged role played by Donnelly and DeMartino in the JEDI contract first came to light in a “dossier” that circulated in Washington, DC, as the bid process for the coveted cloud computing contract heated up. The unverified dossier, which was reported upon in depth by Bloomberg, asserts that Donnelly and DeMartino rigged the JEDI contract in favor of Amazon.

Some facts are not in dispute. While at Donnelly’s firm in 2016, SBD Advisors, Donnelly and DeMartino worked as paid consultants to Amazon. In that capacity, Bloomberg reports, she and DeMartino crafted messaging and marketing strategies to help Amazon win US military cloud computing contracts.

Donnelly left her consulting firm to work for Mattis from January 2017 to February 2018. She was widely considered one of his most trusted advisors. Midway through her time at the Pentagon, Mattis even visited Bezos at Amazon’s headquarters in Seattle where he was pitched on the company’s cloud computing services.

In late 2017, the Pentagon said it planned to issue a massive cloud computing contract to a single company. Moreover, Bloomberg reports, the contract contained technical capabilities that only Amazon had achieved. Shortly before the Department of Defense opened the bidding process for the contract, Donnelly and DeMartino left government service and went on to found Pallas Advisors.

Based upon those facts, Vanity Fair summarized the affair by saying the JEDI contract process had been gift-wrapped for Amazon:

The current call for bids was put together only after Defense Secretary James Mattis hired a D.C. lobbyist who had previously consulted for Amazon. The lobbyist, Sally Donnelly, served as a top advisor to Mattis while the details of JEDI were being hammered out. During her tenure, Mattis flew to Seattle to tour Amazon’s headquarters and meet with Jeff Bezos. Then, as the cloud-computing contract was being finalized, Donnelly’s former lobbying firm, SBD Advisors, was bought by an investment fund with ties to Amazon’s cloud-computing unit.

The bidding process gained further public recognition in August 2019 when President Trump got involved. Shortly before the JEDI contract was to be awarded, Trump asked his new defense secretary, Mark Esper, to investigate complaints of favoritism toward Amazon. Two months later the Pentagon awarded the contract to Microsoft.

In response, Amazon sued in the US Court of Federal Claims to challenge the award. In their complaint, lawyers for Bezos argued that Trump “used his power to ‘screw Amazon’ out of the JEDI Contract as part of his highly public personal vendetta against Mr. Bezos, Amazon and the Washington Post.” Additional legal wrangling continued for more than a year before the Microsoft contract was canceled in 2021.

The matter has not entirely been put to rest, however. Although a Department of Defense Inspector General’s report cleared Donnelly and DeMartino of wrongdoing, some politicians have said their actions were glossed over. Earlier this year, two US legislators wrote to US Attorney General Merrick Garland urging him to investigate “the potentially corrupt and anticompetitive conduct by Amazon Web Services” in the JEDI contracting process. Donnelly’s activities are cited frequently in the letter, particularly undisclosed financial transactions.

“We are aware that a senior DoD official, Sally Donnelly, who previously performed consulting work for Amazon’s cloud computing business, received more than $1 million in undisclosed payments while serving at the DoD from another Amazon consultant, Andre Pienaar, which she failed to disclose until after she resigned her position at DoD,” the letter states.

Blue Origin seeks help

The Pallas Advisors website says the firm specializes “in national security, defense, and innovation,” and according to sources it has a solid reputation in industry circles. It is not certain what services Blue Origin seeks to procure, as neither the company nor Pallas Advisors commented for this article. However, Pallas has experience in managing the contracting process between companies and the US government.

After losing the NASA lunar lander contract in April 2021, Blue Origin protested the decision to the US Government Accountability Office. It lost this protest, with the GAO ruling that NASA had awarded the contract on a fair and competitive basis.

Blue Origin has since filed suit against NASA in the US Court of Federal Claims. Unlike the last time a Bezos company was in the US Court, however, there are no allegations of presidential interference.

A source said Pallas has been hired both to help Blue Origin make its case against NASA as well as for its expertise in dealing with the Department of Defense. Along with Donnelly and DeMartino, the advisory group has as advisors and directors a number of former military officials from the Trump administration, including former US Secretary of the Navy Richard Spencer and US Secretary of the Army Ryan McCarthy.

A pleasure to host #SecDef James Mattis at Amazon HQ in Seattle today pic.twitter.com/JnQZoSOnFN

— Jeff Bezos (@JeffBezos) August 10, 2017

Blue Origin wants to ensure it is on sound footing as it competes for future US military launch contracts with the New Glenn rocket. The US Space Force has said it plans to award $1.5 billion to US launch companies for next-generation rocket engines and upper stage enhancements during the coming year. And then, Blue Origin hopes to vie along with United Launch Alliance and SpaceX for contracts during “Phase 3” of the National Security Space launch procurement that opens in 2024.

Bezos was bitterly upset when Blue Origin failed to win contracts as part of Phase 2 of this national security launch contract in 2020 and aims to be better prepared for the next round of bids.