Pentagon kills Microsoft’s $10B JEDI cloud contract, says tech is now outdated

Following years of controversy and intrigue, the Pentagon canceled its JEDI cloud computing contract with Microsoft today.

Microsoft was awarded the contract in October 2019, but work stalled as Amazon, the other finalist, mounted a legal challenge. Now, the Department of Defense has scrapped the entire project, saying that it’s out of date.

“The Department has determined that, due to evolving requirements, increased cloud conversancy, and industry advances, the JEDI Cloud contract no longer meets its needs,” a Pentagon spokesperson said in a statement.

The deal, which was to be worth up to $10 billion over 10 years, was a significant though contested win for Microsoft that would have given its cloud division a healthy boost in revenue and market share. Late last year, Microsoft Azure held 20 percent of the market, trailing Amazon’s AWS’ 31 percent.

In JEDI’s place, the Pentagon said it will be soliciting proposals for a new contract, the Joint Warfighter Cloud Capability, from both Microsoft and Amazon. Oracle, IBM, and Google submitted JEDI bids as well, though Google withdrew its bid under pressure from employees. The Pentagon says it will continue its research to see whether other companies can compete, but it insists that only Microsoft and Amazon are sophisticated enough to meet its requirements.

The new contract represents a victory for Amazon, which launched its legal challenge a month after the Pentagon awarded the contract for JEDI, which stands for Joint Enterprise Defense Infrastructure. The company filed suit in the US Court of Federal Claims, alleging that former President Donald Trump tipped the scales in favor of Microsoft because of his animus toward Amazon’s then-CEO Jeff Bezos.

Trump fanned the flames with repeated criticism of Amazon’s bid. “I’m getting tremendous complaints about the contract with the Pentagon and with Amazon; they’re saying it wasn’t competitively bid,” he told reporters in July 2019. “I will be asking them to take a look at it very closely to see what’s going on because I have had very few things where there’s been such complaining.”

Trump’s criticism aside, JEDI was mired in controversy almost from the outset. The Pentagon launched the solicitation by insisting on using a single vendor, which drew criticism from Oracle and IBM even before bids were due. Republicans in Congress joined them, arguing that multiple winners should be selected.

Then, in August 2019, just weeks before the contract was to be awarded, Defense Secretary Mark Esper ordered an independent review before ultimately announcing Microsoft as a winner several weeks later. Amazon cried foul, claiming the delay was further evidence that Trump had unfairly influenced the outcome of the bid process.

In February 2020, Amazon won an injunction, halting work on JEDI, and the company continued to pursue its case. The stall tactic seems to have worked. While Amazon won’t get a chance to take the entire pie, as it would have if it had been awarded the JEDI deal, it will likely get a sizable slice of the new JWCC contract.

Update 5:40 pm EDT: Microsoft and Amazon have both commented on the nixed contract.

“We understand the DoD’s rationale, and we support them and every military member who needs the mission-critical 21st century technology JEDI would have provided,” Toni Townes-Whitley, Microsoft’s President of US Regulated Industries, wrote in a blog post. “The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well. Because the security of the United States through the provision of critical technology upgrades is more important that any single contract, we respect and accept DoD’s decision to move forward on a different path to secure mission-critical technology.”

Amazon had a different take on the matter, of course. “We understand and agree with the DoD’s decision,” an AWS spokesperson said to Ars. “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. Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”