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GAO strikes down Oracle’s bid protest, clearing the way for Pentagon’s $10 billion cloud effort

Mark Hurd is co-chief executive officer of Oracle Corp. (David Paul Morris/Bloomberg)

The Government Accountability Office has ruled against a bid protest filed by software giant Oracle, which had taken issue with a Defense Department decision to go to a single company for its $10 billion cloud-computing effort.

Ralph O. White, GAO’S managing associate general counsel for procurement law, said in a statement that the Defense Department’s decision to pursue a single provider for its largest cloud effort is consistent with procurement regulations.

“The agency reasonably determined that a single-award approach is in the government’s best interest for various reasons, including national security concerns, as the statute allows,” White wrote.

Oracle had challenged the Pentagon’s “single-cloud” strategy for the contract in early August, long before contractors had submitted bids. The protest argued that the Pentagon’s initial contract for what is called the Joint Enterprise Defense Infrastructure (JEDI) should have more than one winner.

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Oracle and others have said that Amazon Web Services has an inside track to the contract. The online retail giant’s cloud computing unit is largely viewed as a front-runner because of its experience handling classified data for the CIA, part of an earlier $600 million contract. It is also the only federal cloud provider that holds an impact-level 6 cloud certification — the highest security certification awarded by the Defense Department and an important qualifier for managing top-secret classified data — according to an Oct. 23 document. (Amazon chief executive Jeffrey P. Bezos also owns The Washington Post.)

In a statement, Oracle spokesman Deborah Hellinger said that the company "believes that both the warfighter and the taxpayer benefit most from a rigorous and truly competitive process. We remain undeterred in our commitment to bring tremendous value and flexibility to our customers, including the Department of Defense.”

The Pentagon’s contract calls for the creation of a departmentwide cloud-computing system that will work as a foundation for its operations. Its aim is to help military agencies employ advanced artificial intelligence algorithms and store classified data in the cloud. Its value has been estimated at $10 billion over a decade and could account for about 16 percent of the Defense Department’s overall cloud computing workload, officials have said.

Such a large, long-term opportunity has sparked a competitive frenzy among commercial tech giants vying for the contract. Spokespeople from Microsoft, Oracle, IBM and Amazon Web Services confirmed recently that their companies had submitted bids. Google dropped out of the competition last month, saying it opposed the project on moral grounds and did not have the required IT certifications.

In its Aug. 6 bid protest, Oracle accused the Defense Department of failing to adhere to government regulations and following a strategy that will hurt the technological prowess of the U.S. military.

The Pentagon has said it wants to rely on multiple clouds for its overall strategy, even though it plans to use just a single cloud provider for the JEDI contract.

“The single-award approach is contrary to [the commercial technology] industry’s multi-cloud strategy, which promotes constant competition, fosters innovation and lowers prices,” Oracle wrote in its bid protest.

But in an interview earlier this year, Dana Deasy, the Pentagon’s chief information officer, defended the approach.

“We’ve never built an enterprise cloud,” he said. “So starting with a number of firms while at the same time trying to build out an enterprise capability just simply did not make sense.” Having additional companies involved would “just double or triple your complexity,” he said.

IBM submitted its own bid protest just days before bids were due Oct. 12. The GAO is reviewing that protest with a decision expected by Jan. 18.