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Pentagon cloud contract investigation uncovers ‘potential ethical violations,’ narrows competition to Amazon and Microsoft

The Pentagon, shown above, is seeking to award a $10 billion cloud computing contract for its Joint Enterprise Defense Infrastructure program. (AFP/Getty Images)
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The Pentagon has narrowed the field of potential awardees for its $10 billion cloud computing contract to just two companies: Amazon and Microsoft, Defense Department spokeswoman Elissa Smith said Wednesday.

The Pentagon separately determined that alleged conflicts of interest on the part of Amazon Web Services did not adversely impact the procurement, concluding an investigation it opened in late February. The Pentagon’s investigation did uncover “potential ethical violations” that would be forwarded to the Defense Department inspector general for further inquiry, Smith said Monday.

The Pentagon’s decision effectively removes IBM and Oracle from the running for one of the biggest military IT procurements in history, the Joint Enterprise Defense Infrastructure contract known as “JEDI."

The investigation’s conclusion could chart a path forward for the embattled cloud computing initiative, which has been held up in federal court: The Defense Department now expects to award the contract by mid-July “at the earliest,” Smith said, reflecting a delay from its initial timeline.

“DOD remains committed to adopting the best enterprise cloud solution that fits its unique and critical needs,” Smith said in an email.

The news was reported first by Bloomberg News. Spokesmen for Microsoft, Amazon and Oracle declined to comment. An IBM spokeswoman did not immediately respond to a request for comment.

The Pentagon’s announcement confirmed what industry analysts have said for more than a year: Microsoft and Amazon are the only two companies with a shot at winning the $10 billion contract under its current specifications.

In recent years, Amazon’s Web Services cloud computing unit has become the market-leading cloud provider in the commercial sector, and it has benefited from years of experience handling classified data for the CIA thanks to an earlier $600 million contract. (Amazon chief executive Jeff Bezos owns The Washington Post.)

CIA long relied exclusively on Amazon for its cloud computing. Now it is seeking multiple providers for a massive new contract.

The Pentagon has repeatedly emphasized that it needs to rely on multiple cloud providers for its operations. But it has also held firm in its initial decision to offer the JEDI contract, a potential $10 billion, 10-year cloud procurement, to just one provider.

That decision has made JEDI a competitive lightning rod for numerous West Coast tech companies seeking business in Washington. Defense Department officials have said that roughly 80 percent of the Pentagon’s existing cloud computing efforts will be subsumed by JEDI, meaning some legacy cloud systems could be swept aside.

From the moment of its public unveiling last year, the JEDI contract has been dogged by allegations that it is biased in favor of Amazon Web Services, something that has been the subject of two bid protests and an investigation by the Defense Department inspector general.

Pre-award bid protests from Oracle and IBM were respectively denied and dismissed by the Government Accountability Office last year. Oracle later took its case to the U.S. Court of Federal Claims, where it accused Amazon and the Defense Department of improper conflicts of interest in relation to the contract.

The case was put on hold in late February when the Defense Department opened an investigation into allegations that Amazon created a conflict of interest when it hired Deap Ubhi, a former Defense Department procurement professional who worked on the JEDI project in its early planning phases.

Bid protest for Pentagon's cloud is put on hold after 'new information' emerges related to conflicts of interest

Ubhi, a Silicon Valley start-up founder, had worked for Amazon’s commercial cloud computing division before going to work for the Defense Digital Service in 2016. While he worked at the Pentagon, Ubhi worked on early planning for the JEDI procurement. The procurement kicked off soon after he left the Pentagon to rejoin Amazon in November 2017.

Oracle’s lawsuit has centered around the idea that Ubhi could have improperly influenced the procurement during his tenure at the Defense Department or carried confidential procurement information when he rejoined Amazon.

While he worked at the Pentagon, Ubhi claimed to be “leading the effort” to outfit the Defense Department with commercial cloud computing technology. He openly praised Amazon on Twitter while he was a government official, repeatedly referring to himself as an “Amazonian” while he helped lay the groundwork for a government contract Amazon is now bidding on.

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Before he left the Defense Department, Ubhi recused himself from the JEDI procurement. Aside from his job at the Pentagon, Ubhi had been running a tech start-up called TableHero, a business that drew interest from Amazon. In his October 2017 recusal letter, Ubhi cited “potential conflicts arising from “partnership” discussions between Amazon and TableHero, according to court documents. It is unclear if those discussions went anywhere.

Amazon and the Defense Department have sought to portray Ubhi as a minor player who could not have influenced the JEDI contract in his relatively short stint in government. Amazon accused Oracle of dragging Ubhi into a “broad fishing expedition” meant to undo a national security initiative.

“Oracle attempts to use Mr. Ubhi’s voluntary recusal as evidence of supposed bias, when in reality it demonstrates precisely the opposite: Mr. Ubhi acted specifically to avoid any potential conflict by voluntarily recusing himself from any JEDI activities before he eventually returned to AWS,” Amazon’s attorneys wrote in a recent court filing.

An Amazon spokesman has repeatedly declined to make Ubhi available for an interview, citing pending litigation. Amazon has also declined to comment on whether the company engaged in acquisition or partnership discussions with TableHero while Ubhi worked for the Pentagon, when employment discussions began for his second stint at Amazon, or what prompted his recusal in the first place.