A federal judge in Washington ordered Microsoft on Thursday to halt all work on a $10 billion cloud-computing contract for the Pentagon, in a victory for Amazon, which had challenged the awarding of the contract.
In a sealed opinion, the judge, Patricia E. Campbell-Smith of the Court of Federal Claims, ordered work to stop on the Joint Enterprise Defense Infrastructure project, known as JEDI, until Amazon’s legal challenge was resolved. The 10-year contract was one of the largest tech contracts from the Pentagon, and Microsoft was set to begin work on it this month.
The decision adds to the acrimony surrounding the lucrative deal, which was a major prize in the technology industry, and ratchets up the legal battle around the transformation of the military’s cloud-computing systems. Amazon had been seen as a front-runner to win the JEDI contract, but the Department of Defense awarded it to Microsoft in October.
Amazon protested and said the process had been unfair. The internet giant claimed that President Trump had interfered in the bidding for the contract because of his feud with Jeff Bezos, Amazon’s chief executive and owner of The Washington Post. The Post has aggressively covered the Trump administration, and the president has referred to the newspaper as the “Amazon Washington Post” and accused it of spreading “fake news.”
“This is all setting the stage for a major court fight between Amazon and Microsoft, with the D.O.D. caught in between,” said Daniel Ives, an analyst for Wedbush Securities who has been tracking the JEDI contract. “It’s a political football that’s being kicked around.”
Frank Shaw, Microsoft’s vice president of communications, said in a statement on Thursday that the company was “disappointed with the additional delay” but that it believed “we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require.”
“We believe the facts will show they ran a detailed, thorough and fair process in determining the needs of the warfighter were best met by Microsoft,” he added.
Lt. Col. Robert Carver, a Pentagon spokesman, said it was disappointed by the decision, which has “unnecessarily delayed implementing D.O.D.’s modernization strategy and deprived our warfighters of a set of capabilities they urgently need.” He added that the Defense Department was “confident in our award.”
Amazon did not return a request for comment.
When Microsoft was awarded the contract, the Defense Department was explicit that the bidding process had been correctly executed. “The acquisition process was conducted in accordance with applicable laws and regulations,” it said at the time. “All offerors were treated fairly and evaluated consistently with the solicitation’s stated evaluation criteria.”
In public, Mr. Trump has said there were other “great companies” that should have a chance at the contract. But a speechwriter for former Defense Secretary Jim Mattis said in a recent book that Mr. Trump had wanted to foil Amazon and give the contract to another company.
In December, Amazon filed its legal challenge against the awarding of JEDI, saying that Mr. Trump used “improper pressure” on the Pentagon at its expense. The company also argued that its cloud-computing services were superior to Microsoft’s and that it was better situated to fulfill the contract’s technical requirements.
Since then, Amazon has escalated the battle. The company asked the court this week to let it depose Mr. Trump and Defense Secretary Mark Esper. Amazon argued that hearing from them was crucial to determine if they had intervened against it in the contract. Mr. Esper had recused himself from the contract award decision in October, citing his son’s employment at IBM, one of the early bidders on the JEDI contract.
“The question is whether the president of the United States should be allowed to use the budget of the D.O.D. to pursue his own personal and political ends,” an Amazon spokesman said at the time.
The Pentagon said it was strongly opposed to Amazon’s deposition request. Microsoft said Amazon “only provided the speculation of bias, with nothing approaching the ‘hard facts’ necessary” to demand them.
In another court filing this month, Amazon argued that an injunction was necessary to prevent it from losing the profit it could earn from the contract.
JEDI “will transform D.O.D.’s cloud architecture and define enterprise cloud for years to come,” wrote Kevin Mullen, an attorney representing Amazon in the case.
The JEDI contract has also been in the spotlight because it is viewed as crucial to the Pentagon’s efforts to modernize its technology. Much of the military operates on computer systems from the 1980s and ’90s, and the Defense Department has spent billions of dollars trying to make them talk to one another.
Mr. Ives, the analyst, has said that landing the JEDI contract put Microsoft in a position to earn the roughly $40 billion that the federal government is expected to spend on cloud computing over the next several years.
On Thursday, Judge Campbell-Smith also required that Amazon pay a $42 million deposit that the court will hold in case it later determines that the injunction was wrongfully issued and that Microsoft is owed damages. Amazon must submit a plan for offering the money to the court by next Thursday, and it must agree to redactions to the judge’s order no later than Feb. 27 so that it can be made public.
The preliminary injunction was a “prudent decision” given the complexities of the deal and the monetary stakes, Mr. Ives said, and the $42 million demanded from Amazon would not be a burden for the company.
“It’s less than a rounding error relative to their treasure chest,” he said. He added that he expected Microsoft to prevail in the deal.
Thomas Gibbons-Neff contributed reporting.
Source: Judge Halts Work on Microsoft’s JEDI Contract, a Victory for Amazon
By By Kate Conger
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