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Amazon Adopts Rivals’ Playbook to Fight JEDI Cloud Bid Loss

Naomi Nix

(Bloomberg) -- A powerful executive with Amazon.com Inc. in October portrayed attempts by archrival Oracle Corp. to block her company from winning one of the biggest-ever government deals as a last-ditch attempt to rescue a business that was becoming irrelevant.

Now, Amazon is borrowing a page from the playbook Oracle used to unseat it as the front-runner for an up to $10 billion, 10-year project to overhaul the military’s technological operations.

Amazon filed suit in federal court in November after the Pentagon, in a surprise move, on Oct. 25 awarded the contract to Microsoft Corp. Amazon asserted that the procurement was corrupted by the intervention of President Donald Trump, whose disdain for Jeff Bezos, its chairman and chief executive officer, is widely known.

“Amazon is going to the mattresses,” said Stan Soloway, a deputy undersecretary of defense under President Bill Clinton and now president of Celero Strategies, a Washington-area consulting firm. “It feels like the same scorched-earth approach” that Oracle took.

Earlier, Amazon had sounded a very different note on legal challenges in the government contracts arena. Two days before it lost the award to Microsoft, Teresa Carlson, who oversees government contracting for the company’s profitable cloud-computing unit, Amazon Web Services, derided efforts by Oracle and others to cast the Pentagon’s bidding process as corrupt and rigged in Amazon’s favor.

It’s “kind of sad” when losers routinely protest procurement decisions “because it delays innovation,” she told other female corporate leaders, lobbyists and government officials at a Washington conference.

Amazon’s combative legal strategy includes seeking Trump’s deposition, which legal experts say is unlikely but not impossible. It hopes to block the Pentagon from putting the cloud project into effect without a new evaluation or award decision.

The longer the delay, the more time it has to gather depositions from officials, win over lawmakers, influence public opinion and prevent Microsoft from doing anything on the cloud project that would be hard to reverse. It’s also claiming the Defense Department lowered its standards by choosing Microsoft.

Microsoft declined to comment. Oracle didn’t respond to a request for comment. Amazon pointed to earlier statements from company spokesman Drew Herdener who said the contract evaluation was tainted by deficiencies and “unmistakable bias.”

The company scored an early win on Feb. 13 when a U.S. Court of Federal Claims judge temporarily blocked Microsoft from working on the Joint Enterprise Defense Infrastructure, or JEDI, cloud program while the lawsuit is pending. The order, which is still sealed, says the Pentagon must stop working on the contract “until further order of the court.”

The e-commerce giant’s newfound aggressiveness has surprised some observers. The company remained a champion of the project in 2018 and 2019, while Oracle mounted a fierce lobbying and public-relations effort to stop the Pentagon from awarding a sole-source contract. “I didn’t think” they would protest even if they lost, Soloway said.

Over the last two years, Oracle has filed -- and lost -- challenges at the Government Accountability Office and the federal claims court. Those efforts resulted in news stories airing its claims of unethical behavior by Pentagon and Amazon officials.

Oracle’s audience wasn’t only bureaucrats and judges, but also the White House, lawmakers and the general public, all of which were simultaneously being flooded with revelations about Pentagon employees who worked on the procurement in its early days and then left to work for Amazon.

Amazon is similarly seeking common cause with outsiders. Its case so far has attracted briefs from Protect Democracy, an anti-corruption group, and Citizens for Responsibility and Ethics in Washington, which has sued the Trump administration numerous times for alleged ethics lapses. Both organizations say they haven’t received money from Amazon.

Amazon’s court case could help amplify its perspective on the procurement the same way that Oracle’s challenges attracted media attention. “There is also potential in litigation that you are arguing to members of Congress and the public,”said Steven Schooner, a professor of procurement law at George Washington University Law School.

The company has been characterizing the loss of the contract as a political, not a technical, decision. Its suit contends that Pentagon officials artificially lowered their evaluation of the company’s proposal and that Trump “launched repeated public and behind-the-scenes attacks to steer the JEDI contract” away from Amazon “to harm his perceived political enemy” -- Bezos.

Earlier this month, Jay Carney, Amazon’s top spokesman, told CNBC that the company was taking legal action because it believes that “blatant political interference” affected the award decision. Trump has long criticized Bezos over everything from the shipping rates Amazon pays the U.S. Postal Service to his ownership of the Washington Post.

While Oracle charged that Pentagon officials failed to properly investigate ethical issues surrounding the bid, Amazon goes further by arguing that bias cost it the deal. Amazon alleges that the Defense Department, swayed by Trump’s animosity, unfairly judged its bid. It cites passages in a book by the speechwriter to former Defense Secretary James Mattis, stating Trump once told Mattis to “screw Amazon” out of the bid. (Mattis has criticized the book.)

“Contracting officers are accused every day of not playing by the rules but rarely that they had a vendetta,” said Charles Tiefer, a professor at the University of Baltimore School of Law.

Microsoft, International Business Machines Corp. and other Amazon rivals at times joined forces with Oracle to try to stop the Pentagon from awarding the cloud contract to a single company, which made Amazon the obvious front-runner.

Amazon not only was the market leader in the cloud-server industry, it also had won high-level security clearances from its previous work moving the Central Intelligence Agency’s data to the cloud.

The tech companies courted the press and Defense Department cloud-services buyers. The Oracle coalition also descended on Capitol Hill, appealing particularly to members of the Armed Services committees. Some of the lawmakers would later propose curtailing the Pentagon’s funding for the contract until it justified its strategy.

Amazon, likewise, in June hired a Trump-connected lobbyist, Jeff Miller, just before Trump disparaged the bidding process as uncompetitive, citing complaints from Oracle, Microsoft and IBM.

Oracle’s legal challenges helped Microsoft catch up technologically -- and ultimately win. During the nearly three-year process, Microsoft won new deals with large customers such as Chevron Corp., AT&T Inc. and more than a dozen intelligence agencies that bolstered its standing in the marketplace.

Delay Was Microsoft’s Ally

Microsoft, in addition, invested in a portable Azure system to analyze and transfer data to the cloud from the battlefield. The delay also gave Microsoft time to attain a higher level of government security, though it still hasn’t matched Amazon’s top-secret certification.

Oracle, too, may have benefited from the delays it continued to engineer even after it was eliminated. Oracle, which sells large amounts of legacy software to the Pentagon, already has a partnership with Microsoft that it could use to win more business from the Defense Department.

With much of the fighting between Amazon and Oracle in the rear-view mirror, JEDI’s fate rests with the federal courts. As Amazon waits for the U.S. Court of Federal Claims to decide on its request to depose Trump and Pentagon officials, Oracle is appealing a July ruling that it lacked legal standing to challenge the bidding.

“People file these suits for all kinds of reasons,” Tiefer said. “You could argue that one of the things that Amazon wants is a legitimate explanation for why they lost.”

--With assistance from Dina Bass.

To contact the reporter on this story: Naomi Nix in Washington at nnix1@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, John Harney

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