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Trump Says He’s Looking ‘Very Seriously’ at Pentagon Cloud Deal

Jennifer Jacobs and Naomi Nix

(Bloomberg) -- President Donald Trump said he’s looking “very seriously” at a cloud-computing contract valued at as much as $10 billion that the Pentagon is likely to award to Amazon.com Inc. next month.

“I’m getting tremendous complaints about the contract with the Pentagon and with Amazon,” he told reporters Thursday during a meeting with Netherlands Prime Minister Mark Rutte at the White House.

The contract wasn’t competitively bid, Trump said. The Pentagon is holding a competition for the contract, but Trump said that companies are complaining that the terms favor Amazon, the dominant player in cloud computing services. Microsoft Corp. is the only other company that hasn’t been eliminated from consideration.

Bloomberg News reported Wednesday that Trump recently raised concerns about the contract with aides after learning of correspondence Republican lawmakers have exchanged with the Pentagon and the White House criticizing the bidding process.

Some Republicans have alleged that the contract’s terms were crafted from the start to favor Amazon, and that there were conflicts of interest involving the company as the Pentagon considered bids.

“I will be asking them to look at it very closely to see what’s going on,” Trump said in apparent reference to the Defense Department, “because I have had very few things where there’s been such complaining. Not only complaining from the media -- or at least asking questions about it from the media -- but complaining from different companies like Microsoft and Oracle and IBM. Great companies are complaining about it.”

Some supporters of the Pentagon process pushed back on Trump’s comments. Four House Republicans on the Armed Service Committee, including ranking member Mac Thornberry, wrote a letter to Trump on Thursday saying “it is essential for national security” to move forward with the contract “as quickly as possible.”

“Further delays will only damage our security and increase the costs of the contract,” they wrote.

Trump and Bezos

While Trump didn’t mention Amazon founder Jeff Bezos by name on Thursday, he has long denounced the billionaire in tweets criticizing him on many fronts -- from the shipping rates his company pays the U.S. Postal Service to his personal ownership of what Trump calls “the Amazon Washington Post.”

Oracle Corp. has fought the contract process and has led a fierce lobbying campaign against the Pentagon’s plans to award the project, known as Joint Enterprise Defense Infrastructure or JEDI, to a single bidder. But the company lost a legal challenge last week contesting the terms of the bid and alleging the Pentagon had crafted unfair requirements and that there were conflicts of interest involving Amazon.

In April 2018, Oracle’s Chief Executive Officer Safra Catz dined with Trump at the White House and complained that the contract terms seemed designed for Amazon to win, Bloomberg has reported. The final requirements for the contract were released in July of that year.

International Business Machines Corp. said in a statement after Trump’s comments that it “has long raised serious concerns about the structure of the JEDI procurement. We continue to believe that the Department of Defense and our men and women in uniform would be best served by a multi-cloud strategy” rather than the Pentagon’s plan for a winner-take-all award.

Oracle and Microsoft had no comment on Trump’s remarks.

“We are aware of the remarks and have nothing to add at this time,” Elissa Smith, a Defense Department spokeswoman, said in an email.

Intervention’s Rare

Presidents and their advisers often set out their visions for defense spending and technology priorities, and Trump has spoken out on matters from the cost of F-35 fighter jets to paint colors for new Air Force One planes.

But it’s rare for a commander-in-chief to intervene in specific Defense Department contract competitions because they are governed by extensive laws and regulations intended to wall off billion-dollar awards from political influence, according to experts on the contracting process.

“The system is explicitly set up to prevent political officials from being able to influence the outcome of a contract,” said Stan Soloway, chief executive officer of Celero Strategies LLC. The president “can’t pick winners and losers.”

Federal agencies have to clearly outline the requirements and criteria they will use to choose a winning bid. Losing bidders can challenge a decision to the Government Accountability Office or in the Court of Federal Claims, contending that the ground rules set in a solicitation weren’t followed. Oracle already has lost a court case challenging the handling of the JEDI contract.

But a president has more freedom to exert influence over a project’s structure and acquisition strategy, which could effectively help some companies and hurt others, said Trey Hodgkins, the chief executive officer and founder of Hodgkins Consulting.

“He can shine a spotlight on the process and ask the question: Is this the best option for the warfighter? Is this the best deal for the taxpayer?” Hodgkins said. “I don’t know that it would be politically prudent to ignore executive-level scrutiny of the decision making process.”

(Updates with lawmakers’ letter starting in seventh paragraph.)

To contact the reporters on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net;Naomi Nix in Washington at nnix1@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, ;Sara Forden at sforden@bloomberg.net, Justin Blum, Larry Liebert

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