Pentagon Cancels $ 10 Billion JEDI Cloud Contract

The Pentagon announced Tuesday that it would cancel the $ 10 billion cloud deal that was the subject of a court battle involving Amazon and Microsoft. But it also announces new deals and seeks suggestions from both cloud service providers, both of which are likely to win.

The JEDI (Joint Enterprise Defense Infrastructure) contract has become one of the most complex contracts for the Department of Defense. In a press release on Tuesday, the Pentagon said, “With evolving requirements, improved cloud conversationality, and industry advances, JEDI cloud contracts no longer meet that need.”

Microsoft’s share price fell about 0.4% in response to the news, and Amazon’s share price rose 3.5% after reaching a 52-week high.

The battle over cloud computing projects doesn’t seem to be over yet. The Pentagon said in a press release that it still needed enterprise-scale cloud capabilities and announced a new multi-vendor agreement known as Joint Warfighter Cloud Capability.

The agency said it would seek contract proposals from both Amazon and Microsoft, adding that they are the only cloud service providers that can meet that need. However, he added that he would continue market research to see if others could meet the specification.

The lucrative JEDI contract aimed to modernize the Pentagon’s IT operations for the services offered over a decade. Microsoft was Win a cloud computing contract in 2019Defeat the market leader Amazon Web service.

A month later, Amazon’s cloud computing unit, AWS, filed a proceeding in the US Federal Claims Court in protest of JEDI’s decision.

The company claimed that President Donald Trump’s prejudice against Amazon and then CEO Jeff Bezos would influence the Pentagon and sign a deal with Microsoft.

last year, Pentagon inspector general released report He said the award did not seem to be influenced by the White House.

However, the Inspector General, in a 313-page report published in April 2020, was able to complete the assessment of allegations of ethical misconduct due to limited cooperation from White House authorities throughout the review. Said it wasn’t.

Microsoft Blog post He understands that the Pentagon has decided to cancel the JEDI contract on Tuesday, but said the court battle over it indicates the need for reform.

“Twenty months after DoD chose Microsoft as a JEDI partner, it highlights issues that require the attention of policy makers. A company has been upgrading key technologies for those who protect the country for years. If it can be delayed, the protest process needs reform, “written Whitley, president of Microsoft’s US regulatory industry.

Townes-Whitley said the DoD decision was “twice, not once, after careful consideration by professional procurement staff, Microsoft and our technology were determined to be best suited to their needs. It does not change DoD. Inspector General’s Survey Results There was no evidence of interference in the procurement process. And the fact remains that the Pentagon and other federal agencies, and in fact large corporations around the world, are choosing Microsoft to regularly support their cloud computing and digital transformation needs. .. “

Amazon didn’t immediately respond to CNBC’s request for comment.

Pentagon officials called the reporters, saying the proceedings themselves were not necessarily the main reason for the shift in approach. However, given how much the landscape has changed in the meantime, authorities have determined that needs have changed as well.

“The mission needs were our main impetus for this,” said John Sherman, Pentagon Chief Information Officer.

The Pentagon says that new contract cloud vendors meet several criteria, including working at all three classification levels (ie, unclassified, confidential, or top secret), are available worldwide, and are top-notch cyber. He said he needs to have security controls.

The agency said it has still set a maximum, but expects new contracts to reach billions. The contract is expected to last up to 5 years, including a 3-year performance-based period and two 1-year option periods.

The Pentagon hopes the JWCC will “be a bridge to our long-term approach,” Sherman said. The agency said it would pay directly through a contract around April 2022 and hope to start broader competition in 2025.

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See: How Amazon Web Services Transfers Large Volumes of Data to the Cloud Pentagon Cancels $ 10 Billion JEDI Cloud Contract

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