Pentagon Could Cancel $10 Billion Cloud Contract With Microsoft

Amazon Protests the Pentagon’s Decision

The Pentagon may pull the plug on a $10 billion cloud-computing initiative called the JEDI Project which was awarded to Microsoft (MSFT) in 2019. The Pentagon chose Microsoft over Amazon (AMZN) to help it migrate to the cloud. Amazon, the undisputed leader in the cloud market, contested the decision in court, claiming political bias.

In April a federal judge ruled against the Pentagon’s motion to dismiss the majority of Amazon’s case. The Department of Defense is currently reviewing the litigation to determine the best course of action for the project.

The Pentagon Works to Avoid Legal Disputes

The JEDI contract, which would take 10 years to complete, is aimed at combining the Pentagon’s disparate data systems, providing access to real-time information, and positioning it to take advantage of artificial intelligence. Pentagon officials say there is significant need for these initiatives, but the Pentagon is concerned about the ongoing legal battle. For this reason, some officials are thinking of pausing the current plan and looking for other options.

Critics of the contract have said that giving such a significant project to a single vendor is an outdated method and the Pentagon should have included multiple companies. This would have reduced the risk of facing litigation from companies which were excluded from the deal. Some critics say the Pentagon should start over with a new bidding process.

Microsoft Standing By

If the Pentagon decides to cancel the JEDI project it could expand existing Defense Department IT contracts instead of starting a new bidding process. It is not clear when a final decision will be made.

Winning the JEDI contract over Amazon was a big victory for Microsoft’s cloud computing unit and its efforts to catch up with Amazon. Microsoft remains ready to work on the project but acknowledged that the delays caused by legal disputes are a significant setback. The software giant is standing by and it may take some time before the Pentagon reaches a decision about how to move forward.

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