The Pentagon is canceling a contentious $10 billion cloud computing contract that was given to Microsoft (MSFT) over Amazon (AMZN) during the Trump administration.
The Department of Defense announced on Tuesday that it is canceling Microsoft’s contract for the Joint Enterprise Defense Infrastructure (JEDI). Instead, it will seek new solicitations from Amazon and Microsoft for an updated Joint Warfighting Cloud Capability (JWCC) contract.
Microsoft would have built a cloud storage system for sensitive military data and technology, such as artificial intelligence, for the Department of Defense under the JEDI contract, which could have resulted in revenue of up to $10 billion over 10 years.
Microsoft’s victory over Amazon for the JEDI contract in 2019 sparked some debate, as many industry experts predicted that Amazon would win the contract. In the cloud computing industry, Amazon Web Services is widely regarded as the market leader.
Amazon filed a lawsuit in the United States Court of Federal Claims, claiming that the decision was influenced by former President Donald Trump’s animosity toward Amazon CEO Jeff Bezos and the Washington Post, which Bezos owns.
The department stated in March 2020 that it wanted to reconsider its decision to award the contract to Microsoft. The Pentagon now intends to cancel the contract entirely and invite Microsoft and Amazon to submit bids for a new, updated contract.
In a press release, the Defense Department stated that it decided to cancel the contract due to “evolving requirements, increased cloud conservancy, and industry advances.” As a result, the JEDI contract “no longer meets its needs,” according to the press release.
According to the press release, the department will solicit proposals from Microsoft and Amazon Web Services, as well as proposals from other Cloud Service Providers that “can also meet the DoD’s requirements.”
Microsoft said in a blog post on Tuesday that it understands the Department of Defense’s decision to cancel the contract, but that its technology is the best for the job.
“The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well,” the post said.
“Because the security of the United States through the provision of critical technology upgrades is more important that any single contract, we respect and accept DoD’s decision to move forward on a different path to secure mission-critical technology,” the statement adds.
Amazon Web Services said in a statement that it agreed with the decision but had concerns about the contract’s original awarding process.
“We understand and agree with the DoD’s decision,” a spokesperson said in the statement. “Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement.”
Before Trump promised to take “a strong look” at the deal, Amazon was widely thought to be the frontrunner to win the Pentagon contract.
Amazon accused Trump of launching “repeated public and behind-the-scenes attacks” against the company in a formal protest, according to a lawsuit filed with the US Court of Federal Claims.
Amazon asked the court for permission to obtain testimony from Trump and former Defense Secretary Mark Esper in support of its claim that it lost the cloud contract due to political interference.
“President Trump has repeatedly demonstrated his willingness to use his position as President and Commander in Chief to interfere with government functions — including federal procurements — to advance his personal agenda,” Amazon said in a statement in February. “The question is whether the President of the United States should be allowed to use the budget of the DoD to pursue his own personal and political ends.”
