Oracle Challenges Amazon over $10 Billion Pentagon Contract
The suit is in response to the Defense Department’s request for bids on a single-awarded, indefinite-delivery, indefinite-quantity contract for a range of commercial cloud services known as the Joint Enterprise Defense Infrastructure Contract, or JEDI. The proposed contract is scoped to include both infrastructure and platforms as a service for classified and unclassified materials.
The single-award contract is estimated to have a maximum value of $10 billion over its 10-year timeline.
Oracle filed its suit against the Defense Department (DoD) in early December, arguing that the structure of the single-vendor terms of the contract is unfairly weighted towards the largest provider of cloud services, Amazon Web Services, and violates government procurement standards.
“The technology industry is innovating around next-generation cloud at an unprecedented pace and JEDI, as currently envisioned, virtually assures DoD will be locked into legacy cloud for a decade or more,” said Ken Glueck, the senior vice president of Oracle. “The single-award approach is contrary to well-established procurement requirements and is out of sync with industry’s multi-cloud strategy, which promotes constant competition, fosters rapid innovation and lowers prices.”
Designing the Competition Out of the Game?
The suit also challenges the role of Amazon Web Services (AWS) in crafting a contract that is, according to Oracle, uniquely designed to match their own capabilities at the expense of other potential contenders.
According to Oracle, the department’s process for handling the RFP is both biased and unfair, favoring Amazon especially because two former AWS staffers were allegedly involved in the government’s vendor selection.
One of the key advisors on the design of the contract, Deap Ubhi, was a founding member at Amazon. Ubhi left the company to work at the Pentagon as an advisor for cloud computing services design and strategy. That connection triggered Oracle’s claim that Ubhi was involved in the early planning and market research for the JEDI contract, and helped steered its development in favor of AWS.
Ubhi has since left DoD and rejoined Amazon.
AWS has successfully requested to join the suit as a DoD defender, arguing it needs to protect its private commercial interests in the decision.
“AWS has separate interests that the government has no incentive to defend, such as AWS’s proprietary and financial interests in its proposal and AWS’s reputational interest in defending against Oracle’s meritless conflict of interest allegations,” Amazon’s motion, granted on December 13, charges.
Single Award Faces Multiple Challenges
The suit faces an uphill battle, as its concerns about the procurement process itself largely rely on arguments that already have been rejected by the Government Accountability Office (GAO), which analyzed Oracle’s objections in a November report.
In its request for the GAO investigation, Oracle had argued that a single-award contract violates procurement rules for using multiple awards for indefinite-term, indefinite quantity contracts valued more than $112 million. Oracle further asserted that the contract’s terms went beyond the agency’s needs, creating requirements that then unfairly restrict competition.
The potential conflicts of interest related to the procurement, according to Oracle’s complaint, were not properly considered by the Pentagon.
The GAO rejected each of Oracle’s arguments, saying the contract’s single-award approach was reasonable because of security concerns. It also rejected concerns about conflict of interest and the wide scope the contract, saying that the Pentagon had provided reasonable support for its approach.
IBM filed similar complaints about the JEDI contract with the GAO in October, complaining that the contract’s structure unfairly eliminates smaller cloud providers from the competition. On December 12, the GAO confirmed that it had chosen not to rule on the IBM complaint, stating the Oracle lawsuit took precedence.
“We will not decide a protest where the matter involved is the subject of litigation before a court of competent jurisdiction,” the GAO said in its statement on the case.
