7 Things To Know About JEDI And DOD’s Revised Cloud Strategy

After scrapping its JEDI contract, the U.S. Department of Defense now plans to make awards to multiple cloud computing providers under its new Joint Warfighter Cloud Capability contract.

The U.S. Department of Defense Tuesday said it has scrapped its contentious, multibillion-dollar Joint Enterprise Defense Infrastructure (JEDI) cloud contract with Microsoft and would instead seek bids under a new Joint Warfighter Cloud Capability (JWCC) contract that would be awarded to multiple vendors.

In a blow to Microsoft and a win for Amazon Web Services, the DOD said the JEDI award—made in October 2019 and estimated to be worth up to $10 billion during a potential 10-year period—doesn’t meet its current needs after its implementation had been delayed for 20 months by AWS litigation contesting the contract.

“The department has determined that, due to evolving requirements, increased cloud conversancy and industry advances, the JEDI Cloud contract no longer meets its needs,” the DOD said in a statement.

Here’s a look at seven things to know about the history of the JEDI contract, the legal wrangling surrounding the contract, what happens next, and the reactions of Microsoft and AWS to Tuesday’s news.

The Backstory

With its JEDI contract for general-purpose enterprise cloud services, the DOD was seeking to leverage cloud computing technology to digitally modernize its IT infrastructure and warfighting capabilities across classification levels and all branches of the U.S. military, from the home front to the tactical edge. The contract was designed to provide the DOD with a foundation for data sharing through its cross-domain solution, advanced data analytics capabilities and a cutting-edge cybersecurity posture.

Google Cloud, IBM and Oracle were among the tech giants originally seeking to win the JEDI contract, along with AWS and Microsoft. Google Cloud abandoned its efforts in 2018, saying it couldn’t be assured that work performed under JEDI would align with its corporate principals on using artificial intelligence and that it didn’t possess adequate government certifications. Microsoft, meanwhile, resisted some employee pressure to drop out of the running.

JEDI was designed as a single-award contract, and Microsoft, Oracle and IBM had lobbied against the possibility of one company winning the entire JEDI contract out of fears that AWS had been tabbed prematurely as the winner. Both IBM and Oracle lodged complaints with the U.S. Government Accountability Office (GAO) in 2018 over the contract’s single-award approach.

After Oracle’s GAO challenge failed, Oracle filed a lawsuit against the federal government—which AWS later joined voluntarily as a co-defendant—in December 2018 in the U.S. Court of Federal Claims, claiming potential conflicts of interest by two DOD employees involved in the JEDI initiative who had relationships with AWS, and other issues. The U.S. Court of Appeals for the Federal Circuit last September upheld a U.S. Court of Federal Claims ruling that Oracle wasn’t harmed by Pentagon errors in developing the single-award contact terms because Oracle wouldn’t have qualified for the contract anyway. The appeals court also said the DOD employees’ alleged conflicts of interests did not taint the contract process. Oracle subsequently petitioned the U.S. Supreme Court this year to rehear its case.

The Contract Award

In an upset, the DOD awarded the JEDI contract to Microsoft, the second largest cloud computing provider after AWS, which had been favored to win the deal.

“The Department of Defense has taken another step forward in the implementation of our cloud strategy with the award of an enterprise, general-purpose cloud contract to Microsoft,” the Pentagon said in a statement at the time. “This continues our strategy of a multivendor, multi-cloud environment, as the department’s needs are diverse and cannot be met by any single supplier.”

The DOD set the base contract period for two years with a $1 million guarantee, and it expected user adoption would drive an estimated $210 million of spending during that period.

The AWS Lawsuit

In November 2019, the month after Microsoft won the JEDI contract, AWS filed a lawsuit against the U.S. government with the U.S. Court of Federal Claims in protest of the award, maintaining that the DOD erred in its technical evaluation of cloud providers’ bids for the contract. That December, it amended its complaint, alleging the contract award also was politically corrupted. AWS alleged the White House under the Trump administration—including former President Trump— wielded undue political influence on the bid selection process. AWS alleged Trump’s bias against Amazon and former CEO Jeff Bezos—who also owns The Washington Post newspaper—had tainted the contract award process.

“Through his public statements and explicit and implicit directives to senior DOD officials, President Trump made known his unapologetic bias against Amazon and Bezos and his fervent desire that AWS not be awarded the JEDI contract,” AWS alleged in the complaint.

The court issued a temporary restraining order halting Microsoft work on the contact in February 2020 that had remained in place.

The DOD Inspector General in April 2020 determined that Trump’s expressions of animosity toward Amazon did not improperly influence military leaders’ decision on the JEDI contract procurement process. But in a sealed opinion and order this past April, Judge Patricia Campbell denied Microsoft’s and the DOD’s motions to dismiss the AWS lawsuit.

DOD Cancels JEDI

The DOD’s decision to shelve the JEDI contract this week follows remarks in May by Kathleen Hicks, deputy secretary of defense under the Biden administration, who said that moving to a cloud architecture is “vital” for the DOD, and the Pentagon must reassess where it stands on the JEDI project as the ongoing litigation continued to delay contract work.

The DOD this week said it canceled the JEDI contract after concluding that due to “evolving requirements, increased cloud conversancy and industry advances,” that the contract no longer met its needs. The DOD continues to have unmet cloud capability gaps for enterprisewide, commercial cloud services at all three classification levels that work at the tactical edge, at scale, and those needs only have advanced in recent years with efforts including the Joint All Domain Command and Control (JADC2) and the Artificial Intelligence and Data Acceleration (ADA) initiative, according to the DOD.

“JEDI was developed at a time when the department’s needs were different and both the CSPs’ [cloud service providers] technology and our cloud conversancy was less mature,“ said John Sherman, the DOD’s acting chief information officer, said in a statement.”In light of new initiatives like JADC2 and AI and Data Acceleration [ADA], the evolution of the cloud ecosystem within DOD and changes in user requirements to leverage multiple cloud environments to execute mission, our landscape has advanced, and a new way ahead is warranted to achieve dominance in both traditional and nontraditional warfighting domains.”

DOD Announces New Multivendor Contract Process

The DOD this week said it now would seek bids for a new multi-cloud/multivendor contract—the Joint Warfighter Cloud Capability (JWCC) contract—which it described as an indefinite delivery/indefinite quantity contract.

“The JWCC’s multi-cloud environment will serve our future in a way that JEDI’s single-award, single-cloud structure simply cannot do,” Sherman said.

The contract will include a three-year base period and two one-year options. The DOD plans to release the new solicitation in October and make initial direct contract awards by next April.

“This plan involves a multi-cloud procurement by a full and open competition perhaps as soon as early 2025,“ Sherman said, according to Reuters. ”For the near term, however, we are confident that a direct award path is absolutely required and appropriate to enable us to bring urgently needed enterprise cloud capabilities to the force.”

The DOD plans to seek proposals from a limited number of sources—namely Microsoft and AWS—“as available market research indicates that these two vendors are the only cloud service providers capable of meeting the department’s requirements.” Sherman said both providers likely will get contracts.

“However, as noted in its pre-solicitation notice, the department will immediately engage with industry and continue its market research to determine whether any other U.S.-based hyperscale CSPs can also meet the DOD’s requirements,” the DOD said. ”If so, [the] department will also negotiate with those companies.”

Bloomberg reported that Sherman would reach out to Google Cloud, IBM and Oracle.

Sherman confirmed that the DOD will work directly with the chosen CSPs and will not contract with other solution providers or systems integrators to manage the program during the direct-award time period, according to Nextgov.

The DOD did not attach a dollar figure to the new JWCC contract.

“We don’t have an estimate yet, but I wouldn’t latch onto the $10 billion [JEDI] figure,” Sherman said, according to Reuters.

Microsoft’s Reaction

Microsoft Tuesday, referring to AWS’ lawsuit, said the 20 months following its JEDI contract award highlights issues that warrant the attention of policymakers.

“When one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform,” Toni Townes-Whitley, Microsoft’s president of U.S. regulated industries, said in a blogpost. ”Amazon filed its protest in November 2019, and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward.”

But Microsoft said its commitment to the DOD “remains steadfast.”

“We understand the DoD’s rationale, and we support them and every military member who needs the mission-critical, 21st century technology JEDI would have provided,” Townes-Whitley said. ”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.”

Shares of Microsoft closed at $277.66 on Tuesday, up a penny.

“It’s clear the DOD trusts Microsoft and our technology, and we’re confident that we’ll continue to be successful as the DOD selects partners for new work,” Townes-Whitley said. “Their decision [Tuesday] doesn’t change the fact that not once, but twice, after careful review by professional procurement staff, the DOD decided that Microsoft and our technology best met their needs. It doesn’t change the DOD Inspector General’s finding that there was no evidence of interference in the procurement process.”

Microsoft could submit a termination bid to recover costs associated with the abandoned contract, Sherman said, according to Reuters. Microsoft declined comment on any fees to which it could be entitled.

AWS Reaction

AWS Tuesday said it understood and agreed with the DOD’s decision to scrap the JEDI contract.

“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,“ an AWS spokesperson said. ”Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DOD’s modernization efforts and building solutions that help accomplish their critical missions.”

Shares of Amazon gained 4.69 percent on Tuesday, climbing to $3,675.74 per share.