Pentagon cancels $10B JEDI contract that pitted Amazon against Microsoft

The Department of Defense has canceled its $10 billion JEDI cloud computing contract that was at the center of a legal fight involving Microsoft and Amazon. The Pentagon said the disputed contract no longer met its needs due to "evolving requirements, increased cloud conversancy, and industry advances." 

The move, which was earlier reported by CNBC, puts an end to litigation that could have dragged on for years, though a Defense Department official said that wasn't the driving force behind the change. 

"JEDI was developed at a time when the department's needs were different," said John Sherman, acting chief information officer for the Defense Department, adding that "our landscape has advanced and a new way ahead is warranted to achieve dominance in both traditional and nontraditional war-fighting domains."

Microsoft was awarded the Joint Enterprise Defense Infrastructure, or JEDI, contract in October 2019. The cloud computing deal was expected to be worth up to $10 billion over 10 years. Amazon alleged that former President Donald Trump interfered in the Defense Department's decision making, resulting in the contract being awarded to Microsoft. Amazon filed a lawsuit against the Defense Department in November 2019 and later sought to halt Microsoft's work on the contract.

In a blog post Tuesday, Microsoft said it understood the Pentagon's rationale and that one contract doesn't define its relationship with the Department of Defense. 

"The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward," wrote Toni Townes-Whitley, president of US regulated industries at Microsoft, in the post. "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."

Microsoft also noted in the blog post that the inspector general for the Defense Department last year found there was no evidence of interference in the procurement process. 

In place of JEDI, the Pentagon has plans for a new cloud contract that will be awarded to multiple vendors. It will seek "proposals from a limited number of sources," including Microsoft and Amazon Web Services as well as other vendors such as Google, Oracle and IBM that are able to meet the contract terms, according to Bloomberg. 

Amazon on Tuesday said it looks forward to supporting the Department of Defense's modernization efforts but reiterated its stance that the JEDI contract award was influenced by politics. 

"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," said a spokesperson for Amazon Web Services. "Our commitment to supporting our nation's military and ensuring that our war fighters and defense partners have access to the best technology at the best price is stronger than ever. "