In Pentagon Contract Fight, Amazon Has Foes in High Places

It sounded like the dullest of developments: the award of a big Pentagon I.T. contract was postponed so the new defense secretary could review it.

But the competition over the $10 billion, 10-year contract to transform the military’s computing systems has been fierce, and the highly unusual, last-minute intervention by President Trump this week was another example of his willingness to shatter Washington conventions and test its ethical standards.

Experts thought the contract for the Joint Enterprise Defense Infrastructure, known by the cinematic acronym JEDI, would go to Amazon Web Services, the dominant player in the field of cloud computing. They did not count on two developments: an extraordinarily aggressive public relations and lobbying campaign by Oracle, one of Amazon’s competitors, and the hostility of Mr. Trump to Amazon and its founder, Jeff Bezos.

On Thursday, the new defense secretary, Mark Esper, said the contract would not be awarded until he had completed an “examination” of the issue. Though Amazon may still win the contract, the decision was seen as a major victory for its rivals: Microsoft, which remains in the competition, and IBM and Oracle, which had been eliminated at an earlier stage by defense reviewers.

The Pentagon on Friday denied that the president had dictated who should get the JEDI prize. “The secretary was not ordered by the president to make any specific determination about JEDI, period,” said Jonathan Hoffman, the chief Pentagon spokesman.

But Mr. Trump had already said on July 18 that he would review the contract competition “very seriously,” leaving little doubt about his wishes as commander in chief. Mr. Esper acknowledged on Thursday that there was internal pressure to take another look at the JEDI contract.

“I’ve heard from folks in the administration,” he said in an interview with The Washington Post.

Mr. Esper, a veteran Raytheon lobbyist and thus no novice in the field of defense contracting, characterized the review as only prudent for someone confirmed in his post just last week. “I owe, as the new guy coming in, a fresh look at it, study it, make sure I understand all the different factors,” he said.

Both Mr. Esper and Mr. Trump couched the delay as motivated by seeking the best deal for taxpayers. That had been the president’s stated reason for earlier jawboning about what he considered excessive costs to replace Air Force One and to build the F-35 fight jet.

But the JEDI contract presents a different case. Mr. Trump intervened in the actual competition, in a way that causes potential problems for his old foes, Amazon and Mr. Bezos, who has drawn the president’s ire as owner of The Washington Post, whose coverage Mr. Trump routinely disparages.

Such a presidential intervention in a contract is considered to be rare, bringing a political taint to a contest that by law should be decided based on technical merits and price alone.

Senator Mark Warner, Democrat of Virginia and the vice chairman of the intelligence committee, suggested that Mr. Trump’s actions might be improperly aimed at Mr. Bezos and The Post.

“It’s important that we maintain a fair and competitive process for D.O.D. contracts, but for the president to use the power of his office to punish critics in the media would be a complete abuse of power,” Mr. Warner said on Twitter. “This does not pass the smell test, and we need some answers.”

Mr. Trump’s aides have long known of his disdain for Mr. Bezos, to the point that it has been a noticeable preoccupation at times. Whether he is musing about his belief that Amazon skirts paying taxes or complaining about negative coverage in The Post, the president has repeatedly brought up the topic in the Oval Office.

When asked on Friday about Mr. Trump’s involvement in pulling back the deal, a senior administration official, who spoke on the condition of anonymity to not disclose private conversations, acknowledged that the president dislikes Mr. Bezos. But the official said Mr. Trump supported an abrupt re-evaluation of the process because “he’s focused on the deal,” adding that the president wants to cut the cost to taxpayers of the ultimate contract.

While Mr. Esper’s decision appeared all but inevitable after Mr. Trump’s public comments last month, Pentagon officials had continued to insist that the contract process was moving ahead. On Sunday, just four days before she announced the delay, a Pentagon spokeswoman, Elissa Smith, had said in a statement that the Defense Department had acted “without bias, prejudice or self-interest” before adding pointedly that “the same cannot be said of all parties of the debate over JEDI.”

That appeared to be a jab at Oracle, whose legal and public relations campaign against Amazon Web Services angered some defense officials and raised eyebrows even among jaded Washington observers.

A year ago, an early sign of the tough contest ahead was an anonymous dossier about Amazon and alleged conflicts of interest that circulated among journalists. More recently, Oracle devised a chart showing Amazon executives and alleging a “conspiracy” by Amazon to monopolize Pentagon computing for the next decade — a chart that officials say reached Mr. Trump.

Oracle, a major government contractor noted for developing the software to handle huge databases, lined up supportive members of Congress to push its anti-Amazon line to the Pentagon and White House. It went to court to challenge what it said were Amazon’s conflicts of interest but did not prevail.

Oracle contends that its campaign against the contracting process has been evenhanded and that the company is acting as a whistle-blower when it raises conflict of interest concerns about Amazon.

“Of course we’ve been fair,” said Ken Glueck, a senior vice president at Oracle. “Is protesting at the court of federal claims — which is a legal process that everyone is entitled to — is that fair?”

Mr. Glueck denied that Oracle had funded the anti-Amazon dossier but acknowledged creating a separate PowerPoint presentation on Amazon’s alleged conflicts of interest, as well as the chart that reached the White House.

“I’ve got a chart hanging up in my window because I got frustrated with everyone telling me I’m hiding,” he said. “There are an unbelievable number of conflicts that have arisen in this matter, and they are all legitimate to be discussed.”

Industry executives suggest that Oracle has multiple motives to invest so much effort. It is playing catch-up on cloud computing, so a delay can play to its advantage. It holds many federal contracts that may be displaced sooner or later by the shift to the cloud, so kicking JEDI down the road should preserve its current business longer. And though it probably never had a chance at winning the unified JEDI contract, it might have a chance to land part of the business if the contract is broken into smaller parts.

Most major corporations have already moved their computing operations to the cloud — a metaphor that simply means computing capacity is not built in-house but provided by a company like Amazon Web Services that maintains massive server farms around the globe. Many military strategists believe the Pentagon’s move to cloud computing is crucial and overdue.

Oracle’s stall tactics have been effective, pushing the contract award out nearly a year. The JEDI contact was initially expected to be awarded in late 2018, but Oracle’s legal challenges postponed it. In July, a federal judge ruled against Oracle, and the award was expected in late August. Mr. Esper’s review will likely cause a further delay.

Microsoft, which has deep roots in the military and has been quiet since the contract was released for bid, may be a beneficiary of Oracle’s campaign and the postponed award. It does not yet have all of the security certificates required for JEDI but has said it is actively working on getting them.

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