Microsoft beats Amazon to $10bn Pentagon cloud computing contract after Trump intervention

Microsoft has beaten Amazon to a $10bn (£7.8bn) cloud computer contract after an intensely scrutinised bidding process which drew criticism from Donald Trump.

The Joint Enterprise Defence Infrastructure Cloud (Jedi) contract is aimed at modernising the Pentagon and making it more technologically agile.

Jedi aims specifically to give the military better access to data and the cloud from battlefields and other remote locations.

However, the contracting process had been complicated by conflict of interest allegations, especially after Mr Trump, who has been openly hostile towards Amazon, said his administration was reviewing the company’s bid following complaints from other companies.

A spokesperson for Amazon Web Services (AWS), which was seen as the favourite for the contract, said the company was “surprised about this conclusion”.

A company statement also claimed a “detailed assessment purely on the comparative offerings” would “clearly lead to a different conclusion”.

The technology firm Oracle Corp had expressed concerns about the process and the role of a former Amazon employee who worked on the project at the Defence Department. The employee later recused himself, left the department and returned to AWS.

Amazon is reportedly considering options for appealing against the decision, according to a Reuters source.

The Jedi contract is important because the Pentagon’s information technology has been described as woefully inadequate by officials, despite the US boasting the world’s most powerful fighting force.

Officials have complained of outdated computers systems and difficulties accessing files or sharing information as quickly as they might be able to in the private sector.

During the contracting process, some companies raised concerns that a single award would give an unfair advantage to the winner for follow-on work, prompting the Pentagon to say it plans to award future cloud deals to multiple contractors.

This week, Mark Esper, the US defence secretary, removed himself from reviewing the deal due to his son’s employment with one of the original contract applicants, IBM Corp. However, IBM had already been eliminated from the competition before the final stages.

IBM and Oracle did not immediately respond to requests for comment from Reuters, while Microsoft said it is working on a comment.

According to an upcoming book by a former Trump administration official, Mr Trump called James Mattis, the former defence secretary, and told him to “screw Amazon” by preventing it from bidding on the Jedi contract.

Guy Snodgrass, a former speech writer to Mr Mattis, said the then-defence secretary told other Pentagon officials: “We’re not going to do that ... This will be done by the book, both legally and ethically.”

Mr Snodgrass declined to comment ahead of the release of his book.

In a statement announcing the decision to award the contract to Microsoft, the Pentagon has insisted that the competition was conducted fairly and legally.

“All [offers] were treated fairly and evaluated consistently with the solicitation’s stated evaluation criteria,” the organisation said.

“Prior to the award, the department conferred with the DOD Inspector General, which informed the decision to proceed.”

Microsoft shares were up 3 per cent to $144.98 in after-hours trading after the news. Meanwhile, Amazon shares were down 0.92 per cent to $1,745.12.

Additional reporting by Reuters