Legal Tussle With Amazon Puts Microsoft's $10B JEDI Contract In Jeopardy: Bloomberg

Microsoft Corp (NASDAQ: MSFT) could lose the $10 billion contract to provide cloud computing services to the Pentagon, a deal the government has threatened to discard altogether after years of legal tussle, Bloomberg reports.

What Happened: The U.S. Defense Department intended to reconsider the controversial procurement subject to a federal judge’s decline to dismiss Amazon.Com Inc’s (NASDAQ: AMZN) allegations regarding former President Donald Trump’s involvement and influence in the contract.

Microsoft won the Joint Enterprise Defense Infrastructure Cloud (JEDI) contract in October, after a year-long battle with three other tech giants, including Amazon, Oracle Corp (NYSE: ORCL), and International Business Machines Corp (NYSE: IBM).

Amazon alleged personal political interference from President Donald Trump, who reportedly asked the Department of Defense to “screw Amazon.” Consequently, Amazon requested the court to halt Microsoft’s work with the Pentagon until its protest against the award is ruled.

The Pentagon denied the allegations and disclosed that the decision was made by an expert team of career public servants and military officers.

However, Amazon’s request was subsequently approved by a federal judge.

Why It Matters: The Pentagon considered the proceeding to be immensely time-consuming and might withdraw from the case if the judge allowed the prejudiced case to go on indefinitely.

The warning serves as a twist in a combative process involving years of legal challenges, lobbying, and a public relations campaign by technology rivals to overthrow Amazon as the original front-runner for the cloud contract when it was revealed in 2018.

The Defense Department is still fighting over the JEDI more than a year after Microsoft’s victory.

Interestingly, the Defense Department is talking up its other cloud contracts beyond JEDI. Further, some of the program’s major cheerleaders have quit leaving new leaders to decide on procurement inherited from the Trump administration. Microsoft executives continue to elaborate on the different work they intend to inculcate to win the Defense Department’s favor.

Chris Lynch, the former director of the Defense Digital Service to design the project, had quit to start a new company selling technology to the government. Dana Deasy, the Pentagon’s former CIO, was replaced by John Sherman. The latter previously served as CIO for the Intelligence Community when it decided to fully involve multiple vendors.

The Defense Department had disclosed 13 other cloud projects, including partnerships with Oracle Corp., Amazon, General Dynamics Corp (NYSE: GD), and Microsoft.

Even if the court chucks out Amazon’s politically prejudiced allegations, it will still take several months to mitigate the company’s other complaints about the Pentagon’s evaluation and award process. The Defense Department will get the cloud computing services it needs irrespective of its position in the lawsuit.

The Pentagon admitted the department’s vital and unmet requirement and was prepared to accomplish it by any means.

Price action: AMZN shares are lower by 0.57% at $2,960.70, and MSFT is up 2.06% at $231.41 on the last check Friday.

Photo Credit: Public domain photo via Wikimedia.