On 04/09/2020 the United States Department of Defense confirmed the granting of the Joint Enterprise Defense Infrastructure (JEDI) cloud services contract to Microsoft. Amazon Web Services immediately repudiated the award through a strongly worded blog post entitled – JEDI: Why we will continue to protest this politically corrupted contract award. In this short article Digiecon review the facts leading to this final confirmation of Microsoft as the contract winner.
What is JEDI?
The Joint Enterprise Defense Infrastructure is the embodiment of Department of Defense enterprise cloud strategy. Upon reviewing its use of cloud, the DoD identified that, as of mid-2018, it was maintaining more than 500 public and private cloud infrastructures supporting Unclassified and Secret requirements. This, according to DoD, created a series of technical and contractual complexities which significantly reduced the advantages of cloud adoption.
A Congressional Research Service report from 02/10/2019 identifies that:
“DOD anticipates that the JEDI Cloud acquisition program will ultimately lead to a foundational enterprise-wide General Purpose cloud suitable for the majority of DOD systems and applications, enabling DOD to offer IaaS and PaaS at all classification levels.”
The characteristics of the contract are as follows:
Firm fixed cost – unit costs for each type of service are not to be changed during the life of the contract
Indefinite quantity – a fixed quantity of any service is not granted. The DoS can acquire any quantity during the life of the contract as long as it is within the ceiling budget.
Indefinite delivery – the delivery time is not fixed. An initial period of 2 years is agreed and this period can have three extensions, two of three years and a last one of 2 years. The maximum duration of the contract will be 10 years.
No committed value – the minimum guaranteed award is $1 million and the contract has a maximum ceiling of $10 billion but the DoD has discretion to decide exactly how much will be spent during the life of the contract.
When did the competition started and what have been the defining moments so far?
In September 2017, the DoD established a Steering Groupto develop and execute a strategy to accelerate the adoption of cloud architectures and cloud services with a focus on commercial solutions. In October 2017, a Request for Information (RFI) was released and, in July 2018, the JEDI Cloud Request for Proposals (RFP) was eventually issued.
The contenders initially expressing interest in the selection process included Amazon, Google, Microsoft, Oracle, IBM and Hitachi.
In October 2018, after internal protests from employees, Google decided to drop out of contention citing conflict with its corporate values, along with DoD’s plan to award the contract to a single vendor.
At the later part of 2018, both Oracle and IBM filled protests about the criteria used to evaluate the different bidders but all protests had been dismissed by mid 2019.
In October 2019, the JEDI contract was eventually awarded to Microsoft but Amazon subsequently sent numerous post-award questions and sought an injunction to stop the process claiming its questions had never been answered. Such injunction was finally granted by a Federal Judge in February 2020.
What is all the fuss about?
First, the maximum value of the contract, $10 billion, needs to be looked in the context of the global value for enterprise cloud services, which in 2019 was estimated to be worth approximately $250 billion. Though a fraction of the global market value and spread throughout 10 years, the value of the JEDI contract is huge, even by government standards.
Then, at the start of the process, Oracle explicitly alluded to the hypothesis that the process was deliberately biased towards Amazon citing the fact that three former DoD employees which contributed to the initial development of the JEDI programme had subsequently been employed by Amazon.
Finally, personal differences between Jeff Bezos and Donald Trump are alluded to as one of the reasons for the contract to be awarded to Microsoft. Amazon’s blog post explicitly mentions:
“On JEDI, President Trump reportedly ordered former Secretary Mattis to “screw’” Amazon, blatantly interfered in an active procurement, directed his subordinate to conduct an unorthodox “review” prior to a contract award announcement and then stonewalled an investigation into his own political interference.”
Although the DoD has reaffirmed the award to Microsoft after performing ‘corrective actions’ in relation to the evaluation of the proposals, delivery of cloud services will not begin until the February injunction is dropped.
Gossips, legal disputes and personal differences aside, the granting of such a valuable and long term contract to a single party has indeed the power to stifle competition, giving an important strategic advantage to Microsoft. The American DoD is known to develop leading edge technology which eventually filters through to civilian applications. Development of Artificial Intelligence applications are at the heart of DoD activity and, with a contract of this size and duration, Microsoft may witness first-hand innovation and gain capabilities which will not be easily available to others.