U.S. Markets closed

IBM Protests Pentagon Cloud Contract Expected to Favor Amazon

Naomi Nix

(Bloomberg) -- International Business Machines Corp. said it has filed a protest against the Pentagon’s planned winner-take-all cloud computing contract because it restricts the field of competition.

“Throughout the year-long JEDI saga, countless concerns have been raised that this solicitation is aimed at a specific vendor,” Sam Gordy, general manager of IBM U.S. Federal wrote on a company blog on Wednesday. “At no point have steps been taken to alleviate those concerns.”

IBM follows Oracle Corp. as the second technology company to challenge the Pentagon’s Joint Enterprise Defense Infrastructure contract valued at as much as $10 billion, which is widely seen as favoring Amazon.com Inc., the dominant cloud-services provider. The move increases pressure on the Defense Department to defend its requirements for the contract.

The Jedi project involves moving massive amounts of Defense Department data to a commercially operated cloud system. Companies are due to submit proposals on Friday.

Companies including IBM, Oracle and Microsoft Corp. have opposed a winner-take-all award, arguing it will stifle innovation and raise security risks for the Pentagon.

“We firmly believe in our heart of our hearts, in our technical background, that the single-cloud approach is the wrong approach,” IBM’s Gordy said in an interview. “We believe America’s warfighters deserve the best, not just good."

He described IBM’s protest as a “last-ditch effort for sanity to prevail” in the JEDI procurement process.

Asked about the IBM protest, Heather Babb, a Pentagon spokeswoman, said the department doesn’t comment on pending litigation.

At least nine companies have at some point coordinated their opposition in Washington to the government awarding the contract to a single provider, Bloomberg News has reported.

The Defense Department has said that making multiple awards under current acquisition law would be a slow process that “could prevent DoD from rapidly delivering new capabilities and improved effectiveness to the warfighter that enterprise-level cloud computing can enable.”

‘Rigid Requirements’

Gordy went beyond the debate over a single-source contract, arguing that the requirements the Pentagon outlined either mirror a certain vendor’s internal processes -- he didn’t mention Amazon by name -- or unnecessarily mandate that certain capabilities be in place by the bid submission date instead of when the work would begin.

“Such rigid requirements serve only one purpose: to arbitrarily narrow the field of bidders,” he said in his blog post.

The Government Accountability Office can confirm or deny contractor protests and make recommendations to a federal agency overseeing a contract.

While the GAO sustained only 2.6 percent of defense protests filed since 2008, the Rand Corp.’s National Defense Research Institute reported in January, “the majority of relief to protesters takes the form of corrective actions” by the contracting agency while a challenge is pending before the GAO or withdrawn based on the potential for solving issues short of a decision.

(Updates with Defense Department spokeswoman in eighth paragraph.)

To contact the reporter on this story: Naomi Nix in Washington at nnix1@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Larry Liebert

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.