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Trump Expressed Concern About Pentagon Cloud-Computing Contract

Jennifer Jacobs, Naomi Nix and Steven T. Dennis

(Bloomberg) -- President Donald Trump recently demanded more information about how the Pentagon crafted a massive cloud-computing contract it’s poised to award to Amazon.com Inc. or Microsoft Corp., in order to decide whether he should intervene.

The Defense Department is set to give the contract, worth as much as $10 billion over ten years, to one of the two companies next month. Amazon, whose cloud-computing technology leads the market, is seen as the favorite.

But Trump recently was made aware of letters Republican members of Congress have written to the White House and military leaders complaining that the contract’s terms froze some companies -- including Oracle Corp. -- out of the competition, according to two people familiar with the matter. Trump expressed frustration he wasn’t aware of the concerns and asked aides to show him the correspondence, the people said.

Trump said he’s interested in looking into the circumstances of the bid but didn’t indicate he’ll try to block the contract from being awarded to one of the two finalists, they said.

Senate Homeland Security Chairman Ron Johnson, a Wisconsin Republican who recently wrote to the Pentagon to express concerns about the contract, said in an interview that he discussed it with the president aboard Air Force One last week.

“He wanted to understand what the issues were, what our concerns were,” Johnson said in an interview.

Senator Marco Rubio, a Florida Republican, sent a letter to National Security Adviser John Bolton on Thursday asking him to delay the contract award, saying the bid “suffers from a lack of competition.” Trump and Rubio spoke about the contract by phone the next day, a Rubio spokesman said.

A person familiar with the call said that it sounded as if Trump was thinking about canceling the contract.

All of the people asked not to be identified discussing a sensitive procurement issue. Spokesmen for the White House and Pentagon didn’t immediately respond to requests for comment.

While Trump has leaned on defense contractors to reduce costs on contracts they already hold -- and even to paint new Air Force One planes in his choice of colors -- it may be unprecedented for a president to intervene in a defense contract competition while it’s underway.

The cloud-computing program, known as Joint Enterprise Defense Infrastructure or JEDI, has been contentious. Legacy tech companies including Oracle and International Business Machines Corp. waged a fierce lobbying and legal campaign against the Pentagon’s plan to award the contract to a single company.

“Nothing good can come from President Trump becoming personally involved in an individual procurement, particularly one of this complexity,” said Steven Schooner, a professor of government procurement law at George Washington University. “Historically, the system has operated best with limited -- to no -- high-level political involvement.”

Oracle lost a legal challenge last week contesting the terms of the bid and alleging the Pentagon had crafted unfair requirements and that there were conflicts of interest involving Amazon. Republican lawmakers have taken up Oracle’s cause, pressuring the White House to intervene in the Pentagon project.

Oracle at one point coordinated with at least seven other companies including Microsoft and SAP America to try to block Amazon from winning the entire contract, Bloomberg News has reported. Amazon has already won a contract with the Central Intelligence Agency.

Oracle declined to comment for the story.

For More: Inside the Nasty Battle to Stymie Amazon’s Pentagon Cloud Bid

In April 2018, Oracle Corp. Chief Executive Officer Safra Catz dined with Trump at the White House and complained that it seemed designed for Amazon to win, Bloomberg has reported. The final requirements for the contract were released in July of that year.

The White House raised concerns about the contract with senior Pentagon leaders while they were still drafting the final requirements for the deal, according to a person familiar with the matter.

(Updates with expert comment in 12th paragraph. The spelling of Oracle CEO Safra Catz’s name was corrected in a previous version of the story.)

To contact the reporters on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net;Naomi Nix in Washington at nnix1@bloomberg.net;Steven T. Dennis in Washington at sdennis17@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Sara Forden

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