Oracle presses ahead with Pentagon cloud lawsuit despite Amazon’s contract-bid loss
By AARON GREGG | The Washington Post | Published: November 10, 2019
Oracle is pressing forward with a long-running legal challenge to the Pentagon’s massive cloud computing contract, its third such attempt to upend the procurement since the project was announced 18 months ago.
In an appeal filed recently in the U.S. Court of Appeals for the Federal Circuit, the company accused the Defense Department of improperly limiting competition when it set the terms of the procurement.
Oracle challenged an earlier Pentagon decision to toss its bid, arguing it now meets the minimum requirements. And it doubled down on long-standing accusations that revolving-door hires “corrupted” the process and skewed the playing field in Amazon’s favor. (Amazon founder Jeff Bezos owns The Washington Post.)
Oracle is now seeking an injunction that would block the Defense Department from assigning additional work on the contract.
Oracle’s appeal comes as a surprise to those who followed the company’s lawsuit in the U.S. Court of Federal Claims, which fixated on the idea that Amazon had an unfair advantage. In the end, Amazon lost to Microsoft.
Even so, procurement experts say Oracle still might have a shot at blocking the contract. Steven Schooner, a leading expert in procurement law with George Washington University, said there is “no reason to think that DOD’s award to Microsoft dramatically alters Oracle’s litigation.”
Instead, the Amazon-related conflicts could continue to call into question the Defense Department’s handling of the procurement.
“I could easily see a panel of Federal Circuit judges being sufficiently troubled by the conflicts of interest … and concluding that DOD has to take a step back and more proactively address those concerns before it can proceed,” Schooner said in an email.
Amazon Web Services declined to comment for this report.
The Joint Enterprise Defense Infrastructure contract, known as JEDI, is meant to create an enterprise-wide cloud computing system run by a commercial tech company. The Defense Department’s decision to turn to just one provider for the contract, worth up to $10 billion over 10 years, made it a competitive lightning rod for the handful of giant tech companies jostling for cloud computing market share.
In April, the Pentagon announced Amazon and Microsoft were the only companies capable of meeting the minimum requirements. Initial bids from Oracle and IBM were thrown out.
Amazon Web Services was long seen as the inevitable winner. It is the commercial market leader by far and got a head start in the national security sector due to an earlier $600 million contract with the CIA.
It came as a shock when, late last month, the Defense Department instead awarded the contract to Microsoft. Amazon has not said whether it will protest.
Oracle, whose database business is threatened by the rise of cloud computing, has been working to thwart the Pentagon’s plans since long before the competition started. In court filings and informal lobbying documents, it has accused top officials of conspiring to give Amazon a long-term monopoly on the military’s information-technology infrastructure.
It filed its first JEDI challenge in August 2018 before bids even were submitted, taking issue with the Pentagon’s single-award approach. That bid protest was rejected by the Government Accountability Office. Oracle then took its case to the Court of Federal Claims in a lawsuit that alleged Amazon created conflicts of interest through its hiring activities.
Although that protest was rejected, Oracle’s litigation was a bruising experience for Amazon. The lawsuit seized upon the career paths of several Defense Department officials who later went to work for Amazon.
Court of Federal Claims Judge Eric G. Bruggink largely rejected Oracle’s claims. He concluded Amazon had not created the sort of “organizational conflict of interest” that would have altered the playing field.
He noted that the Defense Department contracting officer overseeing the procurement concluded that at least two hires did break the department’s rules, although their involvement was not significant enough to skew the procurement on the whole.
Victor Gavin, who served as deputy assistant secretary of the Navy before joining Amazon, was found to have violated a section of the Federal Acquisition Regulation pertaining to standards of conduct, Bruggink wrote.
Another, a startup founder named Deap Ubhi, was found to have misled Amazon and the Defense Department about the terms of his departure. The award was delayed for several months while the Defense Department investigated Ubhi’s involvement.
In a review of Ubhi’s Slack instant-messaging conversations to colleagues, Bruggink concluded that Ubhi had “strong, sometimes coarsely expressed opinions” but did not show any particular bias against Amazon Web Services.
The judge wrote that his review of hundreds of pages of Slack messages was “generally an unedifying exercise, except as a cautionary tale about ill-considered use of instant messaging.”
“One would have thought that in this litigious culture, people would be less promiscuous about sharing every stray mental hiccup,” Bruggink wrote.
The only area in which the judge did seem to side with Oracle concerned an obscure aspect of how cloud services would be priced under the contract. The judge noted that the fixed-price contract design is at odds with the fact that cloud computing services are expected to change significantly over time, as the provider improves its product over the course of the multiyear contract.
“The bigger question in all of the legal battles is how do we help the government do a better job of buying technology out of the commercial world and doing so in a timely manner, where it’s still relevant,” said David Berteau, president of the Professional Services Council, a trade group for government contractors.