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Microsoft wins $10bn Pentagon cloud contract

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Via Financial Times

Microsoft has beaten Amazon to win a highly sensitive $10bn US defence contract, following several rounds of bidding, a legal challenge and a last-minute intervention by Donald Trump.

The Pentagon announced on Friday that Microsoft had won the so-called Jedi cloud computing contract, which will allow the company to handle large parts of the defence department’s data and communications.

Many had expected Amazon to win the contract, but President Trump intervened at the last moment to warn that “great companies” had complained about the process, sparking a final review by Mark Esper, the US defence secretary.

Mr Trump has regularly clashed with Jeff Bezos, the Amazon founder and chief executive, and his intervention was seen by some as politically motivated. Amazon is the only technology company that is currently able to provide secure enough encryption to meet the US government’s “top secret” requirements.

The US Department of Defense made the announcement on Friday evening in a brief and technical statement that contrasted with much of the drama that has surrounded the awarding of the contract.

Dana Deasy, the department’s chief information officer, said in the statement: “The DoD digital modernisation strategy was created to support this imperative. This award is an important step in execution of the digital modernisation strategy.”

Ms Deasy’s announcement was the culmination of a two-year process which originally saw four companies bid for the contract. The contract forms the key plank of the Pentagon’s efforts to move much of its computing power away from physical servers and on to the cloud.

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The Joint Enterprise Defense Infrastructure contract, known as Jedi, has been highly contested not just because of its value but also because it places the winner in pole position to win a host of other similar contracts from governments and large institutions around the world.

The bidding process was held up earlier this year when Oracle, one of the original four bidders, challenged the process in the courts. The company lost its appeal, but Mr Trump made his intervention soon afterwards, prompting a last-minute review by Mr Esper, who had recently been appointed as defence secretary.

Mr Trump’s comments were widely interpreted as an attack on Amazon, not least because he named Microsoft, IBM and Oracle — all three other bidders — as the companies who had complained about the process.

The Washington Post reported this week that a new book by a former Pentagon staff member claims Mr Trump wanted to “screw” Amazon by locking them out of the Jedi contract. Neither the Pentagon nor the White House has commented on that report. The newspaper is owned by Mr Bezos.

On Tuesday Mr Esper formally recused himself the final contract decision, citing his son’s employment as IBM — another of the original bidders — as the reason.

Amazon said in a statement: “We’re surprised about this conclusion. [Amazon Web Services[ is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion.”

The company would not say whether it would challenge the decision legally.

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Microsoft said it was “working on” a response.

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