Roger Parloff Contributor, Yahoo Finance•April 14, 2020
LONG, LONG, LONG, LONG READ
“This is an entirely new and astonishing situation,” Charles Tiefer, a law professor at the University of Baltimore who has been teaching government procurement law for 25 years, said. “No one has ever seen a president vocally attack one of the bidders in a procurement. So no one has ever seen anything remotely like the bidder attacked by the president — losing.”
Tiefer is referring to the situation that spawned the sensational lawsuit Amazon (AMZN) filed last November, challenging the Pentagon’s awarding of the $10 billion JEDI cloud contract to Microsoft (MSFT). It alleges that President Donald Trump’s oft-expressed, seething animus for Amazon and Jeff Bezos, its founder and CEO, caused Pentagon officials, “consciously or subconsciously,” to award the contract to Microsoft.
The judge will decide shortly whether to grant the Defense Department’s request, filed last month, to freeze the suit for four months. The department wants a chance to correct an apparent error the judge found in its rationale for selecting Microsoft — a choice that had stunned many observers when announced last October.
Amazon’s Amazon Web Services (AWS) unit had long been considered the front-runner in the contest, because it pioneered the commercial cloud industry; still commands more than twice the market share of its nearest competitor, Microsoft Azure; and is the only vendor already authorized to operate at a “secret” or “top secret” level, having provided cloud services for the Central Intelligence Agency (CIA) since 2013.
President Donald Trump speaks with Satya Nadella, CEO of Microsoft,
and Jeff Bezos, CEO of Amazon during an American Technology Council
roundtable in the State Dinning Room at the White House in Washington,
DC on Monday, June 19, 2017.
(Photo by Jabin Botsford/The Washington Post via Getty Images)
The department asked for the pause after the judge issued a startling preliminary injunction in February, barring the Pentagon from going forward with the contract until she could fully hear Amazon’s case. Judge Patricia Campbell-Smith of the Court of Federal Claims found that, based on what she’d seen so far, Amazon’s suit was “likely to succeed.”
In a statement at the time, Microsoft stressed the narrowness of her ruling. “The decision disagreed with a lone technical finding,” the company said in a statement. “The decision does not find error in the Department of Defense’s evaluation in any other area of the complex and thorough process that resulted in the award of the contract to Microsoft.”
Attendees at Amazon.com Inc annual cloud computing conference
walk past the Amazon Web Services logo in Las Vegas, Nevada,
U.S., November 30, 2017. REUTERS/Salvador Rodriguez
But while that’s true, the judge simply didn’t reach the host of other serious faults Amazon has alleged in the Pentagon’s evaluation. She was saying that even the single likely error she found might alone warrant Microsoft’s being declared “ineligible” and eliminated from the competition.
A bold and extraordinary lawsuit filed by Amazon
The case is playing out at two levels. At level one, it is a conventional bid-protest suit — a dry, technical review of 200,000 pages of administrative memos and reports, judging whether career professionals reasonably evaluated the competing offerings vis-à-vis eight “factors” and 55 “sub-factors” laid out in the solicitation request. On its face, Judge Campbell-Smith’s ruling was made at that level, homing in on just one of the errors that Amazon claims afflict six of the eight factors.
But the ruling unavoidably resonates, sotto voce, at the second level of Amazon’s arguments — the astounding backdrop Professor Tiefer was referring to, and against which all of the level-one decisions are being scrutinized. Those arguments make this case the most extraordinary government procurement lawsuit in history.
At its core, Amazon is alleging an impeachable offense. The claim is that President Trump put his own personal interest in punishing Amazon’s founder and CEO Jeff Bezos — who, since 2013, has also owned the Washington Post — above both the law and the national security interests of the United States.
“The DoD’s substantial and pervasive errors are hard to understand and impossible to assess,” AWS argued in its complaint, “separate and apart from the president's repeatedly expressed determination to, in the words of the president himself, ‘screw Amazon.’”
The boldness of Amazon’s case is also unprecedented — especially for a public company. It bluntly uses the “I” word in its briefs, drawing explicit parallels between its allegations and those that led to Trump’s impeachment.
In a brief filed in January, seeking to take Trump’s deposition — an unheard-of request in bid-protest litigation — its lawyers wrote: “This protest occurs against the background of impeachment … which is grounded in the president’s repeated refusal to separate his personal interests from the national interest.”
Legal experts have said the judge is highly unlikely to order Trump’s deposition. In fact, given the law’s strong presumption that procurement officials act in “good faith,” Amazon’s whole suit has to be regarded — like the impeachment itself — as an uphill battle.
Jeff Bezos, owner of The Washington Post, delivers remarks at
the grand opening of the Washington Post newsroom in Washington
January 28, 2016. REUTERS/Gary Cameron
At the same time — and again, like the impeachment — the suit lays out profoundly disturbing accusations that cry out to be aired, chronicled, and explored. At least two aspects of Amazon’s case are rock solid. There is no denying President Donald Trump’s long-standing, undisguised, foaming animus for Bezos, which first surfaced during the 2016 election campaign. Nor is there any denying his penchant for transgressing “norms” and testing the outer limits of executive power to advance seemingly personal goals.
“And believe me, if I become president,” Trump vowed at a February 2016 campaign rally, “oh, do they have problems. They’re going to have such problems.”
The stated bases for his gripes has varied. Amazon wasn’t paying high enough package delivery rates to the U.S. Post Office, costing the latter “Bilions of Dollars”; it was “getting away with murder” by “not paying internet taxes”; it was “doing great damage to tax-paying retailers”; it was a “monopoly”; Bezos was using the Washington Post to conduct “unregistered lobbying” on Amazon’s behalf; and Amazon was somehow using the Post (in which it has no stake) as a “big tax shelter.”
The accusations ranged from plausible to debatable to baseless to impossible. But what seemed to unite them was Trump’s fury at the tough, First Amendment-protected, coverage Trump was receiving from what he dubbed the “Amazon Washington Post” — an epithet he has used at least 17 times in tweets, and in countless references at rallies or on television.
“[Bezos is] using that [newspaper] as a tool for political power against me and against other people,” he told Fox News personality Sean Hannity in May 2016. “And I’ll tell you what. We can’t let him get away with it.” (The paper’s editor, Marty Baron, has repeatedly said that Bezos plays no editorial role.)
‘Tremendous complaints about the project’
In July 2019, just before the Defense Department was expected to announce the winner of the JEDI procurement, Trump rotated his turret.
“So I’m getting tremendous complaints about the contract with the Pentagon and with Amazon,” he said during a press conference with the prime minister of The Netherlands, referring to JEDI. “I will be asking [the Defense Department] to look at it very closely to see what’s going on.”
Within hours, Trump’s son, Donald Trump Jr., was predicting that AWS would lose the contract. “Well, well, well,” Trump Jr. tweeted. “Looks like the shady and potentially corrupt practices from @amazon and No Bid Bezos may come back to bite them.”
Secretary of Defense Mark Esper speaks as U.S. President Donald Trump
listens during the daily White House coronavirus press briefing April 1, 2020
in Washington, DC. (Photo by Win McNamee/Getty Images)
A week later, the newly sworn-in defense secretary, Mark Esper, commenced the review Trump had promised. In the end, the Pentagon decided that the process had been fair after all — but then crowned Microsoft the winner. Press outlets termed the outcome “stunning,” “shocking,” and “a huge upset.” Even Microsoft seemed caught unawares, not releasing a press release until the next day.
“The most plausible inference from these facts is simply this,” Amazon’s lawyers wrote in their complaint. “Under escalating and overt pressure from President Trump, DoD departed from the rules of procurement and complied — consciously or subconsciously — with its Commander in Chief's expressed desire to reject AWS's superior bid.”
The Pentagon and Microsoft have protested that Amazon’s inferences are preposterous speculation. Amazon failed “to connect the dots between the president’s alleged bias and the decisions of the source selection professionals,” the government’s lawyers argued in their filings. Microsoft’s lawyers have decried Amazon’s “sensationalized and politicized rhetoric,” and stressed that the “evaluation process is multi-layered, multi-phased, and multi-structured so that no one person or team can unduly influence the outcome.”
Veteran procurement attorneys expect the judge to decide the case based on a technical analysis of how the respective offerings stack up against the solicitation specs — the level-one inquiry, as I’ve described it above. But that doesn’t mean she won’t be influenced by the explosive level-two arguments.
“Judges are not blind and deaf,” Franklin Turner, who co-heads the government procurement department at McCarter & English in Washington, D.C., said. “That material is included in the complaint for a reason. I don’t think it’s going to factor into a written decision, but it’s something that’s going to hang out in the cerebrum of the judge.” (Judge Campbell-Smith is an Obama appointee.)
An urgent mission bogged down by bid-protest litigation
The saddest aspect of the whole affair is that implementing JEDI is an urgent, national security mission. JEDI — Joint Enterprise Defense Infrastructure — aims to replace the Pentagon’s fragmented IT infrastructure with a unified, state-of-the-art, interoperable one that would support the nation’s warfighters across the globe and unleash the full military potential of artificial intelligence in the country’s defense.
This objective is at least as vital to national security as the rebuilding of the nation’s nuclear triad, said one former Pentagon official who worked on JEDI. “The thing that’s going to make the most difference in tomorrow’s war is the information layer,” the official said.
Yet the Amazon suit is now the second bid-protest litigation that has bogged JEDI down. The first was brought by Oracle (ORCL) — a niche player in the cloud industry, which could never have fulfilled the contract’s vast requirements. It mounted a massive campaign in the courts, media, Congress, and White House to force the Pentagon to chop the procurement up into multiple, smaller awards — its only chance to win a piece of the pie. After losing at lower levels, it is still pressing its case in a federal appeals court.
Now Oracle’s case has been eclipsed by Amazon’s, promising still further delays.
“The main observation,” procurement expert Frank Kendall said, “is that political people should keep their mouths shut about competitors in procurements. Period.” Kendall is a past Under Secretary of Defense for Acquisition and now a senior fellow at the Center for American Progress.
The most exasperating aspect of Amazon’s all-too-plausible lawsuit is how easily it could have been avoided. Its potency rests on stupendously unforced errors: a president’s irrepressible, primal urge to exact vengeance on a perceived enemy.
“My son in college has better access to computing power than the Department of Defense does right now,” the former Pentagon official who worked on JEDI said. If the department wants to run a sophisticated war-modeling exercise, for instance, it currently needs to requisition the necessary computing power by initiating a procurement process that will probably take six to nine months, he said.
The problems are rooted in the department’s sprawling, decentralized structure and culture. Its scores of divisions have their own budgets, IT managers, and data centers.
In 2012, the department issued its first “cloud strategy.” That was the year Microsoft and Google began marketing “infrastructure-as-a-service” offerings, elbowing their way into a field that AWS had pioneered six years earlier. These vendors offered cloud-based, on-demand computing, network, and data storage services that could be scaled up and down as needed. The cloud offered enormous efficiency gains over on-premises data centers, plus greater security.
But that first cloud strategy only exhorted the Pentagon’s many sub-divisions to meet minimal standards. Each unit would still decide for itself whether to go to the cloud and, if so, which vendor to pick. Thus, the department’s patchwork quilt of data centers began to recreate itself at the cloud layer. (Today, the department’s various units draw upon a federation of 600 tiny clouds and hundreds of data centers, all with limited ability to pool resources.)
During President Barack Obama’s second term, Defense Sec. Ash Carter began enlisting the private sector’s help in bringing the miraculous technological advances of Silicon Valley into the service of the country. He set up the Defense Innovation Unit in Mountain View to identify cutting-edge technology; the Defense Digital Service, to improve internal Pentagon IT systems; and the Defense Innovation Board, to advise at the strategic level.
U.S. Defense Secretary Jim Mattis listens as U.S. President Donald
Trump answers questions during a meeting with military leaders
in the Cabinet Room on October 23, 2018 in Washington, DC.
(Photo by Win McNamee/Getty Images)
In January 2017, President Trump took office with former general Jim Mattis as defense secretary. Multiple advisers — including former Google CEO and then-Alphabet executive chairman Eric Schmidt, who also chaired the Defense Innovation Board — urged him to overhaul the IT infrastructure, according to a then-staffer. The Pentagon needed a “general-purpose” cloud that could bridge the whole “enterprise,” that is, support all warfighters across all four service branches and across all levels of data — unclassified, secret, and top-secret, they advised. (Mattis declined comment.)
Initially, he wasn’t convinced. “Mattis is a battle-hardened Marine,” the staffer said. “War is bloody and it’s personal. It’s not ones and zeroes for him.”
‘Move our warfighting capabilities to the cloud’
To learn more, he scheduled a West Coast trip. In August 2017, he visited Amazon’s Jeff Bezos, Apple’s (AAPL) Tim Cook, Google’s (GOOG, GOOGL) Sergey Brin and Sundar Pichai, a panel of venture capitalists, and the department’s own Defense Innovation Unit. (Originally, he was calendared to visit Microsoft, too, but the visit fell through for logistical reasons, according to two people who accompanied him on the trip.)
He came back sold. He had concluded, according to a memo his deputy wrote upon his return, that advances in cloud computing, cybersecurity, and machine learning were “changing the character of war.” His instructions were broad-brush, according to two people familiar with them. Basically, said one, they were: “Move our warfighting capabilities to the cloud.” He delegated the job to Dep. Sec. Patrick Shanahan.
The task would be hugely disruptive to the companies that serviced the Pentagon’s existing IT infrastructure. New contractors would be brought in, and incumbents replaced. “To achieve the many advantages of cloud computing,” warned a report issued that month by Govini, a government-focused analytics firm, would require “institutional fortitude.”
Dep. Sec. Shanahan tapped Chris Lynch, the director of the Defense Digital Service (DDS), to lead the first phase of the project. In 2015, Def. Sec. Carter had hired Lynch to co-found DDS. DDS describes itself as “a SWAT team of nerds” brought in from the public sector to improve the department’s technology. Lynch was a hoodie-wearing tech geek, “Star Wars” fan, and serial entrepreneur. (His group reportedly named the project JEDI.) After a stint at Microsoft, he had launched a series of startups ranging from enterprise data analytics to gaming platforms. At DDS, he hired other young techies from places like Google, Palantir, and Shopify.
A consensus emerges for a single award
A key, early decision Lynch faced was whether to recommend a “single-award” or “multiple-award” contract. In other words, would one vendor win the whole shebang, or would responsibilities be split among several vendors.
For big-dollar Pentagon procurements, multiple-award contracts are the path of least resistance. To begin with, they’re the easiest way to avoid bid-protest litigation. If everyone gets a lollipop, no one complains.
More important, procurement laws favor multi-award contracts. In order to avoid “vendor lock-in” and spur competition, Congress had enacted two statutes that required procurements like this one to provide multiple awards unless special circumstances are shown.
Oblivious to Pentagon culture, the young outsiders at DDS quickly concluded that a single award was best. Lynch was the most ardent advocate, according to two department officials present at the time.
One key reason was to overcome the crippling incompatibility issues that plagued the department’s existing IT infrastructure.
“If you think about what’s the best, most direct use of AI [i.e., artificial intelligence] and machine learning for the Department of Defense,” a former official said, “it’s pattern recognition from sensor data. As our drones and satellites and planes are flying around taking pictures of stuff on a battlefield, can you identify a mobile missile launcher?
“Today, if the DoD develops a really good AI algorithm for [doing that], and it wants to put it on all its platforms that have sensors, they can’t. They’re going to have to take that algorithm, wrap it in an application, and then reconfigure that application for every single instance where they want to deploy it.”
That’s because all those drones and planes and satellites have different software baselines — e.g., operating systems, essentially. And it’s not just that the Navy platforms differ from those of the Army or Air Force, the official added. “The platform for Navy plane A is different from Navy plane B, which is different from Navy plane C,” he said. “And that’s also true of ships.”
Multiple awards would create new incompatibilities, because each cloud vendor has its own tool set. A single award seemed the only way the Pentagon would be able to push out a new algorithm to its fleets the way Apple pushes out patches to iPhones, this former official said.
Security considerations also favored a single award. All the clouds can hold data securely, the former official continued, “but the minute you send data between clouds, you have to put it in pipes, and those pipes are less secure than the cloud itself.”
By late October, a consensus had emerged within DDS in favor of a single award. The department then sent potential vendors a request for information — the first public tip-off that it was leaning in that direction. It received 65 responses, mostly opposing the single-award structure. Among cloud vendors, only AWS welcomed that approach, while Oracle, Microsoft, IBM, and Google all opposed it.
The most aggressive opponent would prove to be Oracle. “DoD is heterogeneous,” said Ken Glueck, Oracle’s senior vice president for government affairs. “It has many, many, diverse workloads. Some mission critical, some highly classified, some more mundane. Cloud providers provide highly differentiated product offerings. If you use one for everything, some jobs will be under-serviced, and some wildly over-serviced. We have unique product offerings. They ought to let us compete for appropriate workloads.”
Oracle had a point, but it didn’t tip the scales. “There will be some cases,” the former official who worked on JEDI conceded, “where the tool set in, say, Google’s cloud solves certain problems better than the tool set in Amazon’s or Microsoft’s. But those are edge cases and they don’t represent the vast majority of the work.”
‘Gate criteria’ excluding many cloud providers
The Pentagon stuck to the single-award approach. It unveiled the first draft of its solicitation in early March 2018. Bidders’ proposals would be assessed on nine categories of factors. The first factor, however, was a set of “gate criteria” — basic prerequisites — that would weed out bidders who just didn’t have the resources to handle a contract of this size. Those who met the gate criteria would go on to compete on the remaining eight factors, which included considerations like security against cyberattack and insider threats; ability to deliver data to troops in the field under harsh circumstances; and, lastly, price.
Several gate criteria hinged on the vendor’s brute size. As with any essential national security function, the solicitation explained, it had to ensure that JEDI would remain operational even in the event of natural catastrophe or hostile attack. Drawing upon existing military standards, the Pentagon specified that JEDI bidders would need at least three different data centers, located at least 150 miles apart, that could each potentially handle the whole work load. That way, even if two data centers were knocked out, each could seamlessly “failover” to the surviving one.
Another gate criterion required bidders to meet minimum security authorizations from the start. Although the department would give bidders time to ramp up to being able to handle “top secret” data — otherwise only AWS would qualify — it did require that they already meet certain minimum standards.
It was fairly clear from the outset that these gate criteria were going to exclude all bidders except AWS, Microsoft, and possibly Google. But it’s not illegal to weed out bidders who can’t do the desired job. An agency is not required to “understate its minimum needs merely to increase competition,” courts have held.
In 2018, according to Gartner’s estimates, AWS’s market share was 47.8%; Microsoft’s, 15.5%; Alibaba’s, 7.7%; Google’s, 4.0%; and IBM’s 1.8%. (Since Alibaba is a Chinese company, no one considered it a realistic candidate for JEDI.)
Oracle was sixth, below IBM. (Gartner did not break out its market share, grouping it with “others.”)
As far as the commercial infrastructure-as-a-service industry went, Oracle was “late to the game, and a dollar short,” Dave Bartoletti, an analyst with Forrester, said. Its cloud services were focused mainly on protecting its own flagship database business rather than competing with full-service vendors, like AWS, Microsoft, and Google, he said.
But for Oracle, not qualifying for JEDI was worse than a lost business opportunity. It was a threat to its longstanding, legacy business with the Pentagon: licensing database software. Major cloud vendors like AWS and Microsoft offered their own database solutions, Bartoletti observed, which — if not necessarily as good as Oracle’s — were certainly viable.
Department officials tried to soften the blow for the vendors who weren’t going to qualify. They stressed that the Pentagon would be putting out other major cloud contracts in the future. And while the JEDI contract could last up to 10 years, there were off-ramps, so it might be shorter. (The base contract was two years, followed by options to renew.)
The blowback begins
But these consolatory gestures fell on deaf ears. As soon as the draft solicitation was made public, the political blowback began.
A full-page advertisement appeared in the New York Post that same month. Placed by a nonprofit called Less Government, the headline blared: “President Trump: Your Defense Department is set to award a no-bid, 10-year contract for all its IT infrastructure to Administration-enemy Jeff Bezos’ Amazon.” Then came a mock thank-you note: “Thank you for the $10 billion handout. The cash will really help my many efforts to oppose your Administration's policies. Your pal, Jeff. Owner, Amazon & The Washington Post.”
An evocative photo dominated the ad. It showed Bezos and Sec. Mattis strolling through Amazon’s headquarters in August 2017, during Mattis’ West Coast trip. Bezos — perhaps unwisely — had tweeted the photo out at the time.
A pleasure to host #SecDef James Mattis at Amazon HQ in Seattle today pic.twitter.com/JnQZoSOnFN
— Jeff Bezos (@JeffBezos) August 10, 2017
Even then, Bezos’s tweet had raised eyebrows. From a Trumpian perspective, Mattis was consorting with the enemy. Over the three months leading to Mattis’ visit, Trump had been waging a tweet offensive against the “Amazon Washington Post,” denouncing the Post’s “fake news” and Amazon’s not paying enough in taxes.
Bezos, for his part, has never engaged with Trump. Believed to be a libertarian, Bezos plays his politics close to the vest. According to the Washington Post, Amazon’s PAC gave the “large majority” of its 2016-cycle contributions to Republicans, including Senators Marco Rubio of Florida and Rand Paul of Kentucky.
The closest Bezos ever came to responding to Trump was in December 2015. After enduring a series of caustic tweets from the then-longshot candidate, Bezos parried with an oblique put-down. Alluding to the commercial spaceflight company he founded, Bezos tweeted: “Finally trashed by @realDonaldTrump. Will still reserve him a seat on the Blue Origin rocket. #sendDonaldtospace.”
In late March, Trump unleashed another salvo of anti-Bezos tweets, several of which focused on another Trump hobby-horse: Amazon’s alleged “Post Office scam.” Trump hypothesized that the U.S. Post Office was losing “$1.50 on average for each package it delivers for Amazon,” thereby saving itself “$2.6 billion” in shipping costs. (The Postal Regulatory Commission, which sets those rates, found that its program for companies like Amazon generated $7 billion in profit in 2017, according to the Post.)
Trump’s tweets were drawing blood. Under the latest volley, Amazon’s market cap fell $73 billion from March 12 to April 7, The Guardian reported, zapping $16 billion off Bezos’ personal fortune.
By April, Trump’s “obsession” with Amazon and Bezos had become a news story in itself, reported in, for instance, Axios, New York Magazine, Vanity Fair, and the Washington Post. The Post speculated that some of Trump’s animus might stem from a recent Forbes listing of billionaires. In it, Bezos had soared for the first time to the number one spot, with $112 billion in net worth, while Trump had fallen several notches, to 766th, with a measly $3.1 billion.
The Vanity Fair piece, by Gabriel Sherman, was the first to foreshadow that Trump’s Bezos fixation could impact JEDI. Trump was discussing ways to “escalate his Twitter attacks on Amazon to further damage the company,” Sherman reported. Trump was “off the hook with this,” one source told him. Said another: “Trump is like, ‘How can I f*** with him?’” The article continued: “Advisers are also encouraging Trump to cancel Amazon’s pending multi-billion contract with the Pentagon to provide cloud computing services.”
On April 2, Oracle’s then co-CEO Safra Catz had dinner with Trump at the White House, as the guest of Peter Thiel. There, Catz, an early Trump supporter who had served on his transition team, criticized the JEDI bidding process, “complaining that it seemed designed for Amazon to win,” according to Bloomberg.
U.S. President-elect Donald Trump speaks as (2nd L to R) PayPal
co-founder and Facebook board member Peter Thiel, Apple Inc CEO
Tim Cook and Oracle CEO Safra Catz look on during a meeting
with technology leaders at Trump Tower in New York U.S.,
December 14, 2016. REUTERS/Shannon Stapleton
In the ensuing months, Bloomberg revealed that Oracle was leading a coalition of at least nine companies trying to force the Pentagon to move to a multiple-award approach. Others included Microsoft, IBM, and an array of legacy Pentagon contractors, including Dell Technologies (DELL), Hewlett Packard Enterprises (HPE), SAP America (SAP), and General Dynamics’ CSRA unit.
At about this time, a non-profit watchdog group also sprang up, called the Free and Fair Markets Initiative. It began walloping Amazon on an array of fronts, including JEDI. More than a year later, the Wall Street Journal revealed that the group was largely funded by Oracle, retailer Walmart, and shopping mall operator Simon Property Group.
Meanwhile, Trump was still pounding Amazon over postal rates. He personally pushed the U.S. Postmaster General Megan Brennan to double the rate the service charged Amazon, according to the Washington Post. She refused, explaining that she was bound by contracts, and arguing that the rate benefited the service. Trump then issued an executive order setting up a task force to review postal service operations, including the “pricing of the package delivery market.” (In December 2018, the task force did recommend increases in some package delivery rates.) It is doubtful that any president since John Adams has taken as personal an interest in the nation’s postal rates as has President Trump.
Back at the Pentagon, JEDI oversight committees and officials kept revisiting the single- versus multiple-award dilemma. They reached the same conclusion DDS had. Multiple vendors would “complicate management,” “introduce technical complexity,” “raise the risk profile,” “increase security risks,” hinder interoperability, and “create impediments to operationalizing data through data analytics, machine learning, and artificial intelligence,” according to internal reports.
In late July 2018, the department issued the final solicitation — seeking a single award — which formally kicked off the procurement.
By then, a mysterious dossier had been circulating around Washington for months. Written by RosettiStarr, an inside-the-Beltway, private investigatory group, it theorized that Pentagon officials with ties to Amazon had corruptly influenced the shaping of the JEDI procurement to steer it to AWS. Some of the dossier’s insinuations were sufficiently salacious that some reporters initially passed on it. Eventually, DefenseOne and Bloomberg each wrote stories about the dossier itself, and how “ugly” and “nasty” it was.
Some allegations had legs, though. There had, in fact, been some bad optics — and some actual conflicts of interest. One of Mattis’ senior advisers was Sally Donnelly, a Zelig-like character who, prior to joining Mattis at the Pentagon, had run a strategic consulting firm that had AWS as a client. An associate at Donnelly’s former firm, Anthony DeMartino, had also come to the Pentagon, becoming chief of staff to Dep. Sec. Shanahan.
Donnelly and DeMartino each properly disclosed their potential conflicts when they arrived at the Pentagon. Nevertheless, DeMartino did attend some JEDI meetings he shouldn’t have, a Pentagon oversight official later determined. The official, JEDI contracting officer Chanda Brooks, looked into the matter in April 2018. In the end, however, she concluded that DeMartino’s role was “ministerial and perfunctory,” as she wrote, and that he’d had no substantive input into JEDI.
U.S. Defense Secretary James Mattis (R) gives senior advisor
Sally Donnelly (L) a thumbs-up as they discuss their schedule
upon arriving via helicopter at Resolute Support headquarters
on April 24, 2017 in in Kabul, Afghanistan.
(Photo by Jonathan Ernst - Pool/Getty Images)
Donnelly was also a friend of Teresa Carlson, the head of AWS’s public-sector unit, according to a then-department official. Carlson and Donnelly had attended private dinners with Mattis and others in London in early 2017 and in Washington in early 2018. Though there was nothing improper about these per se, and people present claimed JEDI was not discussed, critics saw an undue coziness. (Donnelly’s attorney said: “While at the Department of Defense, Ms. Donnelly … played no role, and exercised no influence, in connection with any government contract, including … the JEDI contract. To suggest otherwise … reflects an absence of even the most rudimentary understanding of the government contracting process.”)
Then there was Mattis’s meeting with Bezos in August 2017. Amazon officials had taken advantage of the chance to make a presentation to Mattis that had the feel of a “sales pitch,” as ProPublica later reported. Indeed, the presentation was “a little weird,” one Pentagon official present told Yahoo Finance, since Mattis was not seeking that level of “granularity.” But Mattis had no role in shaping the details of the JEDI solicitation, this source and two others said, a task he delegated to Shanahan.
‘Ubhi drove the single-award approach’
In early August 2018, Oracle filed a protest with the General Accounting Office, challenging the solicitation’s single-award structure. After losing that in November, it brought a lawsuit in the Court of Federal Claims in Washington, D.C. (IBM also filed a GAO protest, but it was dismissed as duplicative of Oracle’s.)
Oracle was arguing, in part, that the Pentagon had failed to show the exceptional circumstances, required by law, to justify a single-source award. But it also maintained — as had the mysterious dossier — that Pentagon personnel with conflicts of interest had unfairly rigged the solicitation in AWS’s favor. Oracle took aim at five Pentagon officials, but the most troubling case was that of Deap Ubhi.
Ubhi had been a member of the Defense Digital Service team. He’d worked on JEDI for two months, in September and October 2017, and had been among those who favored the single-award approach. It turned out that Ubhi, a former AWS employee, had actually been negotiating with AWS to return there while he was working on JEDI. He did, in fact, return to AWS in November 2017. Both the Pentagon and AWS have said that Ubhi lied to them, giving the Pentagon a false reason for his departure and falsely assuring AWS that Pentagon ethics authorities had greenlighted him to seek employment. (His employment with AWS, before and after his Pentagon stint, was on the commercial side, not in the public-sector unit.)
JEDI’s contracting officer, Brooks, found that Ubhi’s conduct had not tainted the solicitation. But she did refer his case to the Pentagon’s Inspector General for investigation of possible conflict-of-interest violations, including criminal provisions. The IG has not yet released his report.
Though Ubhi was a fairly low-level official — one of more than 70 who worked on the JEDI solicitation — Oracle now argued that “Ubhi drove the single-award approach,” as the company put it in a legal filing.
That was a ludicrous contention, according to a higher-level official involved.
“As one of the central players that built the beginning of JEDI, I met Deap one time in the hallway,” this person said. “To me, this is the story you should be writing: How a company that is selling horse-and-buggies can just fabricate stuff and slow down the government’s acquisition of cars.”
In October 2018, four cloud providers bid on the JEDI contract: AWS, IBM, Oracle, and Microsoft. Google bowed out, citing a conflict with its corporate “AI principles.” (A few months earlier, its employees had protested its involvement in a military AI project.) But the company also admitted to Bloomberg that it probably could not have met the contract’s security requirements.
In December, Mattis resigned, after Trump announced troop withdrawals from Syria without consultation. Trump then fired Mattis, before his resignation could take effect. Dep. Sec. Shanahan became Acting Secretary.
The anticipated JEDI “down-select” — application of the “gate criteria” — came the following April. IBM and Oracle were eliminated. Pentagon officials then began in-person meetings with the two finalists, AWS and Microsoft.
Trump surrounded by allegations of abuses of power
At about this time, a flurry of accusations were surfacing concerning Trump’s alleged abuses of the power, crescendoing to Trump’s “perfect” call to Ukraine President Volodymyr Zelensky on July 25, 2019. Each allegation suggested that Trump was wielding the levers of government not to serve the public interest, but to effectuate base, personal goals. Over and over, it was alleged that he was punishing enemies or rewarding friends in ways not seen since the Nixon era.
The first related to CNN. If there was any media organization that Trump reviled as much as the Washington Post, it was CNN. And, as with the Post, there seemed to be a personal edge to Trump’s animus.
Since 2012, CNN has been led by Jeff Zucker. It had been Zucker who, as then-head of NBC Entertainment, first signed Trump to star in the reality show, “The Apprentice,” in late 2003. For the next 14 years, the show printed money for NBC.
Angry at CNN’s coverage of his debate performance in October 2016, candidate Trump, through an aide, emailed Zucker. He claimed that he, Trump, had gotten Zucker his job at CNN, and called Zucker “the most disloyal person.” He warned, “I always seem to find a way to get even,” according to Jonathan Mahler in the New York Times Magazine.
of Natural History on December 08, 2019 in New York City.
(Photo by J. Countess/Getty Images)
Three days later, when AT&T announced its intent to merge with Time-Warner, Trump instantly vowed to block the deal, with a senior advisor pointedly noting that Time Warner was the parent of “the wildly anti-Trump CNN.” Sure enough, Trump’s antitrust chief, Makan Delrahim, did sue to stop the deal in November 2017, notwithstanding that just 11 months earlier, while still a law professor, Delrahim had told reporters he saw nothing wrong with the deal.
Now, in April 2019, the New Yorker’s Jane Mayer revealed that Trump had, in fact, tried to force Delrahim’s hand. She wrote:
A few months before the Justice Department filed suit, Trump ordered Gary Cohn, then the director of the National Economic Council, to pressure the Justice Department to intervene. According to a well-informed source, Trump called Cohn into the Oval Office along with John Kelly, who had just become the chief of staff: and said in exasperation to Kelly, “I've been telling Cohn to get this lawsuit filed and nothing's happened! I've mentioned it fifty times. And nothing's happened. I want to make sure it's filed. I want that deal blocked!” … As Cohn walked out of the meeting he told Kelly, “Don’t you f***ing dare call the Justice Department.”
Following Mayer’s article, two House committees sought to learn more about Trump’s role in the antitrust case, but the White House rebuffed them, invoking presidential privileges. (Delrahim’s suit to stop the merger was thrown out by a federal judge, whose ruling was unanimously affirmed on appeal.)
In May, another abuse of power allegation surfaced — this one involving Trump’s alleged intervention in a government procurement. “President Trump has personally and repeatedly urged the head of the U.S. Army Corps of Engineers to award a border wall contract to a North Dakota construction firm whose top executive is a GOP donor and frequent guest on Fox News,” the Washington Post reported, citing “four administration officials” as sources. The heads of Homeland Security and the Corps of Engineers had each explained to Trump that he “could not just pick a company,” but Trump “remained frustrated,” according to the article. (Six months later, the $400 million contract would, in fact, be awarded to Trump’s favored contractor. The Defense Department Inspector General commenced an investigation, but has not yet issued a report.)
Then, in June, news broke of Trump’s even greater involvement in still another procurement, though a less formal one. Trump wanted the August 2020 Group of Seven summit, or G-7, held at his own Trump National Doral golf resort in Miami. The resort had reportedly been “severely underperforming,” and bookings in August — the slowest month in Miami — would be welcome. At the 2019 G-7 in Biarritz, he raised the notion again, claiming that his “military” and “Secret Service people” had proposed the idea. “It’s not about me, it’s about getting the right location,” he said.
In October — by which time Trump was already the target of a formal House impeachment inquiry stemming from the Ukraine Affair — Acting White House Chief of Staff Mick Mulvaney announced that the Doral had won the competition. He said the hotel would do it “at cost,” so Trump wouldn’t make money off it. But Mulvaney also admitted that it was Trump himself who first suggested the site, after the Secret Service had already drawn up a list. (An email later obtained by the Citizens for Responsibility and Ethics in Washington, through litigation, suggested that Trump made the final site selection choice himself.)
The selection raised issues under the Constitution’s Emoluments Clause, and amounted to such unambiguous self-dealing that it likely would have constituted a felony if any federal official other than the president or vice president — who are carved out of federal conflict-of-interest laws — had tried it. Trump dropped the idea three days later, under pressure from prominent Republicans and Fox News personalities.
Oracle’s many conspiracy theories
In July 2019, the JEDI bidders were awaiting two key decisions. First, the Court of Federal Claims was due to rule on Oracle’s bid-protest. Then, if the court didn’t block the procurement, sending everything back to the drawing board, the Pentagon would announce the winner.
As crunch time approached, Oracle pressed its case in the court of public opinion. After Mattis’s split with Trump in December, his earlier meetings with Bezos and AWS’s Teresa Carlson became even more inflammatory buttons to push with Trump. The company drew up a one-page chart, entitled “A Conspiracy To Create A Ten Year DoD Cloud Monopoly.” Ken Glueck, Oracle’s government affairs chief, still keeps it in his office window, he told Yahoo Finance in a recent interview.
The flow chart was a visual encapsulation of Oracle’s many, blurry conspiracy theories. It showed a circle of faces surrounding that of AWS’s Carlson, with arrows and dotted lines implying nefarious connections. The faces include those of the conflicted former DDS official, Ubhi; former Sec. Mattis; Mattis’s former adviser Sally Donnelly; Donnelly’s colleague DeMartino; DDS director Lynch; Obama’s Secretary of Defense Ash Carter; and even President Obama himself (shown hugging Carter). Though neither Lynch nor Carter had direct ties to AWS, Carter — who hired Lynch — had reportedly received informal advice from Donnelly when he was Secretary. Perhaps worse still, Carter and Lynch were both independently tainted by their association with Trump’s uber-nemesis, Obama. (Obama appointed Carter, who appointed Lynch.)
Oracle disseminated the chart to both lobbyists and journalists. By the summer, it had reached Trump, according to both the Washington Post and CNN.
In June 2019, key Republican congressmen began writing Trump and other top White House and Pentagon officials, urging postponement of the award and a review of the process. Rep. Steve Womack of Arkansas, Sen. Ron Johnson of Wisconsin, and Sen. Marco Rubio of Florida all wrote letters citing versions of Oracle’s arguments. (Oracle Chairman Larry Ellison had supported Rubio for resident during the 2016 campaign, contributing more than $5 million to two PACs supporting him. During the 2018 election cycle, Walmart’s PACs and employees were Womack’s top source of campaign contributions, according to Open Secrets.) On July 12, Trump called Rubio to discuss Rubio’s qualms with JEDI.
Finally, on July 18, a reporter asked Trump about the JEDI contract at a press conference. He responded: “Which one is that — the Amazon? So I’m getting tremendous complaints … They’re saying it wasn’t competitively bid. … Complaining from different companies, like Microsoft and Oracle and IBM. … So we’re going to take a very strong look at it.”
Within hours, Trump’s son tweeted that it looked like the “potentially corrupt practices” of “Amazon and No Bid Bezos” might “come back to bite them.” Four days later, after another tweet storm about “Fake News” from the “Amazon Washington Post,” Trump tweeted out an entire five-minute Fox News segment from a series called “Fox’s Swamp Watch.” It denounced the “Bezos bailout,” rehearsing some of Oracle’s theories.
That day, the Court of Federal Claims’ ruling in Oracle’s case became public. Judge Eric Bruggink ruled against Oracle, rejecting the conflicts-of-interest arguments that had gained such extraordinary political momentum. After reviewing the 180,000-page record, Judge Bruggink reached essentially the same conclusion that JEDI contracting officer Brooks and the GAO had reached before.
While there were conflicts and “revolving door” situations that “raised eyebrows,” he wrote, they involved “bit players,” not decision-makers. It was unfortunate, he wrote, that these officials had “made it easy for Oracle to cherry pick from the vast communications and isolate a few suggestive sound bites.”
As for Ubhi — the DDS official who applied for work at AWS while working on JEDI — Judge Bruggink found that he “should have never worked on the JEDI Cloud procurement.” Nevertheless, “his involvement did not impact it,” he continued. Ubhi hadn’t shared confidential information with AWS, Bruggink added, nor he had even had access to any that was “competitively useful.” Finally, Ubhi surely hadn’t driven JEDI’s single-award structure. “If there was a high speed train headed toward a single-award decision,” the judge wrote, “Mr. Ubhi was merely a passenger on that train, and certainly not the conductor.”
A ‘significantly superior’ bid, at a lower price
The ruling had no impact on the runaway political train demanding intervention. A coincidence in mid-June had offered the perfect opportunity. Acting Secretary of Defense Patrick Shanahan — who, as Mattis’s deputy had overseen the JEDI solicitation — had been proceeding toward appointment to the permanent post. But then, during the security check, sensitive domestic issues surfaced. Shanahan withdrew his name, and Trump tapped Mark Esper for the position. (Esper was Trump’s Secretary of the Army and, before that, Raytheon Corp.’s top lobbyist.) The Senate approved Esper in mid-July.
On his ninth day on the job, Esper began the review of JEDI that Trump had promised. (Esper denied having been “directed” to conduct it, but admitted having heard concerns expressed by both members of Congress and “people from the White House.”)
By early October, members of Esper’s review committee had come up with six options for “how to move forward,” according to the Pentagon’s filings in the later litigation with Amazon. At least one of these scenarios apparently involved starting the solicitation over with a multiple-source award structure. That would have benefited the previously eliminated bidders, including not just Oracle but also IBM, where Esper’s son had been working since February. It finally dawned on someone that maybe Esper ought to recuse. So on Oct. 7 — after nine weeks of intimate involvement — he removed himself from his own probe, according to an internal memo that did not immediately become public. Dep. Sec. David Norquist took over.
The same day, in another nonpublic decision, Norquist chose to go forward with the procurement just as it was, apparently rejecting Oracle’s conflict-of-interest arguments for the fourth time (counting decisions by JEDI contracting officer Chanda, the GAO, and Judge Bruggink).
On Oct. 22, Esper’s recusal was made public and then, three days later, the outcome: Microsoft had won. The Pentagon had found Microsoft’s bid “significantly superior” to AWS’s, at a lower price.
Satya Nadella, Chief Executive Officer of Microsoft, reacts as he attends
Microsoft's 'Young Innovators' Summit' in New Delhi, India
February 26, 2020. REUTERS/Anushree Fadnavis
If Amazon needed any additional reason to suspect foul play, it arrived with extraordinary timing. Just then, an unauthorized book by Mattis’s former chief speechwriter, Guy Snodgrass, was being released. The most newsworthy revelation in “Holding the Line: Inside Trump’s Pentagon with Secretary Mattis” concerned something Mattis allegedly let slip during a “small group” meeting — a conference he conducted with his top advisers every Monday, Wednesday, and Friday.
In the summer of 2018, Trump called and directed Mattis to “screw Amazon” by locking them out of a chance to bid for the $10 billion networking contract known as “JEDI.” Mattis demurred. Relaying the story to us during Small Group, Mattis said, “We’re not going to do that. This will be done by the book, both legally and ethically.”
This was the closest thing yet to a smoking gun. And while it was true that Mattis had batted Trump away, maybe Esper hadn’t had the guts to do the same. Certainly that’s the way Amazon’s lawyers saw it.
On the other hand, the Snodgrass account isn’t ironclad. Two people who regularly attended Mattis’s “small group” meetings told Yahoo Finance that they remember the incident differently. While they do recall Mattis pointedly instructing them at some point in 2018 that JEDI would be conducted by the book, they say his remarks were prompted by a media account of Trump’s animus toward Amazon. (Neither could recall the specific story.) They deny that Mattis ever said anything about Trump having told him to “Screw Amazon.”
Amazon sues, Microsoft intervenes
Amazon sued the Pentagon in mid-November. Microsoft then intervened in the suit, to protect its interests.
The technical errors Amazon alleged in its complaint are impossible to assess. Much of the complaint — like almost every subsequent filing by any of the three parties — has been heavily redacted to obscure proprietary or classified information. It’s clear, though, that AWS claimed that the advantages of its products, which were singled out for effusive praise by Pentagon technical boards early in the process, were “arbitrarily minimized” later on, to create the appearance of “false parity” between its offerings and Microsoft’s on what were supposed to have been the most highly weighted factors.
Amazon then suggested that the source-selection personnel, consciously or subconsciously, made the technical errors out of fear for their jobs. “As recent events demonstrate,” AWS argued, “the president is perfectly willing to go after those with whom he disagrees, even within his own Administration. That dynamic cannot have been lost on the JEDI award decision-makers.”
In its responsive filings, Microsoft belittled the supposed “errors” AWS cited as “a grab-bag of technical disagreements with DoD experts.” The law requires judges to give the Pentagon’s technical determinations great deference.
As for the bias claim, “The relevant question … is not whether the President dislikes Amazon,” the Pentagon lawyers wrote, “but whether the source selection officials — the government personnel who actually evaluated AWS’s and Microsoft’s proposals and decided which offeror would receive the JEDI contract — exhibited bias against AWS.” Again, the law presumes that these officials acted in “good faith.” AWS offers no “hard facts” that begin to overcome that presumption, the Pentagon said.
The mere fact that underdog Microsoft won is not suspicious in itself. The former Pentagon official who worked on JEDI said he “wasn’t surprised at all” by the outcome. He continued: “Either one of those clouds — or, for that matter Google’s cloud, had they stayed in the competition — it’s a BMW versus an Audi versus a Tesla. It comes down to, how do they do on the performance characteristics.” (In an interview, Forrester analyst Dave Bartoletti offered a similar assessment. “What we found in 2018,” he said, “the last time we did that evaluation, was that Microsoft had really closed all the gaps between it and AWS.”)
In fact, the former Pentagon official is as embittered by Amazon’s litigation as he is by Oracle’s — because both threaten to further delay implementation of JEDI for the warfighter.
“I am one hundred percent certain that the DoD made a decision based on technical merits through a full and open competition,” he said.
Judge Campbell-Smith will soon decide whether to grant the Pentagon the four-month pause it has sought in order to correct the apparent error that led to the Judge’s preliminary injunction. The government claimed that, with more time, it could conceivably even “make decisions that would … obviate the need for further litigation in this Court.”
Amazon opposed the motion, characterizing it as a request for a “do-over” of “its fatally flawed bid.” (Microsoft supported the Pentagon’s request.)
Judge Campbell-Smith seems likely to grant the Pentagon’s motion, though perhaps with some tweaks. It would be hard for any judge to resist the prospect that a case might go away.
Surely our warfighters would also like to see this case resolved as soon as possible.
Yet for students of the inner workings of Trump’s mind and administration — historians, psychiatrists, prosecutors, and armchair versions of any of the above — this is one case they’d love to see play out.
Roger Parloff is a regular contributor to both Yahoo Finance and Newsweek, and has also been published in Yahoo News, The New York Times, ProPublica, New York Magazine, and NewYorker.com, among others. He was formerly an editor-at-large at Fortune Magazine.
No comments:
Post a Comment