Oracle loses $10B Pentagon contract protest as rivals fear Amazon is front-runner

The U.S. Government Accountability Office (GAO) denied a protest by tech giant Oracle on Wednesday, which claimed the Pentagon’s $10 billion pending cloud contract violated federal procurement standards and was biased toward e-commerce giant Amazon.

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Oracle objected to the Pentagon’s request for a single-award contract, said its solicitation process “unduly restrict[s] competition,” and asserted there were potential conflicts of interest related to the procurement process.

The GAO shot down those claims, saying the Pentagon’s decision to pursue a single-source contract to obtain the cloud services was fine since “the agency reasonably determined that a single-award approach is in the government’s best interests for various reasons, including national security concerns, as the statute allows.” It also rejected conflicts of interest claims.

Oracle filed the protest in August. IBM still has a complaint on file with the GAO that has not yet been resolved.

In a statement to FOX Business, a spokesperson for the company said "both the warfighter and the taxpayer " would benefit from a process that is truly competitive.

"We are convinced that if given the opportunity to compete, DoD would choose Oracle Cloud Infrastructure for a very substantial portion of its workloads because OCI delivers the best, most performant and most secure product available at the best price," the company spokesperson said.

The Defense Department’s pending cloud storage contract, known as Joint Enterprise Defense Infrastructure (JEDI), could span a decade and will likely be its largest yet – valued around $10 billion. The department issued draft requests for proposals to host sensitive and classified information and is expected to announce a single winner next year.

Last month, search giant Google pulled its bid for the JEDI contract, amid concerns the job does not align with the company’s artificial intelligence principles. Google has dealt with employee protests and concerns over producing technology for the U.S. military.

Amazon, Oracle, IBM and Microsoft are believed to be the top contenders – but the single-source clause sparked concerns among rivals that Amazon was likely to be the winner, due to its other standing cloud deals.

Microsoft released a statement in March saying it believes the best strategy would leverage “the innovations of multiple cloud service providers.”

Google also said it believed a multi-cloud approach would be in the government’s best interest, “because it allows them to choose the right cloud for the right workload.”

Amazon, which already holds a $600 billion cloud contract with the CIA, has a robust cloud computing division, known as Amazon Web Services, which one analyst predicts could generate $60 billion in revenue over the next five years.

Earlier this year, the Pentagon dramatically scaled back the value of a contract it signed with Amazon partner REAN, to $65 million from $950 million. The original five-year agreement — which was legally challenged by Oracle – was to help accelerate agencies’ migration to the cloud.

In March, a nonprofit group took out a full-page ad in The New York Post lobbying against awarding the newest cloud contract to Amazon. Less Government said in a blog post that the Trump administration “bizarrely [continues] to feed the Bezos hand that bites them,” referencing what it perceives as antagonistic viewpoints between the president and the billionaire tech CEO.