The race to land a multibillion-dollar Pentagon cloud services contract is now down to Amazon Web Services Inc. and Microsoft Corp. after two other competing bids were rejected by U.S. Defense Department officials, Bloomberg reported today.

According to Defense Department spokeswoman Elissa Smith, only Amazon and Microsoft meet the “minimum requirements” for its Joint Enterprise Defense Infrastructure project, which will be worth $10 billion over the next decade.

The decision means that IBM Corp. and Oracle Corp., both of which were competing fiercely for the contract, are now out of the running. The narrowing of the field of contenders came as the Pentagon said an internal investigation has concluded the contract acquisition process wasn’t tainted by conflicts of interest, rebutting allegations from Oracle.

The elimination of IBM and Oracle isn’t really a surprise, since Amazon and Microsoft have long been seen as the front-runners for the contract thanks to their superior federal security accreditations. AWS is still seen as the No. 1 likely choice, however, since it has the highest security accreditations.

Pentagon chiefs had originally expected to announce the winning bid for the JEDI contract this month, but the acquisition process was delayed by the investigation into the alleged conflict of interest. That accusation was first made by Oracle in a legal challenge that blocked the process. The Pentagon now says the contract will be awarded by mid-July at the earliest.

The importance of the JEDI contract is not to be underestimated. It calls for the creation of a huge cloud-computing system that can enable new weapons capabilities and store classified data. The JEDI cloud will host much of the Pentagon’s information technology infrastructure, and is considered to be a “pathfinder” upon which the DOD will build for decades. Whichever company is awarded the contract will not only receive billions of dollars in federal funding but also will have a strong foundation from which to compete for other opportunities.

Most observers believe Amazon has the advantage over Microsoft, and not only because it’s leading the public cloud computing market. Amazon also has a solid track record with the U.S. government, having secured a $600 million contract to operate a cloud data center on behalf of the Central Intelligence Agency in 2014.

Oracle’s legal challenge

The bidding process was brought to a halt in February when Pentagon officials said they were taking time out to review new information about a potential conflict of interest involving Deap Ubhi, who is a former employee of a DoD technology procurement unit.

The allegations stemmed from a lawsuit filed by Oracle in the U.S. Court of Federal Claims last December. It said the acquisition process was essentially biased because Ubhi had helped to design the terms of the contract in a way that was favorable to Amazon. Ubhi did so at a time when he was negotiating the sale of his restaurant reservation company Tablehero to Amazon, Oracle alleged.

Ubhi, who disclosed this information to the Pentagon shortly before resigning in 2017, was also a strong advocate of a “single-source” award. Oracle, in its lawsuit, argued against this, citing rules laid out by Congress that stipulate there should be multiple contract awards in such cases to the maximum extent practicable. It also argued that Congress prohibits single-source contract awards that are valued at more than $112 million.

However, the Pentagon argues that it’s exempt from these rules because multiple awards under current acquisition laws would be a slow process that could prevent it from quickly delivering new capabilities to the U.S. military.

Following its investigation, the Pentagon determined that Ubhi was only involved in the procurement process at the beginning of its development, and that his involvement had “no adverse impact on the integrity of the acquisition process.”

The Pentagon will now ask the U.S. Court of Federal Claims to lift a stay in Oracle’s case that it had requested in order to carry out its investigation.

Dead in the water

The announcement means that Oracle’s legal challenge is likely to be dead in the water. The court will almost certainly accept the findings of the Pentagon’s investigation. Oracle’s other claim, that the contract shouldn’t be awarded to a single bidder, is also likely to be dismissed since it has already been rejected by the Government Accountability Office.

The importance of the JEDI infrastructure is such that it makes sense for the Pentagon to dismiss Oracle’s arguments and begin negotiating more closely with Amazon and Microsoft, said Holger Mueller, an analyst with Constellation Research Inc. However, he told SiliconANGLE that he believes the insistence on a single supplier doesn’t make sense because mission-critical systems such as JEDI should be multicloud to ensure high availability.

“It’s key for both enterprises and government to architect and design cloud-based next generation applications for multicloud right from the start,” Mueller said. “Cloud gravity” exists, he said, and dependencies on a cloud’s specific capabilities can limit portability in later phases.

That said, others argue that for individual projects such as JEDI, there’s less complexity and fewer potential data security issues to use a single cloud provider.

“The DoD’s decision to go with a single cloud supplier for a set of mission-critical workloads makes some sense to me,” said Dave Vellante, chief analyst at SiliconANGLE sister market research firm Wikibon. “In reading the logic of the DoD’s decision in the GAO’s ruling, it’s clear the DoD sees multicloud as more complex, less secure and more expensive for this set of workloads. I think this is generally true and sensible especially for the most critical applications.”

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