ORCL Oracle Corp

By John D. McKinnon 

WASHINGTON--A Pentagon watchdog concluded that few actual problems occurred in awarding the hotly-disputed JEDI cloud computing contract--in a victory for Microsoft Corp., which won the pact .

The Defense Department's inspector general found, after a lengthy investigation, that the award process was generally consistent with federal procurement laws and policies, despite complaints from several frustrated bidders, including Amazon.com Inc. and Oracle Corp. Several tech giants competed fiercely for the contract, which is worth up to $10 billion over 10 years.

The Pentagon report also concluded that available evidence suggests Microsoft's selection last year didn't appear to stem from White House pressure. However, the investigation was hampered by White House assertions of presidential privilege, which effectively prevented some senior Pentagon officials from answering questions, the IG's office said.

Amazon--long regarded as the front-runner for the JEDI contract--has contended that President Trump's public criticisms of the contract process and Amazon itself played an unfair role in the Pentagon's decision. Mr. Trump has been a sharp critic of Amazon, its founder, Jeff Bezos, and the Washington Post, which Mr. Bezos owns.

JEDI stands for Joint Enterprise Defense Infrastructure.

"The evidence we received showed that the DoD personnel who evaluated the contract proposals and awarded Microsoft the JEDI Cloud contract were not pressured regarding their decision on the award of the contract by any DoD leaders more senior to them, who may have communicated with the White House," the Pentagon inspector general office said in a news release.

The report says that the White House asserted a "presidential communications privilege" in preventing senior DoD officials from directly answering IG questions about any discussions they had with White House officials concerning JEDI. The White House offered to let the officials answer in writing and then the White House would review those answers, but the IG's office concluded that wasn't workable, explaining "it would not be an appropriate and practical way to conduct our review," according to the report.

However, the document goes on to say that people involved in the selection process didn't report feeling any outside influence or pressure. Those people said that "public statements from the president and 'media swirl' about the contract did not directly or indirectly influence the integrity of the procurement process or the outcome of the JEDI cloud source selection," according to the report.

Still, media reports about the public controversy, including Mr. Trump's statements, "may have created the appearance or perception that the contract award process was not fair or unbiased," the report notes.

It also concludes that ethical lapses by a DoD official with Amazon ties were not consequential. The official, Deap Ubhi, previously worked at Amazon Web Services before going to the Pentagon, where he worked on the JEDI program's early development, even after restarting employment negotiations with Amazon. He later returned to work for AWS.

His involvement fueled protests by Oracle in particular. But the IG report concludes that Mr. Ubhi's role in JEDI "was not substantial and did not provide any advantage to his prospective employer, Amazon." Mr. Ubhi didn't respond to requests for comment.

In a separate statement, the Pentagon said the report validates the department's decision.

"The [Inspector General's] final report on the JEDI Cloud procurement confirms that the Department of Defense conducted the JEDI Cloud procurement process fairly and in accordance with law," said the statement from Lt. Col. Robert Carver. "This report should finally close the door on the media and corporate-driven attacks on the career procurement officials who have been working tirelessly to get the much needed JEDI cloud computing environment into the hands of our front-line warfighters."

Microsoft said the report "makes clear the DoD established a proper procurement process." Amazon said it leaves many questions unanswered about the Pentagon's handling of the JEDI deal, including the merits of the award to Microsoft and the Trump administration's role.

"The White House's refusal to cooperate with the IG's investigation is yet another blatant attempt to avoid a meaningful and transparent review of the JEDI contract award," the company said.

Oracle didn't respond to requests for comment.

The report doesn't end the controversy over the JEDI deal. The contract remains on hold, following a complaint by Amazon that is pending in the U.S. Court of Federal Claims. A judge issued a preliminary injunction earlier this year blocking the Pentagon from proceeding with the contract, saying that Amazon was likely to prevail on its claim that the Pentagon improperly evaluated certain pricing issues.

In its report, the inspector general's office said, "we do not draw a conclusion regarding whether the DoD appropriately awarded the JEDI Cloud contract to Microsoft rather than Amazon Web Services. We did not assess the merits of the contractors' proposals or DoD's technical or price evaluations; rather we reviewed the source selection process and determined that it was in compliance with applicable statutes, policies, and the evaluation process."

The Pentagon is seeking to reconsider certain aspects of the contract award. Amazon argues in court that those efforts are an attempt to keep the award in Microsoft's hands.

Microsoft added on Wednesday: "It's now apparent that Amazon bid too high a price and is seeking a do-over so it can bid again...At this stage, Amazon is both delaying critical work for the nation's military and trying to undo the mistake it made when it bid too high a price."

Glenn Fine, the former acting inspector general at the Pentagon, oversaw the probe. Mr. Trump removed him from that post earlier this month, and he returned to being the principal deputy inspector general. Mr. Fine's removal meant he could no longer serve as head of a federal panel created by Congress to keep tabs on the government's management of the $2 trillion coronavirus stimulus package; the White House had opposed the oversight.

Write to John D. McKinnon at john.mckinnon@wsj.com

(END) Dow Jones Newswires

April 16, 2020 03:18 ET (07:18 GMT)

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