Was the Pentagon's Cloud Computing Project Rigged?
At what point does lobbying cross over into the realm of crony capitalism and rigging the system? That’s a question many tech companies and the U.S. Congress are asking amid concerns that the bidding process for the Department of Defense’s cloud computing project has been fixed in favor of Amazon.
The controversy began when the Pentagon refused to provide justification for its “winner take all” approach to award the entire contract to a single vendor. In fact, it took a mandate from Congress to introduce minimal transparency into the process of selecting a vendor for this enormous project, which will migrate data to an online cloud-based system for 3.4 million users and 4 million devices.
The Pentagon, naturally, has to keep a lot of secrets. But no one was asking to divulge battle plans or technology for missile guidance systems, merely to provide justification for what will be a multibillion dollar taxpayer funded project. The fact that the Pentagon first bristled at providing justification and only did so after an act of Congress forced its hand should be cause enough for concern. But those concerns were amplified after a senior DOD official had a “combative” reaction at the prospect of contractors exercising their right to protest the decision with the Government Accountability Office and the courts.
And just last week, new reports have surfaced that lend credence to fears that the official request for proposals (RFP) for the cloud project, issued on July 26, was rigged in Amazon’s favor. For example, the RFP “contains a host of technical stipulations that only Amazon can meet, making it hard for other leading cloud-services providers to win—or even apply for—the contract.” One rival bidder went so far to say that “everybody immediately knew that it was for Amazon.”
These latest reports also reveal intimate ties between Amazon and high-level Department of Defense staff. Reuters reported last week that Sally Donnelly, a lobbyist who advised Amazon Web Services, Amazon’s cloud computing arm, was brought in by Defense Secretary James Mattis to run his confirmation process in 2017. She was subsequently brought on as a senior adviser and was at the Pentagon while the details for the cloud computing project were being hashed out. And Vanity Fair reported that Ms. Donnelly’s old firm, SBD Advisors, was recently purchased by C5 Capital, “a private equity firm with direct ties to Amazon.”
These new details give Amazon’s main rivals in the federal government cloud computing space reason to worry. Indeed, there have been reports that while the cloud migration was originally intended to be a multi-party contract, the Pentagon reversed course and switched to a sole provider shortly after Secretary Mattis visited Amazon’s headquarters and met with CEO Jeff Bezos.
Questions regarding the legitimacy of the bidding process were made official on August 7, when Oracle filed a protest with the GAO. Nor does it appear that Congress is satisfied with the Pentagon’s justification for a single provider for the cloud. A high-ranking staffer said “we are concerned about the implications of the appearance of conflicts of interest and impropriety related to how Pentagon personnel with close ties to Amazon may have influenced multi-billion-dollar cloud contracts.”
Whichever company wins the award will effectively have a monopoly on Pentagon cloud computing for a decade. It’s no surprise, then, that the current state of affairs has sparked antitrust fears as well as national security concerns over the lack of redundancies and implications of potential cyberattacks and other problems that may arise with a sole-source provider. When factoring the projected $10 billion price tag, it’s fair to wonder whether it’s prudent for one player to wield so much power in an area that is experiencing such rapid growth. Technology is advancing so rapidly that being tied to one vendor for such a long period of time may stifle innovation in cloud computing — or worse, leave the Pentagon stuck with what may be an inferior product in a few years’ time.
The Defense Department could have avoided many of these potential problems long before they surfaced by ensuring a fully transparent process. Now, given the magnitude of the project and the consequences of getting it wrong, Congress must step in and exercise its oversight authority to determine whether there were any improprieties in the bidding process. For its part, the Pentagon should delay the awarding of the cloud contract until all these issues have been settled. Such an important project must be decided on the merits, not the undue influence of lobbyists.
Demetrios Karoutsos is a political and public affairs strategist.