Congress Strikes Back at Cronyism

Congress Strikes Back at Cronyism

The most recently passed appropriations bill that funds the Department of Defense for the next year (FY 2019) includes a controversial funding rider. The rider involves a request for a proposal for cloud computing storage for defense data. But it seems to have been written exclusively with Amazon Web Services in mind, sidelining other potential providers. 

As Tech Crunch reported on September 29, 2018: “The Pentagon is going to make one cloud vendor exceedingly happy when it chooses the winner of the $10 billion, ten-year enterprise cloud project dubbed the Joint Enterprise Defense Infrastructure (or JEDI for short).” The contract is intended to “establish the cloud technology strategy for the military over the next 10 years” to capitalize on innovations such as the Internet of Things, artificial intelligence, and big data. 

The report indicates further that the cloud computing market is “expected to reach $100 billion a year very soon,” and that this contract may allow the winner to get even more government business and will raise the visibility for private sector opportunities. Other competitors thought to be in the mix included some of the heavy weights of the tech sector, such as Microsoft, Google, IBM, and Oracle.

But an explosive report by May Jeong of Vanity Fair published on August 13, 2018 reported that the deal appeared to be “rigged” from the outset to favor a single company:

According to insiders familiar with the 1,375-page request for proposal, the language 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 provision, for instance, stipulates that bidders must already generate more than $2 billion a year in commercial cloud revenues—a “bigger is better” requirement that rules out all but a few of Amazon’s rivals.

This report caught the attention of House and Senate appropriators, who acted to force some transparency on the process.

The Vanity Fair story included an allegation that a former contractor of Amazon had potentially rigged the process for Amazon. Jeong reported:

[T]he process of crafting JEDI bears all the hallmarks of the swamp that Trump has vowed to drain. Though there has long been talk about the Defense Department joining the cloud, the current call for bids was put together only after Defense Secretary James Mattis hired a D.C. lobbyist who had previously consulted for Amazon. The lobbyist, Sally Donnelly, served as a top advisor to Mattis while the details of JEDI were being hammered out. During her tenure, Mattis flew to Seattle to tour Amazon’s headquarters and meet with Jeff Bezos. Then, as the cloud-computing contract was being finalized, Donnelly’s former lobbying firm, SBD Advisors, was bought by an investment fund with ties to Amazon’s cloud-computing unit.

The content of the request for proposal and the appearance of cronyism raised red flags in Congress, which passed legislation to put the brakes on the process. It passed an appropriations bill that funds the Departments of Defense, Labor, Education, and Health and Human Services for the year, but only funds other parts of the government to December 7, 2018. This effectively punted some decisions to the Lame Duck session.

The defense portion of the bill, Section 8137, provided a funding rider that stopped the JEDI request for proposal for 90 days and required a transparent plan for cloud computing services procurement. The law further required,

a detailed description of the Department’s strategy to implement enterprise-wide cloud computing, including the goals and acquisition strategies for all proposed enterprise-wide cloud computing service procurements; the strategy to sustain competition and innovation throughout the period of performance of each contract, including defining opportunities for multiple cloud service providers and insertion of new technologies; and an assessment of potential threats and security vulnerabilities of the proposed cloud computing strategy, and plans to mitigate such risks.

Congress, in other words, forced transparency on the multi-billion dollar contracting process in order to combat potential cronyism.

This is a classic case of Congress fighting federal bureaucrats in order to give the taxpayers some measure of confidence that this process will end up being fair and treat all contactors equally. Cronyism is still alive in Washington, D.C. and Congress has taken a strong step to address controversial lobbying efforts that allowed one of the biggest companies in human history to get an edge in contracting.

Three cheers to Congress for getting this one right and for addressing a scandal that had sidelined a number of the biggest American tech companies.

Jerry Rogers is the founder of Capitol Allies, and the co-host of The LangerCast on the RELM Network. Twitter: @CapitolAllies.

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