By Aaron Tilley 

The Pentagon on Friday awarded Microsoft Corp. a hotly contested and controversial contract to build a large cloud-computing system for the U.S. military.

The so-called JEDI contract could be worth up to $10 billion to Microsoft over a 10-year period if the Pentagon exercises all options under the deal.

The only other remaining finalist was Inc. Several other firms were eliminated from the bidding earlier.

The deal is a setback for Amazon, the biggest cloud provider, and it was regarded as the favorite to win the contract.

Amazon said it was "surprised about this conclusion. AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion."

Microsoft had no immediate comment.

The process for developing and awarding the JEDI contract has been fraught, amid multiple conflict-of-interest allegations and legal challenges, as well as concerns that opting for a single-source vendor might not be best for the military. Defense Secretary Mark Esper announced his own top-to-bottom review in early August, after President Trump voiced concerns about JEDI. That review delayed the contract award by several weeks.

Mr. Esper this week said he was withdrawing from reviewing the contract to avoid the appearance of a conflict of interest. His son worked for one of the original bidders that was no longer in the running for the deal.

The Pentagon has more than 500 separate clouds. JEDI would serve as an umbrella system to rationalize that number and provide the military with access to services that better keep up with the pace of technology in civilian markets.

"We must improve the speed and effectiveness with which we develop and deploy modernized technical capabilities," Dana Deasy, the Defense Department's chief information officer, said in a statement after the award was announced.

The initial two-year contract includes option periods extending the potential award over a decade. The Pentagon also wants upgrades at commercial prices but with tough built-in cybersecurity protections.

Most of the concerns about the JEDI procurement process have centered on allegations that Amazon had improperly influenced the bidding. Amazon has denied the allegations, and a judge in the U.S. Court of Federal Claims earlier rejected the concerns. That decision has been appealed by Oracle Corp., which had filed a protest after it was eliminated from the bidding process. Oracle declined to comment.

The Pentagon Inspector General's office began investigating the procurement even before a ruling was made on the bid protest, and the Defense Department formally referred some concerns to the IG.


(END) Dow Jones Newswires

October 25, 2019 20:18 ET (00:18 GMT)

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