Defense chief steps aside from reviewing $10B cloud contract

Defense Secretary Mark Esper has recused himself from making decisions on his department's controversial cloud procurement program, a potentially $10 billion deal that has provoked a bitter rivalry between Amazon and Oracle.

Esper made the decision "out of an abundance of caution" because of his son’s employment with one of the original companies competing for the Joint Enterprise Defense Infrastructure, or JEDI, contract, Pentagon spokesperson Jonathan Hoffman said Tuesday.

“Although not legally required to, he has removed himself from participating in any decision making following the information meetings, due to his adult son's employment with one of the original contract applicants,” Hoffman said in a statement. “The JEDI procurement will continue to move to selection through the normal acquisition process run by career acquisition professionals."

The Pentagon would not say which company employs Esper’s son, Luke. But IBM said in a statement that the secretary's son "has been a digital strategy consultant with IBM Services since February. His role is unrelated to IBM's pursuit of JEDI."

Four companies — Oracle, IBM, Amazon and Microsoft — initially bid for the winner-take-all program, which will allow troops across the Department of Defense to seamlessly share everything from employment information to intelligence around the world through the cloud. Amazon and Microsoft remain in the running for the final contract, which could be worth up to $10 billion over 10 years if all options are exercised.

Both Oracle and IBM have raised issues with the Pentagon’s procurement process for the program, saying that the contract should be split among multiple companies rather than awarded to a single winner. Oracle sued the Pentagon in December after it was cut from the competition, alleging that the Defense Department unfairly limited competition by tailoring the JEDI requirements to Amazon’s proposed solution. A federal judge ruled in favor of the Pentagon, but Oracle announced in August that it would appeal the ruling.

Oracle separately filed a protest in August 2018 with the Government Accountability Office, which also concluded that the Pentagon’s procurement process was fair.

While Oracle has been the most vocal critic of the program, IBM also filed a protest with the GAO in October 2018, arguing that the Pentagon should select multiple winners instead of structuring the competition as winner-take-all.

These concerns rose to the level of the White House, with President Donald Trump ordering officials in July to review the contracting process after both members of Congress and the companies themselves complained the bidding process was not fair.

“I’m getting tremendous complaints about the contract with the Pentagon and with Amazon,” Trump said on July 18. “Some of the greatest companies in the world are complaining about it, having to do with Amazon and the Department of Defense, and I will be asking them to look at it very closely to see what’s going on.”

In response, Esper went through a series of listening sessions to learn more about the program.

An inspector general probe into the procurement process for the program is also still ongoing.