Pentagon to Respond on Cloud Contract Rivals Say Favors Amazon

(Bloomberg) -- The Pentagon says it's received 1,089 comments -- including submissions from 46 companies -- on its plans for a multibillion-dollar cloud computing contract in a sign of the intense interest and sharp debate over a winner-take-all award that competitors say will favor Amazon.com Inc.

Industry comments and questions, but not the names of the companies making them, will be posted along with the Defense Department's answers next week when a revised “request for proposal” is issued, according to a posting on a federal contracting website and a Pentagon spokeswoman. Comments also came from two trade associations and three government agencies.

A heated lobbying campaign by companies and industry groups is escalating even as President Donald Trump fires a barrage of Twitter attacks on Seattle-based Amazon, making unsupported claims that the online retailer is “costing the United States Post Office massive amounts of money for being their Delivery Boy” and referring to the “Amazon Washington Post” because the newspaper is owned separately by Jeff Bezos, Amazon's chief executive officer.

Inside the White House, though, there's no discussion about turning the power of the federal government against the company, according to five people familiar with the matter.

Read more: As Trump Attacks Amazon on Twitter, White House Holds Its Fire

The president hasn't weighed in publicly on the Pentagon cloud contract. A conservative columnist and activist has bought ads in newspapers including the New York Post that show a laughing Bezos, a photo of him chatting with Defense Secretary Jim Mattis and a fictional letter from Bezos telling Trump that the contract “will really help my many efforts to oppose your Administration's policies.” The activist, Seton Motley, said he's paying for the ads himself and has had no contacts with Amazon's competitors.

Microsoft, IBM, Oracle

Officials announced March 7 that the Defense Department will choose a single winner to provide cloud services, upgrading and replacing online repositories that now inhibit communications between military services and even between units within the Army, Air Force, Navy and Marine Corps.

The plan to pick a single contractor prompted criticism from Microsoft Corp., International Business Machines Corp. and industry groups representing rivals such as Oracle Corp. Rivals say Amazon would be favored because of its market dominance.

Amazon has 44.2 percent of the cloud market followed by Microsoft's Azure with 7.1 percent, China's Alibaba Group Holding Ltd. with 3 percent and Alphabet Inc.'s Google Cloud Platform at 2.3 percent, based on total cloud industry 2016 revenue, according to research firm Gartner Inc.

The industry comments, to be posted on the contracting site, FedBizOpps.gov, may give hints about plans by companies to file pre-award protests with the Government Accountability Office, which could endorse or reject the arguments presented. The Defense Department's responses are likely to flesh out the argument to entrust its cloud computing needs to a single company.

As Amazon and its competitors awaited the published comments, Oracle's Co-Chief Executive Office Safra Catz was to dine with Trump on Tuesday night, people familiar with the plans said.

‘Transparent Process'

“We appreciate industry's participation in the draft solicitation process and are confident that these inputs will help us to refine and clarify the requirement,” Army Lieutenant Colonel Michelle Baldanza, a Pentagon spokeswoman, said in an email. “DoD remains committed to a transparent process.”

The base two-year contract plus four two-year options may lock in the Defense Department's cloud computing for as long as a decade. The Pentagon has given no estimate for the value of the contract except to confirm it will be in the billions of dollars.

As industry groups mobilize to lobby on the contract, Congress also has moved to play a role. In a $1.3 trillion spending bill signed into law March 23, lawmakers directed the Defense Department to provide a “framework” for how it will acquire cloud computing services for all of its entities as well as budget information within 60 days of the bill's enactment, or the third week of May. That would come before the Pentagon releases its final version of its request for proposals by Memorial Day.

House Appropriations Committee spokeswoman Jennifer Hing said, “The committee has concerns about any contract that limits commercial competition by locking the Department into 10-year contracts with no exit strategy.”

Navy Commander Patrick Evans, another Defense Department spokesman, said “no companies have been pre-selected. We have no favorites. We want the best solution for the department.”

--With assistance from Naomi Nix Bill Allison Ben Brody and Jennifer Jacobs

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net, Sara Forden at sforden@bloomberg.net, Larry Liebert

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