Category: Microsoft news

Today the Inspector General for the Department of Defense released a report into the DoD’s handling of the JEDI contract. With this report and some legal milestones around the corner it is a good time to reflect on where we are in litigation on the award of the contract, and how we got here.

For all of the heat and noise around this case, there is a very specific issue before the court at the moment. It may seem arcane and procedural, but the back-and-forth arguments between Amazon and the government raise a key question of principle and fairness that should matter to us all. Namely, should a company—like Amazon—that bid high and lost, now get a do-over, especially now—as the IG’s report makes clear—Amazon received additional proprietary information about Microsoft’s bid that it should never have had. That’s what Amazon wants. The government rightly says no.

A central premise of the federal procurement system is that “full and fair competition“ on a “level playing field“ means that competitors are asked to make their best bids without knowing what the other has bid or will bid. That principle ensures that companies seeking to do business with the federal government offer their best price from the beginning. They can’t offer a higher price in the hope they’ll win the bid anyway, and then turn around and ask to bid again if they lose. Amazon is not asking to be on a level playing field. It’s arguing that the field be tilted in its favor.

Microsoft won the JEDI contract because the Department of Defense found that we offered “significantly superior” technology at a better price. Four months later, the Court stopped work on the contract based on an error the judge found in one part of the DoD’s procurement process.  The DoD then filed a motion to suspend the litigation for 120 days so it can very specifically address the judge’s concern—but without allowing Amazon and Microsoft to revise their original pricing.

That brings us to where we are today. The DoD is seeking to be responsive to the issue the Court raised in issuing the preliminary injunction. But that’s not good enough for Amazon. Amazon doesn’t want a solution that addresses the Court’s concerns and sticks to the original pricing in the competitors’ bids.  According to its brief, it wants no “constraint on the offerors’ ability to revise their pricing.”

This, according to the government, is a “a transparent effort to undercut Microsoft on price, now that [Amazon] has a target at which to aim.”  Amazon dresses its argument in the language of fairness and level playing fields, but the government’s brief looks right through it: “That AWS now regrets its pricing strategy is no reason to allow AWS a do-over, after it gained significant information about its competitor’s pricing, enabling it to use the currently prevailing information asymmetry to underbid its competitor in an effort to secure the contract.”

But Amazon does not just want to re-do its pricing now that it has information about Microsoft’s pricing. It wants the DoD to go back and broadly re-do its evaluation of many issues, hoping to rescue its losing proposal.  Amazon, as an unsuccessful bidder, lawfully received some information about Microsoft’s winning price.  The Inspector General’s report now reveals that Amazon also received Microsoft proprietary information it should not have received or used —information that the IG states could potentially give it “an unfair advantage in the cloud services marketplace.”  Now that Amazon has this retained knowledge of Microsoft’s proprietary information, a complete re-do can only hurt Microsoft and benefit Amazon.

We can all agree that bid protest cases, and the judges that preside over them, serve an important function in helping to ensure fair procurements. But Amazon’s suggested approach – bid high, lose, try again – isn’t fair.  It’s the opposite.

The JEDI procurement has lasted more than two years. The DoD reviewed our bid against eight distinct evaluation factors and 55 individual sub-factors. The department subjected our products and services to four individual test scenarios, which were composed of more than 78 individual steps. The result? We were rated equal or superior to Amazon in every evaluation factor.

There is a simple explanation for Microsoft’s victory – the strength of our technology, and our willingness to listen to and respond to our potential customers. More than 95 percent of Fortune 500 companies run Microsoft Azure. More than 10,000 government organizations are our customers. Much of the $1 billion (USD) we spend on security each year goes toward Azure. Even if you believe that Amazon may have started as the front runner, it’s clear our team worked hard to catch up and surpass them by investing in our technology and listening to the DoD.

What we learned and developed during the months leading up to the final proposal enabled us to better grasp the DoD’s requirements and what they were looking for so we could adapt our approach to best meet the DoD’s needs. Through the procurement process, we invested significant time and engineering resources into our products, we delivered new innovations including native edge devices that can withstand the challenging environments in which the DoD operates, and we demonstrated that we are capable of meeting their criteria at the best price point.

Our commitment to the DoD runs deep, and we believe our nation’s men and women in uniform deserve this technology now. As Microsoft President Brad Smith wrote in October 2018, “we believe in the strong defense of the United States and we want the people who defend it to have access to the nation’s best technology, including from Microsoft.” That guiding principle remains true today.

We are ready to help the DoD fulfill its important mission. Since we were awarded this contract, we’ve met every deadline established by the DoD. We were ready to move the first DoD early adopter units to the cloud on schedule on February 14. We’ll remain ready to serve the DoD as this process continues to move forward.

Amazon would have you believe that it lost the award because of bias at the highest levels of government. But Amazon, alone, is responsible for the pricing it offered.  As the government explained in its brief: “AWS and Microsoft each had a fair chance to build pricing for the entire procurement, based on their overall business pricing.”  Amazon did build its pricing for the entire procurement, and it wasn’t good enough to win.  And now it wants a re-do.  That’s not good for our war-fighters.  That’s not good for confidence in public procurement. That’s not good for anybody but Amazon.

Tags: Amazon, Defense, JEDI, Microsoft Azure, military