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Amazon, Microsoft Trade Fresh Barbs in Ongoing JEDI Dispute

By Lou Whiteman – Updated May 8, 2020 at 5:08PM

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The battle for a massive $10 billion government contract is getting ugly.

Microsoft (MSFT 1.88%) and (AMZN 2.74%) traded a new round of shots in their ongoing fight over a $10 billion defense cloud computing contract award on Friday, with Microsoft urging Amazon to stand down but Amazon vowing to press on.

The Pentagon's in October awarded the Joint Enterprise Defense Infrastructure (JEDI) contract to Microsoft, a decision that caught many by surprise as Amazon was considered the front-runner by most analysts. In November, Amazon filed suit to try to reverse the award, claiming that Trump's long-standing feud with Amazon and its CEO Jeff Bezos caused him to get involved and steer the contract to Microsoft.

The two sides have been battling it out ever since. The Pentagon's Inspector General weighed in in April with a mixed verdict, finding that the Department of Defense followed proper procedures when picking Microsoft but saying it was unable to conduct a thorough review of whether there was White House interference because presidential communications privilege was asserted.

The two sides are trading insults...

Microsoft Friday in a blog post said it had received noticed on Tuesday that Amazon had filed a new, confidential, protest with the Pentagon. Microsoft doesn't know what the protest says, "however, if their latest complaint mirrors the arguments Amazon made in court, it's likely yet another attempt to force a redo because they bid high and lost the first time."

Amazon in a separate post did not mince words about Microsoft's statements, saying that the company "has published multiple self-righteous and pontificating blog posts that amount to nothing more than misleading noise."

An illustration of a secure tech cloud.

Image source: Getty Images.

Amazon said the initial reward was "fatally flawed on all six of the technical evaluation factors" and said the Pentagon has failed to address all the issues that the courts have identified in the bidding process. It said Microsoft is trying to "bully its way to an unjust victory," but said "we won't back down on this front."

"Microsoft is doing an awful lot of posturing. We understand why," Amazon wrote. "Nobody knowledgeable and objective believes they have the better offering. And, this has been further underscored by their spotty operational performance during the COVID-19 crisis."

... and doing a lot of flag waving

Microsoft's post, which was written by communications vice president -- and former Marine -- Frank X. Shaw, is heavy in flag waving. He writes of wanting what is best for the warfighter, recalling times on active duty in the 1980s when he was forced to train in cold weather "carrying a 1950s-era sleeping bag and 'waterproof' clothing from the 1970s."

Shaw says Microsoft is simply trying to get the protest behind it so the Pentagon can get the benefit of modern tech.

"At the end of the day, putting the customer first is a good business strategy and one where Amazon has traditionally excelled," Shaw wrote. "In this case, I think about the customer not as a singular "DoD" but as the individual soldier, sailor, airman or Marine who wants and deserves the very best tools to do their job. And the best way Amazon can put these customers first is to stand down on its litigation, stop asking for a do-over and let JEDI proceed."

Amazon communications vice president Drew Herdener in his post says his company is also trying to do what is best for the military.

"As we've said all along, we believe it's critical for the DoD, the country, and future U.S. Government procurements that agencies make decisions free from political retribution and interference, and based fairly and on the facts," Herdener wrote. "We also won't allow blatant political interference or inferior technology to become an acceptable standard. We have great respect and admiration for those who serve and are honored to support the DoD, but we will not sit idle nor apologize for doing what we believe is right, fair, and just."

So what happens next?

It's important to say there is a lot more here we don't know than we know. It's pointless to try to say who's tech is superior, especially since the Pentagon had specific guidelines in mind. It's also pointless to try to pretend we know went on in the room when the decision was being made, and who might have influenced the outcome.

What we do know is that JEDI is a top priority for the Pentagon, and Defense officials in comments have indicated some annoyance that the program has been sidelined while this appeals process plays out.

Reading between the lines in the two statements, Microsoft appears to be playing to that urgency to get implementation work started. If I had to guess I'd wager Amazon faces a tough uphill battle from here, though if this contest has proven anything it is the danger in making too many assumptions.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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