WASHINGTON (Reuters) – The U.S. Defense Department canceled its $10 billion JEDI cloud-computing project on Tuesday, pulling the Trump-era award to Microsoft Corp and announcing a new contract that pits the big software firm against rival Amazon.com.
The Pentagon initially said Amazon and Microsoft are the only companies that can meet the department’s requirements but noted later in a press conference that they are reaching out to other cloud providers in the next three months if they also meet the government’s standards.
Microsoft shares dipped a little more than 1% after the news while Amazon’s stock rose more than 3%.
The now-cancelled Joint Enterprise Defense Infrastructure Cloud (JEDI) contract was budgeted for as much as $10 billion and was part of a broader digital modernization of the Pentagon aimed at making it more technologically agile.
“We don’t have an estimate yet, but I wouldn’t latch onto the $10 billion figure,” said John Sherman, chief information officer for the Defense Department.
Microsoft said in a statement the company was confident it will “continue to be successful as the DoD selects partners for new work”. Sherman said that Microsoft could submit a termination bid to recover costs of the scrapped project.
The JEDI contract was awarded to Microsoft in 2019, but Amazon quickly filed a lawsuit to object. Amazon, which was seen as a front-runner to win the project, has argued the contract process reflected undue influence from former President Donald Trump.
While president, Trump publicly derided then-Amazon CEO Jeff Bezos and repeatedly criticized the company. A U.S. Court of Federal Claims judge in April refused to dismiss Amazon’s claims.
(Reporting by Diane Bartz and David Shepardson; Editing by Lisa Shumaker)