Microsoft (NASDAQ: MSFT) scored a significant victory on Oct. 25 when it was awarded a lucrative $10 billion contract by the Department of Defense, seizing the opportunity from its sole competitor Amazon (NASDAQ: AMZN). The decision, however, is deeply marred in controversy as allegations arise that President Donald Trump worked to deny Amazon the highly sought-after contract.
The Joint Enterprise Defense Infrastructure (JEDI) program was highly sought after by the two tech giants, and for some time, it appeared as if Amazon was all but certain to receive the contract. Perhaps the most significant factor in Amazon's early lead is the company's history with cloud computing, being a pioneer in the field and possessing a whopping 48% market share, additionally, the company was awarded a similar contract with the Central Intelligence Agency in 2019, and had pertinent experience for its potential role in the JEDI program.
The decision to award the contract to Microsoft came as a major blow to Amazon, though the decision was immediately met with substantial controversy as allegations that President Trump had interfered in the DoD's decision began to surface. The animosity between the President and Amazon CEO Jeff Bezos has been speculated to have had sway over the decision. A forthcoming book penned by former Secretary of State James Mattis' speechwriter, Guy Snodgrass, lobbies allegations that the President directly ordered Mattis to "screw Amazon" out of the contract.
Should the allegations hold true, Amazon will possess a solid case to contest the decision in court, as federal law prohibits any politician, the President, from affecting contract decisions. According to the Washington Post, a source familiar with Amazon's corporate behavior speculated that the company is evaluating its options and may seek to protest the decision. Another source was quoted as saying, "It's crystal clear here that the President of the United States did not want this contract to be awarded to one of the competitors... It's a virtual guarantee that Amazon is going to pull out all the stops to check the government's math on this one." As of the writing of this article, Amazon has not yet taken any formal action against the decision.
Even before the controversial decision, the contract was steeped in debate. The inclination of the DoD towards Amazon and its "single-company" approach towards the JEDI program were hotly contested by Amazon's competitors. Microsoft, as well as IBM (NYSE: IBM) and Oracle (NYSE: ORCL), who had previously been competing for the contract, launched a lobbying campaign in an attempt to convince the DoD to break up the contract and allow multiple companies to cooperate. The initiative by Amazon's competitors eventually fell flat after protests and a lawsuit were dismissed.
Additional scrutiny has been levied against Microsoft itself, which some believe is not entirely as up to the task as Amazon. While Microsoft is second to Amazon in the cloud computing market, it falls quite short of Amazon's innovation. Some experts believe that a delay in the process of awarding the contract may have given Microsoft time to make itself more competitive, as the company was able to make several innovations and secure high-level security clearance that previously had only been held by Amazon.