Pentagon issues forceful rebuke of Oracle as debate over massive federal contract turns caustic

Pentagon issues forceful rebuke of Oracle as debate over massive federal contract turns caustic
Aaron Gregg and Jay Greene, The Washington Post  5:14 pm CDT, Tuesday, July 30, 2019

WASHINGTON - The Pentagon has issued an unusually strong rebuke of Oracle over the weekend, accusing the company of employing "poorly-informed and often manipulative speculation" in its efforts to undermine the military's process of awarding a massive 10-year contract for cloud computing technology.

The remarks were the latest flash point in the long-running dispute over the bidding process for the Joint Enterprise Defense Infrastructure, or JEDI, a $10 billion contract that would be one of the federal government's most expensive information technology procurements ever.

Oracle alleged in a lawsuit that the Defense Department's bidding process has been plagued with potential conflicts of interest and rigged in favor of Amazon's cloud computing business. Oracle's attempt to block the award was rejected earlier this month, with the judge in charge of the case explaining his reasoning in a lengthy document unsealed Friday. But in his decision, the judge posed new questions about the Pentagon's legal argument for awarding one big contract.

Department of Defense spokeswoman Elissa Smith noted in a statement that the judge also affirmed that the Pentagon was "reasonably justified" to award a single contract. Despite the "tension" in the judge's ruling, the department has said it plans to move ahead and award the contract in August, nearly a year and a half after it was announced.

Smith's statement, which was emailed to reporters Sunday night, also contained the harsh words for Oracle. Smith appeared to take a second swipe at the company as well: "DOD officials directly involved in the work of this procurement along with the senior leaders charged with making the critical decisions related to JEDI have always placed the interests of the warfighter first and have acted without bias, prejudice, or self-interest. The same cannot be said of all parties to the debate over JEDI."

Oracle declined to comment on Smith's remarks.

Oracle had argued that the cloud computing contract should be spread out across several companies. The Pentagon has said that it wants to award JEDI to a single provider and that only Amazon and Microsoft qualify. (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)

The military's position prompted Oracle to sue to halt the bidding. In its lawsuit, the company said the process had been "tainted" by the involvement of Defense Department officials who had close business ties to Amazon.

Oracle also took its concerns to a number of officials in Washington as well as the White House, with co-CEO Safra Catz bringing up the dispute in an April 2018 dinner with President Donald Trump.

In addition, Oracle Executive Vice President Ken Glueck, who runs the company's policy shop in Washington, said Monday that he created a colorful, one-page flow chart that featured photographs of Amazon executives as well as DOD officials in charge of the JEDI procurement with the title "A Conspiracy To Create A Ten Year DoD Cloud Monopoly." A profile picture of Trump's former defense secretary Jim Mattis was included. When sent to The Washington Post, the document was labeled "Most Wanted."

When asked whether he emailed the document or physically handed it to lawmakers or other Washington officials, Glueck said no. But he said he shared it with his colleagues at Oracle. He added that he hung a large version of it in the second-story window of his office and that it was photographed by CNN. The network posted that photo Friday and reported that the graphic had been viewed and discussed by Trump.

In response to a reporter's question during a news conference, Trump this month called for a fresh investigation into the JEDI contract, saying he had received complaints from "companies like Oracle, Microsoft and IBM."

While its request to block the award was rejected, Oracle is hoping that new leadership at the Pentagon will prompt another review of the JEDI procurement. Glueck said he "may write a letter" to newly confirmed Defense Secretary Mark Esper, adding: "There's new leadership at the DoD, which is an opportunity."

"There's very much a debate in the DoD over whether [awarding the $10 billion contract to just one company] is the best approach," Glueck said. "It isn't over until it's over."

The company's latest legal challenge failed in the Court of Federal Claims earlier this month, when Judge Eric Bruggink rejected Oracle's motion to block the award.

It was the third time a bid protest had failed to permanently block the award; last year Oracle brought its case to the Government Accountability Office and was denied. A similar bid protest by IBM was dismissed.

In an extensive legal opinion unsealed Friday afternoon, Bruggink wrote that Oracle had not proved that it was materially harmed by the bidding process, a key requirement for successfully protesting government contract awards. But he also seemed to take issue with the Pentagon's legal justification for its decision to give the contract to a single company, a concern that could be cited in a future bid protest.

In the only point on which he sided with Oracle, Bruggink ruled that a legal exception the Defense Department had used to justify its single-award approach "does not fit the contract" because of the way cloud technology advancements can be expected to affect pricing. He seemed to acknowledge a degree of ambiguity in how that decision should be interpreted, however. Bruggink wrote that his conclusion was "in tension" with the court's previous rulings on the matter, something the Defense Department seized upon in its response. "This peculiar state of affairs is an artifact of a code section which is a mixture, rather than an alloy, of various pieces of legislation," Bruggink wrote. "Not surprisingly, the parties have different views about the implications of this possible result."

Bruggink rejected Oracle's claim that a series of revolving-door hires on the part of Amazon should disqualify it from the competition. His decision also stated that Deap Ubhi - an Amazon Web Services executive who joined the Pentagon and worked closely on the JEDI procurement process before returning to Amazon cloud business as a project manager - had lied to both Amazon and the Defense Department.

Ubhi did not respond to phone and email requests for comment Monday. An Amazon spokesman did not respond to a request for comment for this story. Amazon has said Ubhi has never worked for the company's division that deals with federal contracts.

Ubhi worked as a business development representative for Amazon before joining the Pentagon's Defense Digital Service in August 2016. While working for the military, he separately operated a Silicon Valley-based start-up called TableHero, which used cloud-based software to help restaurants build their business online.

Ubhi publicly praised Amazon while he worked at the Defense Department, repeatedly referring to himself as an "Amazonian." For about seven weeks he worked on early planning for the JEDI procurement before recusing himself from that work over "potential conflicts" due to "further partnership discussions" between TableHero and Amazon.

In response to Oracle's allegations that Ubhi and other officials had biased the procurement in Amazon's favor, the Defense Department opened an investigation into Ubhi's conduct. The probe forced the Pentagon to delay its award by several months.
Bruggink's ruling revealed that some of the information Ubhi had provided to the military was false - and that Amazon was never interested in partnering with TableHero. Bruggink also stated that Amazon Web Services rehired Ubhi "without knowing that he had lied to DoD about his reason for resigning and lied to AWS about complying with DoD ethics rules."

"Mr. Ubhi in fact hid relevant information and misdirected both DoD and AWS," Bruggink wrote.


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