The Competition to Win a $10 Billion Pentagon Cloud Contract Gets Nasty
(Bloomberg) -- A salacious dossier, a mystery client with an alias, dueling allegations of sexual misconduct.
They’re all part of the dirty-tricks campaigns unleashed over the last 10 months as some of the U.S.’s technology giants battle to win a $10 billion cloud-computing contract that the Pentagon plans to award to a single company.
Allegations of a corrupt procurement process have been directed at Pentagon officials and company managers, primarily at Amazon.com Inc., the front-runner for the contract, which involves transitioning massive amounts of Defense Department data to a commercially operated cloud system. Microsoft Corp., International Business Machines Corp. and Oracle Corp. are the biggest names jockeying against Amazon, though there’s no evidence they are behind the mudslinging.
Those companies do, however, vigorously oppose the Pentagon’s winner-take-all approach, arguing that it will amplify security risks and lock the agency into a single technology provider for many years.
One Oracle critic, Floyd Price, a former Pentagon spokesman who has been an Amazon consultant, says he sees the hand of the Redwood Shores, California, company, with millions of dollars’ worth of defense business on the line, behind the 33-page anti-Amazon dossier circulating in Washington. Kenneth Glueck, the senior vice president who oversees Oracle’s government relations in Washington, wouldn’t respond to the allegation but said the company’s interest is in competing for the contract “with the best, next-generation cloud technology at the best price.”
Oracle filed suit Dec. 6 in federal court in hopes of upending the Pentagon’s plans. The company three weeks earlier lost a similar challenge at the U.S. Government Accountability Office, which referees federal contract disputes. The watchdog agency on Dec. 11 also dismissed a protest by IBM because the dispute is now pending in court.
Bitter contracting fights are nothing new in Washington, yet they rarely sink to the level of personal innuendo and nastiness that have colored the cloud-computing competition. Companies such as Lockheed Martin Corp. and Boeing Co. have been known to vie for a multibillion-dollar contract one month and bid together the next.
Not this time. One version of the dossier, which was obtained by Bloomberg, suggests that corporate executives, including one at Amazon, engaged in improper personal relationships and that Defense Department officials participated in shady activities, all of which gave Amazon an edge.
The document relies on photos, charts and public records in an attempt to portray a web of conflicts to cast doubt on the integrity of the cloud procurement. It does contain certain accurate information regarding connections between industry executives and Defense Department officials, but offers no real proof that those relationships corrupted the process.
The dossier, for example, implies that Sally Donnelly, a top aide to Defense Secretary Jim Mattis, unfairly shaped the contract in favor of Amazon Web Services, the Seattle company’s cloud unit. AWS had been a client of Donnelly’s at a company she owned but sold just before she went to work for Mattis.
Donnelly’s lawyer, Michael Levy, said she had nothing to do with the contract. “She played no role, and exercised no influence, in connection with any government contract, including — as the Department of Defense has confirmed repeatedly — the JEDI contract,” Levy said.
The document was shopped around by RosettiStarr, a Bethesda, Maryland-based private-investigations company, according to Nextgov, a government information-technology website owned by Atlantic Media Co. An article posted on the Nextgov website in August said RosettiStarr declined to reveal who paid for the dossier’s compilation. RosettiStarr didn’t respond to Bloomberg requests for comment or a copy of the dossier.
Some of the allegations verge on the preposterous, suggesting, for example, that an Amazon executive’s son's Facebook friendship with the entrepreneur who bought Donnelly’s company constitutes evidence of corruption.
“I have been in and around this market for 30 years,” said Stan Soloway, who was a deputy undersecretary of defense under President Bill Clinton and is now president of a Washington-area consulting firm, Celero Strategies. Having read news articles about the document, he said: “I’ve never seen anything like this dossier, these allegations and all these rumors.”
A spokesman for Amazon Web Services denied the company had an unfair advantage. “We don’t comment on rumors or speculation,” a Microsoft spokeswoman said. IBM declined to comment.
Pentagon spokeswoman Heather Babb said in a statement that the procurement “has been open and transparent, and followed a thorough, data-driven process involving robust industry feedback.” Babb also said Donnelly wasn’t involved at all and that “no vendors have been pre-selected.”
The nastiness began months before the Defense Department had even released the final solicitation for the contract in July with a name evoking “Star Wars”: The Joint Enterprise Defense Infrastructure cloud, or JEDI.
Floyd, the Oracle critic who was an executive at Donnelly’s firm, SBD Advisors, started fielding questions from reporters about the dossier in the spring and concluded that someone was waging an undercover campaign. It seemed the goal was to show that Donnelly and her firm somehow had rigged the cloud contract for Amazon, Floyd said. And at first glance, their role might raise questions.
From January 2017 to February 2018, Donnelly was one of Mattis’s most-trusted advisers. She previously had run the Washington office for the U.S. Central Command when Mattis ran Centcom in the Barack Obama administration. Her associate at SBD Advisors, Anthony DeMartino, joined her at the Pentagon. Both disclosed that SBD had been a paid consultant to Amazon. They helped craft messaging and marketing strategies in 2016 for potential Defense Department cloud-computing deals, Floyd said. DeMartino declined to comment.
Seven months into Donnelly’s 13-month tenure at the Pentagon, Mattis visited Amazon’s Seattle headquarters, where he met with Chief Executive Officer Jeff Bezos.
Three months later, the Pentagon indicated that it wanted its massive cloud contract to go to a single company. And once the formal solicitation appeared, it contained technical capabilities that only Amazon had achieved, such as having clearance to host secret data within six months of receiving the award.
But the dossier skips or plays down important facts, and misconstrues others. It assumes, for example, that Donnelly still had a stake in her company when she went to work for Mattis, based on her financial disclosure form showing she had received partial payment for it. After subsequently receiving additional payments, she updated her disclosure form to reflect that. Donnelly also reported her past work for Amazon. She has now left the Pentagon and started a new consulting firm in Washington.
Because of their previous Amazon work, Donnelly and DeMartino would have needed conflict-of-interest waivers if they were going to be involved in decision-making on the JEDI procurement. They didn’t seek waivers, according to the Pentagon. Since Donnelly wasn’t involved in the project, her lawyer said, she never felt the need for a waiver.
The dossier also leaves out that Amazon had already won a $600 million cloud contract from the Central Intelligence Agency in 2013, showing that the Seattle-based company can manage and keep secure sensitive government data.
The dossier further alleges a romantic relationship between one of Amazon Web Services’ Washington executives and an executive at London-based C5 Capital Ltd., a private-equity firm that has co-invested with Amazon in projects in the U.S. and the Middle East.
In March 2018, the document shows, a C5 portfolio company bought Donnelly’s company, now called ITC Global Advisors, from an investor, Win Sheridan, a Washington, D.C.-area entrepreneur who originally acquired the company a year earlier. The intended implication appears to be that the first purchase was made by a straw buyer to allow Donnelly to quickly get inside the Pentagon and help Amazon. Sheridan didn’t respond to requests for comment.
Without confirming or denying the relationship, Floyd, now a spokesman for ITC Global Advisors, said he couldn’t comment on something Oracle had concocted. C5 said the allegations are untrue. In a blog post, Amazon said C5 has never been a partner or subcontractor, or lobbied on behalf of AWS, “in order for AWS to obtain government contracts.”
The argument that Donnelly and DeMartino were Amazon’s JEDI rainmakers was dealt a blow in November when the GAO rejected Oracle’s conflict-of-interest allegations. But the agency found that a senior Pentagon official who had worked for Donnelly at SBD Advisors scheduled and attended JEDI-related meetings. It also said he had access to internal strategy documents on the contract.
The GAO identified the official as the deputy chief of staff in Mattis’s office, the title held by DeMartino, who now works with Donnelly at her new firm. Ultimately, the GAO said, the evidence it reviewed indicated that he had no substantive input into the contract’s terms or the procurement process. The same DeMartino conflict-of-interest angle, however, is a key part of Oracle’s just-filed lawsuit, which could take months to resolve.
Neither the GAO decision, nor Oracle’s redacted lawsuit, mentions Donnelly.
Such ties between contractors and government officials make ethics experts squirm. “It’s a longstanding problem,” said Neil Gordon, an investigator with the Project on Government Oversight, speaking generally of the revolving door between the Pentagon and defense companies. “It creates the appearance that officials that work for the government may not be making decisions that are in the best interests of the government or taxpayers. That they are constantly angling to get high paid jobs in the private sector.”
In the spring and summer of 2018, Floyd suspected the anti-Amazon effort took a more ominous turn. He said former interns of SBD Advisors were contacted via LinkedIn and peppered with questions about the firm’s work with Amazon. The people who contacted the interns had no other internet presence beyond their LinkedIn profiles, leading Floyd to suspect they were fake.
In May, Floyd said, things got truly bizarre. A tall, stocky man turned up unannounced at his firm’s offices in downtown Washington. The young man introduced himself as an employee of a Maryland security company and said his client, a wealthy Middle Easterner, needed help with some technology challenges.
At first, Floyd said, he didn’t doubt the visitor’s intentions, even when he started asking about past Amazon work by Floyd’s company and its connections to former Pentagon officials. Floyd later learned the visitor had given him a fake email address and that no one by that name worked for the Maryland security firm he supposedly represented. Floyd now thinks the man was an operative investigating Donnelly’s old firm as part of the smear campaign.
Not all of Amazon’s critics worked in the shadows. John Weiler, an industry gadfly, has alleged that a Pentagon official involved with the JEDI competition sexually harassed co-workers and that improper payments were made to silence a trade group seeking more disclosure of internal Pentagon documents — without offering any proof.
Then Weiler, co-founder and executive director of the Information Technology Acquisition Advisory Council, a group that comments on government procurement of technology, was counterattacked. In August, Medium, a blog platform, took down a user-generated page called @MeTooInTech, which purported to represent a grassroots social media campaign accusing Weiler of harassing female government and tech leaders.
No alleged victims came forward, and a promised press conference to present their allegations never took place. Weiler denied the allegations and said the attacks were “clearly intended to make me shut up and stop talking about the corruption that was going on” with the cloud contract.
Allegations and innuendo continue to swirl around the JEDI bid, which is proving to be one of the Pentagon’s most controversial technology procurements. Now all eyes are on which company will win the prize. A decision is expected by April 2019.
“For the winner, it’s a major opportunity to establish a foothold in the federal market. So it’s not surprising that incumbents would fight tooth and nail to protect their business,” Bloomberg Government analyst Chris Cornillie said in an email. “That said, the extent to which the competition has gotten personal would seem unusual for an IT contract.”
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