IBM Loses Challenge to Pentagon Cloud Bid Seen Favoring Amazon

(Bloomberg) -- International Business Machines Corp. lost a challenge over the Pentagon’s $10 billion cloud contract on Tuesday when the U.S. Government Accountability Office rejected the case, saying the matter is currently pending in court.

IBM had asserted that the winner-take-all competition violated procurement statutes and regulations and that the Pentagon had failed to consider potential conflicts of interest.

IBM is the second technology company to lose its protest of the Pentagon’s Joint Enterprise Defense Infrastructure, or JEDI, contract, which is widely seen as favoring Amazon.com Inc., the dominant cloud-services provider.

Oracle Corp. lost its case last month after the GAO upheld the government’s single award approach, saying it followed the law and that the approach “is in the government’s best interests for various reasons, including national security concerns.”

The GAO said in a statement on Tuesday that it “will not decide a protest where the matter involved is the subject of litigation before a court of competent jurisdiction.”

Under the law, the GAO can deny protests or sustain them and recommend that the federal agency overseeing the project make changes to the solicitation.

A spokeswoman for IBM didn’t immediately respond to a request for comment.

Oracle last week continued its challenge of the contract with a lawsuit filed in the U.S. Court of Federal Claims alleging the contract was marred by conflicts of interest and unfair requirements. Both companies have argued that the Pentagon’s decision to choose just one company for the project will stifle innovation and raise security risks for the Defense Department’s data.

The Defense Department has said that making multiple awards for the cloud contract under current acquisition law would be a slow process that “could prevent DoD from rapidly delivering new capabilities and improved effectiveness” that “enterprise-level cloud computing can enable.”

The Pentagon said that the contract will be awarded by next April.

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