Judge Halts Microsoft Work on Cloud Contract After Amazon Suit

(Bloomberg) -- A federal judge temporarily blocked Microsoft Corp. from working on a $10 billion Pentagon cloud-computing contract after Amazon.com Inc. asked for the delay as it challenges the validity of the award over allegations that President Donald Trump interfered.

The government can’t proceed with implementing the contract “until further order of the court,” according to the decision by Court of Federal Claims Judge Patricia Campbell-Smith. The judge ordered Amazon to pay $42 million in security, the minimum amount that the government had requested in the event of a delay. The judge’s full opinion was posted under seal.

Microsoft spokesman Frank Shaw said the company was “disappointed” in the ruling and reiterated that the Pentagon’s procurement process was fair.

“We believe that we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require,” he said.

Representatives for Amazon and the Pentagon didn’t immediately respond to requests for comment.

Microsoft shares fell as much as 1% to a low of $182.87 after the report. Amazon shares, which had been in negative territory, rose less than 1%.

Microsoft in October won the Pentagon’s Joint Enterprise Defense Infrastructure, or JEDI, cloud contract, estimated to be worth as much as $10 billion over a decade. Amazon Web Services, Amazon’s cloud computing division, filed a lawsuit in November alleging the Defense Department failed to fairly judge its bid for the contract because Trump viewed Amazon Chief Executive Officer Jeff Bezos as his “political enemy.”

Amazon earlier asked the U.S. Court of Federal Claims to allow it to question Trump and top Pentagon leaders to seek additional evidence that might show political interference cost the company the cloud deal. Among the leaders Amazon seeks to depose are Trump, former Defense Secretary James Mattis, Defense Secretary Mark Esper and Dana Deasy, the Pentagon’s chief information officer.

The e-commerce giant’s lawsuit chronicles a laundry list of comments and actions by Trump and the Defense Department that it claims show the Pentagon bowed to political pressure when awarding the deal to Microsoft. In one case, Amazon cites claims in a book by Mattis’ former speechwriter, Guy Snodgrass, that Trump told Mattis in the summer of 2018 to “screw Amazon” by locking it out of the bid. Mattis has criticized the book.

But government lawyers argued in a filing made public on Wednesday that Amazon’s request to depose Trump was “particularly audacious” and unnecessary because the company had failed to offer enough evidence to support its claims of bias.

The government also requested that the court dismiss parts of Amazon’s lawsuit, saying that the company had “ample opportunity to bring its objections” before the bidding process had concluded.

The Pentagon’s JEDI project is designed to consolidate the department’s cloud computing infrastructure and modernize its technology systems. The Pentagon has already begun identifying programs that could be transitioned into the JEDI cloud environment.