Why Amazon’s Fighting So Hard for a CIA Cloud Contract

The battle between IBM and Amazon over a lucrative CIA cloud-computing contract is getting more vicious: in a filing released last week, Amazon swiped at the Government Accountability Office (GAO) for recommending that both companies re-bid on the proposed project.

Amazon actually won the contract to build private-cloud infrastructure for the CIA in January, but IBM asked the GAO to reopen the agreement to bidding. Amazon locking down a $600 million cloud contract was clearly viewed as a serious competitive threat by IBM, which already supplies IT infrastructure to the U.S. intelligence community. Big Blue managed to successfully argue that, because it bid lower than Amazon, the contract-approval process should be reconsidered; the CIA agreed with the GAO, and now Amazon is yelling in legalese at everybody involved.

In its latest filing, Amazon referred to IBM’s proposal as “uncompetitive” and “materially deficient.” New bids on the project were due in mid-August; Amazon winning its case with the U.S. Federal Court of Claims, however, could overturn the GAO’s decision and open the CIA to simply giving the contract to Amazon.

At least one outside analyst thinks Amazon will ultimately triumph. “I don’t think there is a high likelihood that Amazon will lose this contact,” Forrester analyst James Staten told The Seattle Times.

But don’t tell that to Big Blue. “We are confident the court in this case will uphold the GAO’s ruling and the agency’s follow-on actions implementing it,” an IBM spokesperson wrote in a widely circulated statement. “Unlike Amazon, IBM has a long history of delivering successful transformational projects like this for the U.S. government.”

It’s easy to see why Amazon and IBM are fighting so viciously over this contract. For starters, $600 million is $600 million—some business executives would rather commit murder than let that sort of money slip away.

IBM, which boasts a contracting relationship with the federal government that extends back many decades, is surely concerned about Amazon seizing an ever-larger share of agency contracts. Although Amazon has a sizable business in cloud-infrastructure services for commercial firms such as Airbnb, Netflix, and SAP, it has never tackled a federal private-cloud deployment on the scale expected by the CIA; if that wasn’t challenging enough, that private cloud will need to provide mission-critical services while obeying all the various regulations and protocols that frame the federal government’s computing operations.

(For its part, the CIA is staying quiet about what the cloud infrastructure will actually do, but it’s safe to assume that it will store highly secure data.)

If Amazon wins the contract and pulls that project off to the CIA’s satisfaction, it could open the door to still more federal contracts—and make the online retailer a genuine threat to IBM and other longtime fed-tech contractors. Hence IBM’s fervor to counteract the initial agreement, and Amazon’s equally enthusiastic response.

 

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