The Pentagon is looking into whether Amazon improperly hired a former Defense Department worker who was involved with a $10 billion government contract for which the tech company is competing.
The government’s review comes as Amazon’s competitors are complaining that the bid is being structured in a way that gives an unfair advantage to Amazon Web Services, the company’s growing cloud computing business.
The contract, known as the Joint Enterprise Defense Initiative, or JEDI, would put much of department’s computing on a secure cloud over a 10-year period. It hasn’t yet been awarded.
Amazon (AMZN) rival Oracle (ORCL) sued the government and Amazon (AMZN) in federal court last month over the role that former Defense worker Deap Ubhi played in the bidding process. Ubhi worked at Amazon (AMZN) before going to the Defense Department, and has since returned to Amazon (AMZN).
The company is not the only one to question the case. Microsoft (MSFT) objected to the bidding requirements, according to Oracle’s complaint. And IBM (IBM) unsuccessfully challenged the bid process with the Government Accountability Office, according to the Washington Post, which first reported the Pentagon’s latest action.
A contracting officer for JEDI looked into Ubhi’s ties to Amazon and whether any conflicts of interest existed last year, according to a court filing that was made public Wednesday. The officer said she also probed ties between Amazon and four other current and former agency workers, who were not identified in the court filing. Ultimately, the officer concluded last July that nothing those employees did hurt the integrity of the contract process.
But the officer said she did not consider at that time whether Amazon had done anything improper, since the company had not yet submitted a formal bid in July. Now that Amazon has done so, the officer says she is looking into whether Amazon’s hiring of Ubhi created an “organizational conflict of interest.”
In its initial complaint last month, Oracle claimed that bid requirements were crafted so that only Amazon Web Service would be in a position to submit a proposal that met the guidelines. Oracle argues that it would be better to split the contract among different vendors so as to create more competition and innovation.
Oracle also said Ubhi was selected as lead product manager for the JEDI bid despite his past ties with Amazon. Oracle also said in its complaint that while Ubhi worked at the Defense department, he had separate talks with Amazon about buying a start-up business he had formed, and also talked about returning to a job at the tech company.
Amazon did not immediately respond to a request for comment from CNN Business.
But the company argued in a response to the court that neither it nor Ubhi did anything wrong. Amazon said that Ubhi voluntarily took himself out of the bidding process early on, and that his access to documents concerning the contract was shut off at that time.
“Oracle wildly overstates Deap Ubhi’s limited involvement in the JEDI cloud procurement,” it writes in its filing, which was made public last week.
“Oracle attempts to use Mr. Ubhi’s voluntary recusal as evidence of supposed bias, when in reality it demonstrates precisely the opposite: Mr. Ubhi acted specifically to avoid any potential conflict by voluntarily recusing himself from any JEDI activities before he eventually returned to AWS,” Amazon said in the court filing.
Oracle also in its legal complaint for access to more documents about the relationship with Ubhi and Amazon. In the latest public filing, the Defense Department criticized that request, calling it a “fishing expedition that, if granted in full, would likely delay this case for months.”
The Pentagon has also defended the role that Ubhi played in the bid process, saying that most of the progress happened after he stopped working on it. The agency also defended the decision to have a single provider for the entire project since “more favorable pricing terms would be achieved under a single-award contract because of the large investment needed to provide the classified and tactical edge offerings.”
Amazon Web Services is a significant part of the company: It brought in $18.2 billion in revenue and $5.1 billion in operating profit through the first nine months of 2018. That was more operating profit than generated from all of its North American sales.
Government contracts have also become a significant part of Amazon’s business. Such deals are one of the reasons Amazon is opening a new secondary headquarters in northern Virginia, about a mile away from the Pentagon.
