Antitrust critics fear that a winner-take-all contract for the Defense Department’s cloud computing needs could help tech giant Amazon corner the government contract market even further.
The winner of the contract, which the DOD updated its position on last week, in its current form would give its winner control over serving the Pentagon’s cloud computing system as it switches over from an older IT system. The agency predicts that the contract will be worth billions.
Amazon competitors like IBM and Microsoft have been pushing for a multi-party contract that would split cloud-computing services between several companies. They argue that leaving the contract in the hands of a single provider unnecessarily increases cybersecurity risks.
“It’s certainly an indication that Amazon has enormous political power,” said Stacy Mitchell of the Institute for Local Self-Reliance, a research group that advocates for local businesses and tracks Amazon’s movements in government. “They have translated their corporate power and wealth into political power.”
“The fact that the process was accelerated and opaque and that other bidders didn’t have the opportunity to get involved and weigh in on it — it seems to be an indication that Amazon has an inside track to a competitive bidding process,” she argued.
The contracting process began in the early fall when, according to industry sources, the Pentagon had initially signaled it would pursue a multi-party cloud computing contract. The Defense Department later changed course, issuing its Joint Enterprise Defense Infrastructure document in November, with the agency saying it wanted only one cloud computing provider.
The Pentagon ultimately released a draft request for proposal (RFP) on Mar. 7 that stuck to the single source contract. Companies competing for the contract have two weeks from that date to file comment about this proposal by the Mar. 21 deadline, with the ultimate contract award expected in September.
Matt Stoller, an economist at the Open Markets Institute who has become a vocal critic of Amazon’s market power, said that Amazon landing the sole-source contract could have wide-ranging negative effects.
“This is a monopoly story but this is a really serious national security story,” Stoller said.
“A single-source provider for Pentagon cloud services is obviously reckless. The Pentagon should clearly have multiple cloud providers so that if something happens to one of them there is resiliency and redundancy.”
Companies frustrated by what they see as procurement bias towards Amazon have also slammed the decision.
IBM called the move “flawed,” while Microsoft said it was “disappointed."
The tech companies have voiced their frustration through their trade association, the Information Technology Industry Council, which also represents Amazon.
“We are concerned with reports regarding a single-award cloud contract for the Department Enterprise, as well as possibly canceling all awarded DOD cloud contracts leaving the Department with only one cloud solution,” ITI wrote in a November letter to the Pentagon that was obtained by The Hill.
The Pentagon has denied holding any bias towards any single company.
“We want the best solution for the department. We have no favorites,” Timothy Van Name, the deputy director of the Defense Digital Service, told reporters on a call on Wednesday.
Amazon has also disputed the idea that it’s being favored in the contracting process.
"[The Pentagon] will select the provider that best meets their needs for the warfighter. Legacy providers that claim otherwise are focused on protecting their own bottom line and not advancing the mission of DOD,” an Amazon Web Services (AWS) spokeswoman told The Hill in an email.
Not all experts watching the high-profile contract say it would necessarily be bad for one company to win the entire contract.
Chris Cummiskey, a senior fellow at George Washington University’s Center for Cyber and Homeland Security, said that going with a single source provider means that the government has fewer companies to manage.
“With something like this, it probably does make sense to have one unified approach the to technology,” he said. “There’s been this notion that if you have multiple vendors, it’s harder to manage the landscape of vendors.”
But Cummiskey added that multiple vendors on a single contract reduces the risks if one vendor has a problem.
“Personally, I would feel a little bit comfortable if they had a little bit more vendors. It’s the hardest thing to manage but it gives you redundancy,” he qualified.
Critics of the contract say that it would allow Amazon to further tighten its grip on all of government contracting.
“This is really huge — Amazon entering the defense market — because it’s about the concentration of power. Once you get into one contract, then the other ones are soon to follow,” said one senior Democratic Congressional aide who has worked on national defense issues. “They’ll be a dominant player in defense, which is a very clubby space.”
This isn’t Amazon’s first foray into high-dollar government contracting. Late last year, the company made a play for a lucrative, multi-billion dollar contract with the Government Services Administration, which experts say could give it a monopoly over the government commercial procurement space. In 2013, Amazon was awarded a contract to handle cloud computing for the CIA.
In 2016, Amazon hired Anne Rung, the former U.S. Chief Acquisition Officer at the Office of Management and Budget’s Office of Federal Procurement Policy. Hiring Rung and others has been seen as a sign that Amazon is focused on securing government contracts.
“They actually hire in-the-weeds policy people, which is why their relationships on the Hill aren’t that great,” the senior Democratic aide said, adding that the tech giant makes up for a lack of Capitol Hill connections with agency relationships.
Experts say that landing the Pentagon contract could help Amazon win even more government deals in the future.
“I can’t overestimate how competitive this space is, and how it sets the tone for the rest of the agencies in the federal government,” said Cummiskey.
“When that DOD domino falls, it will give whoever gets it a competitive advantage across the government space.”
Updated on 3/14 with more on contracting timeline.