Grassley to Defense Dept.: Cloud Computing Contract Questions Remain Unanswered, Other Approaches Show More Promise

WASHINGTON – Sen. Chuck Grassley (R-Iowa) is once again pushing for answers and potential changes in the Defense Department’s approach to the Joint Enterprise Defense Infrastructure (JEDI) program.

 

In light of potentially burdensome litigation and rumors of rebidding, Grassley reiterated his longstanding concerns with the JEDI program’s contracting process in a letter to Secretary of Defense Lloyd Austin.

 

“As public servants, it is of the utmost importance that we be good stewards of the resources provided by the American people. That requires us to carefully examine the apparent conflicts of interest regarding the JEDI program and take actions to ensure that future negotiations follow all legal and ethical standards,” Grassley wrote.

 

In his letter, Grassley specifically highlighted some of the problems that have faced the JEDI program, including allegations of conflicts of interest, politicization and the potential violation of regulations and statutes. He highlighted the different approach taken by the information security industry and the Central Intelligence Agency in its acquisition of a similar cloud computing system, which may prove better than the single-award contract undertaken by the Defense Department.

 

The senator also pressed the department for answers to questions he asked of Austin more than a month ago and first posed to the department over the course of the last few years.

 

Grassley first wrote to Defense Department leadership in 2019, seeking information on department policies intended to mitigate conflicts of interest and prevent the tailoring of procurement requests to match a specific vendor, as has been alleged in the JEDI program procurement process. He continued to press for information, particularly after the Defense Department’s Office of Inspector General issued recommendations to the department following Grassley’s inquiries.

 

Full text of the letter to Austin follows or can be found HERE.

 

June 8, 2021

 

 

The Honorable Lloyd J. Austin III

Secretary of Defense

1000 Defense Pentagon

Washington, D.C. 20301

                                                             

Dear Secretary Austin:

 

On April 28^th of this year I sent you a letter seeking information I originally requested from the Department of Defense (Department) in January regarding the Joint Enterprise Defense Infrastructure program (JEDI).[1] I have not received a response. However, the day my letter was transmitted, the Court of Federal Claims rendered another decision in the series of cases regarding JEDI. [2] Although that litigation continues, the Department had previously informed Congress that if the government’s motion to dismiss in part failed, the repercussions, particularly with regard to discovery, would be enormously burdensome.[3] Subsequent news articles suggest that the Department is considering redrafting and resoliciting the JEDI contract, pointing to the court’s decision as one of many factors.[4] As you weigh the pros and cons of this decision, I wanted to highlight some of my continuing concerns regarding the JEDI program.

 

 As you know, the JEDI solicitation envisioned an indefinite delivery/indefinite quantity (IDIQ) contract to construct and maintain a Department-wide cloud-based computing system capable of eventually holding the entirety of the Department’s classified and unclassified data, as well as certain artificial intelligence (AI) programs.[5] The Department consistently represented that a single awardee could receive up to $10 billion over a ten-year performance period.[6]

 

From the beginning, allegations arose that the JEDI contract was “tailored,” meaning that it was written to advantage a preferred vendor, reportedly Amazon.[7] Multiple Department officials with Amazon affiliations reportedly failed to properly recuse themselves from this acquisition planning process, including, among other things, deciding upon the single-award approach for JEDI in violation of the Federal Acquisition Regulation (FAR) and numerous federal statutes.[8]

 

As I mentioned in previous letters, the Department’s Office of the Inspector General (DoD OIG) completed an extraordinary report last year that reviewed the JEDI program and some conflicts of interest allegations. In addition to confirming allegations of impropriety in the formation and design of the JEDI request for proposals [or RFP or solicitation], the IG found that Department employees had “lied” to the Department regarding their relationship with companies that were expected to bid on, or actively competing for, the JEDI contract.[9] Nor does it appear that Department officials cooperated fully with the IG’s work.[10]

 

Further, high-level political leadership reportedly were both inexperienced and overly involved in the acquisition strategy for JEDI. Former Department officials familiar with the program’s inner workings have reported to me that a “cloud of uneasiness” hung over the acquisition process due to: 1) the pressure by political leadership to accelerate the JEDI acquisition and 2) the failure of political leadership to recognize their own lack of expertise in the government contracting process and the department’s limited experience in the extremely technical aspects of the cloud marketplace. These political appointees allegedly were zealous to quickly acquire JEDI for the Department even though they did not fully understand it.

 

Unfortunately, DoD OIG has not fully reviewed the complete universe of allegations involving the JEDI procurement. This has led to multiple court cases as well a sense in the industry that an amicable resolution is unlikely.[11] Public perception tees up a lose-lose scenario, in which an Amazon win would appear to confirm that the contract was designed for them, while an Amazon loss would suggest that the political deck was stacked against Amazon. Worse, the longer it takes to settle these disputes the more out of date the contract requirements become, resulting in the American warfighter receiving a less advanced product.

 

There have now been three major bid protests since 2018 challenging different elements of the JEDI contracting process. On August 8, 2018, Oracle filed a pre-award bid protest with the Government Accountability Office (GAO) arguing that JEDI’s single source structure violated Federal law, JEDI’s “gate” criteria unduly restricted competition, and that JEDI was subject to conflicts of interest related to the procurement.^[12] On October 10, 2018, International Business Machines (IBM) filed its own protest also challenging various aspects of the JEDI procurement.^[13] The GAO denied Oracle’s protest on November 14, 2020, and IBM’s on December 11, 2018. Oracle then filed suit in the United States Court of Federal Claims, which denied Oracle’s protest.^[14] The Court of Appeals for the Federal Circuit affirmed the decision,^[15] and Oracle has sought review by the United States Supreme Court.^[16] On November 22, 2019, following the Department’s award of JEDI to Microsoft, Amazon filed its own protest in the Court of Federal Claims, based, in large part, on allegations of political interference.^[17] The Court of Federal Claims denied motions to dismiss brought by the United States and Microsoft.^[18]

 

The Department recently provided Congress a briefing paper asserting that this most recent case, should it proceed, would impose significant and burdensome discovery obligations on the Department. The case would require many senior level Department officials as well as current and former White House officials to testify or produce materials.[19] The ongoing proceedings also would further delay the ever-extending timeline for this project. In my October 5, 2020, letter I asked if the Department considered it necessary to review the technical parameters of the contract due to the procurement delays and the speed at which cloud computing is growing and changing.[20] Although the Department assured me that its existing parameters were adequate, the industry’s actions seem to contradict this statement as, by and large, the cloud computing industry has moved away from single vendor designs. Multiple other federal agencies have followed suit.

 

Specifically, in November 2020 the Central Intelligence Agency (CIA) awarded a cloud computing contract to five separate providers: Amazon, Microsoft, Google, Oracle, and IBM.[21] This award worth “tens of billions” was created as a highly flexible vehicle for cloud services; those in charge within the Intelligence Community (IC) can select providers on the basis of the contractor’s ability to meet specific IT needs.^[22] Essentially, the IC selects the best contractor for the job and is neither hampered nor impeded by the inflexibilities often found in typical government contracts. I believe the multi-vendor operation fosters an atmosphere of competition, innovation, and flexible services. Further, it ensures that we don’t put all of our national security eggs in one basket. This could be a win-win solution for our warfighters, the Department, and the American taxpayer.

 

As public servants, it is of the utmost importance that we be good stewards of the resources provided by the American people. That requires us to carefully examine the apparent conflicts of interest regarding the JEDI program and take actions to ensure that future negotiations follow all legal and ethical standards. That accountability also demands a balance between entering into contracts that provide the most efficiency while also exercising fiscal responsibility with taxpayer funds. So, before continuing in costly, drawn-out disputes, I would encourage the Department to carefully analyze its options and utilize a solution that will be reliable, adaptable, and profitable for the Department’s widespread demands. Further, the questions I previously posed remain unanswered and continue to linger over the JEDI program. I fear the Department’s continued failure to provide forthright answers will continue to erode public trust in its cloud computing goals. I look forward to your expeditious reply. Thank you for your attention to this important matter.

 

Sincerely,

 

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