Pentagon cancels embattled $10B JEDI cloud contract with Microsoft

After years of legal wrangling, the Department of Defense has canceled its cloud-computing contract with Microsoft that could have been worth $10 billion.

The contract to build a cloud-computing system for the Pentagon was the subject of a lengthy legal battle, as Amazon alleged it was passed over for the lucrative deal due to political reasons.

The Department of Defense did not mention the legal battle but said the contract was canceled due to evolving requirements, tech advances and different needs than when the contract was first offered.

"With the shifting technology environment, it has become clear that the JEDI Cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD’s capability gaps," a DoD spokesperson said in a statement.

Instead, the Pentagon will now offer deals to Microsoft and Amazon Web Services -- the only companies cleared to meet the military’s security requirements -- for individual contracts that meet specific needs.

The Jedi Cloud can be thought of as the military’s classified version of Apple's iCloud where information could be stored securely and shared across the military’s computer system.

John Sherman, the chief information officer at the DoD, told reporters Tuesday that doing away with the Jedi contract had to do with the growing need for a "multi-cloud approach," which would still be the case even if there had been no legal wrangling.

"We’re at a different spot now," Sherman said, adding that he looks at it as an opportunity for having the "maximum arrows in our quiver, using the very best we can get our hands on."

Sherman said after a few months of research, the Pentagon will issue contract solicitations to Amazon and Microsoft in October. He hopes to have the contracts ready and running by next April.

In a blogpost, Toni Townes-Whitley, the president of U.S. Regulated Industries at Microsoft, said the company remains committed to supporting the DoD and that a lengthy litigation process put the Pentagon in a difficult position.

"We understand the DoD’s rationale, and we support them and every military member who needs the mission-critical 21st century technology JEDI would have provided," Townes-Whitley stated. "The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward. The security of the United States is more important than any single contract, and we know that Microsoft will do well when the nation does well."

Townes-Whitley added, however, that policymakers should reform the "protest process" that delayed the technology upgrades.

"The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform," Townes-Whitley wrote. "Amazon filed its protest in November 2019 and its case was expected to take at least another year to litigate and yield a decision, with potential appeals afterward."

An Amazon Web Services spokesperson said in a statement to ABC News that company agrees with the DoD's decision.

"We understand and agree with the DoD’s decision. Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement," the spokesperson said. "Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions."