President Trump’s social media sniping at Amazon comes as federal agencies consider steering billions of dollars to the retail and cloud-services giant, and critics hope Trump’s fury prompts bureaucrats to hit the brakes.
At the Pentagon, a single-vendor cloud computing contract is about to be open for bids. Competitors fear the contract, which could be worth $10 billion over 10 years, is structured in a way that makes Amazon Web Services the front-runner.
Meanwhile, the General Services Administration is preparing to implement legislation allowing off-the-shelf items — about $53 billion annually — to be purchased through “e-commerce portals,” which critics fear will make Amazon the top source of government office supplies.
Trump mentioned neither potential cash cow in his Twitter criticism of the Jeff Bezos-owned company, and White House press secretary Sarah Sanders said last week that Trump was “not involved” in the Pentagon deal.
Curiously, Trump’s spasm of antagonism toward Amazon — focused on bulk-shipping rates, with a barb about Bezos owning the Washington Post — closely followed activism related to the Pentagon deal.
Trump’s first recent tweet against Amazon was published at 7:57 a.m. on March 29, about an hour after Less Government President Seton Motley appeared on “Fox & Friends,” Trump’s favorite morning show, to denounce Amazon’s path for the cloud contract.
The TV hit was part of a campaign seeking Trump’s attention. Two days earlier, the New York Post ran a full-page ad that Motley bought for $25,000, knowing Trump reads the paper. He also bought promoted tweets displayed to Washington users.
Motley declined to say who paid for the ads, except that it’s not the libertarian Koch brothers. He said that he knows almost nobody at Amazon’s cloud-computing rivals.
“Amazon’s lobbying money is insane, if you wanna talk about money, talk about their freaking money,” he said.
Motley said his intellectual case is more important than his funding and that he would prefer multiple vendors split the Pentagon contract, a position pushed by Amazon’s rivals who argue that would benefit performance and national security.
“It’s a terrible idea having a sole-source, 10-year contract in tech for the Defense Department,” Motley said. “Part of it is Amazon because [Bezos is] a left-wing asshat who’s going to take this money and try to stop everything the Trump administration is going to do — that’s part of it, but that’s not the primary problem.”
Can Trump nix Amazon from Pentagon contract?
As the president waged a largely one-sided Twitter battle, Vanity Fair reported April 2 that unnamed “advisers” were “encouraging Trump to cancel Amazon’s pending multi-billion contract with the Pentagon to provide cloud computing services.”
The Pentagon’s Joint Enterprise Defense Infrastructure cloud deal hasn’t been awarded, but there’s broad suspicion that the company is likely to win it.
Bids for the JEDI cloud will be accepted in May. The Pentagon released a draft bid solicitation for industry comment in March and intends to release a second draft this week before opening the selection process, with a winner announced in September.
Among the reasons to believe Amazon is a shoe-in are that Amazon Web Services has a $600 million, 10-year contract for the CIA’s cloud computing and that it holds a leading position in the U.S. cloud market, though Microsoft and Google are catching up, with Oracle and IBM being other big players.
Suspicion exploded after the Pentagon’s Silicon Valley office awarded a $950 million contract in February to Virginia-based REAN Cloud, which touted its work with Amazon. Oracle Senior Vice President Ken Glueck told the Washington Post, “How does it makes sense to spend a billion dollars to move to Amazon’s cloud before you’ve made the decision of what cloud you’re moving to?” (The REAN award was reduced last month to $65 million.)
In March, the Pentagon said it would give the JEDI cloud contract to a single vendor, and competitors feared the fix was in.
If Amazon loses its bid for the JEDI project, it — or any losing company — can challenge the decision with the Government Accountability Office or file a lawsuit with the U.S. Court of Federal Claims.
Bias is not allowed in government contracting, experts say, but proving bias can be difficult, meaning politically motivated contracting officers may be able to get away with it, while leaders may be able to gently nudge the process toward a particular outcome.
Trump could, for example, boost the standing of rival companies by indirectly highlighting their strengths, or a contracting officer could cite reasonable grounds to conceal an anti-Amazon bias in the contracting process, said University of Baltimore law professor Charles Tiefer.
Tiefer, co-author of the 2012 book Government Contracting Law in the 21st Century and the House’s deputy general counsel for more than a decade, said proving bias is difficult.
“If it was so blatant that the contracting officer that made the award said on the record he did so under orders from Trump, then the Court of Federal Claims would consider reversing the award for bias,” Tiefer said.
But Tiefer said some paths can be taken to avoid a paper trail.
For example, the White House’s legal team “might make some inquiries about special pluses and minuses that different bidders have and then get the president to say something nice about the advantages that just happen coincidentally to belong to Amazon’s rivals,” he said.
For losing bidders, the Court of Federal Claims “is the stronger forum to challenge for bias because it hears live witnesses give live testimony,” Tiefer said. Presiding judges “could put the awarding officer on the stand and ask him whether he made the award decision himself or felt ordered by Trump.”
Joshua Schwartz, co-director of the Government Procurement Law Program at the George Washington University Law School, said bias cannot lawfully influence the contract-awarding process, but agreed with Tiefer that proving it can be difficult.
“It may be difficult for Amazon to prove the president’s opinions were given consideration,” he said.
Schwartz, a member of the advisory committee for the Court of Federal Claims, said one lawful way to target a company is to declare it’s not a “responsible” contractor. Charging that a company doesn’t pay taxes could be grounds for the label, Schwartz said, but he doesn’t see that as a valid argument against Amazon, which last year said it would begin collecting sales tax in all U.S. jurisdictions.
Amazon could challenge a loss by contrasting the offers and prices in the bids, which will be public, Schwartz said. The GAO or the Court of Federal Claims could force it to be rebid, embarrassing Trump. Overt meddling risks administration officials protesting or resigning, he added.
“Now, the president could say, ‘Go find me a valid reason,’” Schwartz said, noting that “before the president got involved, some people felt that the government was in a rush to give this to Amazon.”
Schwartz said the question then would be: “Can they dress this up? Can they make it look like a lamb when it’s a wolf?”
What the Pentagon says
The Pentagon denies steering the JEDI cloud contract to Amazon Web Services and says all companies will be given fair consideration.
“No companies were pre-selected. We have no favorites, and we want the best solution for the department,” Pentagon spokeswoman Heath Babb said.
Many competitors are expected to vie for the contract. Forty-six companies submitted reactions to the Pentagon’s initial draft solicitation, which envisioned a two-year, sole-source contract that could be renewed for a total of 10 years.
Among the potential competitors is CSRA, recently acquired by General Dynamics, which won the $500 million milCloud 2.0 contract last year to provide cloud services for unclassified military information.
CSRA is seeking Impact Level 6 authorization, which would allow the firm to handle secret information, by 2019, company officials told Nextgov. Top authorization is held by a small pool of large companies — another potential advantage for Amazon.
Amazon’s press office did not respond to a request for comment.
Amazon: Government’s shop for office supplies?
Trump’s attacks on Amazon have focused largely on U.S. Postal Service shipping rates, citing a Citigroup analysis last year that USPS should be charging $1.46 more per package for bulk mail.
The president also denounced Amazon’s “putting many thousands of retailers out of business” and claimed, possibly based on outdated information on sales taxes, that the company was paying “little or no taxes to state and local governments.”
A provision tucked into last year’s National Defense Authorization Act, passed by Congress in November, could further entrench Amazon’s commercial-goods dominance.
The General Services Administration has about two years to establish “a program to procure commercial products through commercial e-commerce portals for purposes of enhancing competition, expediting procurement, enabling market research, and ensuring reasonable pricing of commercial products,” the law says.
There’s a concern that a move toward procurement by online purchases will be a big gift to Amazon. However, House Armed Services Committee spokesman Claude Chafin told the Intercept last year that the “legislative intent was never to restrict participation to Amazon/Walmart-like one-stop shop portals, but to include specialized vendors as well.”
GSA spokesmen didn’t respond to a request for comment, but Stacy Mitchell, co-director of the Institute for Local Self-Reliance, said she has heard from people involved in meetings discussing implementation.
Mitchell said that, according to her sources, GSA officials “seem to recognize that having a situation where Amazon becomes the portal for all government undermines competition and makes taxpayers vulnerable to paying higher prices.”
Still, specifics about authorized marketplaces remain up in the air, and proposed GSA guidelines will be subject to a lengthy review process vulnerable to politicization with a variety of stakeholders that need to be consulted, including “affected departments and agencies.”
Mitchell said she shares Trump’s skepticism of Amazon, but while she would like to see aggressive antitrust probes and efforts to put Amazon on equal tax footing with local retailers, she doubts Trump’s attacks will make it happen.
“When Trump gets involved in something, especially in this manner, it’s hard to have a legitimate policy discussion,” Mitchell said.
On that point, Motley disagrees. “Trump was on an anti-Amazon thing before this. We just tried to put it in the jet stream.”
