Pentagon head recuses himself from $10B cloud bid

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(Bloomberg) --Defense Secretary Mark Esper is recusing himself from any decisions involving a controversial Pentagon cloud computing contract worth as much as $10 billion, to avoid the appearance of a conflict of interest.

Esper will delegate oversight of the contract to Deputy Secretary David Norquist because his son works with one of the original applicants, according to a statement from the Pentagon Tuesday.

“Although not legally required to, he has removed himself from participating in any decision making” on the proposal, according to the statement. The “procurement will continue to move to selection through the normal acquisition process run by career acquisition professionals.”

The Pentagon’s statement didn’t say whether the review of the contract would continue under Norquist.

International Business Machines Corp. confirmed in a statement that Secretary Esper’s son has been a digital strategy consultant with the company since February but said that “his role is unrelated to IBM’s pursuit” of the cloud deal.

Esper is stepping away from the highly contentious contract months after ordering a review of the project this summer after President Donald Trump questioned the fairness of the bid terms.

The Pentagon has said the cloud project, known as the Joint Enterprise Defense Infrastructure, or JEDI, is essential to advancing its technology systems but has faced opposition in the form of lawsuits and political pressure. Championed by former Defense Secretary Jim Mattis, the JEDI contract was intended to bring the Pentagon’s technology into the modern era.

Amazon, Microsoft Inc. and Microsoft Corp. are the last remaining bidders for the contract after the Pentagon eliminated Oracle Corp. and IBM in April.

Trump stunned technology companies, the Defense Department and lawmakers in July when he openly questioned whether the pending contract was being competitively bid amid concerns the deal favored Amazon. Trump’s comments followed a flurry of outreach from Republican members of Congress who complained that the contract’s terms unfairly eliminated some companies and may be biased in favor of Amazon, the market leader in cloud computing.

In September, Esper said his review of the cloud contract had no “hard timeline” to be completed. Separately, the Pentagon’s inspector general has been conducting its own investigation of the contract including potential conflicts of interest and misconduct in the competition.

A spokeswoman for the Defense Department’s inspector general’s office said in a statement on Tuesday that its multidisciplinary team was working as “expeditiously as possible” to complete its review of the contract.

Oracle and IBM have waged a legal and lobbying campaign against the cloud-computing program. A Federal Claims Court Judge in July rejected Oracle”s lawsuit, which alleged the contract terms violated federal procurement law and were fatally tainted by a revolving door of conflicts of interest. The judge said that while the relationships between former Pentagon employees and Amazon raised eyebrows, Oracle didn’t have the legal standing to challenge the terms of the procurement process. Oracle has appealed that ruling.

--With assistance from Tony Capaccio

Bloomberg News