Pentagon-Amazon Cloud Contract Risks Tax Dollars and National Security

Looks like the swamp isn’t drained yet. One of the largest companies in the world is primed to cash in on a questionable winner-take-all defense contract that reeks of politics as usual.

The Department of Defense is preparing to hand Inc. a massive four-year $1.6 billion cloud computing contract that may give the online mega-retailer a monopoly over federal government data storage. Rife with cronyism and covered in lobbyists’ fingerprints, the sole-source contract would create a lack of competition that could threaten national security and prove disastrous for taxpayers.

In March, the Pentagon began a search for a cloud computing provider that would service the Defense Department’s 3.4 million users and 4 million web-enabled devices. Rather than splitting the enormous project into several smaller contracts and awarding them through a transparent competitive bid process that would drive down costs, Pentagon officials are prepared to award the entire contract to Amazon.

The e-commerce giant appears to have the billion-dollar deal in the bag. After all, snagging shady federal contracts is old hat for Amazon. In 2013, the CIA awarded the company a $600 million cloud computing contract that bypassed competitive bidding.

Amazon has something else going for it in its effort to win the lucrative military contract: An in with Defense Secretary James Mattis. Amazon CEO Jeff Bezos is a friend and adviser to Mattis. In addition to socializing in Washington, the pair recently enjoyed a tête-à-tête at Amazon’s Seattle headquarters.

If Bezos’ chummy relationship with the Defense Department’s top dog isn’t enough to secure the questionable contract, Amazon hopes to bully its way to securing the deal with millions of dollars’ worth of intense lobbying. Last year alone, Amazon spent $12.8 million to lobby the federal government – the second-most a company has ever spent on lobbying expenses in a year.

Amazon’s connections and lobbying dollars seem to be paying off. In February, the Pentagon awarded REAN Cloud LLC, an Amazon partner, a $65 million contract to help migrate Defense Department data to the cloud. Since the REAN Cloud agreement is widely viewed as a predictor for the larger cloud storage contract, it looks like the fix is already in for Amazon.

That would be terrible news for taxpayers who would be left paying for the additional cost incurred through a lack of competition in the bidding process.

Competition for government services typically reduces costs to taxpayers by more than 20 percent. If the Pentagon’s request for proposals for the cloud computing services were broken down into smaller parts and put out to bid, Americans could expect to save $160 million. That’s enough money to fund nearly 3,000 teachers or repave about 130 miles of road.

To make matters worse, because of extension opportunities written in the contract, the scheme could lock in Amazon as the sole provider of Defense Department cloud computing services for a decade or more – likely turning a $1.6 billion contract into a $10 billion windfall for the company.

Awarding Amazon the Pentagon contract would set the table for the company to take over cloud storage services for every federal agency, creating a massive monopoly and costing taxpayers even more due to an absence of options.

Giving Amazon an exclusive contract over the Pentagon’s cloud computing would also threaten national security.

According to Michael J. Daugherty, a director at the National Cybersecurity Society, “Putting all the government national security data on one cloud computing platform seems illogical and dangerous. The DOD data are not merely communications between employees; they are all the data, including classified information, held by the department’s computers.”

By consolidating all of the military’s most sensitive information into one system, the Pentagon is practically inviting hackers – including the Russians and North Koreans who have already penetrated sensitive U.S. networks – to steal America’s vital secrets.

The Defense Department is expected to award the cloud computing contract to Amazon in September. That means there’s still a time for Pentagon officials to rethink their plan to hand Amazon the sole-source contract to administer the military’s cloud computing system.

No government contract should ever be awarded on the basis of cronyism and powerful lobbying – especially one that unnecessarily snatches millions of dollars from taxpayers and threatens America’s national security.


Drew Johnson is a government waste expert who serves as a Senior Fellow at the National Center for Public Policy Research.

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