Updated with statement from Oracle

The U.S. Government Accountability Office has flatly dismissed a complaint from Oracle Corp. over the Pentagon’s $10 billion cloud computing contract, in a development that could hold industrywide repercussions.

Today’s decision comes about two months after Oracle Corp. lodged its protest against JEDI, as the project is officially known. The database maker sought to replace contract’s winner-take-all structure with an arrangement that would split it among multiple providers.

Oracle fears that the single-provider model unfairly favors rival Amazon Web Services Inc., which is seen as the most likely candidate to win JEDI. AWS is not only the largest player in the cloud market, but it also has a strong track record of hosting sensitive government workloads. The company won a landmark $600 million deal in 2014 to build a cloud data center for the Central Intelligence Agency.

In its decision, the GAO dismissed all three major arguments that Oracle presented against JEDI. This includes what was perhaps the most significant claim: that the contract’s winner-take-all structure violates federal procurement regulations.

“GAO’s decision concludes that the Defense Department’s decision to pursue a single-award approach to obtain these cloud services is consistent with applicable statutes (and regulations) because the agency reasonably determined that a single-award approach is in the government’s best interests for various reasons, including national security concerns, as the statute allows,” Ralph White, the managing associate general counsel for procurement law at GAO, said in a statement.

White directly addressed the other two components of Oracle’s protest as well. “GAO’s decision also concludes that the Defense Department provided reasonable support for all of the solicitation provisions that Oracle contended exceeded the agency’s needs,” he said. “Finally, GAO’s decision concludes that the allegations regarding conflicts of interest do not provide a basis for sustaining Oracle’s protest.”

The decision could have consequences that extend beyond the database maker. IBM Corp. filed its own protest over JEDI’s winner-take-all model last month and Microsoft Corp., another contender, expressed concerns too earlier in the bidding process.

The GAO’s assessment that awarding the deal to a single provider doesn’t violate any regulations may clear the path for the $10 billion contract to proceed in its current form. That, in turn, would represent a big victory for the eventual winner of the deal, which is likely to be AWS.

According to Bloomberg, the watchdog will still need to weigh IBM’s protest separately. Moreover, bidders can file additional protests with GAO or take the matter to court once the Pentagon officially names the winner.

There’s a lot at stake. The $10 billion JEDI contract could last 10 years and encompass about 16 percent of the DoD’s total cloud infrastructure. In the long run, such a high-profile vote of confidence will also likely put the winning provider in a better position to compete for other government contracts.

Update: Oracle said in a statement to SiliconANGLE that “Oracle believes that both the warfighter and the taxpayer benefit most from a rigorous and truly competitive process. We remain undeterred in our commitment to bring tremendous value and flexibility to our customers, including the Department of Defense.”

Photo: Oracle