FBI Probe, Oracle Suit Eye Amazon’s Government Procurement Role

The Federal Bureau of Investigation (FBI) has launched a preliminary investigation into Amazon‘s work with the U.S. Department of Defense (DoD), shining a spotlight on the challenges technology companies face as governments procure products and services to digitize their own operations.

The Federal News Network (FNN) reported this week that the FBI and DoD Inspector General (IG) are now probing the DoD’s dealings with Amazon Web Services (AWS), which secured a $10 billion contract to lead the DoD’s Joint Enterprise Defense Infrastructure (JEDI) program.

An unnamed source told the publication that there has been a meeting between the FBI’s Public Corruption squad and the DoD IG to discuss the agency’s procurement operations and its work with AWS — following allegations that AWS unfairly won the government contract, thanks to personal connections between the company and the DoD.

While the FBI declined to comment on the matter, former FBI Agent Thomas Baker told the FNN that such investigations involving the DoD IG are not uncommon.

“Often, when it comes to government contracting investigations, the FBI will not take over the case, and they [will often] enlist other people who are experts,” he said.

While details are scarce, the FBI probe is the latest in a string of controversies involving Amazon’s work with the federal government.

Amazon’s Government Contract Criticism

AWS’ cloud rival Oracle has emerged as one of the most outspoken critics of Amazon’s work with the government, initiating legal action against the government late last year that likely centered around the DoD’s bidding process. According to CRN reports last December, while court documents are sealed, Oracle previously argued that the government’s procurement process unfairly favored a single vendor for its cloud services.

“The technology industry is innovating around next-generation cloud at an unprecedented pace, and JEDI, as currently envisioned, virtually assures [the] DoD will be locked into legacy cloud for a decade or more,” said Oracle Senior Vice President Ken Glueck, according to CRN. “The single-award approach is contrary to well-established procurement requirements, and is out of sync with [the] industry’s multi-cloud strategy, which promotes constant competition, fosters rapid innovation and lowers prices.”

Glueck’s statement followed the Government Accountability Office‘s decision to toss out Oracle’s complaint over the DoD’s AWS contract, reports noted.

Amazon’s enterprise cloud service operations are far from the company’s only connection to the government.

Reports in 2017 noted that the DoD’s updated National Defense Authorization Act included the ability for the government entity to procure “commercially available, off-the-shelf items” from online marketplaces, with analysts noting that the language could be particularly good for Amazon to facilitate eProcurement for the DoD.

Experts, at the time, pointed to the gained efficiencies the DoD could enjoy as a result of eProcurement via the Amazon platform. However, the government’s use of Amazon to procure goods quickly gave rise to criticism, directed toward a contract that Amazon’s B2B eCommerce unit, Amazon Business, secured in 2018 from government purchasing alliance U.S. Communities.

“A national contract that Amazon Business secured last year to provide local governments with office and classroom supplies lacks standard safeguards to protect public dollars and public transparency,” said the Institute for Local Self-Reliance (ILSR) in a paper at the time.

According to the ILSR, more than 1,500 local governments had adopted the contract, which enables procurement via Amazon Business — a contract valued at about $5.5 billion, with the potential to last over a decade. The report warned that the use of Amazon could undercut competition and limit government spend transparency.

The DoD has faced criticism, too, over its dealings with Amazon and its broader procurement strategy overall.

Last year, lawmakers introduced a bill in the Senate to accelerate the DoD’s payments to suppliers, with the legislation aiming to enforce 15-day payment terms in an amendment to the National Defense Authorization Act, the same legislation that now allows the DoD to procure from Amazon.

While Amazon remains the focus of much criticism over government procurement deals, the DoD is indeed working with other solution providers to digitize and modernize operations. Last year, SAP Concur secured a contract with the DoD to develop a system that would replace its existing travel and expense management portal, a contract estimated at $9.3 million, according to reports at the time.