Court Upholds Amazon Victory Against IBM in Bid for CIA Contract

Cloud computing was popularized by Amazon in 2006 and allows companies and organizations to elastically rent computer power, storage, domain hosting, and other services on demand rather than buying and maintaining their own hardware. The principle is similar to, for example, flexible vehicle rental where a business may find it more cost effective to rent or lease vehicles according to their day-to-day needs rather than purchasing them outright or leasing them on a monthly basis.

The cost of maintenance and the associated staff and personnel wages – together with licensing, insurance, and so on – are all borne by the rental company, while the customer can make use of the services as and when required rather than having, in this case, vehicles standing idle when not needed.

Clearly, the Central Intelligence Agency (CIA) thinks cloud computing is a good idea, even with its stringent security requirements. The agency awarded Amazon Web Services, the cloud computing division of Amazon, a contract worth $600 million. Venerable technology titan IBM also bid for the contract, but lost to the younger Amazon.

With so much money at stake, instead of withdrawing gracefully IBM went to the US Government Accountability Office (GAO) complaining about how the rival bids were evaluated when the contract was awarded to Amazon Web Services. The GAO partly sided with IBM and its recommendation in June was that the CIA should re-open the contract for the two parties to bid again. However, Amazon then decided that enough was enough and filed a legal complaint against the GAO recommendation at the US Federal Claims Court.

On October 7, 2013 Judge Thomas Wheeler heard oral arguments on behalf of both sides and ruled in favor of Amazon Web Services, stating that IBM had no grounds for protesting the company’s CIA contract. The judge wrote that the CIA and Amazon Web Services could resume performance of the contract straight away. Amazon had claimed that IBM’s protest was totally unfounded and without merit.

Amazon was not immediately available for comment but had said publicly in July that it was convinced that the CIA had “got it right first time”. A spokesman for the CIA, Todd Ebitz, said that the CIA was pleased that it could proceed with its original intention of obtaining cloud computing services for its intelligence operations.

After the court judgment an IBM spokesman said that it was unhappy with the ruling and planned to appeal the judge’s decision. Clint Roswell, on behalf of IBM, said that he was disappointed with the US Federal Claims Court’s ruling reversing the GAO’s recommendation to re-open the bidding process. He continued that the Court’s decision seemed “especially inappropriate” in the present economy, since he thought IBM’s bid for the contract was better than that of Amazon Web Services and was also “substantially more cost effective”.

During the course of 2013 Amazon has increased its drive to get more US government agencies and organizations to use cloud hosted applications. In May it was finally certified under the FedRamp program (Federal Risk and Authorization Management Program) which it said will actually lower the cost of implementation of its web hosted cloud services to government agencies. FedRamp is a government-wide program to ensure that security assessment, monitoring and authorization is standardized across all agencies and departments.

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