This post was written with contributions from Charlotte Irwin. Charlotte is a Research Strategist in the ETF and Mutual Fund Research Team.
When Amazon isn’t processing your orders for a new phone case and groceries, it’s busy pursuing billion-dollar federal contracts in cloud computing. Amazon founder Jeff Bezos is also after aerospace contracts for his privately held Blue Origin, a rocket manufacturer and suborbital spaceflight company. This month, both companies will be involved in rulings that could disrupt the federal contract market.
At the end of October, the US Department of Defense (DoD) announced the winner of one of the most coveted technology contracts in US history — the Joint Enterprise Defense Infrastructure (JEDI). Following months of legal and political controversies, the 10-year, $10 billion contract to establish the Pentagon’s cloud computing systems was awarded to Microsoft. The decision not to go with Amazon, whose cloud business leads the industry with 48% market share and has already built out services for the CIA, seems questionable to many. President Trump had, after all, publicly opposed granting the contract to a company controlled by his political nemesis Bezos. Given the scale of the contract, and the high likelihood that it could lead to future federal business, it is possible that Amazon will challenge the ruling in the coming weeks.
This won’t be the only battle a Bezos-owned business faces over a government contract this November. Blue Origin lodged a protest with the Government Accountability Office (GAO) in August arguing that the current bidding process for next-generation rocket development favors incumbents and perpetuates a duopoly in the sector. The GAO’s response is due by November 20, and a ruling in Blue Origin’s favor could go a long way in signaling the government’s openness to nontraditional — and often non-publicly traded — bidders.
Originally Posted on November 15, 2019 – The Big What If: Amazon and Blue Origin Disrupt the Federal Contract Market?
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