Amazon Sues U.S. Over $600 Million CIA Computing Contract

Amazon.com Inc. (AMZN), which had won a $600 million contract for Central Intelligence Agency cloud-computing services, sued the U.S. after International Business Machines Corp. (IBM) secured a government mediator’s ruling that could reopen the bidding process.

Amazon filed its bid protest lawsuit yesterday in the U.S. Court of Federal Claims. The complaint and other documents in the case are under seal until a judge decides what will be made public.

The U.S. Government Accountability Office, the agency that makes recommendations on challenges to contract awards, sided with IBM on June 6, agreeing that the spy agency failed to properly evaluate prices and waived a contract requirement only for Seattle-based Amazon.

The GAO recommended that the CIA reopen negotiations with the companies. The decision, which agencies usually accept, would give Armonk, New York-based IBM another chance to land the computing contract.

IBM is a longtime federal contractor, amassing about $1.5 billion in awards in the fiscal year that ended Sept. 30, 2012. Amazon is newer to the market, setting up a dedicated government sales division only a few years ago. More than 300 U.S. agencies use the company’s computing services, Teresa Carlson, an Amazon vice president, said in statement in May.

Allison Price, a Justice Department spokeswoman, and John Tomczyk, a CIA spokesman, didn’t immediately respond to requests for comment the lawsuit. Ana Rigby, a spokeswoman for Amazon, didn’t immediately respond to an e-mail seeking comment sent before normal business hours.

The CIA has until early August to decide whether to follow the GAO’s recommendation to reopen the bidding process, according to federal contracting regulations.

The case is Amazon Web Services Inc. v. U.S., 13-cv-00506, U.S. Court of Federal Claims (Washington).

To contact the reporters on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Danielle Ivory in Washington at divory@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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