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Originally published Monday, October 7, 2013 at 7:48 PM

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Amazon wins big ruling in fight to keep $600M CIA contract

A federal court blocked IBM’s attempt to wrest the contract away from the Seattle-based online retail giant.

Seattle Times business reporter

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Amazon Web Services won a key legal victory Monday when a federal court blocked IBM’s attempt to wrest a marquee $600 million Central Intelligence Agency contract away from the online retail giant.

In January, Seattle-based Amazon won the contract to provide Web-based tech infrastructure to the CIA, leading to a protest from IBM, which argued the agency did not properly evaluate its bid.

The General Accountability Office, which reviewed the contract, agreed in part, reopening the bidding. That led Amazon to sue, arguing the GAO’s decision was “arbitrary and capricious” and violated federal contracting law.

U.S. Court of Federal Claims Judge Thomas Wheeler, who heard oral arguments Monday in a closed hearing in Washington, D.C., ruled on the matter late in the day. While the court didn’t issue a written decision, IBM acknowledged it had lost.

“We are disappointed with the ruling from the U.S. Court of Federal Claims, reversing the GAO’s recommendation to reopen the competition and correct flaws in the bidding process,” IBM said in a statement.

Amazon declined to comment on the ruling, which was first reported by FCW, which covers federal technology news.

IBM said it plans to appeal to the Federal Circuit Court of Appeals in Washington, D.C. It called the decision “especially inappropriate” because, the company said, its bid was more cost-effective. What’s more, Big Blue pointed to its track record of supplying technology to the federal government “for decades.”

Indeed, the ruling may well presage a significant shift in technology contracting with the government, which, like much of corporate America, is moving toward renting data storage and computer-server time rather than owning and managing the hardware itself.

That’s a business Amazon helped pioneer, launching the division in 2006. The unit now generates roughly $3 billion in annual revenue, according to analyst estimates.

While Amazon Web Services has several key corporate clients, it is still sometimes dismissed as unable to handle the demands of running mission-critical operations and handling sensitive data. That’s why the CIA contract is so key for Amazon: It goes a long way toward quieting those critics.

While the suit was moving forward, the agency accepted new bids from both companies. By ruling in Amazon’s favor, the court has likely put an end to that process, unless IBM is able to overturn Wheeler’s decision on appeal.

Jay Greene: 206-464-2231 or jgreene@seattletimes.com. Twitter: iamjaygreene

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