Amazon decided to open a second headquarters in Northern Virginia ahead of what was expected to be the award of a massive $10 billion contract from the Pentagon.
However, Friday’s announcement that the contract would go to Microsoft instead is prompting questions about the company’s future.
“Losing the bid is also a hit to the reputation of Amazon, which decided last year to open a large outpost in Northern Virginia that will eventually employ at least 25,000 people,” the New York Times reported on Friday.
People recently employed at the new Amazon HQ2 in Virginia must be having lots of questions this morning. https://t.co/uUzM3RQ4tv
— gubatron (@gubatron) October 26, 2019
Amazon is in the middle of planning to build a massive 22-story, two-tower office building with about 67,000 square feet of ground-floor retail, 2.1 million square feet of office space at Metropolitan Park in Pentagon City, and a roughly 12,500-square-foot daycare center, according to Washington Business Journal.
The building, dubbed HQ2, would be completed by 2023. The plan is currently being reviewed by the Arlington Planning Commission and will then be reviewed by the county board.
Amazon had announced its plans to build its second headquarters in Virginia in 2017, about the time when the Pentagon was drafting a request for proposals from prospective bidders to build its Pentagon cloud program, known as the Joint Enterprise Defense Infrastructure (JEDI).
Amazon CEO Jeff Bezos has been also steadily increasing his presence and influence in the area in the years prior, buying the Washington Post in 2013 and buying a home in Washington, DC, in 2016.
The company has also been increasing its donations to local politicians of both parties in recent months, according to news reports.
Virginia's statehouse elections are just two months away, and Amazon is making its presence felt with $23,000 in campaign contributions. https://t.co/ZsJXUIcZC0
— Washington Business Journal (@WBJonline) October 22, 2019
Friday’s announcement that the contract would go to Microsoft sent Microsoft shares up three percent in after-hours trading on Friday and Amazon’s stock down 0.8 percent, according to a Market Watch article on October 28.
— West Virginia Topics (@dubvNOW) October 25, 2019
“It’s a big loss for [Amazon Web Services], which drives most of Amazon’s profit — and a surprise, given that AWS was the favorite to win by most industry watchers,” according to a Business Insider article published on Saturday.
Amazon is expected to challenge the Pentagon’s decision as early as next week on the basis that President Donald Trump influenced the decision by being critical of Amazon’s owner Jeff Bezos, according to Reuters.
Defense Secretary Mark Esper recused himself from the decision, citing a conflict of interest because his son worked for IBM, one of the contract’s earliest bidders. Esper delegated authority over the contract to Deputy Defense Secretary David Norquist.
However, Amazon is still a leader in providing cloud services, and its new headquarters will bring the company closer to the Central Intelligence Agency (CIA), which it already provides cloud services for and has a $600 million contract with.
In the future, Amazon will likely focus on winning cloud contracts from the CIA, which is reportedly looking to ramp up its reliance on the cloud.
Currently, Amazon is valued at $870 billion, while Microsoft is valued at $1 trillion, according to Barron’s.
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This article has been updated to reflect that Amazon’s CIA contract is $600 million, not $600 billion.