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Amazon Pays High Price for Holding Up JEDI

by | Feb 18, 2020 | Government Contracts

Unlike the automatic stay of performance that protestors get for free at the Government Accountability Office (GAO), stopping contract performance at the U.S. Court of Federal Claims (COFC)  comes at a price. The COFC recently imposed a $42,000,000 bond on Amazon for stopping performance of the JEDI contract.

The court imposed the bond after granting Amazon a preliminary injunction (PI) stopping performance of the much-litigated JEDI contract awarded by the Department of Defense to Microsoft. The bond acknowledges that holding up performance of the protested new contract can cost the government money. Often the new contract saves the government money in comparison to both the expiring contract and any bridge contract the government needs to continue contract performance during the protest. Because stopping anything via a preliminary injunction usually costs the defendant money, the court rules require the party getting the PI to post a bond—unless, of course, it’s the government. 

According to the government’s lawyers, a bond is designed to “make the defendant whole in the event of undue judicial interference”—in other words, in case the court should not have issued the PI. As one judge wrote, “courts that do not observe these precautions will sometimes leave wounds that the Court of Claims will be in no position to heal.” 

The rules for bonds make sure that any “wounds” are healed. Here, the government proposed the bond amount to the court, asking for a $42,000,000 bond. That amount was based on its estimate of the increased costs of bridge contracts as compared to an enjoined lower-cost JEDI contract for the estimated 6 months it would take to resolve the protest in light of the extensive written documentation that had to be reviewed and the possibility of depositions being taken. That amount was calculated at between $5M-$7M per month. So the government asked the court to impose a $42M bond on Amazon.

Two bond rules helped the government. First, in reviewing the government’s request and the affidavits (partially redacted in the public documents) describing the careful way the government calculated its estimate, the court used a relatively low standard for reviewing the validity of the government’s estimate: simply a “rational basis.”  Second, when in doubt as to the amount, courts should err on the high side – here, $42M – because any damages the court might find the government entitled to because of the PI cannot exceed the amount of the bond.  

The court agreed with the government and imposed a $42M bond. Amazon was ordered to file with the court by February 20th a notice of filing indicating the form of security obtained.

Terrence O’Connor is a Partner and Director of Government Contracts at Berenzweig Leonard.