The US defence department cancelled its $10 billion JEDI cloud-computing project on Tuesday, reversing the Trump-era award to Microsoft Corp and announcing a new contract expected to include its rival Amazon.com and possibly other cloud players.

The contract was coveted not for its dollar value as much as its prestige: Both companies for years have sought to persuade businesses and governments that it was safe to shift computing work into their data centres. Meeting all the security requirements of the US military would have been a visible stamp of approval likely to sway other corporate and government clients.

Seattle-based Amazon, the biggest cloud computing provider, was widely expected to win the contract.

But when the Pentagon awarded the sole-source deal to Microsoft in 2019, the announcement gave “huge credibility” to Microsoft, which had been working hard to catch Amazon after a late start with cloud technology, said Mark Moerdler, a senior research analyst at Bernstein.

But the contract has been on hold after Amazon filed a lawsuit challenging the decision under then-President Donald Trump, alleging that the former President exerted improper pressure on military officials to steer the contract away from Amazon.

Trump publicly derided then-Amazon CEO Jeff Bezos and repeatedly criticised the company.

Amazon said in 2019 the Pentagon decision was full of “egregious errors”, which it suggested were a result of “improper pressure from Trump”.