Microsoft Signs US$3 Billion AI Deal to Modernize US Government

Microsoft and the US General Services Administration (GSA) have formalized an agreement to provide US government agencies with a suite of productivity, cloud, and AI services at reduced prices. This initiative aims to modernize the federal government's technology infrastructure and accelerate the adoption of AI tools, projecting significant savings in public spending.

The agreement, expected to generate up to US$3 billion in cost savings in its first year, is designed "to enhance operations, strengthen security and accelerate innovation for the American people," say the GSA and Microsoft. This action directly aligns with the GSA's "OneGov" strategy, which seeks to unify technology acquisitions across the government.

This agreement with Microsoft is a key component of a broader government strategy to standardize and modernize its technology infrastructure. The GSA, as the entity responsible for centralizing government procurement, has been actively forging alliances with major technology providers. In recent months, the administration secured similar deals with other cloud sector leaders, such as Google and Amazon Web Services (AWS).

The underlying goal of these actions is to provide simplified and cost-effective access to commercial AI tools for all federal agencies. This strategic direction is consistent with the pillars of the United States’ AI Action Plan, a framework that seeks to position the US government at the forefront of AI innovation and adoption to improve public services.

The agreement introduces a series of specific offers designed to incentivize modernization. A central element is cost-free access to Microsoft 365 Copilot for a 12-month period for millions of existing government users on the Microsoft G5 platform. Additionally, the deal establishes preferential pricing for other key cloud products, such as the Microsoft Sentinel security information and event management (SIEM) platform and the Azure Monitoring tool.

To facilitate migration and interoperability between systems, the agreement includes significant Azure service discounts and waives data egress fees, a common barrier in cloud modernization processes. The offering also includes Dynamics 365 applications, which are geared toward optimizing supply chain management and improving citizen services. In security, platforms like Microsoft Entra ID and Sentinel are integrated to provide advanced identity and threat protection, supporting the implementation of Zero Trust security architectures.

The services included in the agreement have already been authorized under the Federal Risk and Authorization Management Program (FedRAMP), meeting more than 400 critical security controls established in NIST 800-53 standards. Microsoft 365, Azure, and their primary AI services are authorized at FedRAMP High.

Microsoft has also committed to investing US$20 million in additional support services to assist agencies with implementation and value maximization. This support includes complimentary cost-optimization workshops designed to help agencies identify opportunities to reduce software duplication, automate services, and improve cross-team interoperability. The total value of these services and savings could exceed US$6 billion over a three-year period, marking a significant step in the digital transformation of the US public sector.