Government's Microsoft sourcing deal hits $954m

The federal government’s volume sourcing agreement with Microsoft has reached $954 million in value as it is renewed for another year.

The new contract – now spanning seven years – has now reached almost 10 times its original $96 million value as agency demand for Microsoft 365 and Azure services has increased.

The latest iteration of the VSA includes Microsoft Copilot, which predated the original contract terms as first negotiated in 2019 for a timeframe of three years.

The Digital Transformation Agency (DTA) was previously in discussions with Microsoft over the extent to which the VSA - which was due to expire this year - would cover Copilot for M365 use.

The government ran a six-month trial of Copilot for M365 that involved about 7400 staff and could do that under the existing VSA, with Copilot considered an “additional product”. 

DTA's digital investment advice and sourcing division general manager Wayne Poels confirmed that Microsoft Copilot remained available under the VSA for “participating agencies”.

As of last year, 180,000 licences for Microsoft Office and other products and services were sold to government agencies via the government’s official Microsoft reseller Data#3.

Although the VSA was originally listed as $96 million for three years, in 2019, the government later stated this spend was annualised meaning the contract would likely cost $300 million-plus over three years.

However, as of November 9, 2021, the contract had ballooned to over $800 million, the bulk of which stemmed from an amendment to increase its length by another three years – resulting in June 2025 as the new end date.

In a blog post announcing the latest renewal, the DTA said the new iteration would enable “the continuation of existing commercial arrangements” and “a longer lead time for contract review and engagement".