Google wins court challenge on U.S. government contract

By Diane Bartz

WASHINGTON | Wed Jan 5, 2011 5:27pm EST

WASHINGTON (Reuters) - Google scored a small victory in its government contracting race with Microsoft when a federal judge ordered the Interior Department to rethink an email services contract it plans to put up for bid.

Google had said the proposed terms were unfairly designed against it, arguing in a lawsuit in November the Interior Department acted in an "arbitrary and capricious" manner by only considering proposals based on Microsoft technology.

The rivals have been battling in recent months to win fresh technology procurement contracts from U.S. government agencies. They have so far been relatively small in size but represent inroads to a potentially larger market as more government work moves to "cloud computing."

Google had objected to the Interior Department request for the five-year contract worth up to about $59 million and asked for a preliminary injunction to stop it from going forward.

The judge filed a preliminary injunction on Tuesday ordering the Interior Department to put on hold its request for bids to upgrade its email system.

In her ruling, Judge Susan Braden of the U.S. Court of Federal Claims in Washington, D.C., said Google showed that the Interior Department may have violated rules about competition in contracting and sent the matter back for reconsideration.

However, the court made no judgment on whether Microsoft was the right supplier for the contract.

"The court ... discerns no basis in the present administrative record to support Google allegations of bad faith," the judge wrote.

"Likewise, the court discerns no improper conduct by Microsoft, the actions of which show only competitive zeal and interest in customer satisfaction."

SECURING CLOUD-BASED CONTRACTS

The judge's ruling this week is the latest in a series of spats over government contracts.

Google last month said it was shut out when the U.S. Agriculture Department announced a cloud computing contract to move 120,000 employees onto email, Web conferencing and messaging systems provided over the Internet by Microsoft.

However, Google also won a share of a contract the General Services Administration awarded last month. Unisys Corp won the five-year, $6.7 million contract, with Google as a subcontractor, to transition the GSA to a secure cloud-based platform that includes Google's Gmail, Calendar and other applications.

A Google spokesman on Wednesday said the court decision on the Interior Department was a good one.

"As a proponent of open competition on the Internet and in the technology sector in general, we're pleased with the court's decision," the spokesman said.