Google Drops Court Protest That Federal Contract Bidding Favors Microsoft

Google Inc. (GOOG) dropped its lawsuit alleging that the bidding requirements for a $59.3 million contract to supply e-mail services to the U.S. Interior Department unfairly favored Microsoft Corp. (MSFT)

Google sought to end the lawsuit in the U.S. Court of Federal Claims after the Interior Department said it would reopen competition. U.S. Federal Claims Judge Susan Braden in Washington said in a ruling today that dismissal of the case is in “the interests of justice.”

Lawyers for the government told Braden during a hearing yesterday that the research the department relied upon in July 2010 “is now stale in light of new developments in technology and entrants to the market,” according to the ruling.

Google, based in Mountain View, California, sued the Interior Department in October, alleging that a planned e-mail contract unfairly favored Microsoft products and didn’t give full consideration to the company’s “Google Apps for Government” product. Company lawyers argued that Interior didn’t follow federal procurement laws, which favor “full and open” competition.

In a Sept. 22 motion to dismiss the case, lawyers for Google said Interior had agreed to update its market research and seek a contract for cloud e-mail services “in a manner that will not preclude plaintiffs from fairly competing.”

‘Justifiable Basis’

Braden said on Sept. 1 there was a “justifiable basis” for her to find the agency violated federal laws requiring fair competition in the way it conducted the procurement.

“We’re pleased with the outcome of our discussions with the Department of Interior, and look forward to the opportunity to compete for its business and save taxpayers money,” Andrew Kovacs, a Google spokesman, said in an e-mail.

Matt Donovan, a spokesman for Microsoft, said the company is “pleased” the Interior Department “can proceed to obtain the secure e-mail system it needs.”

“We are fully prepared to continue competing for the Department’s business and are confident that we offer the best cloud solutions and value,” Donavan said in an e-mail.

Charles Miller, a spokesman for the Justice Department, had no immediate comment on the dismissal.

Google is competing with Redmond, Washington-based Microsoft to gain a foothold in the $20 billion market to provide so-called cloud computing services to federal government agencies. Cloud services allow government agencies and businesses to have software and data delivered as a service over the Internet.

The case is Google Inc. v. U.S., 10-743, U.S. Court of Federal Claims (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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