Google Sues U.S. Government Over ‘Unfair’ Contracting

In a clear sign that competition between Google (NSDQ: GOOG) and Microsoft (NSDQ: MSFT) over the enterprise software market is heating up, Google has sued the U.S. Government, saying it’s been illegally shut out of a competition to provide e-mail and messaging services to the Department of the Interior. The guidelines published by the department specify that only certain Microsoft products can be used, which, Google says, effectively blocks it from taking part.

The Department is looking for a unified messaging system to replace the 13 separate messaging platforms now operated by its 88,000 users. Its formal “request for quotation,” inviting bids for a five-year contract worth $59 million, was posted on August 30. Google had been in discussions with DOI about winning its messaging business since June 2009.

But the request for price quotes specified that “only the Microsoft Business Productivity Online Suite-Federal” could be proposed. That constituted “a sole-source procurement that is arbitrary and capricious, an abuse of discretion, and otherwise contrary to law,” Google states in its lawsuit.

In the suit, Google says that DOI officials didn’t give its Google Apps solution a fair shot, instead dismissing Google’s “cloud computing” system by saying it wasn’t secure enough. DOI wanted a “private cloud” and an infrastructure dedicated “both physically and logically” to DOI and other Federal government agencies. But Google said a “private cloud” wasn’t necessary and that its solution met all the relevant security standards. At a meeting in June 2010, Google representatives “explained how its Government-only cloud (reserved for federal, state, and local governments) would sufficiently address DOI’s concerns.”

Ultimately, DOI officials published a “Limited Source Justification” explaining the Microsoft-only clause in the request for quotation. It stated that “although many companies can provide messaging services in general, they either cannot provide services that address the complexity of messaging requirements within DOI, or they could not meet the degree of security required by DOI.” Only the Microsoft product “satisfies every requirement identified by the department.”

Google Apps is still a tiny contender when compared to the competing Microsoft applications. According to a 2009 survey, only about 4% of businesses use Google for their primary e-mail and office applications, compared to 77% that exclusively use Microsoft Office. Still, Google execs say their enterprise business is profitable and growing.

The company, which has been the subject of several antitrust inquiries over the past year, has been ramping up its lobbying efforts in D.C. It has spent close to $4 million this year so far.

The lawsuit, filed Friday in the U.S. Court of Federal Claims with co-plaintiff Onix Networking Corp., a reseller of Google services, asks the court to stop DOI from implementing the Microsoft software until it conducts “a competitive procurement in accordance with applicable law and regulations.”

Google v. U.S. Complaint