Why is the U.S. State Department paying Amazon $16.5 million for Kindles?

Update, 6/15/2012, 6:07 PM: It appears the deal will go through, as Jeff Bezos and Hillary Clinton are holding a press conference to announce the Kindle Mobile Learning Initiative next Wednesday. more here

Update, 6/11/12, 10:35 PM: NextGov has backtracked on its original post to say that the State Department is “considering” this program and that it “could include as many as 35,000 Kindle e-Readers” over a 5-year, $16.5 million contract. According to NextGov, “State is willing to guarantee approximately $2.3 million in the first year for at least 2,500 Kindles and content, the spokesman said. [The $2.3 million is not mentioned in the government documents cited below.] It is waiting for Amazon to come back with a proposal for further negotiations.”

So if the program were to include as many as 35,000 Kindles, you can use our 7,000/year estimate below. I have several questions for the State Department and I look forward to hearing back from them.

The U.S. State Department has signed is considering a no-bid, $16.5 million contract with Amazon (s AMZN) to provide Kindle Touches — 2,500 of them to start, preloaded with 50 titles each — for its overseas language-education programs. So why has the government decided the Kindle is the best e-reader — and what is Amazon providing for that money?

Update: The base contract’s “anticipated value is $16,500,000 over the life of the contract, which shall be one base year plus 4 option years.”

In a document justifying the no-bid contract, the State Department says it’s identified “the Amazon Kindle as the only e-Reader on the market that meets the Government’s needs, and Amazon as the only company possessing the essential capabilities required by the Government.” It has international 3G, text-to-speech features and a long battery life, which “other e-readers such as the Barnes and Noble Nook (S BKS), the Sony Reader Daily (s SNE) and Kobe [sic] e-Reader cannot provide.”

International 3G was “a firm requirement since all devices are to be used overseas,” the government says, and “the portability and durability of the Kindle is unique, and is required by the government due to overseas shipment requirements and use in public facilities by students.” (Worldreader, in its pilot program giving Kindles to kids in Ghana, found Kindles actually break a lot, but perhaps other e-reader break more?)

Here’s why the Apple (s AAPL) iPad was eliminated as a possibility: Its “additional features are not only unnecessary, but also present unacceptable security and usability risks for the government’s needs in this particular project. Critically, the Apple iPad falls short on two requirements: the centrally managed platform for registration and content delivery, and battery life.”

Less clear: Are 2,500 Kindle Touches really worth $16.5 million? Update: The contract doesn’t limit the State Department to 2,500 Kindles for the $16.5 million. That money is the upper limit of what could be spent over 5 years, and could cover the cost of more Kindles. In a semi-clarification, the Atlantic notes that “the department was getting the actual Kindle devices for 10 percent off retail price.” I’ve asked the State Department for clarification in both e-mails and phone calls and am waiting for them to get back to me.

The Kindle Touch 3G is $189. At a 10 percent discount, that’s $170.10 per Kindle device (not including the preloaded content). I don’t know if the State Department receives an unlimited number of Kindles under its contract; I don’t think so, but that’s what I’m waiting to hear from them. I also don’t know which titles are preloaded.

In the meantime, here’s a couple of estimates.

Estimate 1: The State Department places an initial order for 2,500 Kindles, as stated in the government documents, and then orders 2,500 more Kindles each yearfor a total of five years. That’s $2,126,250 for the devices, leaving over $14 million for the 50 e-books each Kindle is preloaded with, and other stuff.

Estimate 2: The State Department orders 7,000 Kindles each year for five years. That’s $5,953,500 for the devices, leaving about $10.5 million for the 50 e-books each Kindle is preloaded with, and other stuff.

What’s the other stuff? Amazon is responsible for shipping the Kindles overseas, providing 24/7 customer service (something a smaller company, including Barnes & Noble, might have had trouble handling), sharing data on how the Kindles are used to access content and pushing serialized content to the Kindles regularly. Amazon is also responsible for disabling “standard features, as requested by DoS, for the device such as individual purchasing ability.”

The news was first reported by NextGov and picked up by Infodocket.