Air Force signs volume software deal

Buying in volume pays off, according to the Air Force Standard Systems Group, which expects to save as much as $32 million over the life of a three-year, Air Force-wide contract for Microsoft Corp. software.

Under the contract, which was awarded to Lockheed Martin Federal Systems Division last week, SSG anticipates supplying 300,000 Air Force users with Microsoft Windows and Windows NT operating systems as well as office automation and messaging software. Bundled software will be offered in three configurations (see chart).

If 300,000 users take advantage of this new deal, added to Lockheed Martin's Global Combat Support Systems-Air Force contact, the total value would be at least $122 million and potentially more, depending on which of the three software configurations users opt to purchase.

Lt. Col. Glenn Taylor, director of SSG's Commercial Information Technology Product Area Directorate, said the three Microsoft product bundles "provide an unprecedented combination of flexibility for the customer and deeply discounted prices that accompany high-volume purchases."

SSG estimated that the new agreement will save Air Force users $17 million in General Services Administration prices, with an additional $15 million in savings possible if the Air Force meets negotiated volume targets.

Microsoft and Lockheed Martin could not be reached for comment.

Contracting Strategy

Kenneth Heitkamp, SSG's technical director, said he viewed the Microsoft deal as a volume pricing agreement and not an enterprisewide license— a contracting strategy he said the Air Force still plans to pursue.

"This is a value-pricing option based on potential forecasted quantities," Heitkamp said. "The Air Force is not committing to buy any quantities today...and each major command will make a choice on whether or not this approach is valuable to them. In essence, this provides them with another choice, in addition to [our] other contracting vehicles," he said.

Besides providing a good price, Heitkamp said the new contract also will provide the Air Force with a way to control configuration proliferation within the Air Force, which leads to increased support and training costs.

"This will provide configuration base lines...which will help us reduce total cost of ownership," Heitkamp said.

"It's trying to consolidate and get a better deal," said Chip Mather, senior vice president of Acquisition Solutions Inc. It makes sense to have everyone ordering from one place rather than each Air Force organization ordering from a different contract, he said.

The Microsoft pact eventually could lead to the deployment of just two standard versions of Microsoft software in the Air Force, Heitkamp added: the newest and most current version and its immediate predecessor.

Heitkamp said SSG is looking at "other potential volume licensing agreements" for popular software used widely in the Air Force, but he declined to provide any specific details.

- Diane Frank contributed to this story.