The Digital Transformation Agency (DTA) has finalized a new five-year agreement with Microsoft, known as the Volume Sourcing Arrangement (VSA6), which mandates the tech giant's software across the federal bureaucracy. The deal, set to commence in July 2026, ensures non-corporate Commonwealth entities remain within the Microsoft ecosystem for core digital infrastructure.
DTA chief executive Chris Fechner stated that the agreement would bolster the government's capacity to manage critical ICT infrastructure while ensuring a smooth transition for agencies. The DTA claims the arrangement reduces administrative complexity by negotiating as a single buyer, leading to better pricing and stronger legal protections for sensitive government data.
However, the DTA declined to disclose the percentage of capped price increases, making it difficult for agencies to forecast long-term software expenditure. A strategic review of single-source supplier agreements found that the DTA could not confirm whether its multibillion-dollar deals delivered true value, describing discounts as difficult to quantify.
Despite claiming $1.6 billion in cost avoidance, the agency's lack of a single source of truth has left billions in taxpayer spending in what has been described as a transparency black hole. The previous agreement, in place since 2019, saw total contractual costs rise to over $1.2 billion as more agencies joined and global pricing fluctuated.
VSA6 includes Microsoft's Copilot AI suite, Azure cloud services, and Microsoft 365. A core component is a $1.55 million training fund from Microsoft for APS skills development, including ethical AI use. For 2025-26, departments have procured seven contracts for AI and Copilot training totaling $456,240, about a third of Microsoft's five-year training commitment.
The DTA said Copilot AI is optional for agencies, with no requirement to connect it to other product purchases. The deal aims to accelerate the public service's capability to adopt innovative technologies.
