ProPublica, a Pulitzer Prize-winning investigative newsroom, regularly updates subscribers with impactful stories through “The Big Story” newsletter. Recently, an article from The New York Times caught the attention of journalist Doris Burke and her colleague due to its resemblance to a past report. The New York Times reported that Starlink, a satellite internet venture by Elon Musk’s SpaceX, had donated internet services to the White House to enhance wireless connectivity, prompting some former officials to express confusion over the gesture. To the journalists at ProPublica, this seemed reminiscent of a previous investigation they conducted into business dealings involving Microsoft and the Biden administration.
The ProPublica investigation had uncovered that Microsoft offered “free” cybersecurity upgrades to the federal government following President Joe Biden’s initiative to bolster national cybersecurity. This offer, known internally at Microsoft as the White House Offer, appeared ostensibly generous but was revealed to conceal a strategy aimed at binding government clients to Microsoft products. Once the free trial concluded, these clients were effectively obligated to continue with Microsoft’s services due to the adoption-related costs of switching providers, thereby leading to increased subscription revenue for Microsoft.
Microsoft asserted that all agreements adhered to federal laws and regulations, aiming merely to enhance federal cybersecurity defenses. However, experts in government contracting questioned the legality of such maneuvers, suggesting they skirted competitive processes fundamental to government procurement and innovation.
The donation by Starlink to the White House stirred memories, prompting a review of expert opinions regarding the issue. Jessica Tillipman, a George Washington University professor specializing in procurement law, noted that bypassing competitive bidding through such donations limits access to the best goods and services. Commerce Secretary Howard Lutnick, however, expressed a willingness to accept and promote these types of corporate gifts during an appearance on a Silicon Valley podcast, viewing them as beneficial to the government.
Musk, serving as an unpaid “special government employee,” had showcased similar behavior since President Donald Trump’s inauguration, frequently providing his services and products from his companies to the government without taxpayer expense. In February, SpaceX delivered 4,000 of its Starlink terminals gratis to the Federal Aviation Administration.
During the Microsoft investigation, company insiders described a strategy focused on converting government users to paid subscriptions for Microsoft’s Azure platform after the free trial period. The ultimate intent for Musk and Starlink remains unclear, as they declined to comment.
Historically, American federal law has restrained donations to maintain fiscal oversight, supported by the Antideficiency Act, limiting “voluntary services” to prevent unapproved spending by Congress. The General Accounting Office created a legal exemption for “gratuitous services” in 1947, contingent on written agreements waiving payment upfront. Microsoft leveraged this exemption to offer $150 million in consulting services without charge to the government and provided cybersecurity products with a “100% discount” for a limited period.
Questions remain about whether similar agreements exist for SpaceX’s donations. Neither SpaceX, the White House, nor the Federal Aviation Administration responded to inquiries. Responses from officials previously suggested that legal vetting was conducted.
Experts in procurement law argue that despite these agreements meeting legal requirements, they might not align with legislative intent. The potential consequences of receiving such donations could have widespread implications that might not be immediately evident to governmental decision-makers.
Tillipman pointed out that heavy reliance on a single provider in technology could lead to “vendor lock-in.” While the effects of Starlink’s donations are still pending, Microsoft’s precedent offers insights into the potential outcomes. A continuation of Microsoft’s dominant presence in federal contracts is indicated by a document from the Defense Information Systems Agency explaining orders worth $5.2 million placed directly with Microsoft due to prohibitive switching costs.
