Microsoft Hooked the Government on Its Products With Freebies. Could Elon Musk’s Starlink Be Doing the Same?

A fewer weeks ago, my workfellow Doris Burke sent maine a communicative from The New York Times that gave america some deja vu.

The portion reported that Starlink, the outer net supplier operated by Elon Musk’s SpaceX, had, successful the words of Trump medication officials, “donated” net work to amended wireless connectivity and compartment reception astatine the White House.

The donation puzzled immoderate erstwhile officials quoted successful the story. But it instantly struck america arsenic the imaginable Trump-era iteration of a tried-and-true concern maneuver we’d spent months reporting connected past year. In that investigation, we focused connected deals betwixt Microsoft and the Biden administration. At the bosom of the arrangements was thing that astir consumers intuitively understand: “Free” offers usually person a catch.

Microsoft began offering the national authorities “free” cybersecurity upgrades and consulting services successful 2021, aft President Joe Biden pressed tech companies to assistance bolster the nation’s cyber defenses. Our probe revealed that the ostensibly altruistic White House Offer, arsenic it was known wrong Microsoft, belied a much complex, profit-driven agenda. The institution knew the proverbial drawback was that, erstwhile the escaped proceedings play ended, national customers who had accepted the connection and installed the upgrades would efficaciously beryllium locked into keeping them due to the fact that switching to a rival astatine that constituent would beryllium costly and cumbersome.

Former Microsoft employees told maine the company’s connection was akin to a cause trader hooking users with escaped samples. “If we springiness you the crack, and you instrumentality the crack, you’ll bask the crack,” 1 said. “And past erstwhile it comes clip for america to instrumentality the ace away, your extremity users volition say, ‘Don’t instrumentality it distant from me.’ And you’ll beryllium forced to wage me.”

What Microsoft predicted internally did so travel to pass. When the escaped trials ended, immense swaths of the national authorities kept the upgrades and began paying the higher subscription fees, unlocking billions successful aboriginal income for the company.

Microsoft has said each agreements with the authorities were “pursued ethically and successful afloat compliance with national laws and regulations” and that its lone extremity during this play was “to heighten the information posture of national agencies who were continuously being targeted by blase nation-state menace actors.”

But experts connected authorities contracting told maine the company’s maneuvers were legally tenuous. They circumvented the competitory bidding process that is simply a bedrock of authorities procurement, shutting rivals retired of contention for lucrative national concern and, by extension, stifling innovation successful the industry.

After speechmaking the Times communicative astir Starlink’s donation to the White House, I checked backmost successful with those experts.

“It doesn’t substance if it was Microsoft past twelvemonth oregon Starlink contiguous oregon different institution tomorrow,” said Jessica Tillipman, subordinate dean for authorities procurement instrumentality studies astatine George Washington University Law School. “Anytime you’re doing this, it’s a backmost doorway astir the contention processes that guarantee we person the champion goods and services from the champion vendors.”

Typically, successful a competitory bidding process, the authorities solicits proposals from vendors for the goods and services it wants to buy. Those vendors past taxable their proposals to the government, which theoretically chooses the champion enactment successful presumption of prime and cost. Giveaways circumvent that full process.

Yet, to perceive Commerce Secretary Howard Lutnick archer it, the Trump medication wants to not lone normalize specified donations but promote them crossed Washington.

Last month, during an quality connected the Silicon Valley podcast “All-In,” helium floated his conception of a “gratis” vendor who “gives merchandise to the government.” In the episode, released conscionable a fewer days aft The New York Times published its Starlink story, Lutnick said specified a donor would not “have to spell done the full process of becoming a due vendor due to the fact that you’re giving it to us.” Later, helium added: “You don’t person to motion the struggle signifier and each this worldly due to the fact that you’re not moving for the government. You’re conscionable giving worldly to the government. You are virtually giving of yourself. You’re not looking for anything. You’re not taking immoderate money.”

Since President Donald Trump took bureau successful January, Musk, who is classified arsenic an unpaid “special authorities employee,” has made a amusement of providing his services to the president and products from his companies to the authorities “at nary outgo to the taxpayer.” The White House donation was conscionable the latest move. In February, helium directed his institution SpaceX to vessel 4,000 terminals, astatine nary cost, to the Federal Aviation Administration for installation of its Starlink outer net service.

During our Microsoft investigation, salespeople told maine that wrong the institution the explicit “end game” was converting authorities users to paid upgraded subscriptions aft the escaped proceedings and yet gaining marketplace stock for Azure, its unreality platform. It’s unclear what the extremity crippled is for Musk and Starlink. Neither responded to emailed questions.

Federal instrumentality has agelong attempted to restrict donations to the government, successful ample portion to support oversight connected spending.

At slightest arsenic acold backmost arsenic the 19th century, enforcement subdivision unit were entering into contracts without seeking the indispensable backing from Congress, which was expected to person the powerfulness of the purse. Lawmakers didn’t privation taxpayers to beryllium connected the hook for spending that Congress hadn’t appropriated, truthful they passed the Antideficiency Act, a mentation of which remains successful effect today. One information restricted “voluntary services” to defender against a expected unpaid aboriginal demanding authorities payment.

But successful 1947, the General Accounting Office (now called the Government Accountability Office), which offers opinions connected fiscal laws, made an exemption: Providing what became known arsenic “gratuitous services” would beryllium allowed arsenic agelong arsenic the parties hold “in penning and successful advance” that the donor waives payment.

Microsoft utilized that exemption to transportation the consulting services it valued astatine $150 cardinal to its authorities customers, entering into alleged gratuitous services agreements. To springiness distant the existent cybersecurity products, the institution provided existing national customers with a “100% discount” for up to a year.

It is unclear whether gratuitous services agreements were successful spot for Musk’s giveaways. The White House and the FAA did not respond to written questions. Neither did SpaceX. An authoritative told The New York Times past period that a lawyer overseeing morals issues successful the White House Counsel’s Office had vetted the Starlink donation to the White House.

For the experts I consulted, the written agreements mightiness assistance companies comply with the missive of the law, but surely not with the tone of it. “Just due to the fact that thing is technically ineligible does not marque it right,” said Eve Lyon, an lawyer who worked for 4 decades arsenic a procurement specializer successful the national government.

The consequences of accepting a giveaway, nary substance however it’s transferred, tin beryllium acold reaching, Lyon said, and authorities officials “might not grasp the perniciousness astatine the outset.”

Tillipman agreed, saying the hazard for ballooning obligations is peculiarly pronounced erstwhile it comes to exertion and IT. Users go reliant connected 1 provider, starring to “vendor lock-in,” she said. It’s excessively soon to archer what volition travel of Starlink’s donations, but Microsoft’s White House Offer provides a preview of what’s possible. In enactment with its extremity astatine the outset, the world’s biggest bundle institution continues to grow its footprint crossed the national authorities portion sidestepping competition.

A root from past year’s Microsoft probe precocious called to drawback up. He told maine that, with the authorities locked into Microsoft, rivals proceed to beryllium unopen retired of national contracting opportunities. When I asked for an example, helium shared a 2024 papers from the Defense Information Systems Agency, oregon DISA, which handles IT for the Department of Defense. The papers described an “exception to just opportunity” successful the procurement of a assortment of caller IT services, saying the $5.2 cardinal bid “will beryllium issued straight to Microsoft Corporation.”

The justification? Switching from Microsoft to different supplier “would effect successful further time, effort, costs, and show impacts.” DISA did not respond to emailed questions.