EC concludes backroom deal with Microsoft

The European Commission has renewed software licences worth up to €50m with Microsoft for another three years after opting not to open the business to competition.

The Commission is expected to announce the deal next week in written answers to questions raised by members of the European Parliament over the purchase of Microsoft software without a competition.

The Commission justified doing a back-room deal, called a negotiated procedure, with Microsoft because it claimed that under Article 126 of the European Financial regulations an upgrade of Microsoft XP to the latest Windows 7 operating system on over 36,000 PCs across the EC and another 54 European agencies would be deemed no more than “a partial replacement” or “extension” of existing software installations.

Further justification was claimed under the same regulation because changing from Microsoft to another software supplier would force the EC to acquire software with such different technical characteristics that it “would result in incompatibility or disproportionate technical difficulties in operation and maintenance”.

The Commission will tell Mary Honeyball, Labour MEP for London, and Bart Staes, a Belgian MEP for the Greens, that criticisms of the deal are unfounded.

The deal is justified under European law, it will say, asserting claims it is trapped or “locked in” to buying Microsoft are untrue. It will also claim it supports interoperability standards prized for the way they facilitate a change of computing platforms without raising those difficulties the Commission has used to justify its negotiated deal with Microsoft.

It will answer criticism from open standards campaigners by stating commercial software operators such as Microsoft are capable of creating interoperable software. But it will not seek to claim their software actually is interoperable. It is still fighting Microsoft in court over a 2004 penalty it imposed on the firm for preventing competitors from interoperating with its ubuquitous Windows software platform. Since competitors were unable to access communication protocols used by Microsoft network server software, they were prevented from producing alternative products (notably Samba) that customers could slot in to the corporate network ecosystem dominated by Microsoft.

Microsoft took the European Commission to court this week to appeal a record €899m fine the Commission imposed in 2008 for failing to comply with a 2004 order to make its software interoperable. Microsoft did not contest the 2004 anti-competition rap this week, said reports. It merely claimed the terms of the 2008 fine were unfair because it was not given clear directions about what it must do to comply with the 2004 interoperability order.

While claiming the anti-competitive uninteroperability of Microsoft’s software should justify its purchase without a competition, the Commission will attempt to further justify its Microsoft deal this week by claiming its expenditure with Microsoft is trifling in comparison with its total IT budget.

The software licence deal neither involves paying Microsoft money or committing to purchase any software. But the deal sets favourable terms of purchase that are used to formulate actual exchanges of money that the licensing regime makes a forgone conclusion.

The Commission’s last negotiated deal with the software giant, a 2007 software licence agreement that runs out on Tuesday, was consummated with a €49m deal with Microsoft reseller Fujitsu in 2008.

The deal does however involve paying money direct to Microsoft, again using a back-room negotiated procedure. The Commission allocated €44m for payment to Microsoft on 5 May for the provision of  software support services, a move it said in the award notice was justified because no other company could provide such services for the support of Microsoft software.

In December, the Commission decided  in a series of closed meetings that it would use its renewed Microsoft licences to upgrade its computers from the Windows XP to Windows 7 platform.

The software licence deal also secured licenses for other Microsoft software, including its SharePoint content management system, server software of the sort subject to the 2004 anti-competition case, database and security software.

The Commission will say next week that it’s decision to buy Microsoft licences was separate from its decision to upgrade its computers to Windows 7. The licence that ran out this week would have accommodated the upgrade and the EC could have chosen to do it at any time. But the administration would have been unable to continue using what Microsoft software it did have if it did not conclude another licence deal before 1 June.

The licensing agreement requires European agencies to purchase their Microsoft software through Fujitsu under another contract that has also been the subject of some controversy. Fujitsu was appointed after the Commission held a competition for a “Microsoft” reseller. It is usually forbidden to specify a trade name in a procurement call. Open Forum Europe (OFE), a campaign group, said this week 13 per cent of tenders called in February and April 2010 requested trade names.

OFE also criticised the increasing use of negotiated procedures like the ones struck with Microsoft and called for more transparency of such arrangements. It is usual practice for the EC to justify negotiated procedures by quoting legislation, not providing specific reasons.