Google had sued the U.S. agency in 2010, claiming its requirements for the contract tilted the scales unfairly toward Microsoft. Google eventually dropped its lawsuit last September.

On Tuesday, the Interior Department that it had chosen Google Apps for Government to consolidate a variety of email systems it currently uses.

The agency will also use the online suite's audio and video chat tools, Docs productivity applications, Calendar and the Sites website design tool. Employees will also be able to tap into the Google services from their mobile devices.

The contract is worth about US$35 million over seven years, the Interior Department said. It estimated that by replacing its current systems with Google Apps for Government, it will save up to $500 million by 2020. It didn't say what those current systems are, only that there are several of them.

Asked to comment, Microsoft said it was working on a number of enterprisewide initiatives with the Interior Department, with which it has a "positive, longstanding relationship."