The choice is a blow to Microsoft, which has tried to position itself as offering the most secure services for the government.

The five-year contract is worth US$6.7 million and was awarded to Unisys, which is partnering with Google, Tempus Nova and Acumen Solutions. They will offer a suite of services including e-mail and collaboration tools "to facilitate a more mobile work force," the GSA said in a statement.

It said it is the first federal agency to use a cloud-based system for e-mail across the entire agency. It expects a 50 percent cost savings over the next five years compared to costs associated with its current system.

Microsoft said it was disappointed in the decision. "Our BPOS-Federal proposal was a conscious decision to provide GSA with U.S.-only datacenter support, where data is maintained in the U.S., administered by U.S. citizens with background checks, in accordance with ITAR standards in a FISMA-certified environment," it said.

The Federal Information Security Management Act and the International Traffic in Arms Regulation are two stringent security standards that some federal agencies are required to comply with.