The deal could see the Army purchasing 100,000 HoloLens headsets from the company.
A Microsoft spokesman said: "Augmented reality technology will provide troops with more and better information to make decisions". Currently, Microsoft is said to have sold around 50,000 HoloLens headsets where they have been successfully deployed by companies to speed up the development and design process.
The purchase is part of the United States military's Integrated Visual Augmentation System (IVAS) - a $548 million program approved by Congress that sits in the military's research and development arm.
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The contract is part of a called HUD 3.0, for "heads up device". In its public tender the force asked for the following additional features to be implemented by the contract's winning bidder; night vision and thermal sensing ability, soldier vital signs monitoring capabilities, plus hearing protection. Based on the contract it was awarded, Microsoft will need to deliver 2,500 of these prototype headsets to the US Army within the next two years.
Over the summer, the USA military met with defense contractors such as Booz Allen Hamilton Holding Corp., Lockheed Martin Corp., and Raytheon Co. for the program. The company has previously faced criticism from its employees for bidding for military contracts, but it responded by saying it believed that those defending the USA should have access to the best technology. Along with Microsoft, another AR headset manufacturer, Magic Leap also went after the contract.
Microsoft just won a $480 million contract with the USA military. "As we have discussed these issues with governments, we've appreciated that no military in the world wants to wake up to discover that machines have started a war", he wrote. "But we can't expect these new developments to be addressed wisely if the people in the tech sector who know the most about technology withdraw from the conversation".