This is just a way for the UK gov't to get some additional "concessions" from Microsoft...
No it is not.
Real people are sick of MS in general and MS Office in particular. They're sick of lockin. They're sick of manipulative licensing schemes. They're sick being overcharged for being outside the USA. They're sick of engineered incompatibility. They're sick of upgrade treadmills. They're sick of pointless UI changes and they're sick of all the FUD and deception it takes to keep it all the way it is.
The world is now trying to route around the damage that is Microsoft and its shoddy products and practices. They'll make the change happen sooner rather than later.
I call bullshit.
Google Doc for business requires a yearly fee, per user as well. Adding additional administrative personnel and all, and assuming local hosting (Assuming UK Government is not stupid enough to trust Google's cloud for government data), the cost might came out awash, pending their negotiation with Microsoft.
And guess what, Microsoft does have one of the most effective productivity package, including Access, OneNote, Projects. Excel Spreadsheet is top of the line with data access and all.
Personally I think Microsoft and Google both have quality products. I would hate to see either one go, although with more advancement from Google's suite that might not be too far off. Then Google will simply be another Microsoft and become a menace to the slashdot crowd