The contract could result in the US Army buying around 100,000 customized augmented-reality headsets from Microsoft based on its HoloLens technology.
The prototype headsets would form part of the army's Integrated Visual Augmentation System (IVAS) Program, which aims to address a shortfall in soldiers' close-combat capabilities, particularly in urban and subterranean environments.
The headsets will be integrated with the army's Synthetic Training Environment Squad system to allow US forces to conduct "25 bloodless battles before the first battle", the army noted in tender documents for bidders.
"Soldier lethality will be vastly improved through cognitive training and advanced sensors, enabling squads to be first to detect, decide, and engage. Accelerated development of these capabilities is necessary to recover and maintain overmatch," it said.
The headset will differ from consumer HoloLens headsets, and will be required to have wireless connectivity to support other soldier wearables, night-vision capabilities, and provide real-time metrics on soldier performance, such as data about concussions, heart and breathing rates, and soldier readiness.
"Augmented-reality technology will provide troops with more and better information to make decisions. This new work extends our longstanding, trusted relationship with the Department of Defense to this new area," a Microsoft spokesman said in a statement to Bloomberg.
The contract will make the army Microsoft's biggest HoloLens customers, though the customizations the Pentagon is seeking will make military-grade variants useful not just for training but also the battlefield.
Through two prototyping projects, the Army hopes to improve low-light detection of people at a distance of 150 meters, thermal recognition of people at 300 meters, and getting the weight of the headset down from 1.5lb to 1lb (0.68kg to 0.45kg). The normal version of HoloLens weighs 1.3lb (0.58kg).
There's also a long list of objectives related to combining AR, external sensors, and AI, such as rapid target acquisition, collaborative planning, route planning, soldier position tracking, and identifying moving targets and explosives.
It's also hoping to develop "camera-based foreign-language translation".
As previously reported by Bloomberg, Magic Leap also bid for the army contract.