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Microsoft’s big defense contract that looks to supply the US Army with modified HoloLens AR headsets isn’t going so well. As first reported by Bloomberg, the Senate panel that oversees defense spending announced significant cuts to the Army’s fiscal 2023 procurement request for the device.

Microsoft announced last year it had won a US Army defense contact worth up to $22 billion to develop an Integrated Visual Augmentation System (IVAS), a tactical AR headset for soldiers based on HoloLens 2 technology.

Now the Appropriations Defense Subcommittee announced it’s cut $350 million from the Army’s procurement plans for IVAS, leaving around $50 million for the device. The subcommittee cites concerns based around the program’s overall effectiveness.

Concept testing in 2019, Image courtesy CNBC

“The Committee remains concerned that IVAS continues to face software, hardware, and user-acceptance challenges that the Army has not sufficiently addressed,” an official statement reads, which was obtained by Breaking Defense. “While the Committee was encouraged by the Department of the Army’s 2021 decision to extend testing and evaluation for an additional 10 months, it notes that significant development challenges with IVAS 1.1 remain.”

Earlier this year the US Congress froze $394 million from the Army’s IVAS budget, which Business Insider noted at the time would only leave around $400 million. Even then, that was allegedly $200 million short of what Microsoft needed to recuperate development costs.

Instead the US government appears to be reallocating the 2023 funds to support procurement of the Army’s Enhanced Night Vision Goggle-Binocular, increasing that program’s budget by $300 million.

The subcommittee also increased spending on a number of other Army programs, including ground vehicle procurement, Abrams tank upgrades, Stryker upgrades, new Armored Multi-Purpose Vehicles, and approved budgets for both AH-64 Apache and UH-60 Black Hawk helicopters.

Business Insider reported earlier this year that Microsoft had internally expressed low expectations for its latest version of IVAS, which was set to begin real-world operational tests in May.

This follows reports that cast doubt on a prospective HoloLens 3 amid an internal division that may have hobbled the company’s efforts to release its next AR headset as planned.

Alex Kipman is leaving Microsoft amid what an Insider report alleges to have stemmed from misconduct allegations leveled at the HoloLens co-creator.

The report maintains that Microsoft Cloud head Scott Guthrie is planning a reorganization of the departments, as Kipman is set to leave the company in the next two months as a part of transition process.

According to an email obtained by Insider, the company’s mixed reality hardware teams will join the Windows and Devices organization, which will be led by Panos Panay, whilst MR software teams will join the Experiences and Devices division under Jeff Teper.

The report details alleged actions by Kipman, including inappropriate behavior such as “unwanted touching” of women employees and an instance wherein Kipman viewed an adult VR video in front of other employees.

“Managers warned employees not to leave women alone around Kipman,” the report maintains, according to three affected sources.

Insider says “[m]ore than 25 employees shared their experiences as part of a report that was compiled about Kipman.”

Military version of HoloLens (IVAS) | Image courtesy Microsoft

A former colleague told Insider that the pandemic was “[t]he best thing that happened, sadly,” as no one on the team had to interact with him personally.

Kipman hasn’t responded to any of these allegations. Microsoft also declined to confirm or deny the specific allegations against Kipman, however the company says it’s investigating every report and “for every claim found substantiated there is clear action taken.”

This follows a Business Insider report from earlier this year that cast doubt on a prospective HoloLens 3 amid an internal division that may have hobbled the company’s efforts to release its next AR headset as planned.

That earlier report maintained that progress on fulfilling its $22 billion US defense contract, which aims to put HoloLens in battlefield roles over the next 10 years, has been stymied by internal production issues.

An alleged internal rift stemming from competing designs, one of which would completely reposition HoloLens as a consumer AR device, were citied as reasons for the lack of progress on release of the next-gen device.

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HoloLens Chief Alex Kipman to Leave Microsoft Amid Misconduct Allegations