Re: Forget the discount
Same thing that happens with any term contract, you either renew or don't - if you do renew you get a chance to renegotiate, and if you don't renew you either stop using the service (and therefore stop paying - the 'magic' of cloud!) or you go to non-contract pricing. Pretty much standard contract approach unless you know different?
Would you suggest instead that the government signs a 10 year contract, 20 year contract? Given that AWS reduces prices reglarly (please check facts before you decide to troll this comment) it makes perfect sense for the govt to give themselves a chance to re-look at their usage and re-negotiate after a fixed period.