Army must consider using Palantir software, judge rules

Palantir was co-founded by Peter Thiel, shown speaking Monday at the National Press Club in Washington.

Oct. 31, 2016 3:50 PM PT

Palantir Technologies Inc. said Monday that a federal judge sided with the Silicon Valley software firm in its bid to force the U.S. Army to consider Palantir’s product for a next-generation battlefield intelligence network.

Palantir had sued the Army on grounds that its bid-solicitation process effectively blocked commercial firms such as Palantir from being selected for the project, even if their products were less costly and more readily available than those developed in-house with defense contractors.

Judge Marian Blank Horn of the U.S. Court of Federal Claims granted Palantir’s request for an injunction that “ordered the Army to go back and look seriously at whether there are, in fact, commercial products that can meet its needs,” Hamish Hume, the lead lawyer on the case for Palantir, told reporters on a conference call.

He said the judge made the decision with an oral ruling in court and that a written ruling was expected within a week.

“This is a great result and a victory not only for Palantir but for taxpayers and for our whole procurement system,” Hume said.

The Army said it would decide how to proceed after reviewing the judge’s written opinion.

Palantir is a privately held Palo Alto firm that makes powerful data-analytics software used by military and intelligence agencies as well as commercial companies. Broadly speaking, the software finds patterns in complex data that helps users with decision-making.

Co-founded by prominent and controversial tech financier Peter Thiel, Palantir is among the most highly valued private firms in the nation, with an estimated valuation of $20 billion based on funds it has already raised from investors.

At issue is a contract for the next phase of the Army’s version of a U.S. military data-collecting and visualization system that assists intelligence-gathering and field operations.

Hume, a partner at the law firm Boies, Schiller & Flexner, declined to put an exact price tag on the initial contract for that phase, but he pointed to media reports that said it’s worth roughly $200 million and could swell into a multi-year project worth many times that amount.

“The [dollar] scale of this is potentially very large,” Hume said.

The system is called the Distributed Common Ground System, and Palantir said the first phase of the project took 15 years and nearly $6 billion for the Pentagon to develop with the use of defense contractors such as Raytheon Co.

In its complaint filed in June, Palantir asserted that the Army’s solicitation process for bids to develop the next phase of the project was designed to block commercial firms such as Palantir from competing for the job.

“The Army did not conduct the market research into the availability of commercial items, it did not ask if there were commercial items, it asked only about the ability of potential bidders to do developmental projects, so they just didn’t ask the right question,” Hume said.

That not only was “irrational” but also violated the Federal Acquisition Streamlining Act of 1994, which requires government agencies to buy commercial products “to the maximum extent practicable,” Palantir said in its lawsuit.

“The whole purpose of [the law] is to require government agencies to take advantage of private-sector innovation,” yet the Army’s bidding process “makes it impossible for Palantir to compete for the new DCGS contract,” the company said.

Palantir said it has developed software “that solves the needs of DCGS” and that it’s been “used successfully” in the field on a smaller scale by Army units and other military and intelligence agencies.

Palantir has other legal problems with the U.S government. The Department of Labor sued the company in September, accusing it of discriminating against Asian job applicants. Palantir denied the allegations and said it would contest the suit.

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UPDATES:

3:50 p.m.: This article has been updated to include a response from the U.S. Army.

This article was originally published at 12:35 p.m.