Court ruling might force government to take commercial first stance

A victory in the federal courts for California software company Palantir is either a win for just one company or a much broader decision that will impact how the government buys commercial technology. If the ruling holds, it might mean that agencies will have to look at commercial products first before developing their own solutions.

Palantir took on the U.S. Army and how it was procuring the next generation of the Distributed Common Ground System-Army. DCGS-A is a battlefield network for gathering and sharing information and data from multiple sources and systems.

Palantir’s fight with the Army stemmed from the service’s decision to develop the second increment of the system itself rather than use a commercially available software platform such as one Palantir makes.

The Army’s solicitation was asking for a systems integrator that could write the code and develop the next version of the system.

On Monday, a Court of Federal Claims judge issued an injunction stopping the Army from moving forward. A public version of the judge’s oral ruling will likely not be ready for a week or more, a Palantir spokesman said.

So we might have to wait for some of the nitty gritty details, but Palantir’s problems with how the Army wanted to procure the DCGS contract started at the very beginning when the Army published its first request for information.

According to court records, the Army's RFIs and its other market research was solely focused on finding companies that could develop a custom software platform and not on collecting information on commercially available software that could meet the Army’s needs.

Palantir’s response to the first RFI was that the Army doesn’t need to build anything. “The Government can buy the core functionality from the commercial market and integrate any number of additional applications.”

But the Army apparently wasn’t moved by that argument.

The second RFI asked companies to submit their qualifications for acting as the prime contractor on a development effort. Palantir again answered with a plea for consideration of proven commercial solutions.

In July 2015, the Army issued a market research report that said a commercial solution was not available. In December 2015, the Army issued a solicitation for engineering, manufacturing and development services.

Finally, on Feb. 16 – the same day proposals were due – Palantir filed a protest with the Government Accountability Office. GAO eventually ruled against Palantir saying that the Army acted reasonably.

After that decision, Palantir filed an appeal with the Court of Federal Claims, which brings us to this week's decision.

Part of what Palantir is arguing is that the Army violated the 1994 Federal Acquisition Streamlining Act, which requires the government to consider commercial products.

While a public version of the decision hasn’t been released, the Army likely is being dinged by the court for not doing the right kind of market research to meet the requirements of the law.

It’ll remain to be seen how broadly the ruling will be applied.

Palantir executives think it is a watershed moment.

“Our mission has always been broader than a single program within a single Government agency,” said Doug Philloppone, global defense lead for Palantir in a statement. “This decision removes one of the key barriers blocking innovators from the defense and government markets.”

The company’s attorney Hamish Hume said in Defense News that agencies too often ignore the streamlining act, but this is the first court challenge for failing to follow the law.

Palantir is a Silicon Valley software company co-founded by Peter Thiel, who also was co-founder of PayPal. Incidentally, he is a staunch and vocal Donald Trump supporter.

The company has developed promising data analytics and visualization software and has several government customers. It also attracted the attention of the CIA’s investment firm In-Q-Tel, which put $2 million into the company.

According to USAspending.gov, Palantir had nearly $100 million in prime contracts in fiscal 2015. It’s customers include the Defense, Justice, Homeland Security and State departments. The Securities & Exchange Commission also is a customer.

It might be too early to declare this an outright victory for Palantir. The Army could still decide to take the case to the U.S. Court of Appeals. The Army has indicated it will wait until it has the written ruling before deciding on next steps.

The challenge for the Army, however, will be proving that their requirements are too unique and complex for Palantir’s product.

But as it stands right now, the Court of Federal Claims seems to be saying that the government needs to take a commercial first stance.

If that holds, this could indeed be a significant shift for the government.