Palantir's Army win is important, but not quite the watershed moment

Palantir has won the first delivery order under the Army's "DCGS-A" intelligence system contract. But that doesn't mean the Silicon Valley firm has eliminated Raytheon from the competition.

Palantir Technologies, the Silicon Valley software company that has had a contentious relationship with the Army, has won the first task order under the branch's $876 million Distributed Common Ground Systems-A contract.

DCGS-A is the Army's main intelligence system. Palantir won the right to compete for work on the contract after they took the Army to court.

Last year, the Army awarded Palantir and Raytheon spots on the DCGS-A contract.

While Palantir has won the first task order, Raytheon is still in the competition for future work.

“While we are disappointed in the Army’s decision on this initial delivery order, it represents a relatively small number of systems,” Raytheon said in a statement to WT. “The Army plans to award multiple delivery orders for systems (over the 10-year life of DCGS-A.)

Raytheon declined to comment on whether they planned to protest the task order award to Palantir.

Attempts to reach Palantir were unsuccessful.

The Washington Post originally reported that Palantir won the DCGS-A contract and indicated the award was worth $800 million.

But a source close to the procurement said that the dollar value is incorrect, however also declined to provide the value of this first Palantir task order.

The source confirmed Raytheon’s statement that more task orders will come out that the two companies will compete for.

“With each delivery order, they’ll both get to bid on them,” the source said. “Raytheon and Palantir will both benefit from this contract. That’s how it is structured.”

That Washington Post story set off a flurry of comments about how the award is a watershed moment because Palantir is a Silicon Valley company and had been picked over a traditional systems integrator for the work.

But because this is a task order and not an $800 million contract, watershed might be too strong a term.

It is important though and is another indication that the government -- and Defense Department in particular -- are increasingly turning to commercial technologies instead of asking for custom-built solutions from government contractors.

There also are some unique attributes to Palantir. From its founding in 2003, the federal market has been a target and the company received an early investment from the CIA's investment arm In-Q-Tel. Palantir has had significant success with intelligence agencies and recently won a National Institutes of Health contract to build a collaborative scientific platform.

The company has won over $200 million in federal work over the past 12 months, according to data.

So Palantir is no novice in the federal market.

But cracking the defense market has been a challenge for them.

DCGS-A's mission is to collect and analyze battlefield intelligence and distribute in real-time seemed tailor made for the company and its big data solutions. However, when the solicitation for DCGS-A came out in 2015, the Army asked for custom development work.

The wording of the solicitation was such that Palantir didn’t qualify to bid because they were not developing customized software. Rather, they were selling commercial software.

Palantir then sued the Army after the Government Accountability Office denied their pre-award protest. The company argued that the Army was violating legislation that said the government had to use a commercial solution if one existed. The Court of Federal Claims agreed and ordered that the Army re-work the procurement so that commercial solutions could be considered.

The competition for the reworked contract resulted in the March 2018 awards to Raytheon and Palantir.

While this task order win is significant and is an indication of how much the Army has changed its approach, several industry observers said that Palantir also adjusted its strategy.

They have a reputation for being a bit of a bulldozer, one source said, but that this win indicates how it has worked hard to develop domain expertise.

Another source also said that Palantir has recently been working more with traditional companies to gain insights into the Army’s data architecture.

“It’ll be interesting to see who is on their team,” the source said.