Palantir Technologies, the Silicon Valley software firm, has won an audacious federal case that could allow it to further break into the Pentagon’s rigid procurement process by competing for a lucrative Army contract, the firm said Monday.
Earlier this year, Palantir sued the Pentagon, the agency that it is courting as a potential customer, because it said it was blocked from bidding on a program designed to gather all sorts of information — battlefield terrain, weather, enemy locations — and process it for soldiers on the ground. The contract at issue was worth $206 million, but the program could lead to more lucrative work.
Palantir has cast the suit as an effort not just to win a government contract but to help transform the way the Pentagon does business with the commercial sector. The lawsuit is another attempt to force a culture change at the Pentagon, traditionally resistant to outsiders, and bridge the divide between it and the start-ups that have transformed so much of the nation’s economy.
In a call with reporters, Palantir’s attorney, Hamish Hume, said a judge in the Court of Federal Claims issued an injunction on the procurement, forcing the Army to consider commercial offerings such as the one Palantir would like to offer. The court confirmed the injunction but declined to comment further.
“This is a victory not just for Palantir but for taxpayers and our whole procurement system,” Hume said. He said the decision would have a far-reaching impact that would “make it more appealing for innovators like Palantir to come to Washington and compete for government business.”
“The decision announced today was an oral summary, and is to be followed by the issuance of a formal opinion. Following the formal guidance, the Army will proceed based on a review of the full opinion,” an Army spokesman said.
The case comes as the Pentagon is desperately trying to reach beyond its traditional contracting base and harness the innovation and energy of start-ups in places such as Silicon Valley. It has created a special office designed to reach out to those communities in California and recently opened a center in Boston.
The effort is a top priority for Defense Secretary Ashton B. Carter, who has named Eric Schmidt, executive chairman of Google parent Alphabet, and Jeffrey P. Bezos, founder of Amazon.com, to the Pentagon’s Defense Innovation Advisory Board. (Bezos owns The Washington Post.)
In its lawsuit, Palantir argued that the Army’s approach to the contract “directly contradicts this policy directive.” And it said the Army had committed the service to a procurement process that “benefits no one but the incumbent defense contracting industry, that irrationally resists innovation from Silicon Valley, that wastes billions in taxpayer dollars, and that even risks the lives and effectiveness of our soldiers.”
Palantir alleged that the Army has spent $6 billion on its data processing system with little to show for it. Its system could work for the Army, it argued. But the Army has not allowed it to compete for the contract, displaying “a profound ignorance of advances in commercial technology,” the lawsuit said.
Co-founded by Peter Thiel, a PayPal co-founder, Palantir has had some success selling its system to federal agencies, including the Marine Corps, the U.S. Special Operations Command and the Defense Intelligence Agency, it said in the lawsuit. The company also received $2 million from In-Q-Tel, the CIA’s investment arm.
While Thiel has been an outspoken supporter of GOP presidential nominee Donald Trump, Hume said he did not think that was a factor in the way the Army goes about the procurement.
For years, members of Congress have been calling for the Pentagon to buy goods and services “off the shelf,” saying it does not have to build everything from scratch itself. By working more closely with the commercial sector, officials say, the Pentagon could get more products more quickly and efficiently, which they say is especially important when it comes to acquiring fast-changing technology. But while that may be the wish of Congress and the Pentagon’s top leadership, analysts say it is not seeping down to the people actually making the decisions.
“The efforts by policymakers at the top of the system to change the culture are not really altering the way that people in the system behave,” said Loren Thompson, a defense consultant who counts many of the large contractors as clients. “Palantir’s struggles illustrate the high barriers to entry in the defense industry. If working with the Pentagon isn’t your main line of business, it is really hard to get a foothold in this sector.”
Rep. Duncan D. Hunter (R-
Calif.) said that buying software is vastly different from purchasing major weapons programs, such as tanks or aircraft carriers “and should have different rules. . . . [Technology] doesn’t take a whole cadre of people. It takes someone who thinks outside the box and can write code in a way that’s never been written before.”
Analysts have compared Palantir’s gambit to when Elon Musk’s SpaceX sued the Air Force in an effort to be able to compete for lucrative national-security launch contracts. The parties ultimately reached a settlement, allowing for SpaceX to compete.