© id.linkedin.com
Industry experts said it marked the first time that the government had tapped a Silicon Valley software company, as opposed to a traditional military contractor, to lead a defense program of record, which has a dedicated line of funding from Congress. The contract is potentially worth more than $800 million.
The Army's decision to go with Palantir - which was co-founded by Peter Thiel, the billionaire investor and sometimes advisor to President Trump - ends the latest chapter in a fierce competition.
In March 2018, the Army chose Palantir and Raytheon to vie for the next phase of the Distributed Common Ground System, or DCGS-A, for Army, which lets users gather and analyze information about enemy movements, terrain and weather to create detailed maps and reports in real time. The system is designed to be used by soldiers fighting in remote, harsh environments.
But critics within the Army and in Congress have complained for years that the system cost too much and didn't deliver the intelligence and capabilities that soldiers needed. Some soldiers said the system was too hard to use and searched for alternatives. Many became backers of Palantir, whose customers include governments and businesses, including in the financial and healthcare sectors.
Palantir and its advocates argued that the company's software was cheaper and could meet all the Army's requirements. But Army brass defended the decision to pay for a custom-built platform.
In 2016, the Army chose Raytheon for a next phase of the battlefield intelligence system. Palantir successfully argued in court that the government was required by law to consider buying commercial products when available, rather than custom ones. That sent the Army back to the drawing board and led to the face-off between Palantir and Raytheon.
Then-Sen. John McCain (R-Ariz.) praised the new approach on Twitter at the time, noting that after the Army had spent $3 billion in development costs, "it was time to find another way."
Raytheon and Palantir were allowed to test their respective software platforms with a live audience of soldiers, who told them what they liked and didn't and what they would change. The two companies then refined their offerings to suit the Army's needs.
Traditionally, the government first chooses a company to build a system according to a set of detailed requirements. But this approach let the Army take both companies' products for a test drive before settling on the winner.
"The Army changed its approach to acquisition," Doug Philippone, a former Army Ranger who leads Palantir's defense business, said in an interview. He said Palantir was always confident it could win if it were allowed to adjust its technology after getting feedback from soldiers. He said the soldiers put the software through a rigorous test, even parachuting out of airplanes with reinforced laptops containing Palantir's software.
Raytheon spokesman Chris Johnson said his company was disappointed in the outcome. "We will wait for the Army's debrief to understand their decision."
The Army did not provide a comment for this story.
Raytheon and Palantir may compete for subsequent phases of work on the program.
Most Silicon Valley start-ups aim to make their fortunes building consumer applications and software. But at its founding, Palantir set its sights on Washington, believing its data analytics tools would find an eager market among U.S. spy agencies and the military, which are constantly trying to manage ever-expanding streams of information.
Philippone said the Army had validated Palantir's strategy. "We founded the company around solving this particular mission," he said.
Palantir faced initial skepticism from investors who thought it couldn't overcome entrenched bureaucratic interests and what they saw as political favoritism that led the Pentagon to spend billions of dollars every year with the same small group of contractors.
"Everyone told us we should stay away from Washington because it was corrupt and we didn't know how to play golf with senators," Joe Lonsdale, a Palantir co-founder, said in a 2011 interview.
The company got an early investment in 2005 from In-Q-Tel, the CIA's venture capital arm, which tries to quickly develop technologies that the intelligence agency might use.
The In-Q-Tel connection helped Palantir get meetings with U.S. officials and intelligence analysts and even test its software with the CIA's counter-terrorism center, according to people familiar with the matter.
Founded in 2004, Palantir makes technology that is used by dozens of federal, state and local law enforcement agencies to aggregate far-flung data, find patterns and present results in colorful, easy-to-interpret graphics. Its use by police in Los Angeles, Chicago, New Orleans and elsewhere has raised ethical concerns about the potential for unfairly targeting minorities.
About the Author:
Shane Harris writes for the Washington Post. Bloomberg was used in compiling this report.
Comment: See also: