Palantir USG, Inc. v. United States, CAFC 2017-1465, September 7, 2018, is one of those rare cases where the Government appealed a Court of Federal Claims (COFC) Bid Protest to the Court of Appeals for the Federal Circuit (CAFC) and lost in both courts.

Because of the issues with procuring commercial radios in the First Gulf War, Congress passed sweeping changes to the Federal Acquisition Regulations (FAR) regarding the purchase of commercial products. The first change was the Federal Acquisition Streamlining Act (FASA) passed in 1994, which is the subject of this protest. FASA requires federal agencies, to the maximum extent practicable, procure commercially available products. Pub.L. No. 103-355, § 8104, 108 Stat. 3243 (1994) (codified as amended at 10 U.S.C. § 2377).

The Army issued a solicitation to upgrade its Distributed Common Ground System – Army Increment 1 to Increment 2 (DCGS-A2) on December 23, 2015. The DCGS is the Army’s primary system for processing and disseminating multi-sensor intelligence and weather information. This was after several studies on the viability of purchasing a commercial system and three Requests for Information (RFI). The first study, Data Integration, Visualization and Analytic (DIVA) Market Study dated July 2014, was performed by MITRE. The DIVA Study recommended that the Army use a hybrid approach of a Cloud Infrastructure Platform Provider with a Turn-Key commercial product. The three RFIs were issued after the DIVA Study. However, in each of the RFI’s, the Army requested information regarding a full software development effort. Palantir responded to each RFI stating that it had a commercial solution that could meet the Army’s requirements and that it had provided similar systems to other government agencies. In July 2015, the Army Materiel Systems Analysis Activity issued a Trade Space Analysis report, “’which identified and evaluated technical functionality, cost, usability, schedule risk, and technical risk for DCGS-A2.’” The report analyzed three options: Commercial Off the Shelf (COTS), Government Off the Shelf (GOTS), and hybrid. This report also concluded that a hybrid approach was best. Finally, on July 13, 2015, the Army issued a Market Research Report that concluded exactly the opposite, “’the [DCGS-A2] development effort cannot be procured as commercial product.’”

As a result of the July 13, 2015 report, the Army prepared a Justification and Authorization (J&A) authorizing the release of a solicitation for a full-scale software development effort. Palantir filed a pre‑award protest of the solicitation to the GAO, which denied the protest. Palantir then filed the current pre-award protest to the COFC, who granted the protest and issued a permanent injunction on the solicitation for a non-commercial solicitation for the DCGS-A2. The Government then appealed the COFC decision to the CAFC who affirmed the COFC decision.

Both the COFC and the CAFC found that there was plenty of evidence in the record that the Army was aware of a potential commercial solution and that despite that evidence they issued a non-commercial contract contrary to FASA. To ignore such evidence of a potential commercial solution was “arbitrary and capricious” even with giving deference to the Army’s decision.

Finally, the CAFC made two other things clear – while an agency is not required to document their determinations pertaining to 10 U.S.C. § 2377, “the record must be sufficient to permit meaningful judicial review consistent with the Administrative Procedures Act.” In addition, the CAFC stated “[t]o be clear, we are not suggesting that the Army must choose Palantir as the awardee. We simply affirm that the Army must satisfy the requirements of 10 U.S.C. § 2377.”

For more information, contact MWL Counsel Jody Reed.