Opinion

Palantir Usg, Inc. v. United States

904 F.3d 980

Court: Court of Appeals for the Federal Circuit
Filed: Sep 7, 2018
Status: Published
Author: Stoll
On the bench: Mayer, Newman, Stoll
Cited by: 73 cases
Authority: More cited than 82.1%

noting that when deciding motions for judgment on the administrative record, “the court considers ‘whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in the record.’” (quoting A & D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006))

How later courts described this case

noting that when deciding motions for judgment on the administrative record, “the court considers ‘whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in the record.’” (quoting A & D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006))
“In deciding [cross-motions under RCFC 52.1(c)], the court considers ‘whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in the record.’” (quoting A & D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006))
applying the APA’s review standard articulated in Overton Park to an appeal of a pre-award bid protest
“In deciding these [MJARs], the court considers ‘whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in the record.’” (quoting A&D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006))

Written by the judges who cited it.

The opinion

United States Court of Appeals

for the Federal Circuit

______________________

PALANTIR USG, INC.,

Plaintiff-Appellee

UNITED STATES,

Defendant-Appellant

______________________

2017-1465

______________________

Appeal from the United States Court of Federal

Claims in No. 1:16-cv-00784-MBH, Judge Marian Blank

Horn.

______________________

Decided: September 7, 2018

SEALED OPINION ISSUED: September 7, 2018

PUBLIC OPINION ISSUED: September 13, 2018 *

______________________

THEODORE OLSON, Gibson, Dunn & Crutcher LLP,

Washington, DC, argued for plaintiff-appellee. Also

represented by KAREN LOUISE MANOS, AMIR C. TAYRANI;

JOSH KREVITT, New York, NY; HAMISH HUME, STACEY K.

GRIGSBY, JON KNIGHT, JOSHUA RILEY, Boies, Schiller &

* This opinion was originally filed under seal and

has been unsealed in full.

2 PALANTIR USG, INC. v. UNITED STATES

Flexner, LLP, Washington, DC; DAVID BOIES, Armonk,

NY.

DOMENIQUE GRACE KIRCHNER, Commercial Litigation

Branch, Civil Division, United States Department of

Justice, Washington, DC, argued for defendant-appellant.

Also represented by CHAD A. READLER, ROBERT EDWARD

KIRSCHMAN, JR., DOUGLAS K. MICKLE.

GIDEON A. SCHOR, Wilson, Sonsini, Goodrich & Rosati,

PC, New York, NY, for amicus curiae Technology Net-

work. Also represented by ADAM WILLIAM BURROWBRIDGE,

Washington, DC.

______________________

Before NEWMAN, MAYER, and STOLL, Circuit Judges.

STOLL, Circuit Judge.

The government appeals from a permanent injunction

on its solicitation of bids for Distributed Common Ground

System – Army Increment 2 (“DCGS-A2”), the Army’s

primary system for processing and disseminating multi-

sensor intelligence and weather information. The United

States Court of Federal Claims granted the injunction

after concluding that the Army failed to comply with the

requirements of 10 U.S.C. § 2377. We affirm.

PALANTIR USG, INC. v. UNITED STATES 3

BACKGROUND 1

Palantir USG, Inc. (“Palantir”) filed a pre-award bid

protest in the Court of Federal Claims, challenging the

Army’s solicitation 2 for DCGS-A2. The solicitation seeks

a single contractor to be the system data architect, devel-

oper, and integrator of DCGS-A2. Palantir’s complaint

alleges that the Army violated § 2377(c) by, among other

things, failing to determine whether its needs could be

met by commercial items before issuing the contested

solicitation. See § 2377(c)(2). To provide background, we

introduce the applicable statute and regulations, the

DCGS-A2 system, the relevant facts regarding pre- and

post-solicitation activity, and the procedural history of

this case.

I. The Statutory and Regulatory Preference for the

Acquisition of Commercial Items

This appeal is centered on the Federal Acquisition

Streamlining Act (“FASA”), which requires that federal

agencies, to the maximum extent practicable, procure

commercially available technology to meet their needs.

Federal Acquisition Streamlining Act of 1994, Pub. L.

No. 103-355, § 8104, 108 Stat. 3243 (1994) (codified as

amended at 10 U.S.C. § 2377). As the government

1 The facts and procedural history of this case are

extensive. A more exhaustive recitation of the facts

underlying this appeal may be found in the Court of

Federal Claims’ opinion. See Palantir USG, Inc. v. United

States, 129 Fed. Cl. 218, 221–43 (2016) (“CFC Op.”). We

provide a summary of the relevant facts and procedural

history necessary to resolve this appeal.

2 United States Department of the Army, Army

Contracting Command, Aberdeen Proving Group’s Re-

quest for Proposals (“RFP”) No. W56KGY-16-R-0001.

4 PALANTIR USG, INC. v. UNITED STATES

acknowledges, the legislative history reflects Congress’s

understanding that “[t]he purchase of proven products

such as commercial and nondevelopmental items can

eliminate the need for research and development, mini-

mize acquisition leadtime, and reduce the need for de-

tailed design specifications or expensive product testing.”

S. Rep. No. 103-258, at 5 (1994), reprinted in

1994 U.S.C.C.A.N. 2561, 2566.

FASA provides that the “Federal Acquisition Regula-

tion [FAR] shall provide regulations to implement” FASA.

41 U.S.C. § 3307(e)(1). Under FASA:

(a) Preference.—The head of an agency shall en-

sure that, to the maximum extent practicable—

(1) requirements of the agency with respect to

a procurement of supplies or services are stat-

ed in terms of—

(A) functions to be performed;

(B) performance required; or

(2) such requirements are defined so that

commercial items or, to the extent that com-

mercial items suitable to meet the agency’s

needs are not available, nondevelopmental

items other than commercial items, may be

procured to fulfill such requirements; and

(3) offerors of commercial items and nondevel-

opmental items other than commercial items

are provided an opportunity to compete in any

procurement to fill such requirements.

10 U.S.C. § 2377(a); see FAR 11.002(a)(2). FASA further

requires that agencies shall, “to the maximum extent

practicable . . . acquire commercial items or nondevelop-

PALANTIR USG, INC. v. UNITED STATES 5

mental items [NDIs] other than commercial items to meet

the needs of the agency.” § 2377(b)(1); see FAR 12.101(b).

FASA achieves its preference for commercial items in

part through preliminary market research. Before solicit-

ing bids or proposals, agency officials must conduct mar-

ket research 3 concerning the availability of commercial

items pursuant to § 2377(c)(1), which states:

(1) The head of an agency shall conduct market

research appropriate to the circumstances—

(A) before developing new specifications for a

procurement by that agency;

(B) before soliciting bids or proposals for a

contract in excess of the simplified acquisition

threshold; and

order in excess of the simplified acquisition

threshold.

§ 2377(c)(1); FAR 10.001(a)(2). Next, agency officials

must use that market research to determine whether

commercial items can meet the agency’s requirements,

with or without modification of either the commercial

items or the agency’s requirements, pursuant to

§ 2377(c)(2):

3 The implementing regulations define market re-

search as “collecting and analyzing information about

capabilities within the market to satisfy agency needs.”

FAR 2.101(b). Conducting market research “involves

obtaining information specific to the item being acquired”

and the regulation explains that the “extent of market

research will vary, depending on such factors as urgency,

estimated dollar value, complexity, and past experience.”

FAR 10.002(b)(1).

6 PALANTIR USG, INC. v. UNITED STATES

(2) The head of an agency shall use the results of

market research to determine whether there are

commercial items or, to the extent that commer-

cial items suitable to meet the agency’s needs are

not available, nondevelopmental items other than

commercial items available that—

(A) meet the agency’s requirements;

(B) could be modified to meet the agency’s re-

quirements; or

those requirements were modified to a rea-

sonable extent.

§ 2377(c)(2) (emphasis added); FAR 10.001(a)(3). Palantir

argues—as it did below—that the Army violated both of

these FASA mandates, § 2377(c)(1) and (2).

II. The Distributed Common Ground System –

Army Increment 2 (DCGS-A2)

We briefly introduce the purpose and evolution of the

Army system at issue here. The Distributed Common

Ground System (“DCGS”) is made up of Army, Air Force,

Navy, and Marine Corps ground processing systems that

can share information across the Joint Force. The over-

arching purpose of the Army’s Distributed Common

Ground System (“DCGS-A”) is to combine all of the Ar-

my’s intelligence software/hardware capabilities into one

program with the ability to access and be accessed by

Army intelligence and command components, as well as

other military and intelligence systems. DCGS-A in-

cludes many software products—commercial, government,

and open source—as well as software integration that

allows all the different products and components to com-

municate and operate seamlessly. CFC Op., 129 Fed. Cl.

at 223.

PALANTIR USG, INC. v. UNITED STATES 7

The original DCGS-A Increment 1 (“DCGS-A1”) is op-

erational and deployed worldwide, but its “data architec-

ture is over 10 years old and is based upon technology

that is nearing obsolescence, with no growth margin.” Id.

at 233. Therefore, in 2014, the Army began investigating

the best way to approach DCGS-A2, which would “intro-

duce a new and modernized data management architec-

ture (DMA) using a modular system approach to perform

Army intelligence analysis capabilities.” Id. at 223.

The performance work statement (“PWS”) for this so-

licitation stated that the requirements of DCGS-A2 in-

cluded the ‘‘development of new data architecture,

standards based enhanced visualization and analytical

tools, cloud computing and ‘big data’ analytic capabilities;

cyber analytics and data integration, visualization capa-

bilities, Cyber Operations, Interoperability, Counter

Intelligence/HUMINT, Weather, GEOINT, Geospatial

Engineering and Sensor Management,’’ and explained

that ‘‘[t]hese efforts include Software Development, Capa-

bility Enhancements, Integration, Limited Fielding and

Training support, Maintenance, and Support for logistics

development, for a period of performance of six years from

contract award.’’ Id. The draft version of the perfor-

mance work statement for the DCGS-A2 solicitation

stated that ‘‘[t]he DCGS-A Increment approach utilizes

spiral deliveries to maintain interoperability with Army

and Joint ISR [Intelligence, Surveillance and Reconnais-

sance] architectures and to address capability insertion

and enhancements. This system must remain interoper-

able and compatible with the Joint command system

infrastructure and mission applications.’’ Id. As indicat-

ed by the contracting officer who issued the solicitation,

the data management architecture “will serve as the

architecture foundation and the heart with which the rest

of the capabilities will depend on to function. The [data

management architecture] development is therefore the

8 PALANTIR USG, INC. v. UNITED STATES

focus of the first task order executed under the DCGS-A

Increment 2 contract.’’ Id.

III. The Palantir Gotham Platform

As noted above, Palantir argues that the Army violat-

ed § 2377(c) by failing to determine whether the Army’s

needs could be met by commercial items, and that, had

the Army done so, it would have issued one or more

solicitations to procure commercial or nondevelopmental

items to satisfy the DCGS-A2 requirements. J.A. 194–95.

Specifically, Palantir submits that its flagship software

product, the Gotham Platform, could satisfy the Army’s

requirements.

Palantir’s Gotham software product is a data-

management platform that Palantir began to market to

private sector and government customers in 2009. The

software enables agencies to integrate, visualize, and

analyze large amounts of data from different sources that

reside in different databases in different formats. The

parties stipulate that the government has previously

procured the Palantir Gotham Platform on a commercial

item basis, and that the GSA Schedule lists both term

licenses and perpetual licenses for Palantir’s platform.

Parties’ Joint Stipulations of Fact ¶¶ 3–4, Palantir USG,

Inc. v. United States, No. 1:16-cv-00784-MBH (Fed. Cl.

Apr. 24, 2017), ECF No. 125 (“Joint Stip.”). The parties

also stipulate that Palantir Gotham is a commercially

available data management platform.

IV. Pre-Solicitation Activity

The parties do not dispute the following Court of Fed-

eral Claims’ fact findings. In 2014, the Army decided to

curtail the third release of DCGS-A1 and redirect its

efforts to acquiring and launching DCGS-A2. The Army

PALANTIR USG, INC. v. UNITED STATES 9

chartered an independent Data Integration, Visualization

and Analytics (“DIVA”) Market Study. 4 This market

study, dated July 2014, was completed by the MITRE

Corporation, a not-for-profit research and development

organization. According to the parties, the DIVA Market

Study was intended to “provide situational awareness and

market trends to the Army leadership of the ‘state-of-the-

practice’ within the commercial DIVA software platform

landscape.” Joint Stip. ¶ 11. The DIVA Market Study

report summarized MITRE’s recommendations for the

DCGS-A2 acquisition effort. According to the report, the

DIVA Market Study assessed three acquisition approach-

es:

a. Cloud Infrastructure Platform Provider: Pro-

vide highly-scalable and reliable computing infra-

structure services (e.g., data bases [sic]; analytic

engines; computing and storage; identity man-

agement);

b. Turn-Key: Procure a commercial product as ba-

sis of [DCGS-A2] infrastructure. Integrate addi-

tional applications onto this infrastructure[;]

c. Hybrid approach: both an Enterprise Cloud

Platform and a Turn-Key Platform, including in-

tegration of additional applications . . . .

Id. ¶ 11 (citations omitted). Having considered each of

these three acquisition approaches, the DIVA Market

Study recommended the hybrid approach. The study’s

“Key Observation” was that the hybrid approach blends

the benefits of the other two approaches, provides “the

global scale of the cloud infrastructure with the ‘out-of-

4 A DIVA platform is sometimes referred to as a

“data management platform.” Compare J.A. 18400, with

J.A. 12226–27.

10 PALANTIR USG, INC. v. UNITED STATES

the-box’ capabilities of the DIVA ‘Turn Key’ platform,”

and provides “better tactical edge support.” J.A. 12234.

The DIVA study outlined how to apply a hybrid approach

to the DCGS-A2 capabilities. In particular, the hybrid

approach would start with procurement of two Commer-

cial-off-the-Shelf (“COTS”) foundation components:

(a) cloud infrastructure services and (b) a DIVA “Turn

Key” infrastructure platform. Though the DIVA Market

Study did not analyze any potential vendors, it assessed

overall market trends and served as an early indication

that commercial items should be considered for the

DCGS-A2 infrastructure platform.

Following completion of the DIVA Market Study, the

Army issued three requests for information (“RFIs”). It

issued its RFI #1 in August 2014, just one month after

release of the DIVA Market Study. The goal of RFI #1

was to assess “the level of relevant competition and

capabilities in the market place and elicit industry feed-

back to assist the Program Office in developing the Acqui-

sition Plan” for the potential DCGS-A2 procurement.

J.A. 11802. It requested “respondents’ corporate overview

information and basic qualifications in managing software

development projects that are similar in scope and process

to the DCGS-A program.” J.A. 11876 (emphasis added);