Palantir USG, Inc. v. United States

• Court: U.S. Court of Appeals — Federal Circuit
• Writing for the Court: Stoll, Circuit Judge.
• Citation: Palantir USG, Inc. v. United States, 904 F.3d 980 (Fed. Cir. 2018)
• Decision Date: 07 September 2018
• Docket Number: 2017-1465
• Parties: PALANTIR USG, INC., Plaintiff-Appellee v. UNITED STATES, Defendant-Appellant

904 F.3d 980

PALANTIR USG, INC., Plaintiff-Appellee

v.UNITED STATES, Defendant-Appellant

2017-1465

United States Court of Appeals, Federal Circuit.

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 & 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.

BACKGROUND ¹

Palantir USG, Inc. ("Palantir") filed a pre-award bid protest in the Court of Federal Claims, challenging the Army's solicitation² for DCGS-A2. The solicitation seeks a single contractor to be the system data architect, developer, 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 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, minimize acquisition leadtime, and reduce the need for detailed 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 Regulation [FAR] shall provide regulations to implement" FASA. 41 U.S.C. § 3307(e)(1). Under FASA:

(a) Preference.—The head of an agency shall ensure that, to the maximum extent practicable—(1) requirements of the agency with respect to a procurement of supplies or services are stated in terms of—

(A) functions to be performed;

(B) performance required; or

(C) essential physical characteristics;

(2) such requirements are defined so that commercial items or, to the extent that commercial 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 nondevelopmental 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 nondevelopmental 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 soliciting bids or proposals, agency officials must conduct market research³ 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

(C) before awarding a task order or delivery 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) :

(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 commercial 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 requirements; or

(C) could meet the agency's requirements if those requirements were modified to a reasonable 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 Army'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 includes many software products—commercial, government, and open source—as well as software integration that allows all the different products and components to communicate and operate seamlessly. CFC Op. , 129 Fed.Cl. at 223.

The original DCGS-A Increment 1 ("DCGS-A1") is operational and deployed worldwide, but its "data architecture 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 "introduce a new and modernized data management architecture (DMA) using a modular system approach to perform Army intelligence analysis capabilities." Id. at 223.

The performance work statement ("PWS") for this solicitation stated that the requirements of DCGS-A2 included 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 capabilities, Cyber Operations, Interoperability, Counter Intelligence/HUMINT, Weather, GEOINT, Geospatial Engineering and Sensor Management," and explained that "[t]hese efforts include Software Development, Capability 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 performance 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 Reconnaissance] architectures and to address capability insertion and enhancements. This system must remain interoperable and compatible with the Joint command system infrastructure and mission applications." Id. As indicated 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 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 violated § 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 Federal Claims'...