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Palantir seals its first major US Navy deal as Raytheon is passed over

The Abraham Lincoln Carrier Strike Group transits the Suez Canal in May 2019.

MASS COMMUNICATION SPECIALIST 3RD CLASS DARION CHANELLE TRIPLETT/U.S NAVY

By AARON GREGG | The Washington Post | Published: March 5, 2020

WASHINGTON — Palantir Technologies has sealed its first major deal with the U.S. Navy, public contract documents show — a major step forward for a West Coast tech company that has long struggled to break into the Pentagon's insular information technology industry.

The sole-source contract, worth about $80 million, calls for a logistics management system for the service branch's warships and aircraft scattered across the globe. The Navy will use Palantir's software to fuse together existing data sets that are walled off from one another, forming a broader operating system the Pentagon is calling Naval Operational Business Logistics Enterprise, or NOBLE for short. The terms of the deal were finalized last week, Palantir spokeswoman Lisa Gordon said.

The sole-source award to Palantir came after a competitive prototyping process that involved 31 companies, and a separate period in which the government tested prototypes provided by two finalists. A separate approach proposed by Raytheon was passed over.

A contract justification document published by the Navy described Palantir as the only company that can "eliminate the redundant, resource-intensive and stove-piped systems" it currently relies on. Company executives said the contract will also lay a foundation for the Navy's eventual adoption of artificial intelligence.

"This is Palantir's first formal contract with the Navy and our work is successfully modernizing the Navy's operational supply, maintenance, and logistics enterprise," Doug Philippone, a former Army Ranger who leads Palantir's military business, said in an email.

It is the latest sizable chunk of military business for Palantir, a Silicon Valley-based data-mining firm that has aligned itself closely with Washington's national security establishment.

U.S. spy agencies have long worked with Palantir to make sense of the vast troves of threat information generated by their electronic intelligence-gathering operations. The company has also lent its surveillance tools to the Department of Homeland Security's Immigration and Customs Enforcement agency, something that has been the subject of internal blowback from employees concerned about the Trump administration's immigration policies.

But the Pentagon — with an annual budget of roughly $700 billion — is a much larger prize.

The business of supplying the military has long been cornered by a small group of giant companies whose deep connections, decades of experience with government buying processes, and armies of security-cleared employees have often closed the market to outsiders. Commercial-facing tech companies have often struggled to break in.

It was only after Palantir sued the Army that it became the primary operator of the Army's advanced battlefield mapping system, besting Raytheon in a set of head-to-head trial runs.

That system, called the Distributed Common Ground System, or DCGS, was the first program of record awarded to a Silicon Valley company, meaning it has a dedicated line of funding from Congress. That contract should continue to be a lucrative source of business for Palantir for quite some time; last week the Army awarded Palantir and BAE Systems a related $823 million contract.

Palantir has separately been tapped to help the Pentagon make sense of its own internal data. In December the company won a contract to analyze the Army's human resources and equipment data, locking it into a four-year, $440 million opportunity.

The publicly available portion of Palantir's government business reached a record high of $160 million last year, according to contract data maintained by USASpending.gov. Palantir's actual government is probably much, much larger; those figures do not include classified work or subcontracts.

Palantir's Navy deal is relatively small by the military's standards, but it could be a helpful staging ground for future work. A document used to justify the contract's sole-source status stated that the government "may transition to a full production contract to support the U.S. Navy enterprise" when the current one ends.

The award came after a prototyping competition that used an increasingly-common process called "other transaction authority." Such awards allow the government to bypass procurement regulations to move quickly.

Under that approach more than 31 companies submitted responses and the government asked two finalists, Raytheon and Palantir, to try out their own separate prototypes.

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