Palantir USG, Inc.

DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This version has been approved for public release.

Decision

Matter of:  Palantir USG, Inc.

File:  B-412746

Date:  May 18, 2016

DIGEST

Protest that agency failed to implement the statutory and regulatory preference for the acquisition of commercial items, resulting in a solicitation that unduly restricts competition by offerors of commercial items that could partially meet the requirements of the solicitation, is denied where the agency conducted adequate market research into the use of commercial items and had a reasonable basis for its acquisition approach.

Palantir USG, Inc., located in Palo Alto California, challenges the terms of request for proposals (RFP) No. W56KGY-16-R-0001, issued by the Department of the Army, Army Contracting Command, Aberdeen Proving Ground, for engineering, manufacturing, and development services in support of the Army’s Distributed Common Ground System-Army Increment 2 (DCGS-A2) requirement.  Palantir argues that the agency failed to implement the statutory and regulatory preference for the acquisition of commercial items, resulting in a solicitation that unduly restricts competition. 

We deny the protest.

BACKGROUND

On December 23, 2015, the agency issued the RFP, in accordance with Federal Acquisition Regulation (FAR) part 15 procedures.  RFP at 1-2.  The RFP contemplates the award of a single indefinite-delivery, indefinite-quantity (IDIQ) contract, with the simultaneous issuance of a cost-reimbursement type task order.  RFP at 2.  The solicitation seeks a single contractor to be the system data architect, developer, and integrator of DCGS‑A2, which is the second increment of the DCGS‑A.  DCGS-A is the Army’s primary system for the processing and dissemination of multi-sensor intelligence and weather information to the warfighter.[1]  Agency Report (AR), Tab V, Performance Work Statement (PWS), at 10-11. 

DCGS-A is intended to combine all intelligence software/hardware capabilities within the Army into one program with the ability to access and be accessed by, not only Army intelligence and command components, but also the other members of the broader distributed common ground/surface system.[2]  It is composed of 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.  Agency’s Post-Hearing Comments at 3. 

DCGS-A Increment 1 (DCGS-A1) is currently deployed worldwide in support of intelligence operations in all theaters of operations.  AR, Tab V, PWS, at 11.  With regard to DCGS-A2, the PWS explains that the successful offeror will be responsible for, among other things, 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/human intelligence; signals intelligence; weather; geospatial intelligence; and sensor management.  Id. at 18.  These efforts include software development, capability enhancements, integration, limited fielding and training support, maintenance, and support for logistics development.  The period of performance is six years from contract award.  Id.

Award is to be made on a best-value basis, considering the following factors:  (1) technical; (2) cost/price; (3) past performance; and (4) small business participation plan.  RFP at 129.  The technical factor is divided into the following five subfactors:  (1) data architecture; (2) fusion data analytics; (3) interoperability; (4) visualization framework/usability; and (5) data rights.  Id.  Prior to consideration of the evaluation factors listed above, offerors will be required to provide a software capability demonstration, which will be evaluated on an acceptable/unacceptable basis.  Id.  Offerors who receive an unacceptable rating for their demonstration will not be considered further for award.  Id.  The closing date for the submission of quotations was February 16, and this protest was filed on that date, prior to closing.

DISCUSSION

Palantir argues that the agency failed to conduct market research in accordance with the statutory and regulatory preference for the use of commercial items.  According to the protester, this resulted in an unduly restrictive solicitation that prevents offerors of commercial products, such as Palantir, from competing for a prime contract.  While the protester does not argue that it could provide a commercial solution that would meet all of the agency’s needs, the protester argues that the agency should have used a phased approach for this procurement, whereby the agency would acquire a commercial data integration, visualization, and analytics platform from an offeror like Palantir, followed by separate procurements for integration and development services needed to obtain, integrate, and/or enhance individual capabilities in the DCGS-A2 system.  Based on our review of the record, as well as information gathered during a hearing convened by our Office on April 26, 2016, we find the protester’s argument to be without merit.[3]

The Federal Acquisition Streamlining Act of 1994 established, among other things, a preference and specific requirements for the acquisition of commercial items that are sufficient to meet the needs of an agency.[4]  Federal Acquisition Streamlining Act of 1994 (FASA), Pub. L. No. 103-355 § 8104, 108 Stat. 3243 (codified, as amended, at 10 U.S.C. § 2377).  This section of FASA is implemented in FAR part 12, and allows agencies to use solicitation terms, and other procedures, that more closely resemble the commercial marketplace when procuring commercial items.  Section 12.101 of the FAR directs agencies to, among other things, conduct market research to determine whether commercial items or nondevelopmental items are available that could meet the agency’s requirements.[5]  Section 2377 of Title 10 of the United States Code directs agencies to use the results of market research to determine whether there are commercial items that:  (1) meet the agency’s requirements; (2) could be modified to meet the agency’s requirements; or (3) could meet the agency’s requirement if those requirements were modified to a reasonable extent.  10 U.S.C. § 2377(c)(2).  Determining whether a product or service is a commercial item is largely within the discretion of the contracting agency, and such a determination will not be disturbed by our Office unless it is shown to be unreasonable.  Aalco Forwarding, Inc., et al., B-277241.8, B-277241.9, Oct. 21, 1997, 97-2 CPD ¶ 110 at 11. 

Prior to the issuance of the solicitation here, the agency conducted market research to inform its acquisition strategy.  The market research included consideration of the availability of commercial items to meet the agency’s needs.  There were two studies completed that addressed DCSG-A2 requirements in relation to commercially available solutions:  (1) the Data Integration, Visualization and Analytics (DIVA) market study; and (2) a trade space analysis (TSA).[6]  The DIVA study was intended to provide situational awareness and information about market trends regarding the “state-of-the-practice” within the commercial DIVA software platform landscape, and possible uses of commercial DIVA software in the DCGS‑A2 context.  AR, Tab AQ, DIVA Study, at 2.  The study described a number of potential approaches involving the use of commercial DIVA software, including the approach favored by the protester, whereby the agency could first acquire the commercial software platform necessary for DCGS-A2 data integration, visualization, and analysis capabilities, and could then acquire, separately, the systems integration and development or enhancement work necessary to provide or supplement other DCGS-A2 requirements.  Id., at 30.  In addition to the two studies mentioned above, the agency performed market research by reaching out to industry, including Palantir, through requests for information, industry day events, and industry government one-on-one meetings.[7]  AR at 9. 

While the market research revealed that commercial items were available to meet some of the DCGS-A2 requirements, the agency concluded that there was no commercial solution that could meet all the requirements of DCGS-A2.  As the agency explained in its report, the DCGS-A2 contractor will need to do a great deal of development and integration work, which will include importing capabilities from DCGS-A1 and designing mature interfaces for them.  AR at 44.  Because the agency concluded that significant portions of the anticipated DCSG-A2 scope of work were not available as a commercial product, the agency determined that the DCGS-A2 development effort could not be procured as a commercial product under FAR part 12 procedures.[8]  AR, Tab AG, Market Research Report, at 50.  The protester has failed to show that the agency’s determination in this regard was unreasonable.[9]

The protester next argues that the agency failed to adequately consider whether a commercial product could meet the agency’s requirement if those requirements were modified to a reasonable extent.  In this regard, the protester contends that, rather than awarding a single-award IDIQ contract in conjunction with a cost‑reimbursement type task order, the agency should have sought to meet the DCGS-A2 requirements using a phased approach that would have allowed offerors of commercial solutions, like Palantir, to compete to provide the commercial software platform necessary for DCGS-A2 data integration, visualization, and analysis capabilities, possibly at a fixed-price.  The protester argues that the agency could then acquire, separately, the systems integration and development or enhancement work necessary to provide or supplement other DCGS-A2 requirements. 

A contracting agency has the discretion to determine its needs and the best method to accommodate them.  General Electrodynamics Corporation, B-298698, B‑298698.2, November 27, 2006, 2006 CPD ¶ 180 at 3. In preparing a solicitation, a contracting agency is required to specify its needs in a manner designed to achieve full and open competition, and may include restrictive requirements only to the extent they are necessary to satisfy the agency’s legitimate needs.  Id.  When an agency seeks to procure separate and multiple requirements under a single contract, there is potential for restricting competition by excluding firms that furnish only a portion of the requirement; we therefore review challenges to such solicitations to determine whether the approach is reasonably required to satisfy the agency’s needs.  See Northrop Grumman Tech. Servs. Inc., B‑406523, June 22, 2012, 2012 CPD ¶ 197 at 7.  A protester’s mere disagreement with the agency’s judgment concerning the agency’s needs and how to accommodate them does not show that the agency’s judgment is unreasonable.  General Electrodynamics Corporation, supra.

Here, the record shows that the agency reasonably decided on its approach of having a single contractor, who would be responsible for selecting all the components of DCGS-A2, and who would bear the responsibility for making certain that those components are integrated, in contrast to the phased approach favored by Palantir.  In the written justification for the agency’s use of a single-award IDIQ contract for this procurement, the Senior Procurement Executive explained that the “data integration layer requires unified systems engineering and agile software development activities by a single contractor.  Ad hoc or independently developed software activities cause technical risks, concerns and significant schedule risk and cost uncertainty . . . To separate the systems engineering, software development, and integration activities would only undermine the cohesive development of a new data management and software architecture.”  AR, Tab AT, Determination and Findings for use of Single Source IDIQ Contract, at 2. 

At the hearing GAO conducted in connection with this protest, the executive director and principal assistant responsible for contracting (PARC) at Aberdeen Proving Ground provided greater explanation regarding the need to have a single contractor with responsibility for selecting the components that would be assembled to meet the DCGS-A2 requirements, and writing the software that would be needed in order to integrate the different components and make them interoperable.  Tr. at 203.  According to the PARC, the strategy would require the contractor to “be responsible for ensuring that all of the components that are selected . . . interoperate and to ensure that the code associated with that was made available to the government, because it would have been developed at the government expense, therefore ensuring that we had the capability of supporting it in the post‑production environment.”  Tr. at 203-204.  The PARC further explained that, if the government were to buy some of the components and then provide them to a separate system integrator for integration, it would shift risk to the government that the items might not work or might not be able to be integrated.  Id.  According to the PARC, that approach “puts the government in the middle of selecting certain components and certain pieces, thereby implicitly warranting not only that they will work but they are able to be integrated by the integrator, who would be separate and different.”  Id. at 204.

Here, the agency’s approach is reasonably related to its need for a fully integrated and interoperable system made up of a number of specific capabilities, some of which are commercially available and some of which are not.  While the agency considered several potential approaches to this procurement, including the phased approach favored by the protester, the agency ultimately concluded that it would have a greater likelihood of success (in that it could avoid certain technical risks, concerns and significant schedule risk and cost uncertainty) by opting to have a single contractor serve as the system integrator in charge of developing and selecting the components and making sure that they can be successfully integrated.  AR, Tab AT, Determination and Findings for Use of Single Source IDIQ Contract, at 2.  As such, we have no reason to question the approach chosen by the agency or to conclude that the solicitation is unduly restrictive of competition.

The protest is denied.

Susan A. Poling
General Counsel