Procurement Lawyer

Palantir USG, Inc. v. United States Adds Teeth to Government Preference for Buying Commercial

by Johana (Jody) Reed

Johana (Jody) Reed is Counsel at McMahon, Welch and Learned,
PLLC, Reston, Virginia. Her areas of practice include general
government procurement law, other transaction agreements,
cybersecurity, and protection of intellectual property.

The First Gulf War1 highlighted a major issue with government procurement of commercial products, especially with latest information technology items.  Motorola had radios that met the needs of the government; however, it was  unwilling to sell them to the federal government on the commercial terms being offered pursuant to the Federal Acquisition Regulation (FAR).  Ultimately, the Japanese government purchased the radios and provided them as part of their contribution to the First Gulf War.2 As a result, Congress passed the Federal Acquisition Streamlining Act (FASA) in 1994.3 FASA required federal agencies to procure commercially available products to the maximum extent practicable.4 Another key requirement of FASA was for market research to determine whether commercial products could satisfy the agency’s needs, with or without minor modifications, and if a commercial item was not available, to determine if nondevelopmental items other than commercial items would meet the agency’s needs.5

As a result of the passage of FASA, FAR Part 12 (Acquisition of Commercial Items) was revised to more closely reflect commercial practices and terms and conditions. Many clauses that were otherwise required to be flowed down to contractors were eliminated or made optional.6 Moreover, FAR Part 12 began to make a distinction between commercial items7 and commercial off-the-shelf (COTS) items.8 In making this distinction, certain clauses could be applicable to commercial items, but not to COTS items.9 Congress has continued its commitment to purchasing commercial items in the three most recent National Defense Authorization Acts (NDAAs).10

Although Congress has repeatedly made its preference for commercial contracting clear, Palantir USG, Inc. v. United States11 may be the first protest case at the U.S. Court of Appeals for the Federal Circuit (CAFC) brought by the federal government.12 The plaintiff, Palantir USG, filed a pre-award protest at the Court of Federal Claims (COFC),13 challenging the Army’s solicitation for the Distributed Common Ground System — Army Increment 2 (DCGS-A2) after losing a pre-award protest at the Government Accountability Office (GAO) for the same solicitation.14 Judge Horn granted a permanent injunction against the Army because she found that the Army had failed to comply with FASA.15 The government appealed to the CAFC, which affirmed the COFC’s decision.16

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