The Federal Government has spoken about using non-traditional sources for their products for some time. The idea behind this shift in thinking is that technology is progressing at a rapid rate and smaller, more nimble commercial companies (think Silicon Valley) are more adept at staying on the leading edge of technological advances. Rightly or wrongly, traditional military contractors are perceived as large, slow-moving behemoths that cannot react to changing technology trends as quickly as smaller, more agile venture-backed companies.
Well, the US Army is backing up their rhetoric with a recent award to a venture-backed Palo Alto company, Palantir, with an $800MM contract win. The award is for a Program of Record called Army Distributed Common Ground System, or DCGS-A, which involves building an intelligence system to aid soldiers in remote environments. The primary competitor on this award was Raytheon, clearly a traditional military contractor.
Palantir is a venture-funded data analytics company, backed by Peter Thiel, one of the giants of Silicon Valley venture capital, with credits including PayPal and Facebook. Palantir is rumored to be seeking an IPO in the near future. To be fair, Palantir is not new at the Government contracting game. They have a history with DoD going back to 2009 and won a $222MM contract in 2016 with SOCOM. Still, the fact that the DoD is entrusting a venture-backed Silicon Valley firm with a Program of Record of this size, over a traditional contractor, indicates a significant shift in acquisition philosophy on the part of the Federal Government.