UPDATE: This story, originally published earlier Monday, has been updated to include comments from the lead attorney representing Palantir following a conference call with reporters held after the court's ruling.

WASHINGTON -- In what could be a big blow to the Army's current path to develop its internal intelligence software suite -- which has been long been marred in controversy -- a presiding judge in a lawsuit brought by Palantir Technologies protesting the Army's acquisition efforts for the system has ruled in favor of the Palo Alto-based company.

Palantir filed a bid protest in the US Court of Federal Claims against the US Army June 30 for issuing what it says was an unlawful procurement solicitation for the service's next iteration of its Distributed Common Ground System-Army (DCGS-A) that shuts the company's commercial offering out of the competition.

The protest -- filed through Palantir's lawyers Boies, Schiller & Flexner, LLP -- argues that the lawsuit was necessary because the Army should be stopped from moving forward on an unlawful and risk-prone software development project that would reinvent the wheel at a very high price.

Palantir's lawyers have called the Army's acquisition efforts for DCGS-A Increment 1 and Increment 2 both illegal and irrational.

The protest also sought to show the court that Palantir's data-management product — Palantir Gotham Platform — does exactly what DCGS-A is trying to do and comes at a much lower cost.

The judge delivered an oral ruling Monday, ordering the Army "to go back and look seriously at whether there are in fact commercial products that can meet its needs either without modification or with some modification, but whether there are in fact commercial products, including from Palantir, that meet its needs," Hamish Hume, the lead attorney on the case, who also successfully represented SpaceX in its 2014 bid protest against the US Air Force, told reporters in a conference call shortly after the ruling.

The court upheld Palantir’s central legal argument that the Army violated a 1994 law -- the Federal Acquisition Streamlining Act -- by not conducting the market research needed to determine if commercially available items could meet its needs with or without modification.

The statute is meant to promote thorough research into using commercial items wherever possible to meet capabilities rather than reinventing the wheel through internal development, saving time, money and promoting innovation, Hume explained.

"The Army did not conduct the market research into the availability of commercial items, it did not ask if there were commercial items, it asked only about the ability of potential bidders to do developmental projects, so they just didn’t ask the right question," Hume said. "They didn’t listen when Palantir repeatedly told them that they could do this on a fixed-price, commercial-item basis. The Army was uninterested in that, didn’t explore it."

Moreover, the government didn’t explain why it ignored its legal requirement to thoroughly investigate available commercial items, Hume added.

The Army’s solicitation, released in December 2015, sought bids to develop a data-management platform for DCGS-A Inc. 2. The Army said it was seeking a lead integrator to create a framework that could gather data from numerous sources with a common data layer, share data seamlessly across a suite of analytical tools and provide easy-to-use visualization of the framework for soldiers to use in the field.

According to Hume, government agencies have long ignored the statute, but this is the first time an agency has been directly challenged for failing to comply with the 1994 law.

"The reasons for that are probably that, first, most government contractors don’t particularly like suing the government or suing their potential customers and, secondly, many of those defense contractors have little incentive to do so because if they are repeat players and they make money off of doing defense contracting, then they make a lot of money off of these inefficient, cost-plus contracts," Hume said.

The lawsuit opened up a can of worms on top of what has been a lengthy controversy over whether the Army should scrap its DCGS-A program after spending more than a decade and $3 billion to develop it and go with a commercial, off-the-shelf solution. Soldiers, in Afghanistan particularly, have repeatedly requested permission to use Palantir instead of DCGS-A, as the service continues to work out glitches and problems with its own program.

Palantir mapped out in a motion filed with the court as part of the lawsuit what it believes were the Army’s repeated, biased attempts to block the company from working with the service to test and integrate its technology into DCGS-A.

Hume said the judge stated in her ruling that the standard for proving bias and bad faith in a bid protest like this is extremely high "and she did not make a finding of bias and bad faith but instead ruled on this 1994 statute not being complied with."

Palantir previously filed a protest with the Government Accountability Office arguing that the way the Army wrote its requirements in a request for proposals to industry would shut out Silicon Valley companies that provide commercially available products. The company contended that the Army’s plan to award just one contract to a lead systems integrator means commercially available solutions would have to be excluded.

The GAO denied the protest.

The decision today, Hume said, is seen not only as a victory related to the DCGS-A acquisition issue, but will hopefully hold government agencies’ feet to the fire to conduct more thorough market research into commercially available items and will "make it more appealing for innovators like Palantir to come to Washington and compete for government business."

While the DCGS-A Increment 2 contract has been publicly estimated to be in the $200 million range, Hume said the ruling could have broader impact on defense contracting -- and elsewhere in the government -- as more doors will open between the government and the commercial technology world. "Having to actually comply with the statute and look for commercial items could go quite beyond just that $200 million amount," he said.

While the judge will issue a written ruling in the coming days that will initially be under seal, a public version will be released subsequently, Hume noted.

He said the judge was "clear" that she expected a major effort from the Army to investigate commercial options.

The government, during the hearing, asked whether the injunction would prevent it from continuing to review and evaluate the bids that were previously received in response to the December 2015 solicitation, according to Hume. "The judge did not react positively to that question because it suggested to her that the Army was not taking her order and her injunction seriously, and she told them that," he said.

"This is not something where they can just put a band-aid on it and try to fix this," he said. The judge "made clear she did not think this was some minor thing they could just tweak, but they had to go back and really do the work to study what is available and what is out there."

Jen Judson is an award-winning journalist covering land warfare for Defense News. She has also worked for Politico and Inside Defense. She holds a Master of Science degree in journalism from Boston University and a Bachelor of Arts degree from Kenyon College.

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