Treasury's IRS awards $32.7M contract for software licenses and cloud hosting to Palantir Technologies Inc

Contract Overview

Contract Amount: $32,728,532 ($32.7M)

Contractor: Palantir Technologies Inc.

Awarding Agency: Department of the Treasury

Start Date: 2019-04-04

End Date: 2024-03-16

Contract Duration: 1,808 days

Daily Burn Rate: $18.1K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: IT

Official Description: DISCOVER REPLACEMENT SUPPORT SOFTWARE LICENSES SOFTWARE LICENSES O&M PROFESSIONAL SERVICES PROFESSIONAL SERVICES (CLOUD HOSTING) THE PERIOD OF PERFORMANCE A BASE AND FOUR, ONE YEAR OPTION. BASE YEAR: 04/04/2019 THR 09/23/2019 OPTION YEAR 1: 09/24/2019 THR 09/23/2020 OPTION YEAR 2: 09/24/2020 THR 09/23/2021 OPTION YEAR 3: 09/24/2021 THR 09/23/2022 OPTION YEAR 4: 09/24/2022 THR 09/23/2023

Place of Performance

Location: PALO ALTO, SANTA CLARA County, CALIFORNIA, 94301

State: California Government Spending

Plain-Language Summary

Department of the Treasury obligated $32.7 million to PALANTIR TECHNOLOGIES INC. for work described as: DISCOVER REPLACEMENT SUPPORT SOFTWARE LICENSES SOFTWARE LICENSES O&M PROFESSIONAL SERVICES PROFESSIONAL SERVICES (CLOUD HOSTING) THE PERIOD OF PERFORMANCE A BASE AND FOUR, ONE YEAR OPTION. BASE YEAR: 04/04/2019 THR 09/23/2019 OPTION YEAR 1: 09/24/2019 THR 09/23/2020 OPTIO… Key points: 1. Contract focuses on essential software licenses and cloud hosting services, indicating a need for robust IT infrastructure. 2. The award to Palantir Technologies Inc. suggests a reliance on specialized software solutions for complex data analysis or operational needs. 3. A base period and four one-year options indicate a medium-term commitment, allowing for flexibility and adaptation. 4. The contract's duration of approximately five years (1808 days) suggests a significant, ongoing requirement for these services. 5. The firm-fixed-price contract type aims to control costs by establishing a set price for the services rendered. 6. The contract was awarded under full and open competition, implying a broad search for qualified vendors.

Value Assessment

Rating: good

The total award amount of $32.7 million over nearly five years for software licenses and cloud hosting appears reasonable given the specialized nature of the services and the contractor's expertise. Benchmarking against similar large-scale IT procurements for government agencies suggests that pricing is competitive, especially considering the complexity often associated with Palantir's offerings. The firm-fixed-price structure provides cost certainty for the IRS, mitigating the risk of cost overruns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through full and open competition, indicating that the IRS sought proposals from all responsible sources. While the specific number of bidders is not provided, this procurement method generally fosters a competitive environment, encouraging multiple vendors to submit proposals. This process is designed to ensure the government receives the best value by allowing a wide range of potential contractors to compete for the business.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider selection of qualified vendors, ultimately maximizing the value of federal spending.

Public Impact

The Internal Revenue Service (IRS) is the primary beneficiary, receiving critical software licenses and cloud hosting services. These services likely support essential IRS functions related to tax administration, data processing, and potentially advanced analytics. The contract's impact is primarily within the federal government's IT infrastructure, supporting its operational capabilities. The workforce implications are likely related to IT professionals managing and utilizing the software and cloud services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if the specialized software becomes deeply integrated into IRS systems.
Reliance on a single contractor for critical software and cloud infrastructure could pose a risk if performance issues arise.
The long-term cost implications of software licensing and cloud hosting need continuous monitoring to ensure value.

Positive Signals

Award to a known entity in advanced data analytics suggests access to sophisticated capabilities.
Firm-fixed-price contract provides budget predictability for the IRS.
Full and open competition indicates a thorough vetting process for the selected vendor.

Sector Analysis

This contract falls within the Software Publishers (NAICS 511210) sector, which encompasses companies that publish, and may develop and distribute, software. The federal government is a significant consumer of software licenses and cloud-based services, with substantial annual spending in this area to support a wide range of agency missions. Comparable spending benchmarks for enterprise software and cloud hosting services for large federal agencies often run into tens or hundreds of millions of dollars annually, depending on the scope and complexity.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). As a result, small businesses are unlikely to be direct beneficiaries of this prime contract. However, the prime contractor, Palantir Technologies Inc., may engage small businesses for subcontracting opportunities, depending on their internal policies and the specific requirements of the contract. The absence of a small business set-aside suggests the requirement was likely deemed too specialized or large for small business capabilities.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers within the IRS and the Department of the Treasury. The firm-fixed-price nature of the contract provides a degree of financial oversight by setting clear cost expectations. Transparency is facilitated through federal procurement databases like FPDS, which record contract awards. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse related to this contract arise.

Related Government Programs

IRS IT Modernization Initiatives
Federal Cloud Computing Strategy
Software Licensing Agreements
Enterprise Resource Planning (ERP) Systems
Data Analytics Platforms

Risk Flags

Potential for vendor lock-in
Reliance on specialized software provider
Long-term cost management of cloud services

Frequently Asked Questions

What is this federal contract paying for?

Department of the Treasury awarded $32.7 million to PALANTIR TECHNOLOGIES INC.. DISCOVER REPLACEMENT SUPPORT SOFTWARE LICENSES SOFTWARE LICENSES O&M PROFESSIONAL SERVICES PROFESSIONAL SERVICES (CLOUD HOSTING) THE PERIOD OF PERFORMANCE A BASE AND FOUR, ONE YEAR OPTION. BASE YEAR: 04/04/2019 THR 09/23/2019 OPTION YEAR 1: 09/24/2019 THR 09/23/2020 OPTION YEAR 2: 09/24/2020 THR 09/23/2021 OPTION YEAR 3: 09/24/2021 THR 09/23/2022 OPTION YEAR 4: 09/24/2022 THR 09/23/2023

Who is the contractor on this award?

The obligated recipient is PALANTIR TECHNOLOGIES INC..

Which agency awarded this contract?

Awarding agency: Department of the Treasury (Internal Revenue Service).

What is the total obligated amount?

The obligated amount is $32.7 million.

What is the period of performance?

Start: 2019-04-04. End: 2024-03-16.

What is Palantir Technologies Inc.'s track record with federal contracts, particularly with the IRS or Treasury?

Palantir Technologies Inc. has a significant track record with federal agencies, including the Department of Defense and intelligence community, often for complex data integration and analysis platforms. While specific contract details with the IRS or Treasury prior to this award are not detailed in the provided data, their history suggests experience with large-scale, high-value government IT procurements. Their involvement typically centers on providing advanced analytical capabilities, which aligns with the nature of software licenses and cloud hosting. The IRS, as a large agency with substantial data processing needs, would likely seek contractors with proven expertise in handling sensitive information and complex systems, a niche Palantir often fills.

How does the $32.7 million value compare to similar software licensing and cloud hosting contracts for federal agencies?

The $32.7 million award over approximately five years for software licenses and cloud hosting is within the typical range for enterprise-level IT services procured by large federal agencies like the IRS. Agencies often spend tens of millions annually on such services to support critical operations. For context, major cloud hosting contracts for agencies like the Department of Defense or Health and Human Services can reach hundreds of millions or even billions over their lifespan. Palantir's specific offerings are often considered premium due to their advanced capabilities, so while the total value is substantial, it may represent good value for the specialized services provided, especially when compared to bespoke development or less capable off-the-shelf solutions.

What are the primary risks associated with this contract, and how are they mitigated?

Key risks include potential vendor lock-in, as the IRS's operations could become heavily reliant on Palantir's specific software and platforms, making future transitions difficult and costly. Performance risk is another concern; any disruption in software functionality or cloud hosting could impact IRS operations. Mitigation strategies likely include the firm-fixed-price contract type, which incentivizes the contractor to perform within budget. The contract's structure with option periods allows for re-evaluation of performance before committing to subsequent years. Furthermore, the full and open competition process suggests a thorough vetting of Palantir's capabilities, and ongoing contract management by the IRS would monitor performance and address issues proactively.

How effective is the 'full and open competition' method in ensuring value for money in this specific IT procurement?

The 'full and open competition' method is generally considered effective in ensuring value for money for IT procurements, especially for complex solutions like those potentially offered by Palantir. It allows a wide range of vendors to compete, driving down prices and encouraging innovation. For the IRS, this means they likely received proposals from multiple qualified companies, enabling them to compare technical capabilities and pricing rigorously. While Palantir may be a specialized provider, the competitive process ensures that their pricing and offering were deemed the most advantageous compared to other potential bidders. This method fosters transparency and accountability, increasing the likelihood that taxpayer funds are used efficiently.

What are the historical spending patterns for software licenses and cloud hosting at the IRS or similar agencies?

Historical spending patterns for software licenses and cloud hosting at the IRS and similar large federal agencies have shown a consistent and increasing trend over the past decade. Agencies are increasingly migrating services to the cloud and relying on sophisticated software for data management, analytics, and citizen services. Spending in these categories often represents a significant portion of an agency's IT budget, frequently running into tens or hundreds of millions of dollars annually. The IRS, in particular, manages vast amounts of sensitive taxpayer data, necessitating robust and secure IT infrastructure, which translates to substantial and ongoing investments in software and cloud services.

Industry Classification

NAICS: Information › Software Publishers › Software Publishers

Product/Service Code: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1200 17TH STREET, DENVER, CO, 80202

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $32,728,532

Exercised Options: $32,728,532

Current Obligation: $32,728,532

Actual Outlays: $23,361,244

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Parent Contract

Parent Award PIID: 2032H518A00029

IDV Type: BPA

Timeline