UK government slammed for Palantir 'free trial period' deal in Ukraine housing scheme

US spy-tech vendor’s tactic deemed 'contrary to the principles of public procurement'

Updated The UK's chief commercial officer is warning a government contract with Palantir was awarded against public procurement principles after the US spy-tech biz got a toe-hold in the Homes for Ukraine scheme via a free six-month trial period.

Palantir's approach to the refugee housing scheme closely echoes its tactics in the UK health system, when it began work during the height of the pandemic for a nominal fee of £1. It was subsequently awarded £60 million ($73 million) in NHS contracts without competition and is hotly tipped to win the £480 million ($584 million) Federated Data Platform contract, which will absorb some of the projects in which Palantir is already employed.

Critics of the NHS's contracting of Palantir have warned it could lead to vendor lock-in with the short-term gain of using an existing system preferred to the longer-term benefits of open competition. So, it has proved in the Department of Levelling Up Housing and Communities (DLUHC).

After Russia's invasion sparked war in Ukraine last year, the DLUHC, along with the Home Office, took charge of housing refugees.

In a newly published report [PDF], the National Audit Office said DLUHC took up an offer from Palantir to provide six months of free support to create its main data system to manage and monitor scheme data to set the project up quickly in March 2022. Palantir had promised it would be able to help establish the data system in nine days.

In September, it signed a 12-month contract with Palantir worth £4.5 million ($5.48 million) "without any competitive process" after it "sought and received ministerial approval," said the public spending watchdog.

"DLUHC officials acknowledged that the department should plan to move away from Palantir given the cost of the contract, which was perceived to be higher than other possible solutions," the NAO report said.

In February 2023, the UK's chief commercial officer Gareth Rhys Williams, wrote to Palantir noting his concern about the "practice of offering services to public sector customers for a zero or nominal cost to gain a commercial foothold, contrary to the principles of public procurement which usually require open competition."

Nonetheless, in September 2023, DLUHC extended the contract with Palantir for a further 12 months for a value of £5.5 million ($6.7 million).

The department justified the uncompetitive extension after investigating the feasibility of migrating from Palantir's system to an alternative platform.

"It found that migrating to a new system would be challenging as it would either require a long-term commitment from DLUHC to create and maintain its own system or it would have to incur new costs as a consequence of migrating data to a new commercial off-the-shelf system, which may not be able to be implemented in time and may have unknown quality issues. DLUHC noted that if a new system was not implemented in time, this may present a risk to the unaccompanied minors scheme and wider safeguarding processes," the NAO report said.

The NAO noted that the government will need to decide the future of the data system supporting the housing scheme, which is expected to be ongoing in September 2024.

The NAO's comments come as NHS England, a government quango, is set to announce the winner of a £480 million ($584 million) competition to provide a Federated Data Platform. Critics have argued Palantir — which considers the deal a "must-win" — has an unfair advantage given is position providing existing data systems which will be rolled into the FDP. NHS England has maintained it is a fair and open competition. ®

Updated on October 18 to add:

A Palantir spokesperson said: "We're proud to have stepped up to support the Homes for Ukraine scheme and, in particular, to have stood up a solution in just nine days, which has enabled the safe resettlement of 131,000 refugees."

"Clearly, the urgency of the situation meant that time was of the essence and moving fast helped deliver Ukrainians to safety more quickly. As the report itself notes, when alternatives were subsequently looked at, they were viewed as likely to 'cost more', as well as carrying 'risks to implementing on time' and 'potential quality issues'."

On comments made by the Government's Chief Commercial Officer, the spokesperson responded: "There is nothing unusual in a business offering a prospective customer the opportunity to trial before purchase. Indeed the government's own guidance states that 'where a service is being outsourced for the first time, a pilot should be run' and that 'if you're buying a product, consider asking for a demonstration or trial on a smaller scale'."

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