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Government warned on free (and competition-free) Palantir contracts over Ukraine scheme

HMG's Chief Commercial Officer wrote to the data software firm to raise concerns, which it rejects.

The UK government's Chief Commercial Officer warned Palantir over the need to comply with “principles of public procurement which usually require open competition” after the data software company landed £10 million+ in contracts without competitive tender, following a free trial. 

A National Audit Office (NAO) report on October 17 focusses on the Department for Levelling Up, Housing & Communities (DLUHC) and the Home Office’s £2.1 billion Ukrainian refugee housing programme. As part of that programme, DLUHC contracted Palantir (on a free trial) to “create its main data system to manage and monitor scheme data.”

NAO flags a wide range of issues with the way the broader scheme was rolled out, including its data management approach – including its contracting of Palantir and the subsequent software deployment. 

“Due to the accelerated timetable for creating the scheme, the platform did not undergo the usual research and testing before it went live. Initial issues such as the way it presented duplicated application data from Home Office systems, and a lack of user testing, led to confusion from local authorities as to how to use the main data platform” said NAO.

It added that the government’s Chief Commercial Officer Gareth Rhys Williams, who oversees HMG procurement, subsequently wrote to the company about its practice of “offering services to public sector customers for a zero or nominal cost” NAO said – suggesting in the report that vendor lock-in had since become a problem.

See also: Palantir's CEO: New AI platform will make West's adversaries “quiver and scurry away”

Palantir has denied that characterisation, telling the FT that 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.”

NAO’s report shows that after a free six-month trial, in September 2022, DLUHC signed a 12-month contract with Palantir worth £4.5 million, without any competitive process – even as civil servants “acknowledged that beyond the 12-month contract, it should plan to move away from Palantir given [they assessed it] may not be the optimal value solution.”

When it came to review contracts, “DLUHC investigated the feasibility of migrating from Palantir’s system to an alternative platform prior to the end of the current contract [but] found a number of potential issues with migrating including that a new system may not be able to be implemented in time, may have quality issues and may cost more due to the start-up costs of a new supplier” NAO noted, with the government departments in September 2023, extending the contract for a further £5.5 million.

Deployment and data gaps

Whatever concerns HMG and indeed NAO might have about Palantir’s involvement, it is arguably the shambolic scheme launch that stands out from the report; for example local authority data returns on scheme homelessness are voluntary, meaning DLUHC does not accurately know how many Ukrainian refugees on the scheme are currently experiencing homelessness.

Between 18 March 2022 and 28 August 2023, the government supported 131,000 Ukrainians to come to the UK under the scheme. 

HMG spent £259 billion on the procurement of goods and services in 2021-22, an earlier NAO report notes. It does not measure how much of public procurement as a whole is competitively tendered, but of the total contract value of more than £100 billion awarded by major departments during 2021-22, around two thirds was subject to competition in some form. Arguably extraordinarily, NAO this summer found that, of 235 large contracts recorded on the public contracts database Find a Tender between January 2021 and January 2023, 20% of contracts using open competition received only one bid.

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