A bitter struggle between an innovative Silicon Valley software inventor and the Army has shifted from the raging battlefields of Afghanistan to a sedate federal claims court in Washington.

For years, Palantir Technologies, led by big-bucks Donald Trump supporter Peter Thiel, has pushed the Army unsuccessfully to buy its intelligence data processor.

On June 30, Palantir filed a lawsuit against the Army. In what some conservatives suspect to be retaliation, the Obama administration filed a discrimination lawsuit against the company two months later.

The $15 billion technology startup has soldiers on its side. Officers from the war zone have written memos endorsing Palantir’s fast analysis of the enemy. They sought permission to buy more, but Army headquarters at the Pentagon often discouraged the buys or gave outright rejections.

The standoff intensified last year when the Army issued a solicitation for a new version of the Distributed Common Ground System, the $4 billion battlefield intelligence network that critics say remains flawed after a decade of use. The solicitation locked out Palantir and its Gotham data management platform, an off-the-shelf add-on.

Palantir called in reinforcements in the form of a powerhouse Washington law firm that filed suit in the U.S. Court of Federal Claims. The lawyers charge that the Army “illegally prevented Palantir from bidding” when regulations required the armed service to seek already developed commercial products. The lawsuit asks Judge Marian Blank Horn, appointed to the court 30 years ago by President Reagan, to order the Army to open the competition for what is called Increment 2.

The fact that Mr. Thiel, the billionaire co-founder of PayPal and operator of a huge hedge fund, is now in a battle with the Army adds political intrigue to a basic government contract dispute.

Mr. Thiel is one of the few political conservatives among the giants of Silicon Valley. Social media leaders of Facebook and Google, for example, work with and fund the Democratic Party. Mr. Thiel had a prominent speaking spot at the Republican National Convention, proclaiming he was “proud to be gay” to loud applause. He recently pledged more than $1 million to aid the Trump campaign.

Last month, the Obama administration filed suit against Mr. Thiel’s Palantir. The Labor Department charges that the 1,500-employee company discriminated against Asians in hiring.

Palantir released a statement that said, in part: “Despite repeated efforts to highlight the results of our hiring practices, the Department of Labor relies on a narrow and flawed statistical analysis relating to three job descriptions from 2010 to 2011. We intend to vigorously defend against these allegations.”

Palantir’s legal action has forced a number of Army intelligence czars to undergo sworn depositions by lawyers from the firm of Boies, Schiller & Flexner. While much of their testimony is under seal, some surprising snippets have emerged in follow-up legal motions asking the judge to rule based on the existing record of evidence. A decision is expected by month’s end.

Some consistent complaints against the Distributed Common Ground System are that it is too complicated, too slow to retrieve and dispense data, and too prone to crashes.

Palantir’s attorneys portrayed one unidentified Army official’s testimony as an acknowledgment that the Gotham data management platform does chores “above and beyond” the common ground system.

“There were soldiers, units that had purchased Palantir with their own dollars and were using it to meet some of the specific needs of that unit in Afghanistan and Iraq,” the official said.

Asked if this was because the existing system did not meet their needs, the witness said, “Some of the needs were the same. Some were additional, above and beyond.”

‘No technical reason’

Depositions also show that the Army misled lawmakers when it circulated a white paper on Palantir. The paper said the Army had conducted an extensive evaluation of Palantir when, in fact, it had not.

“We did not do any formal evaluation or determination of whether or not the tools could live inside [the common ground system],” an Army official said.

Congressional aides say the Army’s motivation for fighting Palantir is that it wants to develop its own software and hardware with its selected contractors and views the company in Palo Alto, California, as an interloper.

Members of Congress, led by Rep. Duncan Hunter, California Republican and a former Marine Corps officer, repeatedly have urged the Army to buy off-the-shelf plug-ins to avoid the increased cost of ground-up development. Palantir is used by the CIA, the National Security Agency and special operations, among other agencies.

“This case has the potential to dramatically change not just DCGS as a program, for the better, but also the way the Army goes about contracting commercial solutions already in the marketplace,” said Joe Kasper, Mr. Hunter’s chief of staff. “From the beginning, utilizing Palantir has always been a win-win for the Army and the taxpayer. And if it takes a court decision to make the Army see it, then that’s just the way it is.”

The Army says Palantir simply does not fit well into the common ground system’s far-flung architecture. It says Palantir has shortfalls when dealing with human intelligence, communications intercepts and general data fusion.

Palantir presented its own tech expert witness, Bryant Choung, whose report concluded that “there is no technical reason why the Army could not practically have met its core need” for a data management platform.

The Army and the Justice Department have declined to comment on the case.

The Palantir lawsuit essentially has become an investigation into how the Army kept the company at bay for years.

The witness list is a “who’s who” of intelligence officials inside Army headquarters, including Lt. Gen. Mary Legere, who until March was deputy chief of staff for intelligence; and Lynn Schnurr, the Army’s top information officer.

A confidential Army email reveals one reason Palantir never gained favor inside the halls of the Pentagon: Ms. Schnurr hated the system.

On March 10, 2012, an Army intelligence officer sent an email to a colleague in Afghanistan about efforts to persuade headquarters to embrace Palantir. In Afghanistan, finding the enemy and its deadly improvised explosive devices is a big part of the war. Soldiers had attested that Palantir helped a lot.

The officer wrote that he met with a more senior officer who “views a time a couple years ago when he also was looking at Palantir as a lost opportunity, and that they could be in a much different and better position now with the program if they had gone that route.”

“The biggest obstacles for [the senior officer] to bringing Palantir in are finding how the Army and Palantir can find a win-win relationship, and opposition from Lynn Schnurr for the [deputy chief of staff for intelligence]. Ms. Schnurr appears to have an entrenched animosity towards Palantir, which has been spread and inculcated into the DA staff,” the officer wrote.

The intelligence officer quoted his superior as saying that once he returned to the U.S. from Afghanistan, he wanted to “find a way to bring Palantir into the system.”

Four years later, the Palantir-Army standoff remains and now is in federal court.

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