Baroness warns of ‘unpleasant smell’ over Palantir contract

Peers have questioned the Ministry of Defence over its decision to award Palantir a further three-year contract without competition, raising concerns about propriety, value for money and long-term reliance on a single US supplier for critical defence data and AI capability, the UK Defence Journal understands.

In the Lords, Baroness Goldie said the existing arrangement was known to be expiring in 2025 and claimed British firms had been interested in bidding. She criticised the decision to award a new contract in December 2025 without an open tender, alleging “a very unpleasant smell hovering over this particular bucket of fish” and asking what was discussed at a February 2025 meeting in Washington involving the Prime Minister, Palantir and Peter Mandelson.

Lord Coaker, Minister of State at the Ministry of Defence, said he would reflect on her points and respond after discussions with others, but defended the use of single-source contracting. He cited a Conservative statement from the Commons that “many contracts in the MOD are rightly let on a single-source basis” and said the MoD judged Palantir’s capabilities and delivery record as the basis for the direct award.

He pointed to a transparency notice published in December 2025 which, he said, set out why a direct award was justified, arguing it was “in our interests, the interests of the MoD and the interests of our country” to proceed on that basis.

Lord Fox raised concerns about whether the arrangement amounted to outsourcing a sovereign capability, arguing that while the Government said the data would remain protected, the expertise to exploit it for AI purposes would sit with Palantir’s proprietary systems.

Responding, Coaker said UK defence data used in Palantir software remained sovereign and under MoD control, adding: “It resides in the United Kingdom.” He said there were contractual controls in place and that changes could not be made without UK consent, describing “very real protections” to secure the data while enabling the MoD to benefit from Palantir’s capabilities.

Asked by Lord Bellingham whether minutes were taken of the February 2025 visit to Palantir, Coaker said: “No minutes were taken of that meeting, but it was a routine visit.” He said the visit involved a short presentation, a tour and introductions to staff, describing it as part of normal government engagement with industry.

Baroness Wheatcroft asked for information on contracts with Anduril, after previously seeking details on contracts involving Palantir and Anduril. Coaker said he would write to her, adding that the response would be placed in the Library.

Labour peer Lord Watts said the case raised broader questions about awarding large defence contracts without competition and value for money, urging that British industry should be encouraged to compete where possible. Coaker agreed that open competition was generally preferable but argued there were circumstances where single-source awards were justified. He also said Palantir had committed, as part of the December 2025 enterprise agreement, to “1.5 billion-worth of money to grow British business” through support for small and medium-sized enterprises and skills development, describing this as part of ensuring UK benefit from a contract awarded to a US-based supplier.

Baroness Cash raised concerns reported by openDemocracy regarding political donations and alleged links to firms that could benefit from government contracts, asking whether conflicts had been examined. Coaker said he would write if necessary, but insisted: “everything was done properly and appropriately” saying that the decision to award the contract was made by the Defence Secretary alone and that such matters were not permitted to influence procurement decisions.

Baroness Brinton returned to questions about what Palantir could do with the data, referencing earlier debates during the Procurement Bill on restricting access to sensitive health data. Coaker reiterated that control of defence data remained a sovereign decision for the UK Government and said: “Nothing can be done without the consent of the UK Government,” adding that protections were in place to prevent data moving beyond where it should be.