Neso awards Palantir £21 million grid contract without competitive tender, citing operational lock-in

Britain's state-owned electricity system operator has awarded US data firm Palantir a £21.2 million contract without inviting rival bids, extending a relationship that was never publicly disclosed when it began. The contract runs from 8 September 2026 to 31 July 2027, with six-month extension options available until July 2028.^[1]

What Neso awarded and why

Palantir Foundry is a data integration and operations platform that Neso uses to manage critical electricity grid processes including connections and system balancing. Neso primarily uses the system to manage data and workflows for connecting new renewable energy projects, battery storage, and consumers to the electricity transmission network.

Neso said it did not invite rival bids for "technical reasons" and cited a legal exemption that removes the requirement to consider other bids when there is no reasonable alternative to existing dependencies. In its justification, Neso said the Palantir platform was supported by proprietary architecture licensed exclusively by the company. The procurement notice stated that "Palantir possesses the specialist knowledge, technical expertise and the system knowledge required to maintain and support the solution effectively."^[1]

How the dependency formed

Neso first partnered with Palantir in March 2023 to utilise its Foundry software to support data management. Neso said the original Palantir contract was not formally disclosed because it was not a public body at the time the deal was agreed. The Energy Act 2023 created Neso as a public corporation, wholly government-owned and funded through regulated industry charges. Neso became a public corporation in October 2024, when the UK government acquired what had been the Electricity System Operator from National Grid plc.

The sequence matters for procurement law. By the time competitive bidding opens, Palantir will have held the system for four years and run the transition. Neso added that it would open up areas covered by the contract to other bidders at a later stage.

The connections problem

The direct award lands at an awkward moment for Neso's grid connections record. One of the areas covered by the contract is getting users connected to the electricity grid, where Neso's performance was described as "materially below expectations" in a report from a panel of independent experts published last week. Ofgem found that Neso had "not delivered" its Connections Reform aim "nor made sufficient progress", the one area where the operator underperformed across its business plan objectives.

The Palantir system is therefore supporting processes that regulators have already flagged as falling short - and Neso is now locked into that system for at least another ten months.

Wider scrutiny of Palantir's UK footprint

The Neso award is the latest in a pattern of direct awards to Palantir across British public bodies. The key contracts now in place:

• NHS Federated Data Platform - a £330 million arrangement that the House of Commons Science, Innovation and Technology Committee called on the government to terminate in June 2026
• Ministry of Defence Enterprise Agreement - a direct award justified under the Procurement Act 2023
• Neso grid operations - the £21.2 million contract announced 8 September 2026

In Britain, Palantir holds contracts worth around £670 million and paid £2 million in corporation tax in 2024.

In June, the Commons Science, Innovation and Technology Committee described the government's reliance on the company as an "unacceptable point of weakness." The committee warned that placing vital public services on proprietary technology could strengthen a supplier's negotiating position and make it harder for the government to move to competing platforms. As of March 2026, Palantir was not classified as a strategic supplier to government, and there were no plans to change that designation.

The Neso award will sharpen that debate. A publicly owned grid operator, responsible for connecting the renewable capacity Britain needs to meet its clean power targets, has just confirmed it cannot run a competitive procurement for the software at the centre of that work.

What to watch: whether Ofgem's ongoing NESO1 business plan determinations impose any conditions on third-party software dependencies, and whether the promised competitive process for the areas currently covered by Palantir Foundry materialises before the July 2028 extension deadline.