The New Zealand Defence Force has spent millions on controversial spy software produced by secretive Silicon Valley firm Palantir.

After refusing for more than a year to reveal the extent of links to Peter Thiel's big data analysis company, prompting a complaint by the Herald on Sunday to the Ombudsman, the NZDF were forced to disclose annual spending with Palantir averaged $1.2 million.

The figures suggest since contracts were first signed in 2012 the defence force has spent $7.2m with the firm.

The Herald first requested information last January about Palantir's use and the NZDF initially declined to answer claiming even confirming contact with Palantir could prejudice national security.

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"The Defence Force neither confirms nor denies the existence or non-existence of the information you have requested," it wrote.

After being made aware the adoption of Palantir had been reported in a 2012 copy of NZDF-published Army News, and that the NZDF hosted a publicly-available December 2015 briefing on its website detailing use of Palantir "analytical tools" by the elite SAS, the defence force reconsidered its position.

The NZDF confirmed it's contracts with Palantir were into the third three-year cycle and cover software licenses and training for 100 staff. "Palantir knowledge base and analysis capacity."

The NZDF had claimed releasing the total spent with Palantir would breach commercial confidentiality and damage co-operation with the company. Ombudsman Peter Boshier ruled these concerns were unfounded, and were in any case outweighed by legitimate public interest.

Palantir, founded in 2004, grew as an offshoot of the fraud detection operations of Thiel's other company Paypal. Initial investors - and major clients - include the intelligence agencies of the Five Eyes intelligence network.

In more recent times it has sought to expand its client base to include law enforcement, other government agencies, and financial firms.

The company's secrecy - partly due to its clients in intelligence, partly due to its status as a non-public company - has seen market and industry speculation run rampant. The company is said to be worth $25b, with Thiel its largest individual shareholder.

The company last month was caught up in the scandal surrounding Cambridge Analytica, which harvested tens of millions of profiles from Facebook as part of political influence efforts in support of Trump and Brexit.

The New York Times reported a Palantir employee in London worked closely with Cambridge Analytica to develop their psychological profiling technology, and then suggested the firm create a personality quiz to scrape more data from those who clicked on it.

Cambridge Analytica whistleblower Christopher Wylie told the British parliament that Palantir employees also worked on Cambridge Analytica's vast pool of illegally-obtained Facebook data.

Questions to the NZDF about what they used Palantir data to analyse or assess the data of New Zealand citizens went unanswered.

The Herald revealed last year that Thiel was granted citizenship in New Zealand despite the controversial billionaire having only spent 12 days in the country.

He met less than one per cent of the typical residency requirement of 1350 days.

It caused a domestic and international furore with the opposition Labour Party asking questions in Parliament about whether the matter meant New Zealand citizenship was for sale.

Criticism intensified after it was revealed Thiel's local investments had also been given a generous government subsidy.