Congress is on the cusp of finalizing the FY25 National Defense Authorization Act (NDAA) and sending it to the President for his signature. The compromise version of the bill recently released by the House Armed Services Committee authorizes $895.2 billion for national defense discretionary programs and will shape U.S. defense priorities, from military readiness to emerging technologies. Some features of the bill will be of particular interest to the federal contracting community—a pilot program to require unsuccessful bid protesters to pay the Department of Defense (DoD) and contract awardee, as well as a higher barrier to challenging DoD procurements at the U.S. Government Accountability Office (GAO).
What are the main features of the FY25 NDAA bid protest pilot program?
Section 885 of the compromise bill, "Proposal for Payment of Costs for Certain Government Accountability Office Bid Protests," would require GAO and DoD to submit to Congress within 180 days a proposal for a pilot program with the following key characteristics:
- A process for requiring unsuccessful protesters at GAO to reimburse DoD for costs incurred in processing the protests, using benchmarks from the average costs to DoD based on the value of the protested contract
- An enhanced pleading standard for protesters to meet before they may obtain DoD's administrative procurement records in GAO protests of DoD contracts
- A process to repay a DoD contract awardee for lost profits during a Competition in Contracting Act of 1984 (CICA) stay triggered by the unsuccessful protestor's filing at the GAO. The lost profits would be calculated by determining the amount of profit the contract awardee would have earned if it had been able to perform during the term of the CICA stay
Note that the latter two elements of the compromise bill—the heightened pleading standard and paying the awardee—go beyond what the House had originally proposed. As noted in the Joint Explanatory Statement, the initial House version of the pilot would have only required DoD to "determine the effectiveness of requiring a contractor to reimburse the Department of Defense for costs incurred in processing covered protests."
Hasn't Congress tried something like this before?
Yes. In Section 827 of the FY18 NDAA, Congress passed a similar, but much more limited, pilot program for DoD to assess the feasibility of requiring certain large contractors to reimburse DoD for the costs of processing unsuccessful GAO protests. But Congress repealed this limited pilot program in Section 886 of the FY21 NDAA because "the pilot program [was] unlikely to result in improvements to the bid protest process given the small number of bid protests captured by the pilot criteria and lack of cost data."
It is also worth noting that Section 885 of the FY17 NDAA commissioned a report on bid protests from DoD, ultimately performed by the RAND Corporation. The report observed that "the overall percentage of DoD contracts protested was very small—less than 0.3 percent" and, with respect to GAO bid protests, concluded that "[t]he stability of the bid protest effectiveness rate over time—despite the increase in protest numbers—suggests that firms are not likely to protest without merit." RAND also recommended to "[b]e careful in considering any restrictions on task-order bid protests at GAO" because "[t]ask-order protests have a slightly higher effectiveness rate than the rest of the protest population," suggesting that "there may be more challenges with these awards and that task-order protests fill an important role in improving the fairness of DoD procurements."
Would the FY25 NDAA change anything else about bid protests?
Yes. Section 885 of the FY25 NDAA would also raise the GAO's task and delivery order bid protest jurisdictional threshold from $25,000,000 to $35,000,000 for DoD orders. In other words, for an offeror to protest the issuance of a DoD order at the GAO, the challenged order would now need to be valued at more than $35 million, instead of just $25 million. This means that a larger number of DoD task and delivery order procurements will escape review by the GAO.
What could these changes to the bid protest system mean for the federal contracting community?
If the pilot program passes into law and ultimately produces the contemplated changes to the bid protest process, the first order of impact of these changes is clear. The risks associated with filing a protest at the GAO will be higher for federal contractors serving the DoD, as they will have to account for the potential costs of reimbursing the government for litigation costs and the awardee for lost profits. Additionally, the higher pleading standard could also reduce the likelihood of a successful protest. Even if DoD did make significant errors in its evaluation or award decision, the higher standard would make it more difficult for protestors to obtain the full record of DoD's decision making and prove the existence of the error.
The increased task and delivery order threshold would also result in fewer protests of DoD procurements at the GAO and, ultimately, less scrutiny of such acquisitions. Given the restrictions on the U.S. Court of Federal Claims' jurisdiction to hear bid protests involving task or delivery orders from any agency (a topic Venable has written about previously; see here), more DoD procurements will go without independent review for compliance with procurement law.
Federal contractors should consider subscribing to this space for updates on the pilot program and similar developments in the bid protest system.