As we noted in this blog post in February, the 2025 National Defense Authorization Act (NDAA) was enacted in December 2024 included a provision at Section 885 raising the protest threshold for Department of Defense (DoD), Coast Guard, and NASA task orders from $25 million to $35 million.
That provision of the NDAA also directed the U.S. Government Accountability Office (GAO), in coordination with the Secretary of Defense, to, within 180 days of enactment, submit a proposal to Congress that includes:
- A process for "enhanced pleading standards" when a party seeks administrative records of the Department of Defense (DoD).
- Benchmarks of the average costs incurred by DoD and GAO of a protest based on the value of the contract being protested and "costs of the lost profit rates" the contractor awarded would have earned had performance of the contract being protested not been suspended due to the automatic stay pursuant to 31 U.S.C. § 3553(d) when the protest was filed.
- A process for payment by the losing protester to the government of costs and the contractor awarded the contract its lost profits in accordance with the benchmarks.
Proposed Heightened Pleading Standard
In its 40-page response dated July 14, 2025, GAO proposed enhancing its pleading standard to make it clear that protest allegations must be credible and supported by evidence. GAO's regulations at 4 C.F.R. Part 21 already require that protestors "set forth a detailed statement of the legal and factual grounds of protest" as well as "clearly state legally sufficient grounds of protest," and protests that fail to meet those requirements should be dismissed.
GAO proposes to heighten that standard by requiring that protestors provide, at a minimum, "credible" allegations that are "supported by evidence" and are sufficient, if uncontradicted, to establish the likelihood of the protester's claim of improper agency action. While Section 885 asked for the heightened standard only as to DoD protest, GAO explains that this proposed change, intended to "reduce ambiguity and further bolster GAO's ability to expeditiously resolve protest allegations that are either not credible or unsupported by adequate evidence," would apply to all protests.
Insufficient Data for Benchmarks, No Need for Loser-Pays
Regarding the benchmark requirement, GAO responded that insufficient data was available to develop the requested benchmarks and that tracking those costs and administrative burden would, in DoD's view, likely outweigh the benefits. DoD's position was informed by the fact that, according to the response, GAO protests of DoD procurements declined 48% over the last 10 years and that, on average, fewer than 2% of all DoD procurements are protested.
The GAO also explained that it did not endorse a fee-shifting provision because, in its opinion, "existing statutory authorities and bid protest procedures are sufficient to efficiently resolve and limit the adverse impacts of protests filed without a substantial legal or factual basis." In addition, the GAO noted that imposing a fee-shifting process could have a negative effect on the participation of firms in the protest process and federal procurement as a whole, posing unique harms to small businesses.
This potential decrease in transparency and accountability could, according to GAO, "potentially reduce competition for the government's requirements, which could in turn drive up the prices paid for goods and services." Finally, GAO argued that using cost benchmarks rather than an individualized evaluation of an awardee's grounds for recovering its costs would not result in an equitable distribution.
Alternate Proposals
While it did not provide the requested benchmarks or a proposal for payment of costs by an unsuccessful party to the government and the awardee, the GAO offered Congress alternative processes for consideration, including:
- By statute, Congress could consider requiring the agency to track its protest-related costs and contractor profit or fee information.
- If implementing a fee-shifting mechanism, the DoD could include a contract clause permitting the agency to recoup or withhold profit or fees when an incumbent contractor files a protest subsequently dismissed as legally or factually insufficient.
- Congress could authorize the GAO to recommend that unsuccessful protesters reimburse the department for costs incurred in addressing the protest and compensate the awardee for profits lost due to contract suspension during the protest period, provided the agency concludes the protest lacked a reasonable factual or legal basis.
Going Forward
It remains to be seen whether Congress will accept GAO's and DoD's positions regarding benchmarks and fee shifting or whether it will consider some of the alternate processes for consideration. But the heightened pleading standards, should they move forward, will certainly have an impact on GAO bid protest practice.
Regarding the loser-pays proposal, given the significant decline in GAO protests over the past decade, as well as the low number of DoD procurements that are actually protested, it seems to be a solution in search of a problem. While both the government and awardees may be frustrated by delays caused by protests, on balance, those delays are a small price to pay for maintaining one of the most transparent procurement systems in the world, which provides participants opportunities for review of award decisions that are totally unavailable in many countries. Further, the requirement that litigants bear their costs is in keeping with the general approach taken in the U.S. judicial system, an approach from which the GAO does not believe we should deviate.
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