Section 804 of the House-enacted version of the National Defense Authorization Act for Fiscal Year 2024 would establish a “loser pays” pilot program to require contractors to reimburse the Department of Defense for costs incurred in “processing” bid protests that are ultimately denied by the Government Accountability Office.  The accompanying House Armed Services Committee report explains the provision’s intent as “curtailing wasteful contract disputes.” 

This is not the first time Congress has tried such an approach.  Section 804 is nearly identical to a pilot program included in the FY 2018 NDAA.  Congress repealed that pilot before it could be implemented, however. 

Bid protests have been a feature of the federal acquisition framework for decades–a mechanism by which contractors can challenge the way an agency solicits offers for, or awards, a contract.  Many in the defense industrial base view the bid protest system as providing necessary transparency and accountability in the contracting process, including to ensure that the government follows the law and its own procedures. 

Section 804 seems to begin from the premise that there is a public interest in deterring bid protests.  Critics of the protest system claim that contractors use bid protests to “game the system.”  By filing excessive and/or weak protest allegations, they say, contractors–particularly incumbent contractors–impede timely awards with which they disagree.  There is significant question whether the data actually support this supposed need for deterrence, however, and dialing back a system by which private companies can protest a government contract decision is likely to have a range of unintended and negative consequences.

As currently structured, the pilot program would apply only to protests of Department of Defense contract actions.  DoD acquires roughly $400 billion in products and services from contractors every year–about as much as all other federal agencies combined.  A 2018 RAND study found protests of DoD procurements to be exceedingly uncommon, however:  Between 2008 and 2016, less than 0.3% of all DoD contracts were protested.  Moreover, GAO statistics show that in approximately half of all protests filed, protesters got some form of relief, be it voluntary corrective action by the agency or a sustain on the merits by GAO.  Particularly when taken together, those data support the idea that the bid protest system serves a necessary and important oversight function, improving the integrity and quality of government contracting actions.

There is also significant uncertainty about how the pilot program would work in practice, were it implemented.  As envisioned by House Section 804, bid protests filed with GAO on or after October 1, 2025 would be subject to the three-year pilot program.  Only bid protests rendered final during the program’s three-year term would be covered.  Section 804 defines a “final” protest as one in which GAO has issued a decision denying the protest, and either the time for “appeal” of that decision has expired, or an “appeal” has been filed and the process has completed.  It is not clear what is meant by “appeal,” however, because existing law and regulation provide no ability to “appeal” a bid protest decision from GAO.  That language may be intended to refer to protests that are re-filed at the U.S. Court of Federal Claims, but that still leaves uncertainty about how the program would work in practice.

Other questions remain as well.  For instance, how will the costs to be reimbursed by the losing contractor be quantified?  In 2018, DoD did not track, and RAND could not extrapolate, any data associated with DoD’s costs to “process” bid protests.  As another example, how will the pilot apply if GAO sustains a protest in part and denies it in part?

Other criticisms that attended this pilot program’s predecessor–and prompted its repeal–apply with equal measure today.  In an apparent effort to exempt small businesses and target larger companies, section 804 excludes from the pilot program any bid protest filed by a contractor with annual revenues at or below $250 million.  The 2018 RAND report found that small businesses accounted for at least half of all protests received by GAO, however, and that small business protests were far more likely to be denied than those filed by larger companies. 

Interestingly enough, RAND’s recommendations in its 2018 report mirrored what defense contractors have been saying for years:  To manage the number of bid protests that are filed, DoD and other federal agencies should improve the quality of post-award debriefings they provide.  According to RAND, “[i]t became clear over the course of our study that too little information or debriefings that are evasive or adversarial, or failing to provide required reasonable responses to relevant questions, were likely to lead to a bid protest.”  It’s been more than five years since Congress last probed the adequacy of the government’s post-award debriefings, and although certain agencies have made improvements in their processes, much remains to be done. 

Section 804 first appeared in the HASC Chairman’s Mark of the FY 2024 NDAA, survived an extensive Committee and floor amendment process untouched, and was adopted without change on the House floor.  The Senate-enacted NDAA contains no similar provision.  Accordingly, the ongoing conference in which Senate and House leaders iron out the differences between their respective bills will determine whether the section 804 pilot survives, and if so, the form it will take. 

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Photo of Stephanie Barna Stephanie Barna

Stephanie Barna draws on over three decades of U.S. military and government service to provide advisory and advocacy support and counseling to clients facing policy and political challenges in the aerospace and defense sectors.

Prior to joining the firm, Stephanie was a senior…

Stephanie Barna draws on over three decades of U.S. military and government service to provide advisory and advocacy support and counseling to clients facing policy and political challenges in the aerospace and defense sectors.

Prior to joining the firm, Stephanie was a senior leader on Capitol Hill and in the U.S. Department of Defense (DoD). Most recently, she was General Counsel of the Senate Armed Services Committee, where she was responsible for the annual $740 billion National Defense Authorization Act (NDAA). Additionally, she managed the Senate confirmation of three- and four-star military officers and civilians nominated by the President for appointment to senior political positions in DoD and the Department of Energy’s national security nuclear enterprise, and was the Committee’s lead for investigations.

Previously, as a senior executive in the Office of the Army General Counsel, Stephanie served as a legal advisor to three Army Secretaries. In 2014, Secretary of Defense Chuck Hagel appointed her to be the Principal Deputy Assistant Secretary of Defense for Manpower and Reserve Affairs. In that role, she was a principal advisor to the Secretary of Defense on all matters relating to civilian and military personnel, reserve integration, military community and family policy, and Total Force manpower and resources. Stephanie was later appointed by Secretary of Defense Jim Mattis to perform the duties of the Under Secretary of Defense for Personnel and Readiness, responsible for programs and funding of more than $35 billion.

Stephanie was also previously the Deputy General Counsel for Operations and Personnel in the Office of the Army General Counsel. She led a team of senior lawyers in resolving the full spectrum of issues arising from Army wartime operations and the life cycle of Army military and civilian personnel. Stephanie was also a personal advisor to the Army Secretary on his institutional reorganization and business transformation initiatives and acted for the Secretary in investigating irregularities in fielding of the Multiple Launch Rocket System and classified contracts. She also played a key role in a number of high-profile personnel investigations, including the WikiLeaks breach. Prior to her appointment as Deputy, she was Associate Deputy General Counsel (Operations and Personnel) and Acting Deputy General Counsel.

Stephanie is a retired Colonel in the U.S. Army and served in the U.S. Army Judge Advocate General’s Corps as an Assistant to the General Counsel, Office of the Army General Counsel; Deputy Staff Judge Advocate, U.S. Army Special Forces Command (Airborne); Special Assistant to the Assistant Secretary of the Army (Manpower & Reserve Affairs); and General Law Attorney, Administrative Law Division.

Stephanie was selected by the National Academy of Public Administration for inclusion in its 2022 Class of Academy Fellows, in recognition of her years of public administration service and expertise.

Photo of Kayleigh Scalzo Kayleigh Scalzo

Ranked by Chambers USA among government contracts practitioners, Kayleigh Scalzo represents government contractors in bid protests and other high-stakes litigation matters with the government and other private parties. She has litigated bid protests in a wide variety of forums, including the Government Accountability…

Ranked by Chambers USA among government contracts practitioners, Kayleigh Scalzo represents government contractors in bid protests and other high-stakes litigation matters with the government and other private parties. She has litigated bid protests in a wide variety of forums, including the Government Accountability Office, U.S. Court of Federal Claims, U.S. Court of Appeals for the Federal Circuit, FAA Office of Dispute Resolution for Acquisition, federal and state agencies, and state courts.

Kayleigh a co-chair of the American Bar Association Public Contract Law Section’s Bid Protest Committee. She is also a frequent speaker on bid protest issues.

Kayleigh maintains an active pro bono practice focused on immigration issues and gender rights.

Photo of Nooree Lee Nooree Lee

Nooree advises government contractors and financial investors regarding the regulatory aspects of corporate transactions and restructurings. His experience includes preparing businesses for sale, negotiating deal documents, coordinating large-scale diligence processes, and navigating pre- and post-closing regulatory approvals and integration. He has advised on…

Nooree advises government contractors and financial investors regarding the regulatory aspects of corporate transactions and restructurings. His experience includes preparing businesses for sale, negotiating deal documents, coordinating large-scale diligence processes, and navigating pre- and post-closing regulatory approvals and integration. He has advised on 35+ M&A deals involving government contractors totaling over $30 billion in combined value. This includes Veritas Capital’s acquisition of Cubic Corp. for $2.8 billion; the acquisition of Perspecta Inc. by Veritas Capital portfolio company Peraton for $7.1 billion; and Cameco Corporation’s strategic partnership with Brookfield Renewable Partners to acquire Westinghouse Electric Company for $7.8+ billion.

Nooree also counsels clients navigating the Foreign Military Sales (FMS) program and Foreign Military Financing (FMF) arrangements. Nooree has advised both U.S. and ex-U.S. companies in connection with defense sales to numerous foreign defense ministries, including those of Australia, Israel, Singapore, South Korea, and Taiwan.

Over the past several years, Nooree’s practice has expanded to include advising on the intersection of government procurement and artificial intelligence. Nooree counsels clients on the negotiation of AI-focused procurement and non-procurement agreements with the U.S. government and the rollout of procurement regulations and policy stemming from the Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence.

Nooree maintains an active pro bono practice focusing on appeals of denied industrial security clearance applications and public housing and housing discrimination matters. In addition to his work within the firm, Nooree is an active member of the American Bar Association’s Section of Public Contract Law and has served on the Section Council and the Section’s Diversity Committee. He also served as the firm’s Fellow for the Leadership Council on Legal Diversity program in 2023.