On Dec. 18, 2024, the Senate approved the Fiscal Year National Defense Authorization Act (FY25 NDAA), and the President signed it on Dec. 23, 2024.

Section 885, “Proposal for Payment of Costs for Certain Government Accountability Office Bid Protests,” is particularly notable because it raises the task and delivery order bid protest jurisdictional threshold under 10 U.S.C. § 3406(f)(1)(B) from $25 million to $35 million for DoD orders.

Section 885 also requires the General Accountability Office (GAO) and the Department of Defense (DoD) to submit a pilot program proposal to Congress within 180 days of FY25 NDAA’s enactment, but it is silent on whether the pilot program will apply to small businesses. The GAO and DoD would be required to include and establish an enhanced pleading standard in the pilot program proposal that a protestor must meet before obtaining the administrative record. While it’s unclear how the enhanced pleading standard will take shape, its goal would be to reduce the number of protests filed. The GAO rules already require a protester to establish grounds for a protest in its initial filing. That can be difficult to do at times because only the awarding agency knows what did or did not happen during the evaluation process. A protester rarely has a complete set of facts on which to base its arguments. Nevertheless, protesters are expected to provide as much of a detailed statement of the legal and factual grounds for their protest as possible, in addition to providing relevant documents, when filing a bid protest with the GAO. See 4 C.F.R. §§ 21.5, 21.5(f), and 21.1(c)(4). Against this existing backdrop, it will be interesting to see what the GAO and the DoD propose for a more enhanced pleading standard.

The GAO and DoD pilot program proposal must also include charts to benchmark the average costs (for both the GAO and DoD) of processing protests based on the value of the contract that is the subject of the protest. It also must include the costs associated with the lost profit rates of the contract awardees, calculated by determining the amount of profit the contract awardee would have earned if able to perform the protested contract during the term of the Competition in Contracting Act stay. Presumably, these benchmarks will assist the GAO and DoD in establishing a process whereby an unsuccessful protestor would have to reimburse the government for its litigation costs and the awardee for its lost profits.

Congress passed a similar but more limited pilot program requirement in the FY18 NDAA. Section 827 of the FY18 NDAA required the DoD to assess its costs in processing unsuccessful GAO protests from certain large contractors. Congress ultimately repealed this pilot program in Section 886 of the FY21 NDAA due to the lack of data captured by the pilot program.

In contrast to Congress’ previous attempt, Section 885 of the FY25 NDAA requires the GAO and DoD to jointly submit a pilot program proposal to Congress rather requiring the DoD to submit a proposal on its own. Presumably, this joint proposal will be able to capture both the government’s litigation costs as well as an awardee’s lost profits, although both will be difficult to ascertain.

If the pilot program detailed in Section 885 of the FY25 NDAA is actually implemented, complete with an enhanced pleading standard, federal defense contractors will have more to consider when deciding whether to pursue a bid protest at GAO. The more demanding the enhanced pleading standard, the greater the likelihood of unsuccessful protests – meaning protesters would have to pay the government’s legal costs and the awardee’s profits lost during the tenure of protest.

Section 885 does not address whether unsuccessful protesters would be responsible for protests that are dismissed early. It also does not address whether an agency’s decision to take corrective action is considered a successful protest or how costs will be allocated when more than one company protests an award. Presumably these topics, and others, will be included in the pilot program. While there is no deadline to implement such a program, both the GAO and DoD are obligated to submit their proposal within 180 days of Dec. 23, 2024.

If you have questions concerning the potential impacts associated with the FY25 NDAA, please contact a member of the Taft Government Contracts team.