Bid Protest Clause in 2025 Defense Authorization Act: Implications for Contractors and Legal Practitioners

The Defense Authorization Act for 2025 introduces a pilot program aimed at reshaping the landscape of bid protests in federal procurement. Specifically, the program proposes that companies losing protests may be required to reimburse the Department of Defense (DoD) and the Government Accountability Office (GAO) for legal costs incurred during the process. The new clause, while experimental, builds on similar attempts from the past, such as a limited pilot program in the 2018 National Defense Authorization Act, which targeted contractors earning over $250 million annually. That earlier initiative was ultimately abandoned, but the 2025 version expands both its scope and potential impact.

Notably, this provision extends the obligation to reimburse to an additional party—the winning bidder. In cases where protests freeze procurements, the selected contractor often cannot perform, leading to a loss of profits. Under the proposed framework, the protesting entity, if unsuccessful, could be responsible for compensating the winning bidder for these losses. This shift represents a significant departure from past policy and amplifies the financial stakes for those considering a protest.

Chris Griesedieck, a procurement attorney at Venable, noted that the pilot program will likely aim to deter frivolous protests while introducing an "enhanced pleading standard." This standard could make it more difficult for protestors to access critical procurement records, potentially curbing their ability to challenge the procurement process effectively. For contractors, the heightened threshold for proceeding with protests could mean fewer opportunities to uncover and address legitimate procurement errors.

Critics of the measure point to data indicating that most protests are not frivolous. According to historical reports, such as the RAND Corporation's study commissioned under the 2017 NDAA, only a minuscule percentage—less than 0.3%—of DoD contracts are protested. Furthermore, the rate at which protests are sustained or lead to voluntary corrective action has remained consistent, suggesting that the existing process uncovers valid concerns.

Supporters of the pilot program argue it addresses inefficiencies in the procurement system. By requiring companies to demonstrate greater factual basis before filing a protest, the program aims to streamline timelines and reduce delays. However, this approach risks diminishing the role of protests as a critical accountability tool. Bid protests serve as an essential check on compliance with procurement laws and regulations. Without this mechanism, oversight responsibilities could overwhelm offices of inspectors general or other oversight bodies, leaving gaps in the system.

The implementation of the pilot program involves significant uncertainties. The DoD and GAO have been given 180 days from the law's passage to develop specific benchmarks for cost recovery. These benchmarks might average litigation costs or establish a tiered system based on the complexity or timing of the protest. While details remain to be finalized, industry stakeholders hope for an inclusive rulemaking process that incorporates feedback from the contractor community and legal experts.

The implications of this pilot program extend beyond the mechanics of cost recovery. It reflects broader tensions in federal procurement between efficiency and accountability. As the government seeks to streamline processes, contractors may face greater risks when pursuing protests, potentially discouraging the very oversight that ensures fairness and integrity. Whether this initiative succeeds in balancing these priorities remains to be seen, but it underscores the evolving dynamics of federal contracting.

This blog post reflects a summary of the key points discussed by Chris Griesedieck on the Federal Drive with Tom Temin and is intended to provide insight into the potential ramifications of the pilot program outlined in the 2025 Defense Authorization Act.

Disclaimer: This article is a summary for informational purposes only and does not guarantee accuracy or provide legal advice. Always consult a qualified professional for specific guidance.