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  Congress repealed that pilot before it could be implemented, however.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. 

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 Michele Pearce Michele Pearce

Michele Pearce has wide-ranging experience working on national security issues throughout her two decades of military and government service. She provides advisory and advocacy support and counseling to clients facing policy and political challenges in the aerospace and defense sectors.
Before joining Covington…

Michele Pearce has wide-ranging experience working on national security issues throughout her two decades of military and government service. She provides advisory and advocacy support and counseling to clients facing policy and political challenges in the aerospace and defense sectors.
Before joining Covington, Michele held several senior staff positions within the Department of Defense (DoD) and Congress. Most recently, she served as General Counsel (Acting) of the Department of the Army, providing legal and policy advice to the Secretary of the Army and other service leadership. In this role, Michele was responsible for legal matters related to modernizing acquisition and contracting practices to meet emerging threats, implementing AI and hypersonic systems, and reforming ethics and diversity and inclusion programs.

Prior to her role in the Army, Michele served as Deputy General Counsel (Legislation) at DoD. She was the principal legal advisor to DoD officials, including the Secretary of Defense, Deputy Secretary of Defense, and General Counsel on matters concerning legislation, investigations, and the Department’s Legislative Review Program, which considers more than 400 legislative proposals annually.

Michele also has significant Capitol Hill experience. She was a Senior Defense Advisor to Senator Susan Collins (R-ME), advising on legal and budgetary matters related to authorizations and appropriations for the Departments of Defense, Homeland Security, and Veterans Affairs. Michele also served as Staff Lead/Counsel on the House Armed Services Committee, where she managed one of the largest subcommittees in Congress with a multi-billion dollar budget focused on operations and maintenance activities across DoD. She also served as Staff Lead of the Oversight and Investigations Subcommittee and as Counsel and Professional Staff of the Military Personnel Subcommittee.

Michele also previously served as an Advisor to Andrew Effron, Chief Judge of the U.S. Court of Appeals for the Armed Forces; Military Assistant to the Secretary of the Air Force; Associate Deputy General Counsel for Personnel and Health Policy at DoD; and as an Air Force Judge Advocate General.

Photo of Kayleigh Scalzo Kayleigh Scalzo

Kayleigh Scalzo represents government contractors in 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…

Kayleigh Scalzo represents government contractors in 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, Port Authority of New York and New Jersey, federal and state agencies, and state courts. She is also a co-head of the firm’s Claims, Disputes, and Other Litigation Affinity Group within the Government Contracts practice.

Kayleigh has particular experience navigating state and local procurement matters at both ends of the contract lifecycle, including bid protests and termination matters. In recent years, she has advised and represented clients in connection with procurements in Alaska, Arizona, California, the District of Columbia, Illinois, Indiana, Kansas, New Jersey, New York, Pennsylvania, Tennessee, Texas, and Virginia.

Kayleigh is a frequent speaker on bid protest issues, including the unique challenges of protests in state and local jurisdictions.

Photo of Nooree Lee Nooree Lee

Nooree is a Partner in Covington’s Government Contracts practice.  He represents government contractors in all aspects of the procurement process and focuses his practice on the regulatory aspects of M&A activity as well as foreign military sales and other international contracting matters.