The Senate approved the Fiscal Year 2025 National Defense Authorization Act (FY25 NDAA) on December 18, 2024. The bill is now on its way to the President’s desk for signature. Of particular note to federal defense contractors is Section 885, “Proposal for Payment of Costs for Certain Government Accountability Office Bid Protests.” Section 885 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. Additionally, Section 885 establishes a requirement for GAO and DOD to submit a pilot program proposal to Congress within 180 days of the FY25 NDAA’s enactment. The proposal is required to address enhanced pleading standards and a process for an unsuccessful bid protestor to pay DOD its litigation costs and the awardee for lost profits. Section 885 is silent on the pilot program’s application to small businesses, though that does not mean that GAO and DOD can’t delineate between large and small businesses in its proposal.
Enhanced Pleading Standard
- GAO and DOD must submit to Congress a pilot program proposal that establishes an enhanced pleading standard that a protestor must meet before obtaining the administrative record.
- Although we don’t yet know how this enhanced pleading standard will take form, it could reduce the likelihood of a successful protest. Under GAO’s current Bid Protest provisions, an agency must provide documents as relevant to grounds for protest, although GAO will not consider purely speculative protest arguments, i.e. fishing expeditions. Pursuits of a basis for protest through the bid protest process are expressly prohibited. See 4 C.F.R. §§ 21.5, 21.5(f), and 21.1(c)(4).
Process for Payment
- GAO and DOD’s pilot program proposal must include charts in order to benchmark: 1) the average costs to both GAO and DOD of processing protests based on the value of the contract that is the subject of the protest and 2) costs of the lost profit rates of contract awardees as calculated by determining the amount of profit the contract awardee would have earned if it was able to perform during the term of the Competition in Contracting Act (CICA) stay.
- Using the above benchmarks, GAO and DOD will establish a process for payment by an unsuccessful protestor to reimburse the government for litigation costs and the awardee for lost profits.
Takeaways
- Although the pilot program proposal is due to Congress within 180 days of the FY25 NDAA’s enactment, there is no established timeline as to when federal contractors can expect the pilot program to be implemented, if at all.
- Congress passed a similar, albeit more limited, pilot program requirement in the FY18 NDAA. Section 827 of the FY18 NDAA required DOD to assess its costs in processing unsuccessful GAO protests from certain large contractors.
- However, Congress then repealed this pilot program in Section 886 of the FY21 NDAA due to the lack of data captured by the pilot program.
- Section 827 of the FY18 NDAA included requirements for DOD to implement a pilot program rather than a requirement for GAO and DOD to jointly submit a pilot program proposal to Congress as is contemplated by the FY25 NDAA.
- However, if Congress implements the changes as contemplated in Section 885 of the FY25 NDAA’s pilot program proposal requirements, the risks associated with filing bid protests at GAO could rise. Federal defense contractors will have to decide whether pursuing a bid protest at GAO, especially given the higher pleading standard that could reduce the likelihood of a successful protest, is worth the potential costs of reimbursing the government for litigation costs and the awardee for lost profits. It bears mentioning that the Equal Access to Justice Act, 5 U.S.C. § 504, which authorizes the payment of attorney’s fees to a prevailing party in an action against the United States, absent a showing by the government that its position in the underlying litigation “was substantially justified,” establishes an attorney fee cap at $125.00 per hour unless the Court or Board determines that an increase in cost of living or other special factors justifies a higher fee. It is possible that a similar fee could be used to calculate DOD attorneys’ fees under the pilot program.
- In order to protest the issuance of a DOD task or delivery order at GAO, the challenged order will need to be valued at more than $35 Million. As a practical note, the current threshold for protesting a task order under a multiple-award contract issued by a civilian agency sits at $10 Million or more.
If you have questions about the possible implications of the FY25 NDAA to your business plans in the upcoming years, please contact Cy Alba, Lauren Brier, Abby Finan, or another member of PilieroMazza’s Government Contracts or Bid Protests practice groups. Stay tuned for additional coverage of the FY25 NDAA.
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