On July 22, 2025, the House Committee on Oversight and Government Reform’s Subcommittee on Government Operations held a hearing titled “Bid Protest Reform: Understanding the Problem.” The hearing focused on potential reforms described in Section 885 of the “Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025” (FY 2025 NDAA), Pub. L. No. 118-159, 138 Stat. 1773 (Dec. 2024). See Prusock, Schwartz, Ross, Malone, and Schaengold, “A Comprehensive Analysis Of The Fiscal Year 2025 National Defense Authorization Act’s Impact On Federal Procurement Law,” 25-4 Briefing Papers 1 (Mar. 2025) (discussion of Section 885 and recent bid protest reform efforts).   

Section 885 provides that the GAO, in coordination with the Secretary of Defense, submit a proposal for a “loser-pays” model for bid protests that would require unsuccessful protesters to pay protest costs to GAO and the Department of Defense (DOD), and lost profits to the contract awardee. As part of this loser-pays model, Section 885 required GAO to establish “benchmarks” for these costs, meaning (1) a chart of the average costs to DOD and GAO of a protest (based on the protested contract’s value), and (2) a chart of lost profit rates that the contract awardee would have earned while contract performance was stayed during the protest under the Competition in Contracting Act. It also required GAO to propose enhanced pleading standards for protestors seeking access to DOD administrative records.

Congress has long been concerned about whether bid protests, (particularly “frivolous” protests) are increasing in frequency, and the impact on federal agencies’ ability to quickly access critical goods and services. Congress has tried to impose fee-shifting on at least some unsuccessful protestors in the past, but ultimately abandoned those efforts. The loser-pays model, if implemented, may deter protests, particularly by small businesses, due to the financial risk of having to pay costs and lost profits. Additionally, enhanced pleading standards might make it harder to obtain documents in the administrative record, which in turn may increase the risk that a protest will not succeed.

GAO responded to Section 885’s requirements in a July 14, 2025 letter, as well as in written and oral testimony prepared for the July 22 hearing. GAO emphasized the importance of the bid protest process for ensuring fairness, transparency, and accountability in federal contracting, which increases competition in federal procurements. Overall, GAO concluded that the bid protest system is functioning appropriately and adequately deters meritless protests. Nevertheless, it suggested two fee-shifting options for Congress to consider, as required by Section 885. GAO also stated it would amend its bid protest regulations to clarify and enhance its existing pleading standards. During the hearing, GAO indicated that it remains open to improving the bid protest process but would prefer data-driven policymaking rather than a structural overhaul. 

Some Subcommittee members appear to have been persuaded by the testimony—Subcommittee Chairman Pete Sessions (R-TX) concluded the hearing by expressing renewed confidence in the bid protest process, repeatedly describing it as “fair.”

GAO Bid Protest Pleading Standards: Proposed Enhancements and Requirements

GAO’s current regulations require that protests include a detailed statement of the factual and legal grounds of protest and clearly state legally sufficient grounds of protest. A protest must set forth, at a minimum, either allegations or evidence sufficient, if uncontradicted, to establish improper agency action. Bare, unsupported allegations are not sufficient to meet this pleading standard. Protests that do not meet this standard are subject to dismissal before the protester gains access to the administrative record.

In response to Section 885, GAO proposed to “clarify and enhance” its pleading standard to require that “protesters must provide, at a minimum, credible allegations supported by evidence that are sufficient, if uncontradicted, to establish the likelihood of the protester’s claim of improper agency action” (U.S. Gov’t Accountability Off., GAO’s Proposal in Response to Section 885 of the Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025, B 423717, at i (July 2025)). GAO stated that this would “reduce ambiguity and further bolster GAO’s ability to expeditiously resolve protest allegations that are either not credible or unsupported by adequate evidence.”

Challenges in Establishing Bid Protest Cost Benchmarks for DOD and GAO

GAO was unable to develop accurate cost benchmarks due to a lack of data because DOD does not track costs related to bid protests. It therefore recommended that Congress consider mandating this data collection. DOD opposed this suggestion, citing the administrative burden and cost of collecting the data, as well its limited value given total bid protests have dropped 32% over 10 years, and DOD-related protests have fallen by 48%, with only 1.5% of DOD procurements subject to protest.

Additionally, GAO was unable to identify any generalizable data concerning contractors’ actual lost profit rates while performance is stayed during a protest. It was only able to “identif[y] some published notional profit rate data, maximum profit rates for certain contract types, and various regulatory considerations regarding negotiations concerning profit rates,” and did not deem this sufficient to establish a benchmark for lost profits.

Fee Shifting Models for Bid Protests

GAO did not endorse a fee-shifting process for bid protests. It emphasized the lack of reliable cost data and cautioned against implementing a fee-shifting model, citing the “deleterious impact” on fairness, transparency, and competition in the bid protest process, with particularly damaging effects on small businesses. GAO also stressed that any fee-shifting process would require case-by-case analyses, further complicating and slowing the bid protest process and resulting in additional costs for all parties. GAO further noted that requiring unsuccessful protesters to pay GAO’s costs would undermine GAO’s role as an independent and impartial body because it would create, at a minimum, the appearance that GAO has an incentive to dismiss protests as unmeritorious so that it can recover its costs, especially since there would be no obligation for the agency to reimburse GAO for its costs on successful protests. GAO stated that its existing procedures are effective in curbing meritless protests.

While GAO did not recommend a loser pays model, consistent with the requirements of Section 885(a)(3), it proposed two models for Congress to consider. The first was a contract-clause option that would statutorily require DOD (through either an amendment to the DFARS or class deviation to the FAR) to include a clause in all existing contracts or bridge contracts awarded to incumbents permitting DOD to seek reimbursement or withhold profits from an incumbent contractor if it files a protest that is dismissed. DOD opposed this option, stating that the costs would outweigh the benefits and that it may stifle competition by deterring companies from bidding to avoid the requirement.

The second option GAO proposed was to “authorize GAO to recommend the payment of costs to DOD and the awardee whose contract was stayed during the pendency of a protest where GAO determines that an unsuccessful protest was filed without a reasonable factual or legal basis.” However, GAO noted that because there is insufficient data to establish benchmark rates, this would require case-by-case analysis and adjudication, which would slow down and complicate the protest process. It would also require DOD to track its protest costs, which it does not want to do, as well as changes to GAO’s statutory authority.
 
Addressing Frivolous Protests: Stakeholder Perspectives and Potential Improvements

When asked how the process might be improved to further reduce meritless protests, GAO’s representative advocated for better data collection. Others from private legal practice and academia recommended in their testimony expanding the enhanced debriefing process for DOD contracts to other agencies, arguing that transparency has reduced unnecessary protests.

GAO’s Position on Federal Bid Protest Reform and Future Considerations

In both its testimony and official response to Congress, GAO reaffirmed its support for the current bid protest process, emphasizing that:

• The existing process already deters baseless filings through existing legal standards;
   
• The existing process promotes transparency, competition, and fairness in federal procurement;
   
• A fee-shifting process may have serious negative consequences for contractors, the government, and the procurement process as a whole; and
   
• Any major reform efforts should be informed by reliable data, not speculation.

If history serves as a guide, this may not be the last time Congress considers implementing a loser-pays model for bid protests. However, GAO’s recommendations, DOD’s opposition to collecting the data required to set the benchmarks, and the Subcommittee Chairman’s renewed confidence in the bid protest process in light of the testimony may bode well for contractors. While Congress may still consider further reforms to the protest process, those reforms may be less onerous than reforms foreshadowed by Section 885.