GAO Pushes Back on Protest Cost Penalties but Proposes Stricter Standards
In a detailed response to Congress dated July 14, 2025, the U.S. Government Accountability Office (GAO) pushed back on a key provision of the FY2025 National Defense Authorization Act (NDAA) that would penalize unsuccessful protesters by requiring them to pay for protest-related costs and lost profits to the Department of Defense (DOD) and contract awardees. The letter, submitted under reference number B-423717, was issued pursuant to Section 885 of the Servicemember Quality of Life Improvement and NDAA for Fiscal Year 2025. It responds to a congressional mandate directing GAO to propose: (1) enhanced pleading standards for DOD-related bid protests, (2) cost benchmarks for protests, and (3) a cost-shifting mechanism requiring unsuccessful protesters to pay the government and awardees.
GAO’s core recommendation was to enhance its pleading standards to make clear that protest allegations must be supported by credible and evidence-based claims. While GAO already dismisses legally or factually insufficient protests early—typically before the agency even produces its administrative record—the proposed clarification would formally require that protests include not just allegations, but also factual assertions that, if uncontradicted, suggest a likelihood of improper agency action. Importantly, this new standard would apply government-wide, not just to protests involving DOD procurements.
On the question of protest costs, GAO stated unequivocally that neither it nor DOD currently possesses sufficient data to develop reliable cost benchmarks. DOD confirmed that it does not track either litigation-related or programmatic costs associated with protests, nor does it collect or analyze contractor profit data. Although GAO surveyed trade associations and reviewed available literature, the lack of reliable, generalizable data on contractor profit losses rendered it impossible to produce the benchmark tables requested by Congress. GAO acknowledged that creating such a system would likely require new statutory authority, changes to cost accounting practices, and data reporting mandates that could impose substantial administrative burdens on DOD and its contractors.
Regarding the fee-shifting proposal, GAO cautioned that imposing such penalties on unsuccessful protesters could have unintended and harmful consequences for the federal procurement ecosystem. It warned of a chilling effect that might discourage legitimate protests and reduce overall competition, particularly among small businesses that file the majority of protests. In GAO’s view, the current legal framework already includes sufficient safeguards to quickly dismiss meritless protests and limit their disruptive impact. It does not support a cost recovery system, arguing that any such framework would need to involve case-by-case litigation of cost liability, creating greater delay and complexity in an already time-sensitive process.
Nevertheless, GAO presented two alternative mechanisms for congressional consideration, should lawmakers wish to move forward with cost-shifting. The first would authorize DOD to include a contractual provision allowing it to withhold profit or fees from incumbent contractors who file procedurally or legally insufficient protests. The second would empower GAO to require reimbursement from protesters whose cases are dismissed on those same grounds. GAO made clear, however, that either option would require significant statutory and administrative changes, and that such reforms risk deterring participation in the bid protest process.
GAO’s letter concluded by emphasizing the declining rate of protests over the past decade—down 32 percent overall and 48 percent for DOD procurements—and noted that only about 1.5 percent of DOD procurements are protested each year. These statistics, GAO argued, undermine the need for aggressive fee-shifting measures. While open to improving procedural clarity, GAO maintains that the current protest process—especially with the proposed enhanced pleading standards—is sufficient to safeguard both government efficiency and contractor fairness.
Disclaimer: This blog post is for general informational purposes only and does not constitute legal advice or a statement of official policy. While care has been taken to summarize the contents accurately, readers should consult the full GAO letter or relevant legal counsel for authoritative guidance.