Defense Contract Protest Overhaul Pushed Even as Challenges Drop

Congress and federal agencies are actively reexamining the bid protest process, particularly at the Department of Defense, where billions of dollars in procurements are at stake.

The fiscal year 2025 and 2026 National Defense Authorization Acts and recent Pentagon acquisition reform initiatives propose sweeping changes—from raising protest thresholds to shifting costs—signaling a pivotal moment for procurement law and policy.

While protests are often viewed as disruptive or frivolous, recent data and decisions demonstrate that they remain a vital tool for ensuring fairness, transparency, and accountability in federal contracts. Recent and proposed reforms, including cost-shifting and heightened pleading requirements, could increase the financial and legal burdens associated with filing protests.

Fee-shifting mechanisms—if not carefully structured—could deter smaller or mid-sized contractors from pursuing legitimate protests out of fear of incurring costs, potentially chilling important oversight in sensitive or complex procurements.

On the other hand, steps like enhanced debriefings—as implemented by DOD—have shown promise in reducing protest volumes by providing contractors with more clarity and transparency during the evaluation process.

Decade of Decline

About 1.5% of defense procurements are protested on average, according to the US Government Accountability Office, underscoring the selective and targeted nature of these challenges.

There has been a 32% decline in bid protests over the past 10 years. In 2024, protests filed dropped 11% from the previous year, with DOD-specific protests falling from 1,316 in 2018 to 796 in 2024, according to GAO congressional testimony. Protests dropped 6% in 2025, according to the agency’s most recent congressional report.

Yet the sustain rate (14%) and effectiveness rate (52%) have remained remarkably stable, indicating that more than half of protests result in some form of relief for the protesting contractor—either through voluntary agency corrective action or GAO sustaining the protest.

Recent decisions also show both the GAO and the courts, including the Court of Federal Claims, are willing to scrutinize agency actions.

Notable 2025 Decisions

Impaired Objectivity

DirectViz Solutions, LLC: GAO sustained a protest against a $225 million Army task order awarded to Peraton Inc., citing impaired objectivity and an inadequate investigation.

Despite two rounds of review, the contracting officer relied on conclusory statements from internal officials and conflicting representations by Peraton, rather than conducting an independent analysis. This decision underscores the limits of deference in Organizational Conflicts of Interest evaluations and highlights the need for thorough, documented investigations in complex procurements.

Price Versus Quality

The Mission Essential Group: GAO sustained a pre-award protest challenging the Air Force’s use of Lowest-Price Technically Acceptable criteria, finding the agency failed to meet the statutory and regulatory thresholds required for such an approach.

This case highlights the persistent tensions between lowest price and best value procurements, particularly for complex services where cheapest doesn’t necessarily reflect quality or innovation. Although low cost standard was once prevalent, both defense and civilian agencies have moved to restrict its use in recent years.

Turf Tussle

Raytheon Co. v. United States: In a case of first impression, the Court of Federal Claims found it had jurisdiction over a post-award protest involving the Missile Defense Agency’s Glide Phase Interceptor program. Raytheon challenged its exclusion from continued participation in the other transaction agreement—a move that effectively eliminated the company from a multibillion-dollar follow-on production contract.

This decision marks a jurisdictional shift, positioning the Court of Federal Claims as a de facto forum for reviewing certain challenges. Historically, GAO has asserted limited control over these agreements, and prior challenges have bounced between federal claims and district courts. For example, in a 2019 protest brought by SpaceX, the Court of Federal Claims initially held it lacked jurisdiction over disputes of these types of agreements and transferred the case to federal district court—though it later affirmed jurisdiction over follow-on production contracts of these agreements in 2024.

As these nonstandard agreements become more widely used to promote flexibility and innovation, this ruling may spur increased judicial oversight and more protests of follow-on production awards.

Government Reform, Scrutiny

The 2025 defense authorization legislation includes a number of proposed reforms to the Pentagon bid protest, such as:

• Raising the GAO protest threshold for defense task orders from $25 million to $35 million
• Tracking the full costs of bid protests across GAO,DOD, and contractor awardees
• Proposing a cost recovery mechanism for unsuccessful protesters
• Recommending enhanced pleading standards for initial filings

GAO has responded with cautious support, proposing clarifications to the pleading standard and offering policy options for Congress to consider in implementing fee-shifting mechanisms.

The Pentagon and the Office of Management and Budget continue to advocate for bid protest reform to include faster adjudication and ensure that protester losers pay to minimize frivolous lawsuits.

Inciting GAO’s own prior testimony, Defense Secretary Pete Hegseth explained that the Pentagon supports statutory authority to permit the federal government to “recoup or otherwise withhold profit or fee from an incumbent contractor” when a protest is dismissed for insufficient facts or legal basis.

With the recent passage of the 2026 defense authorization bill, Congress codified this approach by directing the secretary to revise the defense acquisition regulations to establish procedures for withholding a portion of payments from an incumbent contractor that files a GAO protest, with those amounts subject to forfeiture if the protest is dismissed for lack of any reasonable legal or factual basis.

Looking Ahead

The bid protest system stands at a crossroads. While reforms seek to reduce cost, delay, and administrative burden, they mustn’t erode the accountability and transparency that protests provide. As Congress considers changes such as fee-shifting and enhanced pleading, stakeholders should prepare for a more structured—and potentially more adversarial—protest landscape.

As the use of other transaction agreements grow, contractors face both opportunities and new risks, including uncertain legal remedies, jurisdictional gaps, and limited competition for follow-on production awards.

The evolving balance between efficiency and oversight will shape how contractors and agencies navigate high-stakes federal procurements for years to come.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Stacy Hadeka is a partner in Hogan Lovells’ Government Contracts practice in Washington, D.C., where she advises aerospace and defense clients.

Write for Us: Author Guidelines