A Few Contractors May Have to Reimburse DoD for Bid Protest Costs if Protest Denied

Here's an update to a post from last July where we wrote that the Senate version of the 2018 NDAA (National Defense Authorization Act) would require large defense contractors to reimburse the Defense Department for failed bid protests (see Large Contractors May Need to Reimburse the Defense Department for the Cost of Bid Protests). That provision has been greatly watered down in the newest version of the NDAA.

Sec 827 of the House and Senate NDAA compromise bill which has passed the House and is now waiting Senate passage replaced the Senate provision with one that calls for a three-year pilot program, a study and a report. Specifically, the provision requires the following:

1. The Defense Department shall carry out a pilot program to determine the effectiveness of requiring contractors to reimburse the Department of Defense for costs incurred in processing covered protests (see below for definition of covered protests).
2. The pilot program shall be three years beginning two years after the date of enactment of the NDAA and ending five years after the date of enactment.
3. After the pilot program ends, the Defense Department must provide a report to Congress assessing the feasibility of making permanent such pilot program.

In the context of Sec 827, a covered protest means a bid protest that was denied in an opinion issued by GAO (Government Accountability Office) filed by a company with revenues in excess of $250 million during the previous year. The Senate version set the threshold at $100 million.

This current version is significantly different than the original Senate provision which provided detailed statutory mechanisms for the payment of costs for defined protests. This one does not provide details on what procedures that program should include. But, the Defense Department has a couple of years to work out those details - probably through DFARS (DoD FAR Supplement). Of course, two years to implement this provision also gives Congress two years to tinker with the requirement through future NDAAs.

Contractors with sales greater than $250 million (in its prior fiscal year) may find it more cost-effective to pursue bid protests though the U.S. Court of Federal Claims which carries no such requirement.