Interview transcript:
Terry Gerton So we’re going to talk about Section 885. It’s in the 2025 National Defense Authorization. It got some press when that bill was passed. Can you refresh our memory about what this requires?
Eric Crusius Sure, and this kind of has a longer history. For many years, Congress has been looking at curtailing protests and seeing if protests kind of get in the way of the efficient use of the procurement system, so to speak. There was a Section 809 panel a number of years ago. They looked at refining the protest process to really limit when protests could be filed. And there’s been a lot of folks within the Department of Defense especially who have been looking at curtailing protest, thinking that they really gum up the procurement system, not able to keep up with the Chinese because of it. So what happened in last year’s National Defense Authorization Act — and I say last year even thought it’s 2025 because we’re almost on to 2026 now — is that they wanted GAO to kind of look at protests and answer some questions that they had and see, is this really a problem or not? And that really resulted in this letter that GAO just issued.
Terry Gerton GAO did just respond. It had three particular tasks. Let’s sort of take them in order. The first one was to assess whether or not there should be a tougher pleading standard for bid protests. So what does that mean and what did GAO say?
Eric Crusius So essentially, protesters are in a difficult position oftentimes because they’re protesting without a lot of information. So what this kind of question would look at is, should there be something more there besides speculation and besides some kind of bare allegations in a protest? And GAO’s answer really is that we already kind of do that. We already don’t take protests. We dismiss them if they just contain essentially wild allegations without any kind of substantive something behind it. There’s obviously a recognition that there’s no record in place when a protest is filed, or at least a record that the protestor or their attorneys can see. So in that respect, there has to be some kind of measured review of a protest to see, all right, is this enough or is this just kind of wild speculation? And GAO has said they want to look at that and refine that standard a little bit, but it’s not going to change much what they do. They already dismiss protests that are not essentially based in any kind of factual foundation.
Terry Gerton So not a whole lot of change to the pleading standards, probably.
Eric Crusius Probably not. I think we’ll see some marginal protests maybe dismissed that weren’t dismissed before, because they’re taking a closer look at it. But in the letter, they pretty much said this is a standard we already use. We’re just going to formalize it now. But it’s baked into our case law.
Terry Gerton So the second task they had was to provide cost benchmarks for existing protests. And they basically came back and said, the data doesn’t exist to do this. How do you read that response?
Eric Crusius Yes, what’s interesting kind of going back to the drafting of this section is it seems like somebody wanted this, whether it was at DoD or somewhere else, or maybe somebody in Congress thought it was good idea — and I’m not saying it is or it is not. But it’s tough because DoD is essentially saying, we just don’t collect this data. We don’t have it. So we can’t really tell you what protests do to the system from a cost standpoint. All we can do is tell you how often protests are filed comparative to the number of procurements that we have. And again, that’s not as much as people think. I think protests are an easy target and you hate them until you have to file one. But if you look at the statistics, they really do not impact the vast majority of of procurements that are out there.
Terry Gerton So, given the fact that somebody, as you say, wanted this data, do you think Congress might respond to this by implementing a data collection regime?
Eric Crusius I think that’s possible. I don’t know that that’s the most likely scenario. Congress already has so much on their plate, and they’re already so far down the line in drafting the 2026 National Defense Authorization Act. I just don’t see them responding to this letter by inserting a new provision. But you never know what can happen if there’s somebody motivated enough to do something in Congress. They have a way of doing it. But it is interesting how they talk about how there’s just a lack of data there. And again, I think it kind of goes to the theme of this letter, is that maybe the protests aren’t too disruptive, or as disruptive as a lot of people think.
Terry Gerton I’m speaking with Eric Crucius. He’s a partner at the law firm Hunton, Andrews, and Kurth. Well, to your point, GAO reports that actually less than 2% of DoD procurements are protested. So we think that this is a big deal. But in the scheme of things, it may not be.
Eric Crusius Right. And even if you look at those high-dollar procurements which are more likely to be protested, I think they said over $1 billion, just 7.5% are protested. So less than 10% of high-dollar DoD procurements are subject to protest. And when you think about it, that’s a fairly small number when the government is spending this much money. You have a system where a contractor can come in and essentially have an audit done of the procurement and how it was awarded. And only 7.5% of the time a contractor chooses to do that. That demonstrates that contractors are using a very measured approach to do that. Just because they’ve spent hundreds of thousands, sometimes more dollars in putting in a proposal doesn’t mean that they’re necessarily going to spend the $100,000 or whatever it is to protest that. Of course, this is GAO, not necessarily Court of Federal Claims statistics.
Terry Gerton That actually gets to the third task that GAO had, and it was probably the most controversial feature of Section 885 when it was written. Which was, loser pays, simply stated. Tell us a little bit more about the provision and what GAO said about it.
Eric Crusius Right, so this provision would have, if you file a protest at GAO and you take it all the way to the end and it’s not successful, then the loser of that, the protester would have to pay for those lost costs for filing that protest. And GAO again came and said, this is not really information we collect. This would be difficult information for contractors to collect. Because there are circumstances that I’ve seen before where an incumbent contractor will file a protest. And the net effect of that is that they get to keep working on the contract because there’s a stay at GAO, and those profits that come from that contract obviously go to that contractor. And is there a way to grab those profits from that contractor when they file a protest without much merit? It seems like they’re filing that again under, this is more trouble than it’s worth. And this may have the effect also of, there’s two potential side effects to something like this, even these provisions as a whole. One is, it will give less confidence perhaps in the procurement system because there are companies out there that are spending a lot of money to put in a proposal to offer a solution. They’re putting a lot people on these proposals. And if they don’t have confidence that they have some way to have a review of a procurement where something went terribly wrong, they may not submit a proposal. They may not spend the time and effort to do so, so it may limit the competition in the space. The other potential side effect of something like this is it would push people to the Court of Federal Claims where there would be no such solution. The corridor is already fairly busy right now, protests are more expensive there, stays are not automatic there. But oftentimes Department of Justice will agree to a stay to avoid the litigation costs of going in and litigating a stay, and I think oftentimes Court of Federal Claims judges like it when the parties agree on a stay of some kind. But this would push a lot more companies to file protests at the Court of Federal Claims, so it’s not necessarily going to cut down on protests; it may just change the venue on where these protests are filed.
Terry Gerton The 2026 NDAA is in conference, or at least both chambers of Congress have put forward their versions of it. How do you think the GAO response to these tasks is going to play into the conversation for the 2026 version?
Eric Crusius I think it goes into a comment that you made before in that, will Congress maybe ask for more data and it require DOD and GAO to essentially provide more data. I think what it will do is, if they had any provisions teed up that would impact protests, maybe put a pause on those and try to seek more data. Because it’s clear from GAO’s response there’s just not enough information. For those who are advocating for reducing protests in some way or making it harder to file protests or to claw back profits, there’s just not enough information there on how that would work and the impact that would have on the system. It’s a very well-run system, in my very biased opinion, right now. And I think that before they try to disrupt the system, I imagine they’re going to look to see getting all the available information that’s necessary to make those decisions.
Terry Gerton So government contractors are always trying to read the tea leaves in advance. Obviously as we’ve just talked about, there’s some uncertainty about how this will play out. But what advice would you have for the government contract community as they’re waiting and watching the conversations around Section 885?
Eric Crusius Certainly if they have potential protests, they can continue on as normal. But if there is a move afoot in this year’s National Defense Authorization Act, they should take that into consideration about their bidding strategy and how much money they want to spend on their bids, if they think that, at the end of the time, they may not have an opportunity to file a protest. Because while a lot of protests can move to the Court of Federal Claims, there are certain types of protests that have to be filed at GAO.
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