Congress has once again reshaped the protest landscape—this time with a narrow but consequential change targeted squarely at Department of Defense (DoD) procurements. The Fiscal Year 2026 National Defense Authorization Act (NDAA), signed into law by the president on December 18, 2025, includes a new provision designed to discourage meritless protests at the Government Accountability Office (GAO), particularly where an incumbent contractor continues performing work during the protest. Although the language is focused and does not overhaul the protest system more broadly, it introduces a real financial risk calculus that unsuccessful incumbent offerors will now need to consider before pulling the protest trigger.

New Authority to Withhold Payment During GAO Protests

Section 875 of the legislation directs the DoD to update the Defense FAR Supplement (DFARS) to allow contracting officers to withhold up to 5 percent of payments otherwise due to an incumbent contractor that files a GAO protest and receives a performance extension while the protest is resolved at the GAO. If the GAO ultimately dismisses the protest for lacking any reasonable legal or factual basis, the contractor loses those funds permanently. As with most legal developments, the devil is in the details:

  • The provision applies only to GAO protests, not to those filed at the procuring agency or the Court of Federal Claims.
  • The statute provides that the withholdings may be initiated against a “covered contract,” which is defined as one that is substantially similar to the goods or services to be acquired by the DoD under the contract previously awarded to the incumbent contractor. Think of this as the quintessential “bridge contract” that an agency puts in place once a protest is lodged and a stay of performance is issued pursuant to the Competition in Contracting Act.

The statute gives the DoD 180 days to issue implementing regulations. This means that by June 16, 2026, we should know the answers to some key implementation questions:

  • Is the withholding discretionary or automatic?
  • How is the determination to withhold documented?
  • Is any notice required?
  • What if only part of the protest is dismissed?

Practical Implications for DoD Contractors

Companies should keep in mind that the NDAA leaves the mechanics and temporal framework of the GAO protest process intact. The biggest change is that Congress has now enacted a targeted deterrent for frivolous protests perceived as tactical delay maneuvers. In light of these impending developments, here are prudent next steps for DoD contractors of all stripes:  

Incumbents Deciding Whether to Protest:

  • Ensure that your protest is as strong as can be from a factual and legal perspective. While a “kitchen sink” protest approach may have worked in the past, weak or underdeveloped arguments now carry financial stakes.
  • Assess whether a dismissed protest and attendant potential 5 percent penalty is worth the cash flow hit during a period of performance extension. 

Awardees Defending Wins:

  • Move to intervene at the GAO as soon as you receive notice of the protest. 
  • Work with counsel to evaluate the merits of the protest and consider moving to dismiss the protest to the extent that the arguments appear patently frivolous and/or are otherwise unsupported.
  • Coordinate with agency counsel, as appropriate, to mount a joint defense against the allegations

Conclusion

The NDAA does not curb legitimate oversight of defense procurements, nor does it signal a retreat from government transparency or accountability in the acquisition process. Instead, it reflects Congress’s intent to ensure that GAO protests—particularly those that stop work from transitioning—are grounded in substantive concerns rather than tactical delay.

Careful attention to the DoD’s rulemaking process is critical. The final DFARS language—not the statute—will determine how burdensome the NDAA’s provisions become in practice.  Interested contractors should consider submitting comments to help shape the government’s implementation of the requirements. If implemented narrowly, the changes may have limited effect. If drafted aggressively, the NDAA could materially alter how incumbents view GAO filings. Either way, contractors should treat this development as an opportunity to refresh internal playbooks, tighten protest analytics, and make deliberate choices about forum, timing, and posture.