Section 875 of the FY2026 National Defense Authorization Act — signed December 18, 2025 — directs the Department of Defense to amend the DFARS so contracting officers may withhold up to 5% of contract payments from an incumbent contractor whose GAO protest is dismissed for "lacking any reasonable legal or factual basis." DoD has 180 days to issue implementing regulations, putting the answer to most open questions on the table by June 16, 2026. Coverage from Pillsbury.
Why Congress did this
Incumbents who file weak protests can extend their position through the 100-day automatic CICA stay, even when their case is meritless. Section 875 is the cost-of-doing-business response — meritless protests now carry a real economic price.
Open implementation questions
- Who determines "no reasonable basis" — GAO, the agency, or the new contracting officer?
- Does the withholding apply to other contracts the incumbent holds, or only the one being protested?
- How long is the withholding sustained — until protest dismissal or until DoD lifts it?
- Appeal path for incumbents whose payments are withheld?
What to do
- If you're an incumbent: stop filing thin protests — penalty math just changed
- If you're a challenger: §875 may discourage incumbent counter-tactics — file your own protest with confidence
- Watch for the implementing DFARS proposed rule before June 16, 2026