Contract Disputes Act (CDA)- Alternative Dispute Resolution (ADR)
The Contract Disputes Act of 1978 (CDA) is the earliest statutory authority for the use of informal, expedited dispute resolution methods in contract disputes. The CDA requires the Boards of Contract Appeals (BCA) to provide “to the fullest extent practicable…informal, expeditious, and inexpensive resolution of disputes.” 41 U.S.C. § 7105(g). The CDA was designed to encourage the resolution of contract disputes by negotiation prior to the onset of formal litigation. S. Rep. No. 95-1118.
The CDA favors negotiation between the contractor and the agency at the claim stage, before litigation begins. At this stage the agency is typically represented by the contracting officer, who makes the initial decision on a contractor’s claim. If the dispute cannot be resolved between the contractor and the contracting officer, the CDA requires the contracting officer to issue a final decision. The contractor can then appeal this final decision to either a Board of Contract Appeals or the Court of Federal Claims. 41 U.S.C. § 7105; 33.206 and 33.211.
The Administrative Dispute Resolution Act (ADRA) of 1996 specifically provides that agencies may use binding arbitration only after they issue agency guidance, in consultation with the Attorney General. 5 U.S.C. 575(c). However, pursuant to the Contract Disputes Act, an argument has been made that agency boards of contract appeal have the authority outside the ADRA of 1996 to fashion binding ADR proceedings. Thus, with claims properly on appeal before a board of contract appeals, parties may agree to engage in a summary proceeding with binding decision.
In these types of proceedings, parties try their appeal informally before an administrative judge with the judge issuing a binding “bench” or summary written decision. The parties must agree on the details for the binding procedure ADR agreement. To use this type of ADR, the parties must also agree that all decisions, rulings, and orders by the board shall be final, conclusive, not appealable, and may not be set aside except for fraud. Pre-hearing, hearing, and post-hearing procedures and rules applicable to appeals generally will be modified or eliminated to expedite resolution of the appeal using this type of ADR, which is similar in most respects to binding arbitration. For the Armed Services Board of Contract Appeals’ (ASBCA) discussion of this procedure, see Addendum II, Alternative Dispute Resolution, at ¶ 7 (b). For the Civilian Board of Contract Appeals’ (CBCA) discussion of this procedure, see Rule 54(c)(5), 48 CFR 6101.54(c)(5). See also Ch. 21, Arbitration.
ADR at the Armed Services Board of Contract Appeals (ASBCA)
With respect to the ASBCA, the parties must jointly request ADR procedures at the Board. The request must be approved by the Board. The Board may also schedule a conference to explore the desirability and selection of an ADR method and related procedures. If an ADR involving the Board’s participation is requested and approved by the Board, a Neutral will be appointed. If an Administrative Judge has already been assigned to an appeal, the same judge will normally be assigned to be the Neutral in an ADR. If an Administrative Judge has not yet been assigned to the appeal, or if the subject of the ADR is a matter pending before the contracting officer prior to any appeal, the Board will appoint an Administrative Judge to be the Neutral. In such instances, as well as situations in which the parties prefer that an assigned Administrative Judge not be appointed to serve as the Neutral, the parties may submit a list of at least three preferred Administrative Judges and the Board will endeavor to accommodate their preferences.
To facilitate full, frank and open discussion and presentations, any Neutral who has participated in a non-binding ADR procedure that has failed to resolve the underlying dispute will be recused from further participation in the matter unless the parties expressly agree otherwise in writing and the Board concurs. Further, the recused Neutral will not discuss the merits of the dispute or substantive matters involved in the ADR proceedings with other Board personnel.
In a non-binding mediation before the ASBCA, a Neutral is an Administrative Judge who will not normally hear or have any formal or informal decision-making authority in the matter and who is appointed for the purpose of facilitating settlement. In many circumstances, settlement can be fostered by a frank, in-depth discussion of the strengths and weaknesses of each party’s position with the Neutral. The agenda for meetings with the Neutral will be flexible to accommodate the requirements of the case. To further the settlement effort, the Neutral may meet with the parties either jointly or individually. A Neutral’s recommendations are not binding on the parties. When this method is selected, the ADR agreement must contain a provision in which the parties and counsel agree not to subpoena the Neutral in any legal action or administrative proceeding of any kind to produce any notes or documents related to the ADR proceeding or to testify concerning any such notes or documents or concerning his/her thoughts or impressions.
In a binding arbitration before the ASBCA, a summary proceeding with a binding decision is a procedure whereby the resolution of the appeal is expedited and the parties try their appeal informally before an Administrative Judge. A binding “bench” decision may be issued upon conclusion of the proceeding, or a binding summary written decision will be issued by the judge no later than ten days following the later of conclusion of the proceeding or receipt of a transcript. The parties must agree in the ADR agreement that all decisions, rulings, and orders by the Board under this method shall be final, conclusive, not appealable, and may not be set aside, except for fraud. All such decisions, rulings, and orders will have no precedential value. Pre-hearing, hearing, and post-hearing procedures and rules applicable to appeals generally will be modified or eliminated to expedite resolution of the appeal.
ADR at the Civilian Board of Contract Appeals (CBCA)
The CBCA encourages parties to consider the use of ADR at all stages of a contract dispute: pre-appeal, post-appeal, and post-hearing—whenever the parties believe that a neutral third person may be helpful to the settlement process. The CBCA makes its judges available to serve as ADR Neutrals.
ADR is always voluntary and all parties as well as the ADR Neutral must agree ADR is appropriate for the matter. ADR is not intended to replace a party’s right to fully adjudicate its appeal but is meant to supplement that right and provide more flexible choices for parties to resolve their differences. The success of ADR depends on both parties coming to an ADR proceeding well prepared and having a firm, good faith commitment to resolve their differences. Without that commitment, the best structured dispute resolution procedure cannot succeed.
A CBCA judge who serves as an ADR Neutral will maintain the confidentiality established for ADR under the Board’s rules. In addition to other ADR procedures, the parties may use ADR Neutrals outside of the CBCA or techniques that do not require direct CBCA involvement.
In 1999, the Interagency Alternative Dispute Resolution Working Group’s Contracts and Procurement Section published the Guide to Federal Procurement Alternative Dispute Resolution. All 34 chapters of the guide are available at the adr.gov website. CBCA Rule 54, Alternative Dispute Resolution, sets forth the CBCA’s rules and procedures for ADR. 48 CFR 6101.54. The rules can also be found on the CBCA’s website. The rules are very comprehensive and provide answers for most questions about the CBCA, including its approach to ADR.
The types of ADR techniques used at the CBCA can be found at CBCA Rule 54(c). The typical types of ADR include:
- Facilitative mediation
- Evaluative mediation
- Early neutral evaluation
- Mini-trial
- Non-binding advisory opinion
- Summary binding decision, and
- Hybrids of these procedures
The ADR process that is used most at the CBCA is non-binding evaluative mediation, although it goes by other names, such as neutral evaluation. Under this process, before the ADR proceeding, the parties will typically submit to the judge confidential position papers (or exchange position papers) addressing the facts and disputed issues, as well as their positions. They then meet with the judge in a joint session and make informal presentations to each other and the judge. Each party must be represented by someone with authority to settle the dispute. The judge, acting as a third-party neutral, meets both together and privately with the parties to assess the strengths and weaknesses of each side and help identify settlement options. Depending on the request of the parties the judge may, in a joint or private session, provide his/her evaluation on the merits of a party’s position. Parties considering ADR proceedings are encouraged to adapt for their own purposes any provisions in of the Board’s rules which they believe will be useful.
Depending on the type ADR used, a variety of goals may be realized. A dispute may be narrowed, resolved partially, or settled completely; a relationship may be repaired with the parties learning how to communicate more effectively; and/or an innovative solution that may not have been available through litigation may be utilized. The parties might address and reach agreement on how they will move forward in the future so that future potential controversies are more effectively processed. Such outcomes, often not available through more traditional litigation, are part of the beauty of using ADR in the procurement arena.
For docketed appeals, if ADR fails to resolve the dispute completely, the appeal will generally return to the presiding judge for adjudication. If the presiding judge served as the ADR Neutral, however, special rules apply. If the ADR proceeding involved private communications between the Neutral and individual parties, unless the parties and judge all agree that the judge should continue to serve as the presiding judge, that judge will have no further involvement with the case. If no private communications occurred during the ADR proceeding (all communications with the judge were made during a joint session with all parties present), the Neutral, after considering the parties’ wishes, has the discretion to decide whether or not to retain the case as presiding judge and adjudicate the appeal.