Avoiding and Resolving Government Contract Disputes with the Federal Government

Richard W. OehlerPerkins Coie LLP

1201 Third AvenueSuite 4800

Seattle, WA 98101(206) 359-8419

roehler@perkinscoie.com

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Having disputes with the Federal Government can be a time consuming and costly process

We will discuss concepts for avoiding and resolving Government Contract disputes with the Federal Government

We will discuss some processes and also some substantive tips

Avoiding and Resolving Contract Disputes with the Federal Government

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Differences in Resolving Claims with Federal Government

A contractor's chances of resolving an issue or dispute improves if he submits to the Government a well-reasoned explanation of his position and supporting documentation

In my experience, this is true regardless of where the parties are in the issue resolution process So, typically, the sooner the better

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Differences in Resolving Claims with Federal Government

Early documentation of an issue helps ensure that one identifies all relevant events and compiles all relevant information

Avoid potential lack of timely notice defense asserted by the Government Differing Site Conditions – Prompt written notice to

the CO before the condition is disturbed Changes – Within 30 days of receipt of change order

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Prescribes a specific process (usually with deadlines) for consideration of an issue at 2 or 3 levels within the contracting agency and the contractor

Limited use in Government Contracts, but becoming fairly common in commercial contracts

Issue Escalation Clause

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Issue Escalation Clause - Elements

First Level – Involves personnel who are familiar with the dispute

Second Level – Involves personnel who are not involved in the dispute

Sometimes a third, senior level

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Issue Escalation Clause – Elements

The time periods to convene the first level and subsequent levels have tight timelines (such as 10 days)

Sometimes provides for an alternative dispute resolution mechanism if multi-level consideration by the parties has not resolved the dispute

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Issue Escalation Clause

Easy to draft and use such a clause No need to involve a third party neutral

and can be scheduled when convenient This process would be utilized before a

CDA claim or REA is filed Can result in a quick resolution

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Partnering

Focuses on the relationship between the parties and the achievement of mutually beneficial objectives

Build an alliance, improve communications and avoid disputes

Corps of Engineers – leader in use of partnering Includes Partnering clauses in solicitations

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Partnering

Parties seek to accomplish their goals through their own actions without the involvement of a third party neutral

Focus is more on business interests than contract rights

Initiated at the beginning of the contract Must have the buy-in of all stakeholders

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Partnering

Usually a workshop immediately after award to identify mutual objectives, roles and responsibilities of the parties, methods to ensure effective communications and establish an issue resolution ladder

Involves cost of facilitator and training Substantial involvement of management

including senior management

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Partnering – Workshop Agenda

Workshop Agenda Establish expectations Describe partnering Importance of communication and

cooperation Mutual vision

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Partnering – Workshop Agenda

Workshop Agenda (cont) Potential problems Common Goals Plan to sustain the relationship Draft and sign Charter

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Resolving a Dispute After the CO's Final Decision

This focuses on alternative dispute resolution in the forums for appeal of a CO's Final Decision

ASBCA – solid program CBCA Court of Federal Claims – Appendix H

Not used much in practice

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Alternative Dispute Resolution (ADR)

Less common in Government Contract disputes, but I frequently try to convince the Government to use ADR

It can produce a result in less time than traditional litigation

It also may result in a business solution

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ASBCA ADR

Three ADR techniques generally used at ASBCA Settlement judge (non-binding mediation) Mini-trial (non-binding) Summary trial with binding decision

ASBCA allows the parties to use any ADR method, or combination of methods, regardless of the amount in dispute

Mutual agreement and Board concurrence required to use ADR

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ASBCA ADR

Settlement Judge ASBCA judge not assigned to the appeal Procedures can be altered based on parties'

agreement Non-binding mediation Mediation Statement

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ASBCA ADR

Mini-trial Each party presents an abbreviated version of

its position to principals with authority and to a Board-appointed neutral advisor

Upon conclusion of presentations, settlement discussions are conducted

Neutral advisor's recommendations are not binding

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ASBCA ADR

Summary Trial with Binding Decision Expedited appeal hearing Trial informally before a judge A summary bench decision at the conclusion of the

hearing or a summary written decision issued NLT 10 days after conclusion of trial or after receipt of trial transcript

The decision is final and nonappealable Decision has no precedential value Pretrial, trial and post-trial procedures generally

modified or eliminated to expedite resolution of the appeal

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ASBCA ADR Procedure

If non-binding ADR is unsuccessful, the appeal will be restored to the docket

ASBCA judge who participated in the non-binding ADR will not: Participate in the restored appeal, unless

explicitly requested by both parties and approved by the ASBCA Chair

Discuss the merits or substantive matters with other ASBCA judges

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ADR Prior to Submitting a Claim

ADR may be employed to resolve a Request for Equitable Adjustment

Use of ADR must be voluntary by both parties Remain aware of any time bars for submitting

your claim Even after a claim is submitted, the parties can

agree to postpone a final decision and appeal to the ASBCA pending ADR proceedings

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Benefits of ADR

Parties save in terms of cost Parties save in terms of time

A formal ASBCA appeal (including pleadings, discovery, trial, post-trial briefing and time for the judge to write the decision) can take two to three years

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When ADR Makes Sense

Routine matters are well suited for ADR For matters that are more significant ("bet

the company" disputes), litigation may be a more appropriate approach

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Lessons Learned

Keep the process as simple as possible Allow for sufficient, but not excessive,

information exchange Ensure that business representatives and

financial decision-makers are available and willing to commit the necessary time

Identify funding sources for an anticipated settlement prior to beginning ADR

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Funding The Settlement

Funds allocated to the contract Judgment Fund – for "judgments" Binding ADR decisions for BCA appeals qualify as

judgments For non-binding ADR, the parties may agree to a

"stipulated judgment" and request the board to treat it as a consent judgment Also payable from the Judgment Fund

Parties must reach agreement on how to treat CDA interest for settlements paid from the Judgment Fund

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Combination ADRs

"Med-Arb" proceedings have become more common Process begins with a full mediation Parties agree that if mediation is unsuccessful, it will

be followed by a summary trial with a binding decision "Last Chance" arbitration is where, prior to a

judge rendering a decision in a summary trial proceeding, the parties attempt a mediated settlement (usually just a few hours). If unsuccessful, the judge issues a decision.

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Confidentiality

Written material prepared specifically for use in ADR, oral presentations made in ADR, and all discussions in connection with ADR proceedings are confidential

The underlying facts and information used during ADR are not confidential

The parties can agree to allow the admission of ADR materials and discussions as evidence in future proceedings