Government contractors, particularly small business contractors, often share that their experience with Alternative Dispute Resolution (ADR) is costly and inefficient. This may be true of traditional ADR involving paid neutrals or mediation services, as often found in binding arbitration clauses within subcontracts. However, the stated goals of ADR before the Boards of Contract Appeals (BCA) are informality, expedience, and inexpensiveness. Where settlement negotiations fail but both the government and the contractor are still interested in resolving the dispute before a BCA decision, ADR may be the most cost-effective and speediest route to resolution. In this final installation of PilieroMazza’s BCA blog series, we discuss the typical Board-led ADR process, as well as considerations contractors will want to keep in mind. Visit this link for Parts 1-3 in our series to catch up on other tips for navigating the BCAs and the Contract Disputes Act (CDA), and visit this link to register for our webinar covering this important topic.
When can I use Board-led ADR?
The CDA, 41 U.S.C. 7105(g)(1), states that boards of contract appeals “shall…to the fullest extent practicable provide informal, expeditious, and inexpensive resolution of disputes.” The BCAs recognize that both parties benefit from resolving a dispute at the earliest feasible stage, by the fastest and least expensive method possible. To that end, the BCAs strongly encourage the parties to consider ADR for pre-claim and pre-final decision matters, as well as appeals pending before the Boards.
There are only two requirements to utilize Board-led ADR:
- As stated above, you must have a CDA dispute against a government agency. Disputes between private companies (e.g., a prime and subcontractor) working on a government contract are not subject to the CDA and cannot be decided or mediated before the BCAs. Check out our first blog of this series for more information about which BCA has jurisdiction over which agency.
- The government agency involved in the dispute must agree to participate in ADR in order to resolve the dispute through that process. This can be tricky. Sometimes the agency feels its position denying a claim is too strong to settle, or that getting a decision on the merits by a Board judge would have precedential value. In these instances, it is difficult to convince them to give ADR a chance. However, sometimes the agency is hesitant to engage in ADR for other reasons: (a) perhaps the contracting officers and agency attorneys are unfamiliar with the BCA’s ADR procedures; (b) someone on the government side is personally invested in the dispute or otherwise hesitant to appear to “give an inch” by indicating interest in settlement; (c) the contracting team is concerned about a lack of funds left on the contract to resolve the matter; or (d) allegations of fraud have been raised —the list goes on and on.
How can I get the agency to agree to Board-led ADR?
If the agency denies your pre-claim request for ADR, it is likely time to engage legal counsel. Not only do you need legal counsel on hand to ensure you don’t blow past any statute of limitations while you’re waiting to hear about ADR, but also your attorney can either help you navigate pursuing ADR further or filing a claim (and, possibly, pursuing ADR again pre- or post-appeal). No matter when you’re chasing an ADR agreement, the most important thing to keep in mind is that you are asking for the agency to participate in a process based upon mutual trust and that the other party will behave reasonably and work to find a compromise. Disputes are inherently adversarial, but the adage that “you catch more flies with honey than with vinegar” applies here—the agency is infinitely more likely to agree to participate in this collaborative process to resolve your claim where you communicate kindly and respectfully despite your understandable frustration.
No matter the agency’s reason behind not wanting to engage in ADR, the fact remains that ADR is often in the government’s best interest as well as the contractor’s. In fact, most agencies have internal guidance encouraging the use of ADR, and as stated above, the Boards strongly encourage it. A useful first step in convincing the agency to agree to Board-led ADR is to locate the agency’s policy and kindly provide it to your counterpart in the government. You can also cite FAR 33.214, as section (b) requires a contracting officer rejecting a request for ADR to “provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute.”
Depending on the facts of your case, there may be other benefits your legal counsel can relay to the agency. Where there are several pending issues between the contractor and agency, even across different contracts, the idea of a global settlement is often enticing. The Boards are authorized to mediate global settlements, as well as contract closeouts—the agency may not be especially interested in settling the dispute at hand, but it may be willing to settle the dispute at hand if it can knock out all other issues in one go. Additionally, where the agency is concerned about a lack of remaining funding on the contract such that it cannot afford to settle, it is important to remind the agency that, with some minor exceptions like foreign military sales contracts, agencies can use the Judgement Fund to resolve Board-led ADRs. The Judgment Fund is managed by the Department of the Treasury and pays court judgments and compromises settlements of lawsuits against federal agencies if the funds are not legally available to pay from the agency’s own appropriations. With recent turnover in federal contracting and a growing number of relatively “green” contracting officers, it is more important than ever to know the government’s options and respectfully educate your agency counterparts.
How does BCA ADR work?
Once both parties agree, your counsel will work with agency counsel to execute an ADR agreement and request that the Board assign a judge as a neutral. The Board judge assigned to your ADR will never be the same judge who decides your case on the merits, so there is no reason to worry about potential bias if ADR fails and you need to proceed to a hearing. Each Board judge has their own preferences for how they run their ADR. Some want the parties to give a formal presentation, some want to have a private conversation with each party’s attorneys to candidly discuss the legal strengths and weaknesses of their case, and some are hands-off and will only read the parties’ legal positions on paper ahead of the ADR. That said, most Board-led ADRs follow a predictable path: (1) limited discovery, (2) position paper, and (3) in-person or virtual ADR.
Limited discovery typically entails exchanging written discovery requests and possible expert reports depending on the subject matter of the dispute. While the parties may agree ahead of time to engage in depositions, it is uncommon—the aim of Board-led ADR is to move quickly and cost-efficiently, and deposing every witness is at odds with that aim.
Once discovery is exchanged, the parties will file position papers. These papers will be “off the record” such that neither party will be able to use anything contained in them against the other should ADR fail, and the parties proceed to a hearing. Nonetheless, the papers set out the entirety of the parties’ positions for the other side and the judge. In addition to briefing their case for entitlement (i.e., why you are entitled to damages), it is critical that parties brief their case for quantum (i.e., how much you are entitled to in damages) as the goal of ADR is to reach a settlement. Depending on the size and complexity of the case, there may also be an opportunity to file a rebuttal to the other party’s position paper. Additionally, parties are encouraged to file exhibits to the paper containing important documentation that they want the Board judge to review and understand ahead of the ADR.
The actual ADR can be held in-person or virtual. In-person ADR is particularly successful (and recommended) as it’s more difficult for one (or both parties) to walk away from the table when everyone travelled to the same place to negotiate. However, the Board also offers virtual ADR if travel is cost-prohibitive for the contractor or the agency is adamant that the parties negotiate virtually.
ADR can last several days, depending on the complexity of the case, but parties typically set aside two days. On the first day, the parties usually gather in one room and present their cases. After each party has an opportunity to meet each other and present their opening positions, the parties will be divided into two rooms. Sometimes the judge will call smaller groups back into the main presentation space to talk through issues, but otherwise the Board judge will spend most of the ADR traveling between these rooms, presenting the other party’s offer or counteroffer, and offering their perspective on each party’s litigation risk.
Both the CBCA and ASBCA boast incredibly high rates of success with resolving ADRs before hearing, so as long as you put in the work to prepare and come ready to negotiate, there is every reason to believe you will walk away satisfied to await your settlement check. And if you’re not satisfied, Board-led mediation is non-binding (unless the parties agree otherwise), so you can walk away and proceed to a hearing. Moreover, you’ll go into that hearing more prepared than ever, having already heard the government’s case and having already had a practice run at presenting your own case to a Board judge.
Should you have any questions regarding the BCAs, COFC, REAs, claims, appeals, ADR, or any other government contract dispute, please contact Lauren Brier, Josie Farinelli, Kelly Kirchgasser, or another member of PilieroMazza’s REAs, Claims, and Appeals or Government Contracts practice groups. Remember to register here for our webinar on this important topic.
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