Avoiding and Resolving Government Contract Disputes with the Federal Government

1. Avoiding and Resolving Government Contract Disputes with the Federal Government Richard W. OehlerPerkins Coie LLP1201 Third AvenueSuite 4800Seattle, WA 98101(206) 359-8419roehler@perkinscoie.com

2. Avoiding and Resolving Contract Disputes with the Federal Government • 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

3. 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

4. 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

5. Issue Escalation Clause • 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. Partnering – Workshop Agenda • Workshop Agenda • Establish expectations • Describe partnering • Importance of communication and cooperation • Mutual vision

13. Partnering – Workshop Agenda • Workshop Agenda (cont) • Potential problems • Common Goals • Plan to sustain the relationship • Draft and sign Charter

14. 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

15. 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

16. 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

17. ASBCA ADR • Settlement Judge • ASBCA judge not assigned to the appeal • Procedures can be altered based on parties' agreement • Non-binding mediation • Mediation Statement

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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.

27. 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