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Alternative Dispute Resolution
A Practical Guide for Resolving Government Contract Controversies
Prepared by the Special Committee
on Alternative Dispute Resolution
of the Section of Public Contract Law
Nothing contained in this monograph is to be considered as rendering of legal advice for
specific cases, and readers are responsible for obtaining such advice from their own legal
counsel. This monograph, including any forms and sample agreements set forth as
appendices, are intended for educational and informational purposes only.
© 1999 American Bar Association. All rights reserved. Non-copyrighted materials within
the appendices are in the public domain and may be freely reproduced and used.
Acknowledgments
Alternative Dispute Resolution (ADR) Committee Co-Chairs
Joseph M. McDade, Jr.
David E. Marmelstein
Primary Authors/Editors
Hon. Martin J. Harty
Joseph M. McDade, Jr.
Richard C. Walters
Contributing Authors
P. Jean Baker
James DeLanoy
Anthony H. Gamboa
Hon. Allan H. Goodman
Jeremy M. Griffin
Behn Miller
Nicholas P. Retson
Contributing ADR Committee Members
Hon. Ruth C. Burg
Richard F. Busch, II
Frank Carr
William F. Cloran
George M. Coburn
Paul G. Dembling
Donald G. Gavin
Hon. Robert J. Gomez
Carole S. Houk
David E. Marmelstein
Malcolm S. Mason
Karen D. Powell
Hon. Robert J. Robertory
George Sisson
Mark Wilkoff
Our thanks to Herman D. Levy, Esq. for his editorial assistance.
Page i

Table of Contents
I. Introduction 1
II. Cases Suitable for ADR 5
A. Screening Criteria Mandated by Congress Under the 5
ADRA of 1996
B. The DoJ Guidelines for Use of ADR in Federal
6
Litigation
C. ADR Case Screening: Factors to Consider 8
III. ADR Techniques 12
A. Non-Binding ADR Techniques 12
1. Mediation 12
2. Settlement Judge 15
3. Minitrial 16
4. Advisory Opinion 16
5. Dispute Review Board 17
B. Binding ADR: Arbitration/Summary Trial with
17
Binding Decision
Page ii

IV. Matching Your Controversy with the Appropriate ADR 19


Techniques
A. The Dispute Resolution Spectrum 19
B. Considerations for Choosing Specific ADR
22
Techniques
1. Binding ADR 22
2. Non-Binding ADR 23
a. Mediation 23
b. Minitrial 24
c. Outcome Prediction 24
V. Timing of ADR Use 26
A. Knowledge of the Facts/Need for Fact Finding 26
B. Financial Considerations 26
1. Contractor Financial Considerations 26
2. Government Financial Considerations 29
C. Protests: ADR Use by the GAO Timing 29
1. ADR Use Prior to Protest Submission 29
2. ADR Use after Protest Submission 29
D. Claims: ADR Timing 31
1. ADR Use Prior to CDA Claim Submission 31
Page iii

2. ADR Use after CDA Claim Submission 32


3. ADR Use after Issuance of Contracting Officer 33
Final Decision
VI. Designing the ADR Process 34
A. Guidelines for Drafting an ADR Agreement 34
B. Additional Considerations 36
VII. Selecting the Right Third Party Neutral 38
A. Considerations When Choosing a Neutral 38
1. Neutrality and Related Ethics Standards 38
2. Training 39
3. Experience 39
4. Subject Matter Expertise in the Type of Controversy39
B. Mechanics of Engaging a Neutral 40
1. Private Sector Neutrals 40
2. GAO Attorneys As ADR Neutrals 42
3. Boards of Contract Appeals Judges As ADR
42
Neutrals
4. Neutrals at the FAA Office of Dispute Resolution 42
for Acquisition
5. United States Court of Federal Claims 42
6. United States District Courts 43
Page iv

VIII. Preparation for ADR 44


A. ADR Attendance: Principals and Participants 44
B. Preparation for the Proceeding 45
1. Position Papers 45
2. Non-Monetary Settlement Terms: Checklists 46
3. Opening Settlement Positions and "Fall-Back" 46
Positions
4. Client Preparation 46
C. Structuring/Conduct of the Presentation Phase 47
1. Mediation 47
2. Minitrial 47
3. Arbitration 49
D. Structuring/Conduct of the Negotiation Phase 49
E. Closing: Settlement Agreements 52
IX. Other Considerations 53
A. Information Exchange 53
1. Incurred Cost Audit 53
2. Discovery 54
3. Dealing with Classified Materials 57
Page v

B. Confidentiality 57
1. Administrative Dispute Resolution Act of 1996 57
2. Other Confidentiality Protections 59
a. Contract Provisions 59
b. Federal Rule of Evidence 408 59
c. Federal Rule of Evidence 501 60
d. Protective Orders 61
C. Mechanics of Settlement 61
1. Preparing and Executing a Settlement Agreement 61
2. Funding the Settlement 61
a. The Funding Cycle 62
b. Access to the Judgment Fund 63
(1) Binding ADR Procedures at the Boards 64
(2) Non-Binding ADR Procedures and the Use of 64
Stipulated Judgments/Consent Decrees
3. Final Considerations 65
a. CDA Interest 65
b. Attorneys' Fees and Costs 66
X. Dispute Resolution Forums 69
A. General Accounting Office 69
Page vi

B. Boards of Contract Appeals 69


1. ASBCA ADR Program 71
2. GSBCA ADR Program 73
3. Department of Veterans Affairs Board of Contract 74
Appeals (VABCA)
C. FAA Office of Dispute Resolution for Acquisition 74
D. United States Court of Federal Claims 76
E. United States District Courts 78
XI. Lessons Learned 80
A. The Parties' Perspective 80
B. The Neutrals' Perspective 81
Appendices
Page 1

I
Introduction
Most federal government contract controversies1 settle and many that do not, should.
Alternative Dispute Resolution (ADR) techniques can help parties settle their contract
controversies2 and, in the process, avoid the time and expense of formal litigation. The
term ADR refers to an array of non-binding and binding dispute resolution methods that
involve the use of third-party neutrals to aid the parties in resolving these
1 The Administrative Dispute Resolution Act of 1996, Pub. L. No. 104-320 (ADRA of 1996)
(codified at 5 U.S.C. §571, et. seq., and various subsections of 41 U.S.C. §605) introduced a new
term of art, ''issues in controversy." The new term is aimed at making it clear that disagreement
between the parties need not be a formal dispute before the controversy can be submitted to ADR.
For readability, we use the shorthand reference, "contract controversies," as applied to bid protests
and performance disputes involving federal government acquisition contracts.
2 For resolution of controversies relating to federal grants, ADR is used by the Department of Health
and Human Services (HHS) Departmental Appeals Board. See Appendix 2. The Department of
Defense (DoD) has stated, as its policy, that ADR is to be used for resolution of controversies
regarding both grants and cooperative agreements:
(c) Alternative Dispute Resolution (ADR) -(1) Policy. DoD policy is to try to resolve all issues
concerning grants and cooperative agreements by mutual agreement at the grants officer's level.
DoD Components therefore are encouraged to use ADR procedures to the maximum extent
practicable. ADR procedures are any voluntary means (e.g., mini-trials or mediation) used to
resolve issues in controversy without resorting to formal administrative appeals (see paragraph
(e) of this section) or to litigation.
(2) Procedures. (i) The ADR procedures or techniques to be used may either be agreed upon by
the Government and the recipient in advance (e.g., when agreeing on the terms and conditions of
the grant or cooperative agreement), or may be agreed upon at the time the parties determine to
use ADR procedures.
(ii) If a grants officer and a recipient are not able to resolve an issue through unassisted
negotiations, the grants officer shall encourage the recipient to enter into ADR procedures. ADR
procedures may be used prior to submission of a recipient's claim or at any time prior to the
Grant Appeal Authority's decision on a recipient's appeal (see paragraph (e)(3)(iii) of this
section).
63 Fed. Reg. 12152 at 12173-12174, §22.815(c) (March 12, 1998). For an exposition of the law of
federal grants, see M. Mason, ed., Federal Grant Law (ABA Public Contract Law Section 1982) and
P. Dembling & M. Mason, Essentials of Grant Law Practice (American Law Institute-American Bar
Association 1996). Similarly, in terms of so-called "other transactions," ADR is available for
controversy resolution. See Appendix 3, Defense Advanced Research Projects Agency (DARPA)
Model "Disputes" Clause.
Page 2
contract controversies via a structured settlement process.
The Executive Order on Civil Justice Reform, Exec. Order No. 12,988, 61 Fed. Reg. 4729,
Sec. l(c) (Feb. 7, 1996), sets out a federal government policy favoring settlements of
disputes and the use of ADR:
Whenever feasible, claims should be resolved through informal discussions, negotiations, and
settlements rather than through utilization of any formal court proceeding. Where the benefits of
alternative dispute resolution (ADR) may be derived, and after consultation with the agency
referring the matter, litigation counsel should suggest the use of an appropriate ADR technique to
the parties.
In accordance with the Administrative Disputes Resolution Act, 5 U.S.C. §571, et seq.
(the ADRA of 1996), the President established an interagency ADR committee, known as
the Interagency Alternative Dispute Resolution Working Group (IADRWG), on May 1,
1998. IADRWG activities, presently coordinated by the Senior Counsel for ADR at the
United States Department of Justice (DoJ), are publicized regularly on the Internet at the
IADRWG Website (http://www.financenet.gov/iadrwg.htm). Numerous federal agencies
have issued agency policy statements strongly endorsing the use of ADR, and the Federal
Acquisition Regulation (FAR) has been amended to encourage federal agencies to "use
ADR procedures to the maximum extent practicable." FAR §33.204. In the Alternative
Dispute Resolution Act of 1998, Pub. L. No. 105-315, 112 Stat. 2993 (October 30, 1998)
(the ADRA of 1998), Congress has also called for federal district courts to authorize, by
local rule, the use of ADR in all civil actions.
The best available data regarding resolution rates indicate that ADR has resulted in
resolution in better than 90 percent of all cases involving federal government contract
controversies. Notwithstanding these impressive results, there still is reluctance to engage
in ADR, particularly among those government contracts professionals and legal
practitioners who lack familiarity with the ADR process. This monograph seeks to fill the
information void for those individuals. This monograph does not cover, or discusses only
in passing, the following types of dispute avoidance or dispute resolution processes:
Unassisted negotiation techniques;
Binding ADR conducted by someone other than a sitting board of contract appeals judge;
or
Partnering.
Although unassisted negotiations frequently can be effective for resolving
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contract controversies, the ADRA of 1996 and implementing FAR regulations restrict the
definition of ADR to dispute resolution techniques involving the use of third-party
neutrals. Given this definition, and to make the scope of this monograph manageable, we
avoid any discussion of unassisted negotiation techniques. As explained more fully in the
pages that follow, as of this printing (April 1999), agencies (in consultation with DoJ)
have yet to issue the guidance required for use of binding arbitration to resolve contract
controversies. Since it is not possible to predict the form and substance of such guidance,
we will only touch briefly on binding arbitration. Partnering is a conflict avoidance
technique, rather than a dispute resolution technique. Accordingly, a discussion of this
technique is beyond the scope of this monograph.3
The monograph focuses solely on the resolution of contract controversies between
federal agencies and their prime contractors (including sponsored subcontractor
controversies) and bid protests. It does not cover a number of related areas (e.g resolution
of prime-subcontractor disputes). Our aim is to provide information on the ADR
methodologies available for resolving contract controversies that may arise in the
formation or administration of federal government acquisition contracts.
Section II of the monograph discusses what types of contract controversies are suitable
for ADR. Screening of cases for ADR potential is a common facet of many federal agency
ADR programs. Both public- and private-sector contract attorneys need to understand that
not every case is a good candidate for ADR and why this is so. Section III provides
general descriptions of the various ADR techniques employed in resolving contract
controversies, in order to provide a common frame of reference for our discussion of
ADR. In Section IV, we build on the discussion in Section III and reinforce the need to
match the right type of ADR process to your needs in resolving a particular contract
controversy.
If a matter is appropriate for ADR, the next issues to consider are the practical and
financial aspects associated with the timing of its use. We address these issues in Section
V. The parties then need to design the ADR process to address the particular facts and
circumstances of their controversy. We provide our treatment of this important topic in
Section VI. In Section VII, we address factors to consider when selecting a third-party
neutral, as well as the steps for engaging a third-party neutral. Once the parties have
signed their ADR agreement, they then need to focus on preparing for the ADR
proceeding itself. Among other things, Section VIII of the monograph discusses who
should attend the ADR proceeding, how to prepare for the ADR proceeding, structuring
the ADR presentation, and the conduct of the negotiation phase the ultimate phase of all
forms of non-binding ADR.
There are a number of other considerations to take into account whenever parties
3See Frank Carr et al., Partnering: A Comprehensive Guide (American Bar Association Spring
1999)
Page 4
use ADR. Section IX addresses questions ranging from streamlining the information
exchange, verification of incurred and anticipated costs, confidentiality of the
proceedings, to the mechanics of settlement. We discuss in Section X the various ADR
programs offered by the United States Court of Federal Claims, the boards of contract
appeals, the FAA Office of Dispute Resolution for Acquisition, the General Accounting
Office, and other federal dispute resolution forums (hereinafter collectively referred to as
the Dispute Resolution Forums). We conclude this monograph in Section XI, by
providing a review of "lessons learned" from the perspectives of both the parties and the
ADR neutral. The monograph includes an extensive set of appendices, including sample
ADR agreements that parties have used successfully, a sample CDA interest computation,
and a discussion of ethical considerations. The sample forms set forth as appendices are
for your use and may be modified to suit your needs.
We hope that this monograph will provide valuable insights into the ADR process and
will prove to be a useful tool for those seeking sensible alternatives to litigation for the
resolution of their federal government contract controversies.
Page 5

II
Cases Suitable for ADR
Although most practitioners recognize that certain disputes may not be appropriate for
resolution through ADR, what is less clear is precisely which types of disputes are not
amenable to the use of ADR. Forcing disputes into an inappropriate ADR proceeding not
only can cause immediate frustration, but also can greatly diminish the willingness of a
party to submit to an ADR process in the future.
There are several sets of ADR screening criteria available for determining whether ADR
will be suitable for the resolution of a given controversy, including criteria mandated by
Congress.4 A review of ADR case screening criteria developed by various federal
agencies including the criteria set forth in DoJ guidelines for the government's use of
ADR in the federal courts reveals that they generally focus on three broad areas: (1) the
relationship between the parties; (2) the nature of the dispute; and (3) other pragmatic
considerations. In contrast, the mandatory screening criteria for administrative disputes
Congress specified in the ADRA of 1996, focus solely on the second area, i.e., the nature
of the dispute. In this Section, we will review the mandatory ADRA case screening
criteria, as well as those developed by DoJ, and will provide our own suggested ADR
case screening guidelines.
A
Screening Criteria Mandated by Congress under the ADRA of 1996
The ADRA of 1996 provides that, in determining whether or not to use ADR to resolve
controversies falling within the scope of that statute, federal agency employees must
consider certain factors as militating against the use of ADR. These factors focus on the
nature of the controversy. The identification of the presence in connection with any given
controversy of one or more of these factors does not rule out the use of ADR.
Nevertheless, as a practical matter, federal sector decision-makers are likely to be strongly
influenced by the presence of one or more of the factors. The factors are:
1. A definitive and authoritative decision is needed as a precedent;
2. The matter involves significant issues of government policy that require procedural
development, and ADR will not assist policy development;
3. Maintaining an established policy and/or avoiding variations in decision is of special
importance;
4. The matter significantly affects non-parties;
4See, e.g., Appendix 28, Enclosure 1, CAD ADR Appropriateness Checklist, developed by the
U.S. Army Litigation Center.
Page 6
5. A full public record of the proceeding or resolution is important; or
6. The agency must maintain continuing jurisdiction over the matter with the right to alter
the resolution as circumstances demand.5
The ADRA of 1996 insulates an agency's decision to use ADR from judicial review. See 5
U.S.C. §581(b) (decision to use ADR is "committed to the discretion of the agency and
shall not be subject to judicial review . . . "). Even though ADR is an entirely voluntary
process, if a party rejects the other's request for ADR proceedings, both the Contract
Disputes Act (CDA) and the FAR require that party to provide a written explanation for
rejecting ADR. See 41 U.S.C. §§605(d) and (e); FAR §33.214(b); FAR §52.233-1,
"Disputes (December 1998)". The FAA Office of Dispute Resolution for Acquisition
(ODRA) imposes a similar requirement with respect to ODRA proceedings, which are
exempt from the FAR. See Section X.
B
The DoJ Guidelines for Use of ADR in Federal Litigation
Disputes pending before federal courts are not subject to the terms of the ADRA of 1996.
Accordingly, DoJ has promulgated ADR policies and case screening criteria for each of
its civil litigation components and has distributed these policies and screening criteria for
use by all of its staff attorneys who handle civil litigation, both in Washington, D.C. and
in the various United States Attorneys' Offices throughout the country. These policies and
criteria were also published in the Federal Register to make clear to the general public the
Department's commitment to expanding the use of ADR. See, 61 Federal Register, pages
36,895-36,913 (July 15, 1996). The case screening criteria developed for the DoJ Civil
Division's Commercial Litigation Branch which are typical of the criteria for the various
DoJ components are as follows:
Factors Favoring Use of ADR
(a) The Parties
(1) There is a continuous relationship.
(2) There may be benefits to either client hearing directly from the opposing side.
(3) Either party would be influenced by opinion of a neutral third-party.
5 U.S.C. §571(b).
Page 7
(4) The opposition does not have a realistic view of the case.
(5) The parties have indicated that they want to settle.
(6) Either party needs a swift resolution.
(b) Nature Of The Case
(1) Complex Facts.
(2) Technical Complexity.
(3) Hostile forum or decision-maker.
(4) Flexibility in relief is desired.
(5) Trial preparation will be difficult, costly, or lengthy.
(6) Need to avoid adverse precedent.
Factors Disfavoring Use of ADR
(a) Need for precedent.
(b) Need for public determination or sanction.
(c) Case likely to settle soon without assistance.
(d) Case likely to be resolved efficiently by motion.
(e) Opposing counsel are not trustworthy.
Id. Although both DoJ's Commercial Litigation Branch and the ADRA of 1996 caution
against the use of ADR if precedent is needed, only DoJ expressly states that the need for
public sanctions also makes ADR use inappropriate. The remaining DoJ factors
disfavoring the use of ADR are all designed to ensure that ADR will work and will be
cost-effective. These pragmatic considerations are conspicuously absent from the ADR
screening criteria found in the ADRA of 1996.
Page 8
C
ADR Case Screening:
Factors to Consider
ADR professionals have proposed a wide array of ADR case screening systems. Some
focus on the interplay between the goals of the parties and the identification of barriers to
settlement.6 Other approaches focus solely on pragmatic considerations, i.e., will the use
of ADR resolve the matter.7 Although those espousing a "pragmatic approach" may not
necessarily agree on all of the "pragmatic" factors that should be considered, most cite the
same or similar factors.
We have fashioned the following guidelines an amalgamation and distillation of the more
significant screening factors in order to assist your efforts to assess whether a particular
case is appropriate for ADR. As with anything else, there is no guarantee that use of these
or any other guidelines will mean successful ADR results. We have seen cases in which
many of the factors disfavoring ADR use were present, yet ADR was used and its use
proved to be successful. In other cases, only factors favoring use of ADR were present,
yet the ADR process failed. Accordingly, use of the guidelines below must be regarded
only as the first step toward an ultimately successful ADR process.
Factors Favoring Use of ADR
Client Goals & Objectives
1. Continuing Relationships Between the Parties Need to be Maintained: The parties are
likely to have continued contact with one another.
2. Need for Problem Solving or Development of Creative Alternatives: A thorough
exchange of information and generation of alternatives and options will help the parties
reach a principled and justifiable settlement.
3. Flexibility Desired in Shaping Relief: The parties are seeking relief that may be difficult
to obtain in formal adjudication before a Dispute Resolution Forum. For example, the
parties may want to achieve a more comprehensive resolution involving other issues
between them, which are not part of the contract controversy being adjudicated.
6See, e.g. F. Sander & S. Goldberg, Fitting the Form to the Fuss: A User-Friendly Guide to
Selecting an ADR Procedure, 10 Negotiations J 295 (1994). The client's objectives are divided
into 8 items: cost, speed, privacy, relationships, vindication, neutral opinion, precedent, and
maximizing outcome. Barriers to settlement are divided into 10 elements: poor communication,
need to express emotions, differing views of the facts, differing views of the law, need for a
principle, constituent pressure, linkage, large number of parties, lawyer client divergences, and the
jackpot syndrome. For both groups of factors, the authors propose a scoring system for each of the
primary types of ADR.
7See, e.g., N Rogers & C. McEwen, Mediation: Law, Policy, Practice (2nd Ed.) Clark, Boardman &
Callaghan, Vol. 1, Sec. 6:03, page 4.
Page 9
4. Need for Swift Resolution: The parties may have programmatic/financial needs that
cannot await the usual length of the litigation process. For example, the government may
need to take advantage of expired appropriations, and the contractor may have a
significant cash flow problem that threatens its continued viability.
Barriers Hampering Unassisted Negotiations
1. Communications Difficulties Between or Among Parties: Impasse has been reached or
is likely to develop, because of personality conflicts or a history of poor or non-existent
communications among the participants (including attorneys). A skilled ADR neutral can
bridge the parties' communications gap.
2. Communications Difficulties Between Lawyers and Their Clients: Clients may be
resistant to settlement overtures, even if they are endorsed by their counsel, without first
obtaining from an impartial neutral a candid appraisal of the merits and the parties'
respective legal positions.
3. Factual or Technical Complexity/Uncertainty: The parties would benefit from reliance
on the expertise of a third-party expert for technical assistance and/or fact-finding.
Obtaining such expert neutral assistance could facilitate more meaningful discussion and
resolution of a complex matter.
4. Ultimate Outcome Uncertain: The parties are confused about the likely outcome, should
the matter proceed through litigation. Negotiations, to be productive, require a better
grasp of litigative risks. A knowledgeable ADR neutral can provide the parties with
needed insights as to those risks.
Pragmatic Considerations
1. Lawyers Are Willing To Consider ADR: The lawyers involved are knowledgeable
about ADR processes and intend to participate in the chosen ADR process in a good-faith
attempt to resolve the dispute.
2. Hostile Decision-Maker: The case, if left to adjudication, would likely be tried before
an unsympathetic judge.
3. Facts Are, Or Could Be, Sufficiently Developed Within the Timeframe Contemplated:
The parties have sufficient information to permit them to
Page 10
make informed decisions concerning the ultimate disposition of the dispute.
4. Parties Are Prepared To Discuss Settlement: The parties are willing to resolve the case
short of trial.
PRACTICE TIP: The most important screening criterion favoring
the use of ADR is simply the desire of senior decision-makers to
reach a fair and expeditious resolution without litigation.

Factors Disfavoring Use of ADR


Client Goals and Objectives
1. Your Client Wants or Needs Public Vindication: A definitive and authoritative decision
is needed as a precedent. See 5 U.S.C. §572(b)(1). For example the case is expected to be
one of many, and a precedent is needed to discourage further litigation, or the matter
involves an important new area of the law that needs to be developed, or either party
wants vindication of its rights.
2. The Government Wants/Needs to Develop or Establish a Policy: The matter involves or
may bear upon significant questions of government policy that require additional
procedures before a final resolution may be made, and an ADR proceeding would not
likely serve to develop a recommended policy for the agency. See 5 U.S.C. §572(b)(2).
3. The Government Wants/Needs to Maintain Uniform Policy: Maintaining an established
and consistent policy is of special importance, and the result obtained through ADR could
mean a deviation from such policy. See 5 U.S.C. §572(b)(3).
4. Full Public Record Needed: A full public record of the proceeding or resolution is
important, and an ADR proceeding cannot provide a record. See 5 U.S.C. §572(b)(5).
5. The Government Must Maintain Jurisdiction Over the Dispute: The agency must
maintain continuing jurisdiction over the matter with the authority to alter the disposition
of the matter in light of changed circumstances, and a dispute resolution proceeding
would interfere with the agency's fulfilling that requirement. See 5 U.S.C. §572(b)(6).
Page 11
Barriers to Settlement through ADR
1. The Proposed Settlement Would Have a Significant Impact on Nonparties: The
outcome would significantly affects non-parties. See 5 U.S.C. §572(b)(4).
2. Unassisted Negotiations are Working: The case is very likely to settle through
unassisted negotiations in the near future.
Pragmatic Considerations
1. Dispositive Motion More Cost-Effective Means of Resolving the Dispute: A successful
Summary Judgment is highly likely to resolve the case conclusively.
2. Injunctive Relief is Appropriate: If irreparable harm is likely, then injunctive relief
should be sought first before considering the use of ADR.
3. Fraud is Involved: If a contractor's claim involves fraud, ADR may not be used. The
CDA prohibits any federal agency head from settling, paying, compromising, or
otherwise adjusting any claim involving fraud. 41 U.S.C. §605(a) & FAR §33.210. See
also Matter of Defense Logistics Request for Advance Decision, Comp. Gen. B-230095,
Mar. 16, 1988, 88-1 CPD ¶273. Agency personnel should consult with their offices of
inspector general (IG), if they are considering the use of ADR to resolve a contract
controversy and believe a related IG investigation may be underway.
4. An Unrepresented Party is Involved: An additional factor that counsels against the use
of ADR is the involvement of an unrepresented party. This situation can create significant
procedural problems as well as ethical problems, particularly for a third-party neutral.
Keep in mind that even if ADR generally may be determined appropriate for resolution of
your case, based on the foregoing guidelines, your ADR efforts may still fail if you select
a form of ADR that is ill-suited to resolving the controversy in question. The following
sections of this monograph should assist you in selecting the appropriate ADR techniques
for the resolution of your contract controversy.
Page 12

III
ADR Techniques
There are a number of basic ADR techniques available to parties to a contract
controversy. Our intent is to provide some general understanding of common ADR
terminology, a sense of how each technique operates, and a recognition and appreciation
that these techniques are by no means mutually exclusive. ADR proceedings may and
should be tailored to include appropriate combinations of these techniques.
Several Dispute Resolution Forums have their own ADR programs that employ the
techniques described below, in one variation or another. Section X contains a more
complete discussion of those Dispute Resolution Forum ADR programs and processes.
A
Non-Binding ADR Techniques
1
Mediation
Mediation is an extremely flexible non-binding, negotiation-based process, whereby a
third-party neutral assists the parties' dispute resolution efforts. The neutral facilitates
communications between the parties, and helps them to identify and further define for
themselves and for one another their respective interests (so-called ''facilitative"
mediation). The goal is to produce a settlement solution, which is optimally satisfactory to
both parties (a "win/win" solution). Experience has shown that mediation can be a
powerful tool for reaching resolution. A skilled neutral frequently can help resolve
contract controversies that initially appear incapable of resolution.
The mediation process generally consists of the parties meeting or otherwise consulting
with the neutral in either joint or separate sessions. Mediation may be done either in
person or by telephone, but is best done in person. After selecting the neutral, the process
normally involves an exchange of position papers between the parties prior to an initial
mediation session. This exchange of information serves the twin goals of educating the
parties and the neutral and of forcing the parties to identify and assemble the support that
may exist for their positions. Typically, the information exchange includes key documents
culled from a larger database, as well as a summary statement of each party's position.
The initial mediation session normally is conducted as a joint session in which both
parties make an informal presentation to each other and to the neutral. At some point
thereafter, the neutral will generally meet separately with or contact each of the parties,
with or without counsel (depending on how the parties agree to proceed). One
distinguishing feature of mediation is that the neutral is allowed to have ex parte contacts
with the parties. During these ex parte sessions, the parties may reveal to the neutral
confidential information, which they believe might be helpful for the neutral to know, but
which they do not wish to reveal to the other party. During the course of mediation, the
neutral obtains a comprehensive understanding of the positions and respective interests of
the parties. The neutral's unique and impartial perspective
Page 13
permits the neutral to develop and suggest potential options for settlement. Not
infrequently, a matter can be resolved by satisfying some unrelated needs or interests that
the neutral is able to identify.
In conjunction with mediation sessions, the neutral may be authorized to provide his
views to the parties separately as to the merits, strengths and weaknesses of their
respective positions to further settlement discussions. This additional technique is
sometimes known as "evaluative mediation". Under this approach, the neutral assists the
parties in their analysis of the risks and probabilities of success. The neutral may also be
called upon to go further and to render to both parties a more formal non-binding
advisory opinion regarding the contract controversy. (See Subsection 4, Advisory
Opinion). On the other hand, the parties may not wish to hear the neutral's opinion as to
the merits of their positions, but may only want the neutral to facilitate the transmission of
settlement offers, that is, to engage strictly in "facilitative mediation."
In many instances, the more a neutral evaluates, the less impartial the neutral may appear
and the less willing at least one party may be to disclose or admit to weaknesses in its
case, even in separate sessions with the neutral. On the other hand, neutrals who refrain
completely from discussing the merits of a case and the risks associated with the parties'
respective positions may be so passive as to add little or no value to the dispute resolution
process. A fuller treatment of this tension between whether or not to engage in
"evaluative mediation" is beyond the scope of this monograph, but practitioners should
be aware that the topic has been hotly debated.8 Practitioners should be aware that
8 For a more in depth discussion, see Thomas Stipanowich, The Multi-Door Contract and Other
Possibilities, 1998 Journal on Dispute Resolution 303. Professor Stipanowich provides a wide-
ranging and thoughtful discussion of the evolution and future of ADR in resolving contract
controversies. He also provides an excellent discussion of the variations of mediating styles and the
mediation processes. For example, he provides the following summary of what is meant by
"evaluative mediation" on page 368, footnote 236, which is worth quoting in full:
What is becoming clear, moreover, is that evaluation means very different things to different people. In
a presentation to the ABA Forum on the Construction Industry, Professor Eric Green made it clear that
he views evaluation, meaning "the neutral's prediction of how the actual judge, jury or arbitrator(s) . . .
will decide the case," as a primary element in the neutral's strategic arsenal. Eric D. Green, Successful
Mediation of Construction Claims, Construction Advocacy & All That Jazz, ABA Forum Annual
Meeting 8 (Apr. 25, 1997) (on file with the author). He indicated, however, that such predictions
should be reserved from a personal judgment of the issues, which he categorized as inappropriate. See
id. But another construction neutral, in describing his own approach to mediation, explains: "After
receiving all relevant materials . . . and permitting each party a separate, private opportunity to present
its best case, the neutral is prepared, with the parties' consent, to present proposed settlement terms for
separate consideration by each party. [If the parties consent to go forward, the neutral then presents the
proposed settlement terms.]" Kenneth Feinberg, Viewpoint of Kenneth Feinberg, in Alternative
Dispute Resolution in the Construction Industry, at 192. See also George Marcus & Paula Marcus,
Fact-Based Mediation in the Construction Industry, Arb. J., Sept. 1987, at 7 (describing mediation
procedure in which neutrals meet with the parties, then conduct fact-finding, technical analysis and
expert evaluation, before issuing a report to the parties).
(footnote continued on next page)
Page 14
government contract controversies generally have been resolved through mediation which
is evaluative in nature, as opposed to being strictly facilitative.
(footnote continued from previous page)
See also Kimberlee K. Kovach & Lela Love, Mapping Mediation: The Risks of Riskin's Grid, 3
Harv. Neg. L. Rev. 71 (1998); Randolf Lowry, To Evaluate or Not, That is Not the Question!
Resolutions (Strauss Institute for Disp. Resol. Pepp. U. Sch. of L.), Vol. 2, No. 1 (Winter 1997)
(arguing that evaluative mediation is endorsed and selected by many clients and that determining
how and when to evaluate remains the real question); Marjorie Corman Aaron, ADR Toolbox: The
Highwire Art of Evaluation, 14 Alternatives to High Cost Litig. 62 (1996); James J. Alfini,
Evaluative Versus Facilitative Mediation: A Discussion, 24 Fla. St. U. L. Rev. 919 (1997); John
Bickerman, Evaluative Mediator Responds, 14 Alternatives to High Cost Litig. 70 (1996) ("parties
often want - and expect - a mediator to explore strengths and weaknesses of the case. . . . Without
sacrificing neutrality, a mediator's neutral assessment can provide participants with a much-needed
reality check."); James B. Boskey, Let 100 Flowers Bloom, Alternative Newsl., Nov. 1996, at 1;
Dwight Golann, So You Want An Evaluation, 15 Alternatives to High Cost Litig. (1997); Dwight
Golann & Marjorie Corman Aaron, Managing the Merits: The Use (and Misuse) of Evaluation in
Mediation, Disp. Resol. J., Jan. 1997; Samuel J. Imperati, Mediator Practice Models: The
Intersection of Ethics and Stylistic Practices in Mediation, 33 Williamette L. Rev. 703 (1997);
Kimberlee K. Kovach & Lela P. Love, "Evaluative" Mediation Is An Oxymoron, 14 Alternatives to
High Cost Litig. 31 (1996); Lela P. Love, The Top Ten Reasons Why Mediators Should Not
Evaluate, 24 Fla. St. U. L. Rev. 937 (1997) (arguing that mediators facilitate evaluation by the
parties, and that "mediator evaluation detracts from the focus on party-responsibility for . . .
creative problem solving."); Johnathan Marks, Evaluative Mediation Oxymoron or Essential Tool?
The Am. Law., May 1996, at 48A; Robert B. Moberly, Mediator Gag Rules: Is It Ethical for
Mediators to Evaluate or Advise? 38 S. Tex. L. Rev. 669 (1997); Leonard L. Riskin, Mediation
Quandaries, 24 Fla. St. U. L. Rev. 1007 (1997); James H. Stark, The Ethics of An Evaluative
Lawyer Mediator, 38 S. Tex. L. Rev. 769 (1997); Jeffrey W. Stempel, Beyond Formalism and
Dichotomies: The Need for Institutionalizing a Flexible Concept of the Mediator's Role, 24 Fla. St.
U. L. Rev. 949 (1997) (arguing in favor of evaluation in court-sponsored mediation because the
parties in these programs will assume that ''whatever occurs under the auspices of the mediation is
within the range of outcomes that would result from litigation. If the mediators permits the parties to
reach settlements that fall outside this admittedly broad range of 'adjudication default probabilities,'
at least one of the parties may pay a heavy price for the mediator's assiduously facilitative
approach."); Joseph B. Stulberg, Facilitative Versus Evaluative Mediator Orientations: Piercing the
"Grid" Lock, 24 Fla. St. U. L. Rev. 985 (1997) ("If the debate were simply a terminological
quibble about the use of a particular term, 'mediation,' then people would probably not be so
agitated by the proffered distinction. However considerably more is at stake."); Donal T.
Weckstein, In Praise of Party Empowerment and of Mediator Activism, 33 Williamette L. Rev. 501
(1997); Laurence D. Connor, How to Combine Facilitation with Evaluation, 14 Alternative to High
Cost Litig. 15 (1996).
Page 15
2
Settlement Judge9
The most popular non-binding ADR technique employed by the boards of contract
appeals10 is the use of a "settlement judge". In the boards, under this technique, at the
parties' request, the board Chair will appoint an administrative judge or hearing examiner
for the purpose of facilitating the parties' settlement efforts. The premise of the settlement
judge approach is that settlement can be fostered by a frank, in-depth discussion of the
strengths and weaknesses of each party's position with a sitting judge. While combining
some features of "facilitative" mediation, the use of a settlement judge is essentially
"evaluative" in orientation.
The settlement judge normally meets with the parties in joint settlement conferences and
then separately in ex parte sessions. The judge's recommendations are not binding on the
parties. Moreover, to help insure an objective, non-prejudicial assessment of the merits,
the settlement judge will not participate further in adjudication of the matter if the ADR
effort is unsuccessful. Instead, the matter will be assigned to another judge for
adjudication. In addition, the settlement judge will respect the confidentiality of the ADR
proceeding and not disclose the content of the discussion to the succeeding judge. (On
occasion, for the sake of efficiency or because the parties have confidence in the
settlement judge's fairness and impartiality, they may agree to allow the settlement judge
to continue on as the ultimate adjudicator. Continued participation will, of course, depend
upon the agreement of all concerned.)
The parties are usually given a great deal of flexibility in structuring the settlement judge
process, including the agenda for their settlement discussions. The expectation is that each
party will have a representative at the discussions with authority to settle the dispute and
will act in good faith in all aspects of the proceedings, with the view of resolving the
contract controversy.
Generally, the parties must decide how much information they require before they are
prepared to proceed. The parties must then agree on what documents will be presented
for consideration by the settlement judge. Typically, as with most mediations, the parties
also submit position papers for the settlement judge to review before
9 According to a 1996 survey of BCA judges regarding their ADR experience and attitudes: "Non-
binding ADR accounted for roughly 60 percent of the ADR proceedings from fiscal year 1987
through fiscal year 1994. The settlement judge approach was used in roughly 50 percent of the
procedures, with minitrials or modifications thereof accounting for the remaining 10 percent. For
fiscal years 1995 and 1996, non-binding ADR accounted for roughly 55 percent of the ADR
requests received by the ASBCA and roughly 85 percent of the ADR activity at the other boards."
See Judge Martin J. Harty, Results of Survey of Boards of Contract Appeals (BCA) Judges'
Attitudes Towards Alternative Dispute Resolution (ADR) (October 1996)(hereinafter the "BCA
ADR Survey"), Appendix 23.
10 Although the United States Court of Federal Claims offers a similar "settlement judge" ADR
approach (see Section X), it is rarely, if ever, used.
Page 16
conducting any substantive discussion. The extent of the documentary record and the
length of the position papers to be presented to the settlement judge will vary with the
complexity of the subject matter of the ADR. In practice, the parties solicit the views of
the settlement judge, and together they agree on an appropriate level of detail for such
submissions.
Transcripts of the settlement conferences are not made. The methods of presentation and
allocation of time are left to the parties. The emphasis is on informality. Some parties
present their positions only through counsel, others rely principally on client
representatives, and still others present witnesses and use a question and answer format.
In some cases, the parties rely extensively on demonstrative evidence.
3
Minitrial
The term "minitrial" is used to describe a structured settlement process that contemplates
the involvement, as "principals" for the two sides, of senior business representatives,
individuals who normally have not been directly involved in the contract controversy and
who thus can maintain objectivity regarding the dispute. Minitrials permit the parties to
present their case, or an agreed upon portion, to the principals, who serve as judges. An
agreed upon impartial neutral will preside over a minitrial proceeding along with the
parties' principals, as a panel. The presentation itself normally made by the parties'
attorneys may be a summary or abbreviated hearing, with or without oral testimony, as
the parties agree. During these presentations, the neutral typically helps control the
presentation process.
Following the presentation, the parties' principals begin confidential negotiations between
themselves, often without counsel, but with the assistance of the neutral. At this point, the
role of the third-party neutral changes from that of presiding judge to that of mediator. It
is critical that the neutral be skilled in both roles, in order to ensure the ultimate success
of the minitrial process.
4
Advisory Opinion
The provision of an advisory opinion is an ADR technique that can be used in any matter,
regardless of complexity. It can also be used in combination with mediation or a minitrial.
After consideration of the parties' written and/or oral presentations and following
discussions needed to clarify the respective positions on various issues, the neutral, with
the parties' consent, may render a non-binding advisory opinion on the merits of the case.
Once the neutral renders the advisory opinion, the parties use the opinion as a basis for
settlement discussions.
This approach is in contrast to the settlement judge/early neutral evaluation approach,
where the neutral normally does not go beyond an assessment of litigative risks
Page 17
and probabilities of success. If a Dispute Resolution Forum neutral is to be used for the
provision of a non-binding advisory opinion in a matter on appeal before the Dispute
Resolution Forum, be aware that the boards may be hesitant to permit their judges to
offer such opinions. Many board judges believe that, once a neutral decides the merits of
a case in a non-binding proceeding, the incentive for further compromise ends, along
with the likelihood of ADR success.
5
Dispute Review Board
A dispute review board (DRB) is a permanent mechanism put into place as part of the
administration of an individual contract (generally a sizeable contract). Its purpose is to
permit the parties to obtain non-binding neutral evaluation of the merits of contract
controversies as they arise. See Appendix 11 (Naval Facilities Engineering Command's
ADR procedures that contemplate the use of four different types of DRBs). Use of DRBs
is most prevalent in construction contracting. However, the Department of Defense has
begun experimenting with their use in conjunction with the administration of major
weapon system contracts. See Appendix 22 (Example of a DRB clause).
Most DRBs have three neutrals or board members, individuals of some eminence who are
selected by agreement of the parties to the contract. The parties normally establish a DRB
shortly after contract award, and the DRB remains in existence until contract completion.
The DRB members themselves, as opposed to the parties to the contract, frequently
design the procedures used by the DRB. Members of the DRB are often invited to attend
meetings between the contracting parties, so that they acquire first-hand knowledge of
various contract administration issues. In this way, members of the DRB will have
intimate familiarity with the parties and the contract requirements, in the event a contract
controversy arises. Generally, although early neutral evaluation by a DRB is non-binding,
because of their confidence in the DRB members, parties frequently settle their
differences and proceed amicably with the contract on the basis of DRB evaluations.
B
Binding ADR:
Arbitration/Summary Trial with Binding Decision
Until the passage of the ADRA of 1996, binding arbitration was not authorized for federal
agencies.11 Although the ADRA of 1996 lifts the ban on binding arbitration, it also
requires heads of federal agencies to develop guidance, in consultation with the Attorney
General, before federal agencies may use binding arbitration. See 5 U.S.C.
11 The Comptroller General has long held that, absent specific statutory authorization, agencies
may not enter into agreements to use binding arbitration to resolve disputes. See 19 Comp. Gen.
700 (1940) ("There is no authority for establishing boards of arbitration to determine the rights of
the United States, in the absence of statutory provision."); 8 Comp. Gen. 96 (1928) (Without
specific statutory authority, agencies are not to submit contract controversies to binding arbitration).
Absent pre-existing statutory authorization to use binding arbitration, agencies must rely on the new
authority of the ADRA of 1996.
Page 18
§575(c). As of April 1999, not a single federal agency has issued such guidance. See FAR
§33.214(g).12 For that reason, although statutorily authorized, binding arbitration has yet
to become an integral part of ADR practice for the resolution of government contract
controversies.
One variant of binding arbitration that has been in use in the government contracts arena
for many years is offered by the boards for docketed appeals and is known as a summary
trial with binding decision. Scheduling of summary trials before the boards is expedited,
discovery is abbreviated, and the parties try the matter informally, with relaxed rules of
evidence, either before a single administrative judge or before a panel of judges. A
summary or "bench" decision generally will be issued at the conclusion of the trial and
subsequently will be confirmed in writing. Sometimes, the parties agree that a summary
written decision will be issued shortly after the conclusion of the trial or receipt of a trial
transcript, if a transcript is made. Parties selecting this approach to ADR must agree that a
board's summary trial decision will be final and conclusive and may not be appealed or
set aside, except for fraud. In addition, the parties must agree that all decisions, rulings,
and orders issued by a board judge in conjunction with a summary trial will have no
value as case precedent.
Normal board pretrial, trial, and post-trial procedures and rules applicable to appeals will
be modified or eliminated to expedite resolution of the case. The board will tailor the
length of summary trial and will schedule other aspects of the proceeding, to meet the
needs of each particular contract controversy. Typically, a summary trial will last no more
than a day. Parties frame the issue or issues they want decided and submit a brief position
statement in advance of the trial. Closing arguments ordinarily take the place of post-trial
briefing.
The summary trial with binding decision technique is often used for small dollar cases or
non-complex cases with relatively clear-cut factual or legal issues. It is also suitable for
cases where only quantum is in dispute and can be used even if the amount in
controversy is substantial, provided the parties are prepared to accept a binding, non-
appealable decision.
12 This provision of the FAR states: "Binding arbitration, as an ADR procedure, may be agreed
to only as specified in agency guidelines. Such guidelines shall provide advice on the appropriate
use of binding arbitration and when a agency has authority to settle an issue in controversy through
binding arbitration." (Emphasis added).
Page 19

IV
Matching Your Controversy with the Appropriate ADR Techniques
Parties who seek out the informality of ADR often overlook how important choosing the
right ADR techniques can be to assuring the success of the process. Indeed, many users
of ADR give little thought to the design of the process until they appear at the first
session. Well before that time, however, the parties should be discussing and reaching
agreement on such issues as the specific procedures that will be used, the type of third-
party neutral who will be selected, the individuals whose attendance will be required,
party representation, information exchange, use of experts and scheduling, to mention
only a few. Although there is no one right way to design an ADR process, some ADR
procedures are better suited to resolving certain types of disputes. We will attempt to
provide some guidance on this subject below.
A
The Dispute Resolution Spectrum
The following chart provides a simple model of the continuum of dispute resolution
processes. ADR processes are delineated in the middle three columns of the chart. As
indicated in the shaded area at the top of the chart, ADR methods fall into three broad
categories based on the type of assistance needed: (1) negotiation assistance; (2) outcome
prediction; and (3) binding ADR. Moving from left to right, the chart depicts increasingly
adversarial, costly, and time-consuming modes of dispute resolution. Equally important,
moving from left to right, the parties find themselves losing their ability to control the
outcome of the dispute resolution process.
Page 20

NEGOTIATION ALTERNATIVE DISPUTE LITIGATION


RESOLUTION
Unassisted Assisted Outcome Binding Public
Negotiations Negotiations Prediction ADR Adjudication
Assistance
Settlement
Court of
Judge/Early Binding Federal
Mediation
Neutral Arbitration Claims
Evaluation
United
States
District
Courts
(concurrent
bid protest
jurisdiction)
Boards of
Contract
Appeals
Minitrial
(followed Board
Non- FAA
by Summary
Binding ODRA,
Unassisted Trial with
Negotiations Advisory Binding GAO
Opinion And Other
or Decision
Misc.
Mediation)
Dispute
Resolution
Forums
Federal
Some
Circuit and
Court-
Other
Annexed
Circuit
ADR
Courts of
Programs
Appeals
Dispute
Supreme
Review
Boards Court
Page 21
The dispute resolution spectrum extends from the least formal processes on the far left of
the chart to the most formal processes on the far right. The different ADR processes are
classified based upon the type of assistance that a third-party neutral provides.
When unassisted negotiations prove unsuccessful,13 some form of ADR should be
considered. The first issue to address when selecting an ADR method is the degree of
control the parties wish to retain over the settlement process. Where the parties wish to
maintain maximum control and envision only a limited role for the neutral, obtaining
early neutral evaluation, as a predicate to unassisted negotiations may be all that is
required. On the other hand, if some assistance in their negotiations is needed, they
should consider an ADR process involving mediation or a minitrial, which is followed
either by unassisted negotiations or mediation. As noted in the previous section,
mediation may be strictly facilitative or may incorporate some form of early neutral
evaluation (e.g., the settlement judge approach).
In some instances, rather than retaining control, what is most important for the parties is
that they obtain a quick and certain resolution of their contract controversy. The nature of
the case may also lend itself to a neutral issuing a binding decision on the matter, i.e.,
where an "either/or" issue is presented. In such cases, the use of arbitration may be
attractive, especially if the arbitration is to be conducted by a private-sector arbitrator.
Private-sector arbitration can enable the parties to control who will be selected as the
arbitrator. Use of private-sector arbitrators can also mean the parties can design the rules
of engagement for the arbitration process itself. Equally important, for some private-
sector arbitration proceedings, the parties can control how long the arbitrator will have to
render a decision on the merits. As noted above, however, binding arbitration has yet to
become a real possibility for resolution of federal government contract controversies,
other than summary trials with binding decisions as offered by the boards of contract
appeals. Use of summary trials at the boards may mean the parties will have less control
over the selection of the arbitrator, and the process used. However, typically, the decision
is rendered either at the conclusion of the trial or within 3 to 5 days thereafter, if a
transcript is provided. Summary trials before the boards, however, are less expensive
than private sector arbitration and ultimately result in a binding decision sooner than
would traditional litigation (public adjudication).
The three categories of ADR processes (assisted negotiations, outcome prediction,
13 In the BCA ADR Survey, the BCA judges cited the following as the top three reasons why cases
that should settle do not:
1. Emotional involvement preventing realistic assessment of case.
2. Lack of preparation by one or both of the parties.
3. Breakdown in communication due to personality conflicts.
See Appendix 23.
Page 22
and binding ADR) offer parties flexible options to the use of unassisted negotiations and
public adjudication. Moreover, parties can mix and match ADR techniques to create
"hybrid" combinations of ADR processes that more precisely address the needs of the
parties. The key to selecting or designing the appropriate dispute resolution alternative is
an in-depth understanding of when the different ADR processes should or should not be
applied to resolve different types of disputes.
B
Considerations for Choosing Specific ADR Techniques
An article analyzing the 1991 American Bar Association dispute resolution database
concluded that choice of procedure was the key element that influenced successful
outcomes of ADR proceedings.14 Too often parties leave the design of the specific ADR
procedures to the neutral, who is assigned the systems design role by default at the start of
the process. The lesson learned is that counsel should be sure to get involved early, if
possible, and help determine which ADR techniques are best suited to resolving the
contract controversy. The first and most obvious choice for the parties to make is
between binding and non-binding ADR. Among non-binding ADR techniques, the
choices are less obvious.
1
Binding ADR
As already discussed, the use of binding ADR procedures other than summary trials with
binding decisions, as employed by the boards of contract appeals may have significant
restrictions. In the administrative dispute context, there is still a bar to the use of binding
arbitration until the agency promulgates guidelines on the use of binding arbitration.
Before an agency has issued guidelines, any attempt to agree to the use of binding
arbitration is simply not authorized. See, e.g., FAR §33.214(g). If the matter is before a
federal court, different rules may apply. The Court of Federal Claims does not yet
provide for the use of binding arbitration as part of its ADR efforts. Several federal
district courts do, however, have court-annexed binding arbitration programs. DoJ will
itself submit to binding arbitration, if a federal district court has ordered its use. Absent a
court order, however, DoJ typically declines offers to use binding arbitration.
For a general discussion of some of the issues that will likely present themselves when
federal agencies begin issuing binding arbitration guidance, see J. Shaffer, C. Hahn & W.
Focht, Challenges & Pitfalls in Drafting "Arbitration" Clauses, Construction Briefings No.
97-4 (Federal Publications, Inc. Mar. 1997); and J. R. Tolle, W. B. Barton & M. J.
Mountain, Construction Arbitration Procedures/Edition II, Construction Briefings No. 90-
13 (Federal Publications, Inc. Dec. 1990). Another area that is likely to receive renewed
attention is the use of binding arbitration for controversies involving
14 D.A. Henderson, Mediation Success . . . An Empirical Analysis, Ohio State Journal on Dispute
Resolution, Vol. 11, No. 1, pp. 105-147 (1996).
Page 23
public contracts awarded overseas. See R. Mitchell, A. Ness & J. Socknat, International
Alternative Dispute Resolution, Construction Briefings No. 96-12 (Federal Publications,
Inc. Nov. 1996) for a good review of this area.
Some agency personnel may not be aware that restrictions on binding arbitration exist.
Before signing an agreement to arbitrate, contractors should insist that agency officials
provide written authorization to submit the dispute to a binding process. Aside from the
restrictions on the use of arbitration found at FAR §33.214(g), counsel should be aware
that FAR §33.214(f) contains significant additional restrictions on the use of binding
arbitration. This section provides that:
(1) A solicitation shall not require arbitration as a condition of award, unless arbitration is
otherwise required by law. Contracting officers should have flexibility to select the appropriate
ADR procedure to resolve the issues in controversy as they arise.
(2) An agreement to use arbitration shall be in writing and shall specify a maximum award that
may be issued by the arbitrator, as well as any other conditions limiting the range of possible
outcomes.
See FAR §33.214(g)(emphasis added).15 This FAR language make plain that binding
arbitration should not be specified in advance as the parties' dispute resolution
mechanism. It should only be used in the context of an existing controversy, and when
the parties believe a binding decision is what they require and they are willing to utilize
binding arbitration under these restrictions.
2
Non-Binding ADR
a
Mediation
The use of facilitative mediation may be most appropriate in cases where:
The parties are having difficulty conducting effective negotiations or communications
because of emotions, technical issues, incompatible analytical methods, etc;
The parties believe that ex parte communications with a neutral or expert will assist them
in developing creative options for settlement; or
15 Section 348 of the 1996 Department of Transportation Appropriations Act, Public L. 104-50,
made the FAR inapplicable to all FAA acquisitions under its new Acquisition Management System.
Page 24
The confidential advice of a knowledgeable neutral respected by both parties will assist in
reaching a resolution.
The use of facilitative mediation is generally not appropriate when the parties consider as
crucial to their settlement discussions the rendering of either an advisory opinion
regarding the entire dispute or non-binding decisions regarding individual evidentiary or
legal issues. Mediation in any form would be inadvisable, if a binding decision is what is
being sought.
b
Minitrial
The minitrial is the most formal of non-binding ADR techniques. Specific factors that
counsel for the use of mediation also apply when deciding to use a minitrial. The
involvement of senior management officials as minitrial ''principals" represents a strength
of this particular ADR technique. However, the use of senior management officials for a
minitrial dictates the following factors also be present.
First, the dispute in question should be complex. Otherwise, there would be no reason for
involving senior management decision-makers, who otherwise would rely on their
subordinates to resolve disputes. Second, resolution of the dispute should have real
significance for both parties, sufficient to justify the commitment of senior management
time and resources. For example, a minitrial would ordinarily be justified for a dispute
involving a large sum of money on a high-visibility or high-value project. Also, from the
private sector perspective, a minitrial entailing the involvement of senior management
personnel may be appropriate for a dispute involving a significant corporate policy, even
if it does not involve complex issues or large sums of money. Third, a timely resolution
of this dispute is in the interest of both parties. This last factor is important to consider,
because disputes that qualify for use of a minitrial also typically acquire considerable
momentum toward a litigated outcome. Both parties will frequently have to expend
substantial resources in re-directing the efforts of their organizations away from litigation
and toward an ADR solution.
The senior decision-makers who participate in minitrials ordinarily invest significant
amounts of time in the process. Because these individuals are typically goal oriented
individuals, their perspective and personal involvement combine to give minitrials a high
probability of success. Nevertheless, senior decision-makers who have participated in a
minitrial are seldom interested in participating in a series of such proceedings. For this
reason, both parties should be sparing in their use of the minitrial format.
c
Outcome Prediction
Differing perceptions about the relative merits of the parties' respective positions
Page 25
may arise from differing interpretations of the relevant facts or of how the law ought to
be applied to those facts. In these situations, some form of neutral outcome prediction
may be required before a resolution can be achieved. In such situations, use of either
early neutral evaluation/the settlement judge approach or an advisory opinion may be
appropriate. In addition, early neutral evaluation can be geared, not only to eventual
outcome prediction regarding the contract controversy, but also to narrowing and
rendering more manageable the scope of issues to be resolved.
Ultimately, the reputation of the neutral who provides outcome prediction must be
sufficient that, on the basis of his or her evaluation, both parties might be willing to
reconsider and to modify their negotiation postures. For this reason, where case
evaluation/outcome prediction appears critical to a non-litigative resolution of a federal
contract controversy, the parties, more often than not, will select as their neutral a sitting
member of an established Dispute Resolution Forum. Several Dispute Resolution Forums
will make their adjudicators or judges available to provide early neutral evaluation.
Notably, the General Accounting Office's ADR Program, the FAA Office of Dispute
Resolution for Acquisition and the General Services Board of Contract Appeals ADR
Program all explicitly feature this type of ADR service. Normally, the ASBCA will
provide early neutral evaluation in the context of its settlement judge approach. ASBCA
judges rarely, if ever, render advisory opinions. In addition to sitting judges, there are a
number of retired judges of the Dispute Resolution Forums, law professors and others
who offer their services as neutrals, either individually or through established ADR
organizations, such as the American Arbitration Association (AAA), the Center for Public
Resources (CPR), JAMS/Endispute, or others.
Page 26

V
Timing of ADR Use
In determining the optimal time for employing ADR techniques to resolve claims and
potential disputes under a contract, counsel for the parties should address: (1) the need
for some fact finding before commencing with most ADR proceedings; and (2) financial
considerations that may bear on the timing of ADR. There are also unique factors relating
to protests and contract claims, as well as idiosyncrasies of individual Dispute Resolution
Forums, that should be taken into account when establishing an appropriate timeframe
for ADR.
A
Knowledge of the Facts/Need for Fact Finding
A significant impetus for using ADR has always been the possibility of averting the kinds
of time-consuming discovery (interrogatories, depositions, etc.) and associated legal fees,
transcription and reproduction costs, and travel expenses that litigation of a large,
complex government contract case can and often will entail. In this light, one might think
that the earlier in the process ADR is invoked, the better. By the same token, counsel will
still need sufficient knowledge of the facts of a case to be able to make a meaningful
presentation at an ADR proceeding and/or to represent the client effectively during
settlement negotiations. Also, unless the parties have sufficient threshold knowledge of
the facts and issues, there is a chance that a settlement may not later be justifiable.
Therefore, some form of fact finding will be required before any ADR proceeding is
conducted. However, this does not preclude the parties from initiating the ADR process at
an early stage or mean that the information exchange that must take place for an ADR
proceeding to be meaningful requires the use of established discovery mechanisms.
Indeed, an ADR neutral can be particularly helpful in working with the parties to
structure a limited, cost-effective disclosure regime.
B
Financial Considerations
1
Contractor Financial Considerations
Cash flow considerations will play a part in whether and when a contractor chooses to
initiate efforts to resolve a contract controversy through use of ADR. Because litigation
has inherent uncertainties, is more costly, and more often than not takes far longer to
resolve than an ADR process in which the parties are able to set their own timetable, ADR
should be explored early on in a matter, particularly if there are cash flow concerns. If the
parties are serious about a resolution, have a fairly good understanding of the relevant
facts, and have selected a conscientious and competent neutral, the chances of successful
resolution through ADR can be very high, even early on in the dispute.
Contractors and their attorneys must also analyze what is done, when it is done and how
it is done, in terms of the allowability/recoverability of various kinds of costs
Page 27
under applicable cost principles regulations. In particular, recovery of professional fees
associated with the resolution of contract controversies has been the subject of much
controversy. The FAR expressly disallows recovery of costs incurred "in connection
with . . . the prosecution of claims . . . against the Government." FAR §31.205-47(f). In
Bill Strong, Inc. v. Shannon, 49 F.3d 1541 (Fed. Cir. 1995), the Federal Circuit articulated
the following allowability test for determining if costs were incurred in connection with
the prosecution of a claim or in furtherance of contract administration:
In classifying a particular cost as either a contract administration cost or a cost incidental to the
prosecution of a claim, contracting officers, the Board, and courts should examine the objective
reason why the contractor incurred the cost. See Singer, 568 F.2d at 721 (judging the "purpose" of
the contractor's submission).[16] If a contractor incurred the cost for the genuine purpose of
materially furthering the negotiation process, such costs should normally be a contract
administration cost allowable under FAR 31.205-33, even if negotiation eventually fails and a
CDA claim is later submitted. See Armada, 84-3 BCA ¶17,694 at 88,242-43. On the other hand, if
a contractor's underlying purpose for incurring a cost is to promote the prosecution of a CDA claim
against the Government, then such cost is unallowable under FAR 31.205-33.
Id. at 1549 (footnote added). Nevertheless, the Federal Circuit further emphasized that:
"consultant costs are not automatically allowable just because those costs were incurred
before a CDA 'claim' came into existence. . . . [T]he Government must receive some
benefit from the services of the contractor's consultant in order for the consultant's costs
to be allowable." Id., at 1545. Hence, determinations of allowability of professional fees
in connection with a pre-claim ADR proceeding will need to be made on a case-by-case
basis in light of the facts and circumstances of each case.
The boards have issued at least two decisions in which professional fees were allowable
in this context. Federal Insurance Co. IBCA No. 3236, et seq., 96-2 BCA ¶28,415
(contractor entitled to recover some professional fees incurred in furtherance of contract
performance); Herman B. Taylor Construction Co. v. GSA, GSBCA No. 12915, 96-2
¶28,547 (professional costs allowed even though the negotiations failed and the matter
was submitted to litigation); but cf., Systems & Electronics, Inc., ASBCA Nos. 41113 &
48097, 97-1 BCA ¶28,671 (consultant costs not recoverable because they were incurred
after the parties were in litigation); Fire Security Systems, Inc. v. GSA, GSBCA Nos.
12267, et seq., 97-2 BCA ¶28,992 (consulting costs not allowable because the services
provided were not beneficial to the contract purpose); Ball, Ball & Brosmer, Inc.
16 The court in Singer found that consultants' fees for preparing equitable adjustment claims were
not recoverable, because the claims were not presented to the contracting officer until after all
work had been completed.
Page 28
on behalf of SCL Materials and Equipment Co., IBCA No 2841, 97-2 BCA ¶29,072
(professional fees unallowable because contractor failed to demonstrate they were
incurred to further any pre-litigation negotiation process or for the benefit of contract
performance or administration); Stewart & Stevenson Services, Inc., ASBCA No. 43631,
97-2 BCA ¶29,252 (Legal fees not allowable because, by the time the services were
incurred, negotiations had been concluded).
The Court of Federal Claims recently addressed this issue in Plano Builders Corp., v.
United States, 40 Fed. Cl. 635 (1998), and denied a claim for consultant costs incurred
prior to the submission of a CDA claim, finding that the costs were "associated with or
related to the submission [and "prosecution"] of that claim." However, the court indicated
that consultant costs might be recoverable, if incurred to further "good faith negotiations''
engaged in by the parties prior to claim submission:
This case does not raise, and hence the court need not address, a situation where a contractor
employs a consultant's work product during good faith negotiations before filing a CDA claim and
then, after the negotiations fail, relies upon that same work to show entitlement either at the time it
submits a CDA claim or thereafter. In such a case, the consulting service would only form a basis
for and support a CDA claim, but also would facilitate pre-claim negotiations that potentially could
have prevented the necessity of even filing a CDA claim.
Plano, 40 Fed. Cl. at 643.
The best advice on this subject comes from Nash & Cibinic, who state:
Our final conclusion is that the safest course of action is to submit a well documented [request for
equitable adjustment] stating that it is not a claim and make a strong attempt to settle the matter
through negotiations. This gives up interest on the claim, but probably preserves the right to the
costs incurred in this effort. It also leaves the contractor in the position of being able to begin the
running of interest by submitting a CDA claim if the negotiations break down. Thereafter, costs are
going to have to be very clearly associated with contract administration to be recoverable. . . .
See Nash & Cibinic Report, Vol. 12, ¶35, page 96 (June 1998). Those seeking to make
this argument should read Fisherman's Boat Shop, Inc., ASBCA No. 50324, 97-2 BCA
¶29,257 (a contractor's letter requesting an REA was held not to constitute a CDA claim,
because the contractor explicitly stated that it was not seeking a contracting officer's final
decision).
Page 29
2
Government Financial Considerations
In conjunction with the timing of ADR, contracting officers and agency counsel should
consider the availability of funding for financing a settlement agreement. As a general
rule, it is advisable to schedule and conduct ADR proceedings as quickly as possible, so
as not to sacrifice funding that will expire over time. Section IX.C.2 contains an extensive
discussion of current and expired appropriations for purposes of financing any settlement
through ADR.
C
Protests:
ADR Use at the GAO Timing17
Among the types of ADR, two kinds of non-binding ADR have been selected for use at
GAO: negotiation assistance and outcome prediction. Before the GAO will work with the
parties in a negotiated assistance ADR, all parties will have to agree to its use. GAO may
initiate outcome prediction ADR without the agreement of all parties. GAO attorneys have
great flexibility in the conduct of ADR and may tailor the proceedings consistent with the
requirements of the situation. In terms of timing, the GAO may use ADR both before a
formal protest is submitted as well as after protest submission.
1
ADR Use Prior to Protest Submission
If GAO grants a request for pre-protest ADR, it will assign an attorney to meet with all
parties and review the relevant facts and arguments. If protected information is involved,
GAO will review this portion of the record in camera unless the agency has executed a
confidentiality agreement with the protester. In a pre-protest ADR setting, the GAO
attorney may comment and convey to the individual parties perceived strengths and
weaknesses in each party's argument. In the event that a protest follows the pre-protest
ADR conference, however, GAO will assign the case to a new GAO attorney for
resolution.
2
ADR Use after Protest Submission
Negotation Assistance. GAO may raise the possibility of negotiation assistance ADR with
the parties on its own initiative; alternatively, a party may raise it in writing or on a
conference call with the GAO attorney and other parties. However raised, the possibility
will generally be explored through discussions between the GAO attorney and the parties.
If GAO decides to proceed with the ADR (and that decision rests ultimately with GAO),
the GAO attorney will set out the ground rules and ensure that the parties agree to them
before moving forward. Those ground rules are that the GAO attorney
17 The resolution of protests via ADR differs somewhat in FAA's Office of Dispute Resolution for
Acquisition (ODRA), which is not subject to the CICA. See Section X for a more detailed
discussion of the ODRA.
Page 30
handling the case will act as a facilitator, that any settlement will be voluntary, that GAO
will not "sign off" or otherwise review any settlement, and that, if the ADR fails, the same
GAO attorney will draft the decision.
The particulars of how the negotiation assistance ADR is conducted will vary from case
to case. Generally, though, GAO's position is that face-to-face negotiations are more
fruitful than telephone discussions, and that the presence of clients, in addition to their
counsel, might also be helpful. The GAO attorney might point out the strengths or
weaknesses of particular positions of either party. GAO has found negotiation assistance
particularly useful in specification challenges and cost claims. Whatever the details of the
ADR session, whether it succeeds depends largely on the parties and, to that end, the
GAO attorney may leave the room at some point to let the parties talk among themselves.
If the parties are able to reach agreement, the process has been a success. Even if no
agreement is reached, however, the parties and GAO may find that the process offered the
benefit of clarifying or narrowing the remaining disputes.
Outcome Prediction. In this kind of ADR, the GAO attorney tells the parties what she or
he believes is the likely outcome of the case. Also as with negotiation assistance, the ADR
will not be binding. A key element in GAO's decision to engage in outcome prediction is
the GAO attorney's confidence in the likely outcome. The best basis for confidence, of
course, would be the existence of GAO decisions that are squarely on point and that
uniformly point to the same conclusion, but there could be other reasons that cause the
GAO attorney to feel confident about the likely outcome.
There are, however, some categories of cases that are poor candidates for ADR,
regardless of this confidence factor. Examples might be cases of first impression and
cases where, for whatever reason, having a published decision could help the
procurement community. A high degree of confidence may exist as to one issue in a
multi-issue case, and GAO may therefore engage in outcome prediction as to that issue.
Because the GAO attorney's opinion about the likely outcome is central to outcome
prediction, this form of ADR is unlikely to be invoked before receipt of the agency
report. In general, outcome prediction ADR will occur only after the agency report and
the protester's comments have been received. However, the GAO attorney may tailor the
issues the agency or the protester is to address and the time for submission. For example,
if a multi-issue protest on its face raises an issue that looks like a sure "winner," the
agency might be asked to address that issue on an expedited basis. Outcome prediction
ADR will be conducted as soon as practicable after these submissions have been filed.
The details of the outcome prediction session with the GAO attorney will vary from case
to case. Because the parties' role is less active than in negotiation assistance, outcome
prediction ADR may work just as well in a telephone conference call as face-to-
Page 31
face. As with negotiation assistance, the GAO attorney may suggest that it would be
useful to have the clients present along with their counsel during an outcome prediction
ADR session.
D
Claims:
ADR Timing18
Resolution of contract controversies at the earliest possible time and at the lowest level
feasible is the government's policy. See FAR §33.204. Most contract controversies are
resolved prior to the submission of a claim through unassisted negotiations. Only those
that have reached impasse are normally candidates for an ADR process.
1
ADR Use Prior to CDA Claim Submission
FAR §33.214 Alternative Dispute Resolution (ADR) provides as follows:
(a) The objective of using ADR procedures is to increase the opportunity for relatively
inexpensive and expeditious resolution of issues in controversy. Essential elements of
ADR include
(1) Existence of an issue in controversy;
(2) A voluntary election by both parties to participate in the ADR process;
(3) An agreement on alternative procedures and terms to be used in lieu of formal
litigation; and
(4) Participation in the process by officials of both parties who have the authority to
resolve the issue in controversy.
The FAR defines an "issue in controversy" as a material disagreement between the
government and the contractor which: (1) may result in a claim; or (2) is all or part of an
existing claim. FAR §33.201. An uncertified REA will thus qualify as an "issue in
controversy," and ADR may be employed, even before a CDA "claim" is submitted. The
requirement for a voluntary choice to use ADR ensures that contractors and contracting
officers are not coerced into using ADR. However, this can mean that one side of a
dispute usually needs to spend some time convincing the other (1) that the use of ADR
makes sense, and (2) to agree to the terms of an ADR agreement that describes how the
ADR will proceed. The last requirement of FAR §33.214 relating to "authority to resolve
18 As with protest resolution, the use of ADR to resolve claims and contract related disputes
before the FAA's ODRA will differ significantly. The ODRA will take jurisdiction over contract
disputes filed by contractors, regardless of whether there has been a "claim" submitted to an FAA
contracting officer and regardless of the existence of a contracting officer's final decision. Further,
the ODRA will undertake ADR efforts with the agreement of both parties, even prior to the formal
institution of a "contract dispute" before the ODRA. See Section X.
Page 32
the issue in controversy" may be difficult for the government to satisfy, if the dollar
amount in controversy is large. In those instances, the contracting officer may need to
seek higher level approval before beginning an ADR.
There are several other practical matters that parties should consider when employing
ADR prior to the submission of a claim:
Before engaging in pre-claim ADR, contractors should consider any applicable time bars
for "claim" submission.19
Contractor personnel and their consultants/attorneys frequently begin work on preparing
their REAs months before these matters are formally brought to the attention of the
government. Once the REA is presented, both sides must allow for a reasonable and
realistic timeframe to exchange and analyze relevant information and then to present their
respective positions in a cogent manner.
All too often, business persons believe that ADR is simply a means of "keeping the
lawyers out" of the process. This impression can be counterproductive. Experienced trial
counsel, working in conjunction with appropriate business persons and technical experts,
can play an invaluable role in terms of ensuring that both sides obtain the information
they need for meaningful negotiations.
ADR processes often put a premium on the advocacy skills of both parties. Because ADR
use is voluntary and may be non-binding, the ability to persuade the other side of the
merits of your case is critical. Mature, experienced counsel with government contract
expertise are likely to have the skills and temperament necessary to resolve a federal
contract controversy successfully through the use of ADR.
The use of ADR prior to the submission of a claim does not mean that government
contracting officials can dispense with the need to assemble adequate documentation to
justify a settlement. These officials will likely insist on the provision of a coherent, albeit
summary, exposition of the factual background and a reasonable and appropriate level of
cost documentation to support the dollar amount of the contractor's claim. Audits may
also be necessary in some cases.
2
ADR Use after CDA Claim Submission
Once a contractor has submitted a CDA claim to the contracting officer and it appears that
the parties are willing to seek resolution of any dispute concerning the claim through
ADR, there is no reason why the parties cannot enter into an agreement
19See generally Joseph D. West & Susan Cassiday, Contract-Related Statutes of Limitations,
Briefing Paper No. 97-7 (Federal Publications, Inc. June 1997).
Page 33
postponing any final decision and appeal, pending completion of ADR proceedings. The
agreement also might provide that the ADR neutral be selected as soon as possible, and
that the neutral assist the parties in developing an appropriate regime and schedule for
fact finding. Procedures for fact finding at such a stage may follow the same informal
pattern employed in connection with an REA. However, it is important that the ADR
agreement contain provisions regarding the extent to which any information and
documentation exchanged in furtherance of fact finding for the ADR will be treated as
confidential settlement communications. See Section VI.A, Confidentiality.
3
ADR Use after Issuance of a Contracting Officer Final Decision
Once a contracting officer renders an adverse final decision, engaging in ADR will not
toll applicable time limitations for the contractor to take an appeal under the CDA either
to an agency board of contract appeals or to the United States Court of Federal Claims.
Furthermore, use of ADR procedures does not constitute a reconsideration of the final
decision. FAR §33.214(c). Accordingly, contractors must file an appeal to preserve their
appeal rights. However, an appeal will not preclude the parties from attempting ADR. In
fact, most ADR proceedings in government contract controversies are conducted after the
contractor has filed an appeal. For this purpose, the boards and the United States Court of
Federal Claims have established ADR programs for matters brought before them on
appeal. See Section X for more detailed discussions of these programs.
Page 34

VI
Designing the ADR Process
A
Guidelines for Drafting an ADR Agreement
Once the parties commit to using ADR, counsel usually plays the lead role in designing
the ADR process. Normally, the parties will develop and execute an ADR agreement. Key
elements to be taken into account when drafting an ADR agreement are as follows:
1. The agreement should cover the ADR techniques and process to be utilized, procedures
to be followed, schedule for discovery and the conduct of proceedings, and how the
agreement may be terminated. In terms of specifying procedures, consider including
provisions on who presents first, time limits on presentations, where the ADR will take
place, how many days, number and sequence of both witnesses and issues, how
documents will be introduced/used/excluded. You should also consider: the scope of the
ADR, i.e., which issues/which contracts; fees and expenses, i.e., whether each party bears
its own costs or whether one party pays all; who will sign the agreement; use of ADR
generated products in subsequent litigation; and, if a binding arbitration decision or non-
binding advisory opinion, what the decision should contain, i.e., findings of
fact/conclusions of law/result only; and when the decision will be rendered.
2. If you have a third-party neutral, you should have provisions for the appointment, and
payment of the neutral. You should define the role of the neutral as that of a technical
expert, facilitator, evaluator, arbitrator, etc. You must decide the extent to which the
neutral should be disqualified as a witness or judge in subsequent litigation. You should
also decide whether ex parte communications with the neutral should be permitted. Ex
parte communications with the neutral can be critical in terms of facilitating discussions
between or among the parties. Also, assurance that the neutral will be not be involved
further if the ADR fails and the matter must proceed to adjudication is frequently essential
to establishing trust in the neutral as someone in whom the parties can confide.
3. You should decide whether and the extent to which to stay or suspend all litigation,
whether the stay period should be indefinite or should be linked to specific events or
dates. Also, you should consider and provide for whether CDA interest on the claim is to
run during any stay period.
4. Consider providing for an audit, if one is needed and if one has not already been
completed, for any proposals or claims which will be involved in ADR. You may want to
address what information or types of information and
Page 35
documents are to be provided to the auditor and whether there are any restrictions on the
use of information and documents provided.
5. Section 574 of the ADRA of 1996 addresses confidentiality of ADR proceedings. In
addition, FAR §33.214(e) and Section 605(d) of the Contract Disputes Act incorporate the
provisions of Section 574 of the ADRA of 1996 to protect the confidentiality of ADR
proceedings. Nonetheless, you may consider including a provision in your agreement
regarding confidentiality that references the above Section 574 of the ADRA of 1996.
Further, you still may want to consider Rule 408 of the Federal Rules of Evidence
(discussed in Section IX.B.2b); Exemptions (b)(4) and (b)(5) of the Freedom of
Information Act; a confidentiality contract between the parties; and a protective order
issued by a Dispute Resolution Forum. Should any findings by any third-party be
admissible for any purpose in future litigation? Do the parties want a prohibition against
discussing the matter with third parties unless by express written agreement?
6. You should address how you intend to limit discovery/factual exchange. How are the
limits to be imposed? By time? By relevance to particular issues/subjects? By the types
and number of discovery requests? You should also addre2ss the retention and use of
furnished information and the effect on future access/discovery.
7. Have you provided for the exchange of information? Is the exchange of the parties'
positions to be oral or written or both? What about page limits? What other limits should
you have, i.e., support for statements made in position papers? Should the exchange be
simultaneous or sequential? Do the parties want written or oral rebuttals (both or
neither)? How, if at all, and to what extent may positions be used? You may also wish to
require that, at the conclusion of the ADR, all written submissions shall be returned to the
party who provided the submissions or destroyed.
8. Who will be the representatives for each party? Attorneys (advisors or participants)?
Business representatives? Technical representatives? What is to be the authority of each
representative?
9. If appropriate, consider using one spokesperson per party to control information, style,
and credibility. (You may then wish to resist allowing advisors to the spokesperson to be
directly questioned.)
10. At what point should the parties begin their negotiations?
11. Have you made provisions/preparations for a bilateral contract modification to
Page 36
be executed at or as soon after the ADR process is concluded as possible?
12. Availability of funds in the event of a settlement should be determined prior to
making the decision to do ADR, and both parties should know how and when payment
will be made.
13. The recovery of attorneys' fees and costs under the Equal Access to Justice Act
(EAJA) should be a consideration in most ADR proceedings20. Contractors who meet the
eligibility requirements of the EAJA and who qualify as "prevailing" parties, may be
entitled to attorneys fees and costs under the EAJA, if the agency's position has not been
"substantially justified." An ADR agreement may provide for the waiver of EAJA
recovery. ADR agreements may also address such issues as interest, the submission of
pre- and post-hearing briefs, and the use or waiver of transcripts. Note: If parties do not
agree to waive recovery of attorneys' fees and costs, then transcripts should not be
waived. A written record may be needed later by a Dispute Resolution Forum, when it
evaluates an application for such fees and costs, to determine whether the Government's
position regarding the contract controversy was "substantially justified." In the alternative,
the parties may consider specifying in their ADR agreement that issues regarding the
recovery of attorneys' fees and costs are to be addressed by the parties and the neutral at
the close of the ADR proceeding.
The appended sample ADR agreements, all of which have been used in conjunction with
successful ADR proceedings, take into account many of the foregoing points. See
Appendices 12-20.
B
Additional Considerations
In crafting their ADR agreement, the parties should provide for an exchange of
information that will be needed to justify a potential settlement. From the government's
perspective, the information exchange may well have to include an audit of costs incurred
by the contractor. If the issue in controversy may impact upon future cost incurrence by
the contractor under a contract subject to the FAR cost principles, then certified cost and
pricing data may be required. Insistence by the government on the provision of
information needed to verify incurred or anticipated costs often generates consternation
20 Attorneys fees and costs associated with GAO bid protests may be recoverable in accordance
with the Competition in Contracting Act (CICA), as amended by the Federal Acquisition
Streamlining Act, P.L. 103-355, 108 Stat. 1994 (October 13, 1994) (FASA). Neither the CICA nor
the FASA is applicable to matters before the FAA Office of Dispute Resolution for Acquisition
(ODRA). Accordingly, the only means for recovering attorneys' fees for ODRA protests is under
the Equal Access to Justice Act, 5 U.S.C. §504. See EAJA Application of IBEX Group. Inc., 96-
ODRA-00037EAJA (April 9, 1998).
Page 37
on the part of the contractor. Contractor resistance to furnishing adequate cost
information can be counterproductive, where such information is required by law or
regulation, since government personnel who engage in ADR without such information are
placing themselves in a potentially untenable situation.21 The point for both sides to
remember is that although ADR may require less work than full-blown litigation, both
sides must have sufficient information to arrive at a principled resolution of their dispute.
Precisely how much information is required to generate such a resolution, as well as the
means employed to provide it, is a question that can only be answered with good
judgment on a case-by-case basis.
At some point, the parties will have to determine whether they intend the information
exchanges to serve a dual purpose, i.e., both as an aid to the ADR and to develop their
respective cases for litigation, in the event ADR is unsuccessful. Their ADR agreement
will have to define clearly the extent, if any, to which information exchanged is to be
considered confidential settlement communications and the extent to which it is to be
usable in connection with any later litigation. Of course, should the parties choose to treat
all further information exchanged strictly as an aid to ADR, they will be able to resort to
more informal fact finding methods and thus will be able to avoid transcription and other
costs. Also, if all further discovery is being done by agreement solely as an aid to the
ADR process, any related costs incurred by the contractor should arguably be considered
fully "allowable" and recoverable rather than as costs of prosecuting claims against the
government.
21 See C. Barnes, Understanding DCAA's Roles in Contract Claims Litigation, Cost, Pricing &
Accounting Report, Issue No. 97-11 (Federal Publications, Inc. Nov. 1997), for a more detailed
discussion of the Defense Contract Audit Agency's role in contract litigation.
Page 38

VII
Selecting the Right Third-Party Neutral
A
Considerations When Choosing a Neutral
The qualifications you should consider in selecting a neutral will vary greatly, depending
on the ADR process you have selected. There are no generally accepted guidelines for
choosing a neutral, nor are there uniform qualification guidelines. The ''qualifications"
specified by the ADRA of 1996 are merely that the neutral:
Be a permanent or temporary officer or employee of the federal government; or
Be any other individual who is acceptable to the parties to a dispute resolution
proceeding; and
Have no official, financial, or personal conflict of interest with respect to the contract
controversies, unless such interest is fully disclosed in writing to all parties and all parties
agree that the neutral may serve.22
Thus, subject to the limitations listed above, Congress appeared to believe that the market
should dictate the qualifications of a neutral. This also means that the admonition "buyer
beware" applies to those entering the marketplace for the services of neutrals.
The Department of Justice is the only federal agency to date that has published neutral
selection guidelines that apply in a government contract controversy resolution context.
These guidelines, which we find fairly complete, fall into the following four categories:
1
Neutrality and Related Ethics Standards
Is the ADR provider unbiased, acting in good faith, diligent, and not seeking to advance
his or her own interests at the expense of the parties?
Will the ADR provider deal fairly with the parties, be reasonably available to the parties,
show no personal interest in the content of the settlement?
Is the neutral acquainted with counsel, and if so, what is the
22See 5 U.S.C. §573. The foregoing elements appear as the definition of a "neutral" in Federal
Acquisition Regulation (FAR) §33.201.
Page 39
nature and context of that acquaintance?
Is the neutral subject to disqualification on grounds analogous to those found within 28
U.S.C. §455 (i.e., for bias or conflict of interest)?
2
Training
What kind and extent of training for the particular ADR process has the neutral received?
Has the neutral received training in a well-recognized program?
3
Experience
ADR Experience: Determine the number of cases in which the proposed neutral has
employed the particular dispute resolution process or related processes being
contemplated, the dollar amounts in controversy, diversity of processes used by the
neutral, complexity of the issues the neutral has handled, years of experience in a
particular process, breadth of experience in types of disputes, experience in multi-party
and/or multi-issue disputes, and any affiliation the neutral may have with court-annexed
programs.
Litigation Experience: Is the neutral an attorney? If so, look to type of legal practice, years
of overall legal experience, complexity of litigation cases and issues handled, and
experience in government litigation, to determine whether the individual would be
appropriate for a given controversy.
4
Subject-Matter Expertise in the Type of Controversy
The following factors favor the use of subject-matter expertise as a criterion for selection
of neutrals:
Highly technical areas of law are central for understanding the dispute and/or issues and
the fashioning of the options for resolution of the dispute (e.g., patent, subspecialties of
science or medicine).
When the issue is one of damages and the offers are far apart, expertise in typical damage
awards and in standard components
Page 40
of damage calculation may bring parties' offers closer (e.g., certain attorney fees, personal
injury disputes).
When the parties and attorneys are hesitant to use ADR for a particular case, and expertise
will build credibility for them.
There is an impasse over discrete factual and/or legal issues.
Expertise in terms of factual issues is central to a particular kind of ADR process.
B
Mechanics of Engaging a Neutral
Most agencies have made extensive use of Dispute Resolution Forum neutrals to resolve
contract claims and bid protests. There are several good reasons for this. First, these
neutrals have extensive government contract expertise and a reputation for impartiality.
Second, use of such neutrals is far less expensive than the use of private-sector neutrals.
Third, use of a sitting Dispute Resolution Forum neutral adds credibility to and can justify
any settlement that may emerge from ADR. It is normally much more persuasive to cite to
the opinion of a sitting Dispute Resolution Forum neutral, than to that of a private-sector
neutral. Nevertheless, agencies have at times used private-sector neutrals to resolve
significant contract controversies. Hence, the discussion that follows will address the
mechanics of selecting and securing the services of both public- and private-sector
neutrals.
1
Private-Sector Neutrals
As noted in Section IV.B.2.c, in addition to board judges and other Dispute Resolution
Forum neutrals, there are a number of individuals and organizations within the private
sector that furnish ADR services for the resolution of federal government contract
controversies. The ADRA of 1996 expressly authorizes agencies to: (1) enter into
contracts for the services of neutrals;23 and (2) use the services of one or more employees
of other agencies to serve as neutrals in Dispute Resolution Proceedings.24 Agencies may
also use, with or without reimbursement, the services and facilities of other federal
agencies, state, local and tribal governments, and private organizations. 5 U.S.C. §583.
The GAO has traditionally taken the view that employees being paid by one agency
should not be detailed to perform the work of another agency without reimbursement,
unless there is expressed statutory authority to do so. In a memorandum dated December
23 5 U.S.C. §573(e). Note that agency officials generally are prohibited by law from entering into
personal services contracts.
24 5 U.S.C. §573(d).
Page 41
31, 1993, however, GAO's General Counsel stated that the ADRA of 1996 "clearly
provides that authority." In addition, to facilitate and simplify the hiring of neutrals, the
ADRA of 1996 amended the CICA25 to permit the acquisition of neutral services for
ADR proceedings to occur without "full and open competition."26
Justifications, procedures, and approvals required to procure the services of a neutral
using "other than full and open" competition vary with the anticipated contract amount.
Acquisition of neutral services with an anticipated dollar value not exceeding $2,50027
may be awarded without soliciting competitive quotations, if the contracting officer or
individual appointed in accordance with FAR § 1.603-3(b)28 considers the price
reasonable.29 Acquisition of neutral services with an anticipated dollar value exceeding
$2,500 and not exceeding $100,000 (which should be the dollar range that applies to the
vast majority of contracts for the services of private-sector neutrals) is subject to the
following requirements:
These contracts are reserved exclusively for small business concerns and must be set
aside in accordance with FAR, Subpart 19.5.
Contracting officers may solicit from only one source if the contracting officer determines
that under the circumstances of the contract action only one source is reasonably
available.30
If only one source is solicited, the contracting officer must provide
25 10 U.S.C. §2304, et seq.; 41 U.S.C. §251, et seq.
26 Full and open competition in which all responsible sources are permitted to compete for a contract
is the norm in government contracting. See 41 U.S.C. §253(a) and 10 U.S.C. §3204(c). Law also
provides exceptions to the requirement for full and open competition. See 10 U.S.C. §2304(c) and 41
U.S.C. §253(c). The ADRA of 1996 amends 10 U.S.C §2304(c) and 41 U.S.C. §253(c) to permit the
use of "other than full and open competition" when acquiring the "services of an expert or neutral in
any part of an alternative dispute resolution process, whether or not the expert is expected to testify."
27 Contracts for this amount are known as micro-purchases, which are defined to mean the acquisition
of supplies or services, the aggregate amount of which does not exceed $2,500, except that in the case
of construction, the limit is $2,000. FAR §2.101.
28 Agency heads are encouraged to delegate micro-purchase authority to individuals who are
employees of an executive agency or members of the Armed Forces of the United States who will be
using the supplies or services being purchased. Individuals delegated this authority are not required to
be appointed on an SF 1402, but shall be appointed in writing in accordance with agency procedures.
FAR §106-3(b).
29 These contracts are not subject to the "other than full and open" justification documentation
requirements of FAR Part 6. See FAR §6.001(a).
30 FAR §13.106-2(a)(5). These contracts are not subject to the "other than full and open" justification
documentation, procedures, and approvals found in FAR Part 6. See FAR §6.001(a) (FAR Part 6 does
not apply to "contracts awarded using the simplified acquisition procedures of part 13.").
Page 42
a written "notation" to explain the absence of competition.31
Acquisition of neutral services with an anticipated dollar value exceeding $100,000 are
governed by the procedures, documentation, and approvals required by FAR §6.302.
In short, the procedures and justifications for hiring a neutral are now essentially the same
for agency counsel to hire an expert to assist in preparing for litigation or appearing as a
government witness during a trial or hearing. Agency personnel should contact their trial
attorney office to obtain the forms and procedures used to hire such experts without "full
and open" competition.
2
GAO Attorneys as ADR Neutrals
The procedures for engaging the GAO's ADR procedures vary with the disposition of the
protest. See Sections V.C. and X.
3
Boards of Contract Appeals Judges as ADR Neutrals
Boards of contract appeals will make their judges available to serve as neutrals in ADR
proceedings. As a general proposition, use of board judges to serve as neutrals is easiest
when the matter is docketed before the board and becomes hardest when the contract
controversy is not yet a CDA "claim." See Section X for a more detailed discussion of the
procedures for obtaining board neutrals.
4
Neutrals at the FAA Office of Dispute Resolution for Acquisition
The FAA Office of Dispute Resolution for Acquisition (ODRA) has special procedures
for the designation of ADR neutrals for resolution of FAA acquisition bid protests and
contract disputes. The parties may use ODRA Dispute Resolution Officers (DROs) as
ADR neutrals, or may agree to engage outside third parties as "Compensated Neutrals."
Also, by interagency agreement, the ODRA can make available as ADR neutrals
administrative judges of the General Services Administration Board of Contract Appeals
(GSBCA). See Section X.
5
United States Court of Federal Claims
When both counsel agree and wish to employ one of the ADR methods offered, they
should notify the presiding judge of their intent as early as possible in the proceedings, or
concurrently with submission of the Joint Preliminary Status Report required by
Appendix G of the court's Rules. The presiding judge will consider
31 FAR §13.106-2(d)(3).
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counsels' request and make the final decision whether to refer the case to ADR.
If the ADR is considered appropriate, the presiding judge will refer the case to the court's
ADR Administrator (1) for assignment to a Court of Federal Claims judge who will act as
a settlement judge or preside over a minitrial, or (2) for the appointment of a third-party
neutral. If the case is referred to an ADR judge, that judge will exercise ultimate authority
over the form and function of each method within the general guidelines adopted by the
court. The parties are expected to meet promptly with the assigned ADR judge to establish
a schedule and procedures for the technique chosen.
6
United States District Courts
In terms of engaging ADR neutrals in conjunction with matters before federal district
courts, it should be understood that there is a wide range of court-annexed ADR
programs in the federal district courts. For a description of those programs, consult the
Federal Judicial Center on its web site at http://www.fjc.gov.
Page 44

VIII
Preparation for ADR
The type of preparation to be used for an ADR proceeding is dependent upon the form of
ADR that is selected. In preparing for any ADR proceeding, bear in mind that there are
three key elements that contribute to the likelihood of its success. First, the parties and the
neutral must be thoroughly prepared before the ADR begins. This means the parties must
be satisfied that they know enough about their respective cases through discovery or
otherwise to proceed. Second, the principals who participate in the ADR must have the
authority to settle (see FAR §33.214(a)(4)) and must want the process to work. It is
important to make certain that all of the parties with a stake in the outcome are supportive
of the ADR process. For example, subcontractors, sureties, banks, and insurers could be
potential stakeholders. Third, the parties must have confidence in the neutral and the
neutral's ability to provide an unbiased and realistic assessment of the strengths and
weaknesses of their respective positions.
A
ADR Attendance:
Principals and Participants
For any ADR that involves assisted negotiations, the parties should each designate
principal negotiating representatives who have authority to negotiate a settlement, and
who will be able to approach the ADR proceeding objectively and with an open mind.
Although it is always preferable to keep matters at the lowest level possible, see FAR
§33.204, due to the emotional nature of a particular controversy, it may be helpful if the
parties' principals have had little or no prior involvement in the day-to-day administration
of the contract or with the matter in controversy, so that they can view the facts with fresh
eyes and without having to justify their own previous positions or actions. It is also
preferable that, if the principals know one another, their prior experiences have been
cordial and positive. Where proposed principals have had prior acrimonious relations,
and alternates are not available, it may be more productive not to involve them either
during a presentation phase of the ADR proceeding or in direct face-to-face negotiations.
A more effective approach in this instance would be to keep the principals physically
separated, and for the neutral to mediate between them by means of "shuttle diplomacy."
PRACTICE TIP: Be sure that the principals are apprised of the
time commitment that ADR will entail, and that they will be
available sufficiently to prepare for and participate in the
proceedings. Also, be sure that your ADR team has sufficient
access to the principals who will represent your organization, so
they are "up to speed" on the facts and issues that will be
presented and analyzed during the course of the ADR proceeding.
It is frequently of great value for attorneys to give a pre-ADR
briefing to the principals and other key players within the client's
organization, to summarize the contract and the issues in dispute
and provide for their consideration a range of potential ADR
resolutions.
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In addition to their principals, the parties should be prepared to have in attendance at any
ADR proceeding individuals having direct, first-hand knowledge of the facts. Their
participation is important to the principals to help them understand the other party's
position and can help the neutral to assess more accurately the strengths and weaknesses
of the parties' respective positions. This is especially important where credibility becomes
an issue. Also, allowing participation by those who have been involved in the dispute
since its inception can bring about some emotional closure, where such individuals can
feel that they have had their "day in court." Because the success of negotiations will tend
to vary inversely with the numbers of participants, only those most knowledgeable about
the issues to be presented should be included. They should be available to respond to
questions not only throughout the course of any presentation phase of the ADR
proceeding, but should remain available throughout the negotiation phase, unless released
by their principals or the neutral.
Despite the potential scheduling problems, it is important that the parties' principals,
attorneys, and other essential decision-makers actively participate in every aspect of the
ADR process. Without their active participation, acceptance of the ultimate settlement may
not be possible.
B
Preparation for the Proceeding
1
Position Papers
It is essential to the success of an ADR proceeding that the attorneys prepare and provide
to the neutral and to their counterparts in advance of the proceeding position papers that:
(1) set out in clear and concise language the facts surrounding each issue in dispute; (2)
summarize the legal basis for the positions being taken on each issue; and (3) detail the
dollar amounts involved and provide backup documentation for such amounts. The
position papers should highlight the major arguments and any overall themes that will be
explored during any presentation phase of the ADR proceeding. To support factual
contentions, the position papers might include exhibits as well as affidavits and pertinent
excerpts of deposition transcripts. Although the imposition of some page limitation on
position papers is usually preferable, this may not be feasible in all cases, particularly
those involving large numbers of complex claim items. The act of preparing these pre-
ADR position papers will frequently force the parties to re-think and narrow the numbers
of issues in dispute and thus can be a crucial first step towards an eventual settlement.
Early submission of position papers to the neutral and to the other party will greatly
reduce the amount of time spent during an ADR proceeding. Familiarity with the
background of a dispute and with the factual and legal issues involved will enhance the
neutral's credibility with the parties. Also, position papers will be invaluable in terms of
orienting the parties' principals, especially if their prior exposure to the issues in dispute
Page 46
has been limited.
2
Non-Monetary Settlement Terms:
Checklists
In addition to the position papers, the parties' attorneys should exchange with their
counterparts checklists of key non-monetary settlement terms. Nothing can scuttle a
mutually satisfactory settlement faster than unanticipated demands concerning non-
financial concessions. Terms that create the most serious problems involve mutual release
provisions, time payments, characterization of the proceeds for tax purposes, non-
competition clauses, liquidated damages, confidentiality concerns, and attorney fees and
costs. Exchange of checklists before the commencement of the ADR proceeding can give
the parties and their attorneys sufficient time to investigate their options, and thus prevent
last minute surprises and negotiation impasses.
3
Opening Settlement Positions and "Fall-Back" Positions
Also in advance of the ADR proceeding, the parties should be prepared to present to the
neutral their respective opening settlement positions and to have available one or more
"fall-back" negotiating positions, so that meaningful and productive negotiations can take
place after the parties have concluded any presentations. Those negotiation positions, of
course, would be subject to modification, based on the principals' evaluation of the
relative strengths and weaknesses of each claim item once presentations have been made.
How and when negotiating positions are to be shared with the neutral and provided by the
neutral to the respective parties should be established by the parties with the assistance of
the neutral.
4
Client Preparation
Attorneys should prepare their clients for ADR by discussing with them the importance of
projecting an appropriate settlement posture. The negotiating style of the key decision-
makers/principal negotiators will have a lot to do with whether or not the ADR process
succeeds. Ideally, principals will themselves have a problem-solving style, as opposed to
a combative, angry, or belligerent approach. They should also be made to understand that
some time in the ADR process may be consumed in allowing the other party's
representatives an "opportunity to vent" their emotions, in order for settlement to occur.
Attorneys should establish a "we need to talk privately" signal with the client's participants
and should assure them that he or she will not either abandon them to the neutral's control
or allow opposing counsel to intimidate them. The client's employees need to understand
that ultimate control of the ADR process rests with the parties' principals and their
counsel, although the neutral has the inherent right to recess or adjourn an ADR session,
if participants are not negotiating in good faith. Clients also
Page 47
need to understand that questioning and "reality testing" by the neutral may be an essential
part of the process and are not to be construed as an indication of bias. Thus, client
representatives need to be instructed to minimize as much as possible any automatic
defensive responses to questions and observations by the neutral.
Finally, attorneys should caution their clients' representatives regarding unrealistic
expectations for the ADR process. Instead, the process should be characterized as an
attempt by both parties to reach an optimal resolution of the controversy with the help of
a knowledgeable neutral, based on a reasonable airing of the issues.
C
Structuring and Conduct of the Presentation Phase
1
Mediation
Mediation proceedings (including proceedings involving a board settlement judge)
typically commence with a joint conference among the parties, counsel, and the neutral.
During the conference, the neutral first discusses such matters as confidentiality and
disclosure of any known conflicts of interest. The neutral then explains the mediation
process and the procedures that will be followed, affirms the willingness of the parties to
participate voluntarily and in good faith, and confirms that all persons or their agents are
present with sufficient authority to resolve the dispute. Each party then makes a statement
of position on the matters in controversy. These statements permit the participants and the
neutral to assess the merits as well as the emotional intensity and sincerity of the parties'
positions.
Following the statements, the neutral meets separately with each party and respective
counsel to gain further insight concerning the needs of each party. The balance of the
mediation will consist of both private and joint sessions, as deemed necessary by the
neutral in order to achieve a settlement of the matters in dispute. The neutral will (1) with
the parties' agreement, engage in "evaluative mediation," imparting his or her views
regarding strengths and weaknesses of the respective positions, i.e., the litigative risks, in
order to disabuse parties of any unrealistic expectations they may have as to the merits of
their positions; and (2) engage in "facilitative mediation," suggesting possible settlement
formulas that may satisfy the parties' needs.
2
Minitrial
The most successful minitrials utilize the parties' principals as adjunct judges. Indeed, at
the proceeding, the parties' principals should be seated to the right and left of the selected
neutral and serve as members of a "panel of judges." The lawyers and witnesses should
present evidence to them as they would to a panel of court judges. This physical
configuration creates the proper atmosphere for the minitrial proceeding and
Page 48
gives the principals the proper perspective and ''mind set" for considering and analyzing
the facts in an objective and reasonable manner. This should be kept in mind when
selecting a site for the minitrial.
The presentation phase for minitrials is typically somewhat longer than that for
mediations. For minitrials, the neutral must be able to gauge the case accurately and to
establish and enforce a minitrial schedule. The schedule is broken down into appropriate
time periods for direct case presentations and rebuttal presentations. The entire
proceeding can usually be handled in a single week. Except in the most complex of cases,
minitrial presentations for both parties ought not to be allowed to run for more than the
first 2-3 days. The balance of time can then be set aside for the neutral and principals to
analyze the case amongst themselves and to conduct negotiations.
In terms of the minitrial proceeding, as with mediations, it is appropriate that counsel for
each party present opening statements as to the facts and their respective positions for
each individual claim item, as well as an overall summary of the amounts being sought,
followed by a more detailed oral presentation of the facts. It is frequently helpful to the
neutral and principals if counsel utilizes visual aids/demonstrative evidence to explain the
nature of the contract controversy and the issues to be resolved. In this connection,
counsel should also consider preparing and presenting chronological timelines which put
each of the claim items into chronological context within the history of the contract at
issue.
PRACTICE TIP: Demonstrative evidence in ADR proceedings is
extraordinarily effective at focusing the attention of the parties'
principals and the neutral on the critical issues to be resolved. For
example, "As planned" and "As Built" timelines are regularly used
in presenting claims on construction projects. They may be
appropriate for other types of contracts as well. Reduced hard
copy versions of such exhibits should be prepared, so that the
"judges" can refer to them both during the presentation and later
during the discussion/negotiation phase. Allow sufficient space
along the borders of these hard copy versions for the "judges" to
make notes during your presentation.

Because the duration of a minitrial is invariably much shorter than that of a full-blown
trial before a Dispute Resolution Forum, the oral presentation will, of necessity, be more
general. In order to adhere to a compact schedule, the parties must aim for simplicity,
without compromising accuracy. Since the minitrial is not ordinarily transcribed, the
standard question-answer format need not be followed. Usually, it will suffice for the
attorney to pose an introductory question to each individual presenter (fact or expert
witness) plus appropriate prodding questions to keep the presentation on track or,
perhaps, to emphasize particular points. Since time during an ADR proceeding is
extremely limited, the use of leading questions should be viewed as appropriate.
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To the extent certain documents are regarded as critical either to establishing or
disproving entitlement (especially those documents frequently referred to as "smoking
guns"), both hard copies and slides or overheads of those documents should be used
during the course of the presentation. Likewise both slides/overheads and hard copies of
quantum breakdowns and summaries should be presented.
3
Arbitration
Each side in an arbitration proceeding (including a summary trial with binding decision)
typically presents opening statements. Unlike mediations and minitrials, an arbitration
proceeding, though less formal, normally parallels court litigation. Factual presentations
are usually accomplished via live witnesses, using the standard question-answer format,
with direct testimony and cross-examination. The proceeding is also usually transcribed.
Furthermore, the presentation phase is the only phase in an arbitration proceeding and
can be more extensive than in either mediation or a minitrial, depending on the
complexity of the case.32 Negotiations are generally not involved in arbitration, at least
formally. As stated previously, however, ADR methods and techniques are not mutually
exclusive. By agreement of the parties, i.e., as part of their ADR agreement, an arbitral
decision may be made by a neutral at the conclusion of either a mediation or a minitrial, if
the negotiation phase proves unsuccessful. Likewise, by agreement, negotiations,
mediated by the arbitrator, could be sandwiched between an arbitration presentation and
issuance of the arbitral decision.
D
Structuring and Conduct of the Negotiation Phase
An indispensable prerequisite to any serious settlement negotiation is to assess the range
of potential settlement amounts you could ultimately support. A variety of methods exist
for evaluating the risks inherent in litigation. They range from a standard review of facts,
liability, and damages with qualitative assessments regarding the potential outcome of a
particular dispute to formal quantitative analysis using decision trees and probabilities. At
a minimum, a party preparing for ADR must evaluate and attempt to place a dollar value
or other quantifier on the following list of items:
Attorney's fees to be included in the remainder of discovery and trial preparation or trial
and appeal;
Foreseeable costs, including witness fees, jury fees, fees for transcripts of depositions and
trial proceedings, and, if the ADR technique involves arbitration, administrative,
arbitrators' and
32 Judge Martin J. Harty advises that summary trials before the ASBCA normally are concluded in
one day and rarely go beyond three days.
Page 50
other related fees;
Expert witness fees;
The effect of continuing the dispute upon business relationships, including not only the
business relationship between the principal parties, but also relationships of related
parties;
The unavailability of key personnel for their normal work, while participating in the
preparation and conduct of any trial;
Diminished morale of the employees both during the pendency of ongoing litigation and
in the event of loss;
A lack of confidentiality inherent in ongoing litigation and the public trial, as contrasted
with the confidentiality of settlement;
The precedential value (positive or negative) of a trial on the merits;
The possible res judicata or other preclusive effect of an unfavorable trial outcome;
The difficulty of paying a large, adverse verdict or judgment, and the inability to amortize
that cost as contrasted with what might be bargained for in a settlement;
The collectability of an unsecured judgment compared to a secured or partially secured
settlement;
The cost of preparing exhibits, including demonstrative evidence;
Loss of business opportunities while key personnel participate in trial preparation and
trial; and
Tax advantages available in structuring a resolution or controlling its timing, as opposed
to the uncontrolled timing of a judgment or verdict.
During the negotiation phase, the neutral's role is to make sure the parties continue to
communicate, so that the process moves forward to a reasonable resolution. Keeping the
principals focused and communicating is critical to achieving a successful ADR
settlement. The neutral must also be prepared to guide the principals and to suggest
Page 51
formulas and other settlement approaches that they may not have considered. It takes a
great deal of skill and experience to judge what suggestions to make, when to make them,
and whether to make them in joint sessions. The prime art of the good neutral is
facilitating a settlement by creating conditions under which no party feels that the neutral
is biased.
Most ADR assisted negotiations are structured so as to situate the respective parties in
separate locations where they can caucus. To narrow the gap between the parties, the
neutral will frequently move from one group to the next, communicating information
concerning respective positions and the possibilities of settlement. To avoid any
appearance of bias towards or against any side, the neutral should take care to balance the
time spent with each side in caucus. If maintaining balance is impossible, the neutral
needs to check in with waiting parties periodically to reassure them that progress is being
made.
While engaging in this "shuttle diplomacy," the neutral should treat stated positions as
proposals to be discussed rather than the ultimate solutions the parties may think they
have presented. Discussion of the specifics of the opposing positions is facilitated with
support from significant disclosure of information. Demands that might increase initial
bargaining leverage are subordinated in favor of those that enhance mutual agreement.
Furthermore, the neutral should facilitate reduction of the number of demands to
manageable proportions. All efforts are to be focused on unveiling possible alternative
solutions and reviewing the inherent difficulties of each. The neutral should encourage
the presentation of differing points of view as suggestions for resolution rather than
points of dispute, paying considerable attention to avoiding differences on abstract
principles. Finally, and perhaps fundamentally, the neutral should encourage open and
complete exchange of information throughout the entire interaction, including the
accurate expression of the parties' intentions and expectations, as well as the actual facts.
To avert needless angry exchanges and to maintain an atmosphere focused on rational
problem solving, it may be wise, when the parties engage in face-to-face negotiations, that
the numbers of representatives of each party be limited. For minitrials, negotiations
generally are conducted only between the parties' principals (with or without the presence
of their attorneys as the parties may choose) with the assistance of the neutral. It is
important that minitrial principals keep their team members informed of discussions or
negotiations with their counterparts, so that the principals are timely provided with
information that may facilitate further discussions and possible settlement.
It is not atypical of settlement negotiations that once resolution of key issues is reached,
parties abandon the search for specificity as to the terms of the agreement. Negotiations
tend to devolve quickly to the exchange of "bottom line" figures.
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PRACTICE TIPS: For purposes of negotiations, the parties
should consider preparing and having available multiple copies of
negotiation forms that list each of the individual
claim/counterclaim items, indicating the initial claim amounts, and
leaving spaces for subsequent offers/counteroffers, either as to
each claim/counterclaim or on a "bottom line" basis. Because
CDA interest may figure into the development of any settlement
position, it is helpful to have available a CDA interest
computation that arrays the interest rates/factors that have accrued
since the date of initial claim submission. (See Appendix 26) Do
not make a final offer too early. Recognize that the process needs
time to function effectively. A final offer that is delivered too
early in the process could create the impression that offering party
is not negotiating in good faith. It is appropriate, however, to
communicate that concessions made during ADR may be
withdrawn, if the ADR does not achieve a complete settlement.

E
Closing:
Settlement Agreements
ADR settlements can come apart, if: (1) the settlement terms are not memorialized during
the ADR proceeding; and (2) tentative verbal agreement are never finalized, due to
changing circumstances, loss of the focus on resolving the dispute, settler's remorse, or
second guessing by the home office. Always get something in writing before everyone
leaves the room. Any settlement agreement should include non-monetary provisions
based upon the checklists the atorneys submitted during he pre-ADR conferences. Once
the parties reach an agreement in principle, the neutral should be prepared suggest
formats and terms for a settlement agreement (see Appendix 25) and methods for
implementing the agreement, i.e., via a contract modification, use of the Judgment Fund
(see Section IX.C.2.c (2)), or otherwise.
The agreement should be drafted carefully and thoughtfully, should be easily enforceable,
and should preserve the confidentiality, finality, and benefits of mediation. The terms
should be workable, realistic, specific, and utilize objective criteria to measure future
performance. If it is impracticable to draft a final settlement agreement during the course
of the ADR proceeding, the neutral should make sure that a date for completion and
execution is specified in a written memorandum of understanding. The parties' attorneys
must ensure not only that any settlement agreement is committed to writing in clear,
unambiguous terms, but that the reasoning underlying the decision to settle is
welldocumented and fully detailed, so that needless "second guessing" can be averted.
Page 53

IX
Other Considerations
A
Information Exchange
The purpose of an ADR proceeding is to facilitate the development of information that
may serve as the basis for a comprehensive resolution of the contract controversy. The
need to streamline the exchange of information, so as to render an expeditious resolution,
is perhaps the biggest challenge in an ADR proceeding. As discussed above, there are
several common issues that arise when drafting the information exchange provisions of
an ADR agreement. For example, contracting officers will often seek an audit of costs
incurred by the contractor. We provide below some guidance on audits and other areas of
common concern.
1
Incurred Cost Audit
The clause quoted below was used successfully in conjunction with several ADR
proceedings. While you may wish to tailor its language, we believe it represents a good
starting point for crafting an incurred cost audit provision for your ADR agreement.
1. The Government will request, and ____________will timely cooperate with, DCAA to
audit ____________ incurred cost of contract performance and the costs sought by
________________in connection with ____________.
2. Subject to the preceding paragraph, ____________ will follow its standard processes
and practices to support the audit described above. ____________ will make available
the work papers of internal and external organization regarding _________________.
3. ______________will authorize all individuals and activities both internal and external
to provide DCAA with copies and an explanation of their work papers and other audit
evidence regarding ____________.
4. Subject to DCAA receiving authorization from each of ______________
subcontractors to release each subcontractor's data, the Government will authorize DCAA
to provide ____________ a copy of all DCAA's audit reports and other supporting U.S.
Government reports related to __________.
5. Nothing in this agreement shall be construed as a waiver of any audit or inspection
rights the Government may have under the terms of contract _______________ . It is
expressly agreed that the Government may continue to exercise its audit and inspections
rights under contract __________ without regard to the Discovery provisions of this
agreement or the
Page 54
Discovery rules of the ASBCA.
No doubt, some may believe the foregoing protocol is pro-government and, indeed, there
are many circumstances in which incurred cost audits may not be required at all.
Nevertheless, it does raise those issues that are frequently stumbling blocks in an incurred
cost audit and therefore provides at least a checklist of the issues that both parties may
want to consider when addressing the audit question.
2
Discovery
One means of streamlining discovery for ADR is to limit it to the exchange of documents.
The parties may agree to tailor document discovery to existing discovery rules. For
example, the parties may agree to exchange, as a minimum, those documents that are
described by ASBCA Rules 4(a) and (b).33 The particular case will, of course,
33 ASBCA Rule 4 provides:
(a) Duties of Contracting Officer - Within 30 days of receipt of an appeal, or notice that an appeal
has been filed, the contracting officer shall assemble and transmit to the Board an appeal file
consisting of all documents pertinent to the appeal, including:
(1) the decision from which the appeal is taken;
(2) the contract, including pertinent specifications, amendments, plans, and drawings;
(3) all correspondence between the parties relevant to the appeal, including the letter or letters
of claim in response to which the decision was issued;
(4) transcripts of any testimony taken during the course of proceedings, and affidavits or
statements of any witnesses on the matter in dispute made prior to the filing of the notice of
appeal with the Board; and
(5) any additional information considered relevant to the appeal.
Within the same time above specified the contracting officer shall furnish the appellant a copy of
each document he transmits to the Board, except those in subparagraph (a)(2) above. As to the
latter, a list furnished appellant indicating specific contractual documents transmitted will suffice.
(b) Duties of the Appellant - Within 30 days after receipt of a copy of the appeal file assembled by
the contracting officer, the appellant shall transmit to the Board any documents not contained therein
which he considers relevant to the appeal, and furnish two copies of such documents to the
government trial attorney.
(c) Organization of Appeal File - Documents in the appeal file may be originals or legible
facsimiles or authenticated copies, and shall be arranged in chronological order where practicable,
numbered sequentially, tabbed, and indexed to identify the contents of the file.
(d) Lengthy Documents - Upon request by either party, the Board may waive the requirement to
furnish to the other party copies of bulky, lengthy, or out-of-size documents in the appeal file when
inclusion would be burdensome. At the time a party files with the Board a document as to which
such a waiver has been granted he shall notify the other party that the document or a copy is
available for inspection at the offices of the Board or of the party filing same.
(footnote continued on next page)
Page 55
dictate the scope of appropriate discovery, and the parties should attempt to reach
agreement on specific categories of documents to be produced. If the parties believe
depositions are needed to prepare for an ADR proceeding, they may want to limit them
the number of depositions taken and to impose time limitations on the depositions. As
with document discovery, the parties may wish to make reference to existing discovery
rules, such as calling for "limited discovery of relevant non-privileged facts, regarding
disputed issues, consistent with ASBCA Rules 1434 and 1535 as supplemented by Rules
(footnote continued from previous page)
(e) Status of Documents in Appeal File - Documents contained in the appeal file are considered,
without further action by the parties, as part of the record upon which the Board will render its
decision. However, a party may object, for reasons stated, to consideration of a particular
document or documents reasonably in advance of hearing or, if there is no hearing, of settling the
record. If such objection is made the Board shall remove the document or documents from the
appeal file and permit the party offering the document to move its admission as evidence in
accordance with Rules 13 and 20.
(f) Notwithstanding the foregoing, the filing of the Rule 4 (a) and (b) documents may be dispensed
with by the Board either upon request of the appellant in his notice of appeal or thereafter upon
stipulation of the parties.
34 ASBCA Rule 14, Discovery & Depositions, provides:
(a) General Policy and Protective Orders - The parties are encouraged to engage in voluntary
discovery procedures. In connection with any deposition or other discovery procedure, the Board
may make any order required to protect a party or person from annoyance, embarrassment, or undue
burden or expense. Those orders may include limitations on the scope, method, time and place for
discovery, and provisions for protecting the secrecy of confidential information or documents.
(b) When Depositions Permitted - After an appeal has been docketed and complaint filed, the
parties may mutually agree to, or the Board may, upon application of either party, order the taking
of testimony of any person by deposition upon oral examination or written interrogatories before
any officer authorized to administer oaths at the place of examination, for use as evidence or for
purpose of discovery. The application for order shall specify whether the purpose of the deposition
is discovery or for use as evidence.
(c) Orders on Depositions - The time, place, and manner of taking depositions shall be as mutually
agreed by the parties, or failing such agreement, governed by order of the Board.
(d) Use as Evidence - No testimony taken by depositions shall be considered as part of the
evidence in the hearing of an appeal until such testimony is offered and received in evidence as
such hearing. It will not ordinarily be received in evidence if the deponent is present and can testify
at the hearing. In such instances, however, the deposition may be used to contradict or impeach the
testimony of the deponent given at the hearing. In cases submitted on the record, the Board may, in
its discretion, receive depositions to supplement the record.
(e) Expenses - Each party shall bear its own expenses associated with the taking of any deposition.
(f) Subpoenas - Where appropriate, a party may request the issuance of a subpoena under the
provisions of Rule 2 1.
Page 56
26-37 of the Federal Rules of Civil Procedure."36 The advantage of using such devices is
that the parties are familiar with these rules, and disputes regarding discovery can be
resolved by reference to existing authorities. Even more importantly, these rules provide
objective frames of reference that can be used to convince business persons that certain
types of information ultimately will need to be exchanged, in the event the controversy
must be resolved by means of litigation. The difference when applying these rules in an
ADR setting is that the parties should spend more time providing the information and less
time finding ways to avoid providing it.
To ensure that discovery is streamlined, the parties frequently agree on time limitations
for the exchange of information. These time limitations are normally embodied in an
expedited discovery schedule in the ADR agreement. It is important for the parties to
ensure they have some flexibility to extend the schedule to permit additional discovery, if
deemed necessary by either party. The parties may elect not to produce privileged
documents or information. The ADR agreement should provide that, if a party does not
have requested documents or elects to withhold particular documents on the basis of a
privilege, it will so inform the other party and provide a justification for the failure to
produce the documents.
Frequently, parties include in an ADR agreement a provision that "the parties may retain,
use, or, if returned, access, and admit into evidence in any subsequent proceeding any
information, data or document that either party presents in ADR (including, but not
limited to, discovery documents and attachments to position papers) and to which there is
no claim of confidentiality or privilege." Discovery obtained in ADR normally does not
limit a party's right to additional discovery, in the event ADR is not successful and
35 ASBCA Rule 15 regarding Interrogatories to Parties, Admission of Facts, and Production and
Inspection of Documents, provides that after an appeal has been docketed and complaint filed with
the Board, a party may serve on the other party:
(a) written interrogatories to be answered separately in writing, signed under oath and answered or
objected to within 45 days after service;
(b) a request for the admission of specified facts and/or the authenticity of any documents, to be
answered or objected to within 45 days after service; the factual statements and the authenticity of
the documents to be deemed admitted upon failure of a party to respond to the request; and
(c) a request for the production, inspection and copying of any documents or objects not privileged,
which reasonably may lead to the discovery of admissible evidence, to be answered or objected to
within 45 days after service. The Board may allow a shorter or longer time. Any discovery engaged
in under this Rule shall be subject to the provisions of Rule 14(a) with respect to general policy
and protective orders, and of Rule 35 with respect to sanctions.
36 Several of the provisions in Rule 26 can supplement a Rule 4 file submission. For example, Rule
26(a)(1) & (2) articulate several important types of information that require disclosure.
Page 57
litigation is pursued.
3
Dealing with Classified Materials
If the parties contemplate an exchange of classified information, both parties must ensure
they immediately notify the other if they withhold a classified document. With respect to
any classified documents, each party must follow applicable security laws and regulations
for obtaining the documents and in submitting the documents as part of its position paper.
The ADR agreement should address the issue of classified materials if the parties
anticipate such materials may be pertinent to the contract controversy.
B
Confidentiality
1
Administrative Dispute Resolution Act of 1996
In enacting the confidentiality provisions of the ADRA of 1996, Congress struggled with
striking a balance between the need for confidentiality to promote the use of ADR, and
the need for openness in government.37 In the end, the ADRA of 1996 established
narrow confidentiality protections for certain communications made to or generated by a
neutral. Numerous common sense exceptions applied to these new confidentiality
protections. For example, the Act's provisions do not provide new confidentiality
protections for communications made between the parties themselves. In addition, written
agreements to enter into an ADR proceeding, or a final written agreement or arbitral
award reached as a result of an ADR proceeding, are not confidential.38 The end result is
that, although qualifying dispute resolution communications made during an ADR
process are generally confidential, the settlement agreements that result from ADR
processes are not.
The ADRA of 1996 basically protects information provided in two contexts: (1) private
communications between a party and a neutral; and (2) communications that a neutral
provideds to all parties. If confidentiality protection is of paramount importance
37 To understand the origins of this provision, see the report to the Administrative Conference of
the United States (ACUS) by Philip J. Harter, entitled "Neither Cop Nor Collection Agent:
Encouraging Administrative Settlements by Ensuring Neutral Confidentiality, Report to ACUS",
1988 ACUS 839, reprinted in 41 Admin. L. Rev. (1989) (the "Harter Report"). Based largely on
recommendations contained in the Harter Report, ACUS published a Recommendation Encouraging
Settlements by Protecting Neutral Confidentiality, 1 C.F.R. 305.88-11 (1992). In turn, Congress
relied heavily upon the ACUS recommendation in drafting the confidentiality section of the ADRA
of 1990. For a general discussion of these documents, and a review of the reasons the ADRA of
1996 should make improvements to the ADRA of 1990's confidentiality provisions, see Mark. H.
Grunwald, Freedom of Information and Confidentiality under the Administrative Dispute
Resolution Act, 9 Admin. L.J. Am. U. 986 (1996).
38 The definition of "dispute resolution communication" specifically excludes such documents. See 5
U.S.C. §571(5).
Page 58
to the parties as a condition of engaging in an ADR process, the design of the process
may well determine if the communication qualifies for protection under the ADRA of
1996. For example, in a binding arbitration proceeding, the parties decide to use an expert
witness to discuss a particular issue. Because the expert is not expressly functioning as a
neutral, the expert's opinions will not qualify for protection under Section 574(a) of the
Act. Second, because the communication of those opinions is to be provided to all the
parties, the parties may not cite to the ADRA of 1996 to protect this information from
disclosure or use in future litigation. See 5 U.S.C. §574(b)(7).
On the other hand, if the parties agree as part of their ADR agreement to a two-step ADR
process that first contemplates an early neutral evaluation and then allows the the work
product of early neutral evaluation to be used as part of an arbitration, arguably a
different result may emerge. More specifically, if the ADR agreement provides for the use
of expert opinion to be an integral part of the initial early neutral evaluation, then the
expert would effectively be functioning as a neutral and the expert opinion would
probably qualify for confidentiality protection under the ADRA of 1996. See 5 U.S.C.
§§574(a) & 574(b)(7). The ADRA of 1996 indicates that both parties and ''nonparty
participants" must consent in writing to the use in this manner of such an opinion
rendered as early neutral evaluation. See 5 U.S.C. §§574(a)(1) & 574(b)(2). Although
there seems to be some ambiguity in the text of the ADRA of 1996, from language in the
Act's legislative history, a reasonable argument can be made that Congress intended such
information to be protected. See Appendix 5 for a more complete discussion of the Act's
confidentiality provisions. In this regard, the Conference Report that accompanied the
ADRA of 1996 states:
The overall purpose of the confidentiality provision is to encourage a candid exchange between a
party and the neutral to the end of facilitating an agreement. Thus, the conference agreed that dispute
resolution communications between a party and a neutral are to be protected against disclosure
under FOIA. It is not the intent of the conferees, as is made clear by the statement of managers, that
this provision be read to permit parties to evade FOIA by passing documents through the neutral to
another party.
142 Cong. Rec. H. 11,446. Nevertheless, absent case law or subsequent legislation
clarifying the meaning and scope of the ADRA of 1996's confidentiality provisions,
practitioners should proceed with caution and should not assume that everything
conveyed during the course of an ADR process will automatically be protected.
Page 59
2
Other Confidentiality Protections
a
Contract Provisions
Confidentiality provisions in ADR agreements bind only the parties to the ADR
agreement. Accordingly, a person or organization that was not party to the ADR
agreement can file a request under the Freedom of Information Act, 5 U.S.C. §552
(FOIA), and the agency may have to release this information. Assuming an agency is
unable to justify withholding the requested agency records pursuant to a recognized
exemption under FOIA, it will be compelled to release this information. Similarly, the
protection afforded by such an agreement in the face of a third-party's civil discovery
request or a grand jury subpoena is suspect.
PRACTICE TIP: Counsel should not rely solely on confidentiality
provisions in ADR agreements to prevent disclosure or use of
information submitted during ADR.

b
Federal Rule of Evidence 408
Rule 408 of the Federal Rules of Evidence,39 relating to offers of compromise, is
designed to prevent the admissibility of information for the purposes of proving liability.
It does not, however, prevent the disclosure/discovery of information covered by its
terms. Rule 408 provides important protection against the admissibility for purposes of
proving liability, whether or not those seeking to use such information are parties to an
ADR agreement. Rule 408, however, contemplates that information covered by its terms
can be admitted into evidence, if the purpose for which it is offered is not to prove
liability. See, e.g., Towerridge, Inc. v. T.A.O., Inc., 111 F.3d 758 (10th Cir. 1997).40
39 Rule 408, Compromise and Offers to Compromise, reads as follows:
"Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or
promising to accept, a valuable consideration in compromising or attempting to compromise a
claim which was disputed as to either validity or amount, is not admissible to prove liability for
or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise
negotiations is likewise not admissible. This rule does not require the exclusion of any evidence
otherwise discoverable merely because it is presented in the course of compromise negotiations.
This rule also does not require exclusion when the evidence is offered for another purpose, such
as proving bias or prejudice of a witness, negating a contention of undue delay, or proving an
effort to obstruct a criminal investigation or prosecution."
40 In this case, evidence that the government had paid the prime contractor on a federal project an
undisclosed sum to settle claims for damages resulting from government delay and disruption on
project. The court held this evidence was held admissible in a subcontractor's action under the Miller
Act to recover sums allegedly due and owing. The court's rationale focused on the purpose for which
the evidence was offered which was only to show that the subcontractor was not at fault for any delay
on the project and that prime contractor had acted in bad faith.
Page 60
Accordingly, its protections against admissibility are hardly ironclad. Rule 408 agreements
ought therefore be combined with other means of protecting confidentiality.
c
Federal Rule of Evidence 501
Whether a special privilege attaches to ADR proceedings and communications with ADR
neutrals must be viewed in terms of Rule 501 of the Federal Rules of Evidence.41 Rule
501 was enacted to avoid any judicial delineation of specific privileges in the Federal
Rules of Evidence. Instead, this rule contemplates the recognition of privileges on a case-
by-case basis "in light of reason and experience." The factors to be taken into account
when determining whether a specific privilege not "firmly embedded in Federal law" is to
be recognized were enunciated as follows:
1. The federal government's need for the information being sought in enforcing its
substantive and procedural policies;
2. The importance of the relationship or policy sought to be furthered by the state rule of
privilege and the probability that the privilege will advance that relationship or policy;42
3. In the particular case, the special need for the information sought to be protected; and
4. In the particular case, the adverse impact on the local policy that would result from
non-recognition of the privilege.
41 Rule 501 of the Federal Rules of Evidence, General Rule, reads as follows:
"Except as otherwise required by the Constitution of the United States or provided by Act of
Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the
privilege of a witness, person, government, State, or political subdivision thereof shall be
governed by the principles of the common law as they may be interpreted by the courts of the
United States in the light of reason and experience. However, in civil actions and proceedings,
with respect to an element of a claim or defense as to which State law supplies the rule of
decision, the privilege of a witness, person, government, State, or political subdivision thereof
shall be determined in accordance with State law."
42 A number of states have passed legislation regarding the confidentiality protections afforded
neutrals and parties in mediations. These provisions vary widely in scope, content, and operation. An
excellent survey of these provisions is provided in Alan Kirtleyn, The Mediation Privilege's
Transition from Theory to Implementation: Designing a Mediation Privilege Standard to Protect
Mediation Participants, the Process and the Public Interest, 1995 J. Disp. Res. 1 (1995). Kirtleyn also
provides a good list of common law cases in which a mediation privilege was found. Id. at 13,
footnotes 84-86. Another interesting article on this subject is a note prepared by Joshua Rosenberg,
Keeping the Lid on Confidentiality: Mediation Privilege and Conflict of Laws, 1994 J. Disp. Res. 157
(1994).
Page 61
United States v. King, 73 F.R.D. 103, 105 (E.D.N.Y. 1976). There is no generally
recognized federal common law neutral privilege in civil proceedings. Given that
"privileges are not lightly created, see United States v. Nixon, 418 U.S. 683, 710 (1974),
the argument in favor of recognizing such a privilege will have to be compelling.
In a criminal proceeding, there is even less reason to believe a court will recognize a
neutral's privilege. See In re Grand Jury Subpoena December 17, 1996 F. 3d 487 (5th Cir.
1998) (holding that the district court erred in ruling that documents related to mediation
proceedings were privileged and protected from disclosure from the grand jury); see also
In Re: March, 1994, Special Grand Jury, 897 F. Supp. 1170 (S.D.Ind. 1995)(public
interest in fact-finding served by Grand Jury subpoena outweighed settlement interested
that would be served by recognizing a neutral's privilege.)
d
Protective Orders
Protective orders can provide additional confidentiality protections. Properly drafted
protective orders require the parties not to disclose certain information. Specifically, a
protective order may be sufficient to justify withholding documents otherwise responsive
to an FOIA request. However, the mere existence of a protective order is, without more,
insufficient to justify nondisclosure by an agency under the FOIA. Instead, only those
protective orders intended to operate as the functional equivalent of an injunction
prohibiting disclosure can justify an agency's decision to withhold records that do not fall
within one of the specific FOIA exemptions. See Morgan. v. U.S. Dept. of Justice, 923
F.2d 195, 197 (D.C. Cir. 1991); see also Armstrong, et. al. v. Executive Office of the
President, 830 F. Supp. 19 (D.D.C. 1993).
C
Mechanics of Settlement
1
Preparing and Executing a Settlement Agreement
We suggest that, prior to the commencement of an ADR proceeding, each party prepare
and have available for use during the negotiation phase a draft settlement agreement, the
terms of which necessary elements within its organization (contracts, legal, program
management, etc.) have already reviewed and approved. Appendix 25 contains a sample
settlement agreement for your consideration, use and appropriate modification.
2
Funding the Settlement
The single most critical aspect of settling government contract controversies is obtaining
funding. The parties to a contract controversy must therefore address what funds may be
available for a settlement.
Page 62
a
The Funding Cycle
NOTE: The following material regarding funding has been taken almost verbatim from
text developed by the Air Force Materiel Command (AFMC).
In 1990, Congress enacted Public Law 101-510, a statute that substantially restructured the
life cycle availability of appropriations.43 There are now three distinct phases in terms of
availability of appropriations: (1)"Current," which means the funds are available for
obligation; (2) "Expired," which means they are not available for obligation, only
liquidation of previously incurred obligations or certain adjustments to these obligations;
and (3) "Canceled,'' which means the funds are not available, and cease to exist for any
purpose. A brief description of the three phases of the new life cycle of funds follows.
Current - Phase 1. This stage is primarily for obligating or placing funds on contract for a
specific purpose. Phase 1 lasts three years for procurement funds, two years for R&D
funds, and one year for O&M type funds.

Expired - Phase 2. This phase is for the expenditure (or payment) of funds against the
obligations created in Phase 1. There is some flexibility to adjust previously made
obligations. These adjustments are generally limited to price adjustments or within-scope
contract changes. This includes such things as cost overruns, payment of claims, cost
escalation, increases due to rate adjustments, and contract closeout costs. Funding in this
phase remains available for 5 years from the year the appropriation expires, regardless of
the appropriation type. No obligations for new requirements can be incurred against
expired funds during this phase. As a result of this change in law, there has also
developed a high level of interest and oversight concerning the use of expired account
funds. This resulted in a detailed and at times lengthy review process that government
personnel must take place prior to receiving permission to use these accounts.
Canceled - Phase 3. After the Phase 1 (obligation) and Phase 2 (expenditure) periods have
passed, funds are no longer available for use for any purpose and are canceled. Under
Public Law 101-510, any use of canceled funds is
43 Before the enactment of Public Law 101-510, funds appropriated by Congress had an unlimited
availability to make payments against the obligations that had been incurred against them. Under the
old process, after funds expired for purposes of incurring new obligations, or for adjustments to
previously incurred obligations, they were merged into a successor "M" (merged) account, where
they remained indefinitely for liquidation of previous obligations to include costs such as payment
of contract closeout costs. Public Law 101-510 restructured the appropriation life cycle by
eliminating the "M" account, and established the appropriation life cycle we use today. See Karen
L. Manos, The Antideficiency Act Without an "M" Account, 23 Pub. Cont. L. J. 337 (Spring 1994).
Page 63
prohibited and results in a violation of the Antideficiency Act. This includes incurring any
new obligation or payment against a previous obligation. The law now requires payments
beyond Phase 2 to revert to currently available appropriations. These payments are also
subject to a one-percent limitation after which Congressional approval is required.

b
Access to the Judgment Fund
Congress created the Indefinite Judgment Fund (hereinafter the "Judgment Fund") as a
source of funds to pay judgments against the United States government. 31 U.S.C. §
1304.44 The U.S. Treasury requires that, when a board of contract appeals or Court of
Federal Claims renders a monetary award to a contractor, the parties execute a certificate
of finality (certifying neither party contemplates an appeal or further action on the appeal)
and the contracting officer completes three Treasury Department forms: Treasury FMS
Form 195, Judgment Fund Payment Request; FMS Form 196, Judgment Fund Award
44 The Judgment Fund certification of payment function has been transferred from the General
Accounting Office (GAO) to the Financial Management Service (FMS), United States Treasury
Department. This change only affects the administrative procedures for tapping the Judgment Fund
and does not impact the substantive guidance on the appropriate use of the Judgment Fund.
Page 64
Data Sheet; and FMS Form 197A, Voucher for Payment. The ASBCA or Court of Federal
Claims will include copies of the FMS forms (195, 196, and 197A) and certificates of
finality for completion by the parties when it forwards a decision making a monetary
award to a contractor. The agency will forward these forms to the contracting officer
upon receipt of the authenticated copy of the board's decision. The contracting office,
using FMS Form 195 as a transmittal letter, should send the completed forms and
certificates of finality along with a copy of the board or court decision to the address
listed on FMS Form 195 if the award is to be paid from the Judgment Fund (as opposed
to other funds currently available to the contracting officer such as surplus contract
funds).
The Treasury Department will ordinarily send payment to the contracting office, not to
the contractor or to the contractor's attorney. Each Form 197A should contain the name,
address, and telephone number of the person in the contracting office to whom payment
should be sent. The contracting office will be responsible for delivering the payment to
the contractor or the contractor's representative. The Treasury Department also requires
that all check or wire transfers have the payee's taxpayer identification number or Social
Security number on the payment. If the payee is the contractor's attorney, you are to give
the attorney's tax number.
The CDA requires agencies to reimburse the Judgment Fund out of current
appropriations or obtain additional appropriations from Congress for the judgment. 41
U.S.C. §612(c). Such reimbursement must be out of current year funds, unless otherwise
authorized by law. See Matter of Bureau of Land Management, B-211229, 63 Comp. Gen.
308. Reimbursements come from funds available for obligation when the judgment is
entered. The rationale of Congress in requiring agency reimbursement of the Judgment
Fund as the result of board awards was to foster responsible agency decision making
during the claims resolution process. Bureau of Land Management, supra. For a more
detailed discussion of the mechanics of obtaining payment from the Judgment Fund,
consult Carl Vacketta & Eric Kantor, Obtaining Payment from the Government's
Judgment Fund, Briefing Paper No. 97-3 (Federal Publications, Inc. February 1997).
(1)
Binding ADR Procedures at the Boards
As noted above, boards of contract appeals offer ADR procedures that contemplate
decisions binding upon the parties, i.e., Summary Trial with Binding Decision and Bench
Decisions. These decisions qualify as judgments and are subject to payment from the
Judgment Fund.
(2)
Non-Binding ADR Procedures and the Use of Stipulated Judgments/Consent Decrees
In some non-binding ADR procedures, the parties have agreed to a stipulated
Page 65
judgment in which the parties agree to the facts and amount of settlement and request that
it be adopted by the board as a "consent judgment." If a board adopts a settlement
agreement as a "consent judgment," then it may be paid from the Judgment Fund. The
Judgment Fund cannot be used to fund settlements between the parties unless a board or
a court adopts such a settlement.
Use of stipulated or consent judgments to be paid from the Judgment Fund may be
advantageous to the government. This is especially true when the appropriation that
funded the underlying contract is no longer available or is exhausted. It can also be useful
if the contracting officer must obtain funds from higher headquarters, which may involve
substantial delay and the unnecessary incurrence of interest charges on the CDA claim. If
the foregoing circumstances are present and the delay in obtaining funds from higher
headquarters may imperil an otherwise advantageous settlement for the government, then
access to the Judgment Fund may be appropriate.
Conversely, the use of stipulated or consent judgments also has disadvantages.
Reimbursement of the Judgment Fund, which is necessary when stipulated or consent
judgments are used, must be from current year funds, whereas payment of settlements by
the contracting officer may be able to draw on expired funds.
3
Final Considerations
a
CDA Interest
Accrual of CDA interest begins on the date the contracting officer receives a claim under
the CDA. 41 U.S.C. §611. Interest prior to the submission of a contractor's claim is
generally unallowable. FAR §31.205-20.45 Interest on contractor claims runs regardless of
whether the claimed costs have actually been incurred at the date of submission of a
claim. Servidone Constr. Co. v. United States, 931 F.2d 860 (Fed. Cir. 1991).
CDA interest is based upon the rate established semi-annually by the Secretary of the
Treasury. (See Appendix 26 for an example of a CDA claim interest computation used in
conjunction with an ADR proceeding.) When the contracting officer pays a contractor
claim, the payment is applied first to accrued interest. Then the payment is applied to the
principal amount due. Any unpaid principal continues to accrue interest. Paragon Energy
Corp., ENG BCA No. 5302, 91-3 BCA ¶24,349.
45 However, under the Prompt Payment Act, 31 U.S.C. §§3901-3907, the contractor could be
entitled to interest, if the contractor submits a proper voucher and the government fails to make
payment within 30 days.
Page 66
b
Attorneys' Fees and Costs
Under the EAJA, 5 U.S.C. §504, a contractor that meets specified eligibility requirements
relating to business size and that is deemed a "prevailing party" in litigation against the
government may recover attorneys' fees and associated litigation costs, where the
government's position is determined not to have been "substantially justified" or where
there are no special circumstances that would render an EAJA award unjust. Under the
EAJA, contractors must submit their EAJA applications "within thirty days of a final
disposition" of a matter. See, e.g., Reid Associates, Inc., ASBCA No. 44633, 1998 ASBCA
LEXIS 52 (denying contractor's EAJA application as untimely because the 30 day period
under EAJA occurred at the time the parties signed the settlement agreement.)
Recovery under the EAJA is also possible for ADR-related attorneys' fees and other costs
relating to claims governed by the CDA46 under appropriate circumstances. See PetroElec
Construction Co. Inc., ASBCA No. 32999, 87-3 BCA ¶ 20,111. In Hopkins Heating &
Cooling, Inc., VABCA No. 4905E & 4905E, 98-1 BCA ¶29,449, for example, the
contractor filed two appeals that were consolidated by the Veterans Administration Board
of Contract Appeals in July, 1996. The parties subsequently agreed to use an ADR
process. The ADR procedure utilized a settlement judge and was non-binding. As a result
of the ADR, the parties agreed to settle the appeals. The parties entered into a stipulation
of settlement, and the board dismissed the appeals with prejudice. However, the parties
failed to address the issue of EAJA fees in their stipulation of agreement. The board
found that the contractor had met its initial burden of proof by: (1) demonstrating it met
the EAJA eligibility requirements; (2) that it had prevailed on at least a portion of its
claim; and (3) alleging that the government's position was not substantially justified.
Accordingly, the burden then shifted to the government to establish its position was
substantially justified.
The board in Hopkins recognized that the government had a very limited record from
which to establish substantial justification, in light of the broad confidentiality provision
of the parties' ADR agreement. Nevertheless, the board, looking to "the totality of the
circumstances" in the case, ascertained that the government's position had a
46 In terms of protest related attorneys' fees and costs, under the Competition in Contracting Act
(CICA), as amended by the Federal Acquisition Streamlining Act (FASA), GAO may recommend
the protester's recovery of costs and attorneys' fees, where the agency's action violated a
procurement statute or regulation. 31 U.S.C. §3554(c)(1). GAO's Bid Protest Regulations also
provide that GAO may recommend that a protestor recover its costs of filing and pursuing a protest,
where the contracting agency decides to take corrective action in response to a protest. 4 C.F.R.
21.8(e). As indicated above, because Section 348 of Public Law 104-50 makes both the CICA and
the FASA inapplicable to the FAA Acquisition Management System, the FAA Office of Dispute
Resolution for Acquisition (ODRA) may only award attorneys' fees and costs, to the extent allowed
under the EAJA. See EAJA Application of IBEX Group, Inc., Note 21, supra.
Page 67
"reasonable basis both in law and in fact" and thus found the government position to
have been "substantially justified" within the meaning of the EAJA. On that basis, it
denied the contractor's request for EAJA fees. Implicit in the Hopkins decision is the
notion that, if the government's position had not been found acceptable, the board would
have permitted EAJA recovery for the fees and costs incurred in connection with the
ADR proceeding. In view of this possibility, it would be wise for counsel to address the
recovery of legal fees and costs as part of any ADR agreement.
Contractors' counsel should be aware that if an ADR proceeding fails, the government
may argue that settlement offers it made during the ADR process should eliminate or at
least reduce contractor recovery under the EAJA of attorneys' fees and costs for any
subsequent litigation. To prevail on such an argument, however, the government must
show that the judgment the contractor ultimately obtained through litigation was no
greater than its earlier offer of settlement and, accordingly, the attorneys' fees and other
litigation costs expended after the government's offer were not reasonably incurred. See
Sage Construction Co., ASBCA No. 34284, 92-1 BCA ¶24,493; Kos Kam Inc., ASBCA
No. 34684, 88-3 BCA ¶21,049. See also Fiesta Leasing and Sales, Inc., ASBCA No.
29311, 90-2 BCA ¶22,729; Oneida Construction, Inc./David Boland, Inc., Joint Venture,
ASBCA Nos. 44194, 47914, 47915, 47916, 95-2 BCA ¶27,893. Of course, this argument
would be impossible, if the ADR agreement expressly precludes settlement offers from
being used for any purpose outside the ADR proceeding.
One further issue relates to recovery of attorneys' fees and costs under the EAJA for ADR
efforts that fail, where a contractor prevails in subsequent litigation. This issue was not
addressed squarely by the ASBCA. Nevertheless, by way of dicta, in its decision in
Qualex International, ASBCA No. 41962, 93-1 BCA ¶25,517 (1992) (a non-EAJA case
involving an "allowability" issue under the FAR), the ASBCA indicated that all attorneys'
fees and related costs an appellant incurred may be recoverable under the EAJA. This
would be so, if those costs were incurred in conjunction with proceedings before the
board pursuant to Section 607 of the CDA, regardless of whether those proceedings were
formal adjudication or board-sponsored ADR:
Once appellant filed its appeal before us, appellant was involved in an administrative adjudicative
proceeding and all proceedings thereafter were pursuant to Section 607 [of the Contract Disputes
Act] whether they were the formal or alternative dispute resolution procedures offered by the
Board. . . . Such expenses [incurred after issuance of a contracting officer's decision] may be
recoverable under EAJA to the extent, if any, that entitlement to reimbursement would be found
under that Act.
The FAA ODRA recently addressed this issue in an EAJA case and, also by way of dicta,
indicated that attorneys' fees and costs relating to a failed ADR attempt involving a matter
eventually adjudicated in favor of a protester should not be recoverable under the
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EAJA. EAJA Application of Camber Corporation, 98-ODRA-00102 EAJA. Unlike ADR at
the ASBCA, the ODRA's use of ADR is not done pursuant to the CDA, which has no
applicability to the ODRA dispute resolution process. The ODRA's ADR efforts are
separate and independent of its Default Adjudicative Process47 and thus are not part of an
"administrative adjudicative proceeding." The ODRA observed that EAJA recovery
should not be available for ADR that does not cause the protester to "prevail" and that has
no impact on a later adjudication. The ODRA also cited a variety of other policy reasons
favoring ADR which, in its view, would weigh against allowing EAJA recovery under
those circumstances:
Moreover, making an EAJA award under such circumstances could well be at odds with the policy
strongly favoring resolution of disputes through ADR. Agencies could be less willing to engage in
ADR, if they know they may be required to bear both their own costs and those of the contractor if
the effort fails. Additionally, the possibility of such an award might require a forum to evaluate the
reasonableness of an agency's ADR position -- i.e., to determine whether the agency was
"substantially justified" in that ADR position. This, in turn, could have serious implications for
maintaining ADR confidentiality and could discourage the agency from exploring the strengths and
weaknesses of its case with the ADR neutral.
Id. at 8, n.1.
47 At the ODRA, two Dispute Resolution Officers (DROs), operating independently of one another,
handle ADR and adjudication efforts. See Section X.C, FAA Office of Dispute Resolution for
Acquisition.
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X
The Dispute Resolution Forums
Each of the major Dispute Resolution Forums has adopted policies to promote the use of
ADR. Given the differing structures, roles, and resources that each of these Dispute
Resolution Forums possess, it is not surprising that their commitment to and procedures
for ADR usage vary. Many are unaware of the distinctions between Forums regarding the
use of ADR. Accordingly, we will briefly describe these procedures below.
A
General Accounting Office48
On September 23, 1996, in accordance with the Comptroller General's statutory mandate
under the CICA "to provide for the inexpensive and expeditious resolution of bid
protests," 31 U.S.C. §3554(a)(1), the GAO announced its formal implementation of ADR
techniques in bid protests. GAO's goal in using ADR techniques is to avoid unnecessary
protest litigation, and, where possible, accelerate protest resolution by inviting the parties
to consider possible compromises early in the protest development process.
The ADR procedures used by the GAO fall into two broad areas, negotiation-assistance
and outcome prediction. See Section III for a more detailed discussion of the various
ADR procedures that fall within these broad categories. The vast majority of ADR
procedures used by the GAO to date have been in connection with the provision of
outcome predictions, in the form of early neutral evaluation or an advisory opinion. The
typical practice by the GAO when using outcome prediction is to have agency counsel
and the protester, as well as any interested parties, on either a teleconference or assembled
in person. The GAO attorney reviews the facts and the respective positions of the parties
and then provides an opinion about the likely outcome of the protest. Counsel should be
aware that under the GAO's ADR program, the GAO attorney who provides an advisory
opinion regarding the bid protest will be the same attorney who will write the bid protest
decision should the ADR process fail.
PRACTICE TIP: The GAO appears to be the only Dispute
Resolution Forum that contemplates using the same person to
provide ADR services and, if ADR fails, make a binding decision
as part of GAO's normal adjudication function. This should be
taken into account whenever considering engaging in ADR for
resolution of a GAO protest.
B
Boards of Contract Appeals
The boards of contract appeals (BCAs or boards) are committed to actively fostering the
use of ADR in government contract-related matters and will make board
48See Appendix 30.
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personnel available to participate in appropriate ADR proceedings in protest, pre-appeal
matters, and post-appeal disputes.
The boards offer four basic ADR techniques: The first type is a Summary Trial with
Binding Decision, which is essentially a binding arbitration technique. The other three are
non-binding procedures: (1) Settlement Judge (evaluative mediation); (2) Minitrial; and
(3) Advisory Opinion. Apart from the basic techniques, the boards are willing to consider
tailoring other methods to suit the requirements of a particular dispute.
The boards participate in an interagency neutral sharing arrangement.49 The purpose of
the sharing arrangement is to make neutral BCA personnel available to the government
and federal contractors for use in ADR proceedings. The BCA chairs have issued the
following policy statement setting forth the general principles and guidance for using the
neutral sharing arrangement:
Alternative Dispute Resolution (ADR) techniques offer the potential for a faster, less expensive
disposition of contract controversies. The Boards of Contract Appeals (BCAs) are committed to
fostering the use of ADR in appropriate Government contract-related matters and will continue to
make Board personnel available to participate in ADR proceedings in protest, pre-appeal matters
and post-appeal disputes.
The BCAs offer a wide choice of ADR techniques as an option to traditional dispute resolution
procedures. Assistance is also available in designing ADR arrangements that will best serve the
parties' interests in resolving a particular dispute. Parties who are interested in pursuing ADR
should consult the procedures and/or rules of practice of the BCA that would typically handle the
matter.
Most of the BCAs also participate in an arrangement in which BCA personnel can be made
available to conduct ADR processes for other agencies. Under the BCA-ADR Sharing
Arrangement, the Boards may provide their services free of charge.
Agency contracting officials or Federal contractors who are interested in using BCA personnel
from another agency should
49 The BCAs participating in the neutral sharing arrangement are: the Armed Services BCA,
Department of Agriculture BCA, Department of Energy BCA, Corps of Engineers BCA, Department
of the Interior BCA, Department of Housing and Urban Development BCA, Department of Labor
BCA, Postal Service BCA, Department of Transportation BCA, Department of Veterans Affairs
BCA. Though not a signatory, the General Services Administration BCA supports its basic
principles. See Appendix 28 (Enclosure 5) for a copy of the sharing arrangement.
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contact the Chair of the Board that would normally handle the matter. Chairs can suggest the names
of personnel from other Boards who can be made available to conduct ADR processes.
The boards are an excellent source of impartial and cost effective neutrals with specific
expertise appropriate for assisting in the resolution of government contract controversies.
Under the interagency neutral sharing arrangement, parties are to be encouraged to look
first to obtaining ADR services from the board that would normally handle the matter.
Parties should approach the Chair of that board with any requests to use judges from
other boards as ADR neutrals. The Chair will then expeditiously transmit such a request
to his or her counterpart at the other board.
The procedures for using ADR before the boards are evolving. At present, there appear to
be some important variations among boards in their approaches to ADR. Both the
VABCA and GSBCA are committed to providing ADR neutrals for the resolution of
federal contract controversies, even though they have not been docketed as appeals
before those boards. The GSBCA is also willing to provide its judges to serve as neutrals
in bid protests. Although the ASBCA has provided ADR neutrals for matters not
docketed at that board, its policy is to focus on contract controversies and to make the
determination to support such ADR efforts on a case-by-case basis.
Under the interagency neutral sharing arrangement, participating boards provide their
services free of charge. Only the GSBCA is not a signatory of the BCA-ADR Sharing
Arrangement, and imposes a modest charge for the use of its judges in matters not
pending before the GSBCA. Of all the boards, only the VABCA indicates it will help the
parties design their ADR process. In practice, all boards will assist the parties in drafting
ADR agreements and the ASBCA, for example, has ADR sample agreements for use by
the parties. See Appendices 17-19.
Although differences among boards in terms of ADR practices appear to be narrowing,
we believe it would be helpful to describe briefly the "official" ADR procedures at three
representative boards: the ASBCA, GSBCA and VABCA.
1
ASBCA ADR Program
For many years, the ASBCA has issued a "Notice Regarding Alternative Methods of
Dispute Resolution" with every appeal docketing notice. See Appendix 9. The docketing
notice itself urges the appellant to consider ADR procedures for the disposition of the
appeal. The ASBCA ADR Notice identifies three techniques which have worked in the
past: (1) Summary Trial with Binding Decision; (2) Settlement Judge; and (3) Minitrial.
The board notes that any method that brings the parties together in settlement, or partial
settlement, of their disputes is a good method. Equally important, the ADR methods
identified are not intended to preclude the parties' use of other resolution
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techniques, such as settlement negotiations, fact finding conferences or other procedures
not involving use of the board's personnel. The ASBCA takes the view that the parties
may select any method, or combination of methods, including ones, which will result in a
binding decision, regardless of the dollar amount in dispute.
In order to engage in ADR before the ASBCA, both parties must submit a request to the
board for the use of ADR. If the parties request an ADR method involving the board's
participation, the presiding administrative judge or member of the board's legal staff will
forward the request to the board's Chair for consideration. The presiding administrative
judge or member of the board's legal staff may also schedule a conference to explore the
desirability and selection of an ADR method. If the parties request a non-binding ADR
method involving the board's participation and the ASBCA Chair approves that request,
the Chair will appoint an administrative judge to serve either as a settlement judge or
otherwise as an ADR neutral.
If a non-binding ADR method fails to resolve the dispute, the board will restore the
appeal to the active docket for processing under the board's rules. To facilitate full, frank,
and open discussion and presentations, any ASBCA administrative judge who has
participated in a non-binding ADR procedure that has failed to resolve the underlying
dispute ordinarily will not participate in the restored appeal, absent an explicit request of
both parties and approval of the ASBCA Chair. Further, that judge will not discuss the
merits of the appeal or substantive matters involved in the ADR proceedings with other
board judges.
Written material prepared specifically for use in an ADR proceeding, oral presentations
made at an ADR proceeding, and all discussions in connection with such proceedings
between representatives of the parties and the ASBCA neutral are to be treated as
confidential. Unless the parties otherwise specifically agree, such materials and
discussions will be inadmissible as evidence in any pending or future board proceeding
involving the parties or the matter in dispute. However, evidence otherwise admissible
before the board is not rendered inadmissible because of its use in an ADR proceeding.
An agreement executed by the parties and the neutral will prescribe guidelines,
procedures, and requirements implementing the ADR method selected. ADR methods can
be used successfully at any stage of the litigation. Adoption of an ADR method as early in
the appeal process as feasible will eliminate substantial cost and delay. Generally, ADR
proceedings at the ASBCA will be concluded within 120 days, following approval of their
use by the Chair.
PRACTICE TIP: During FY 96 - 98, the ASBCA enjoyed a
remarkable 98% rate of success in using non-binding ADR
procedures. In light of this success rate, the ASBCA is willing, at
least unofficially, to experiment with various ADR procedures the
concepts.
Page 73
2
GSBCA ADR Program
In October, 1996 the GSBCA expanded the availability of its judges to serve as ADR
neutrals. The GSBCA amended its ADR rule to make its ADR services available to any
federal agency that requests ADR services on a reimbursable basis. GSBCA Rule 204
states: ''The Board will make its services available for ADR proceedings in contract and
procurement matters involving any agency, regardless of whether the agency uses the
Board to resolve its Contract Disputes Act appeals." As the result of this expanded
availability, the GSBCA may now provide ADR services for all agencies the CDA appeals
of which are resolved at another board of contract appeals.
This expansion of the GSBCA's ADR services to all federal agencies occurred before
initiation of the interagency sharing agreement by the other BCAs. The GSBCA chose not
to be a signatory of that interagency sharing agreement. This was so, because the
agreement contains two conditions that conflict with the GSBCA's procedures: (1) a
suggestion that parties seeking ADR should contact the Chair of the board which would
normally handle the matter; and (2) a provision discouraging requests for a particular
judge to serve as an ADR neutral.
The GSBCA's current rule also allows parties to seek ADR services from the board to
resolve disputes "at any stage of a procurement, even if no contracting officer decision
has been issued or is contemplated." Thus, one may request ADR of a dispute at the
GSBCA, even if the dispute is not ripe to be docketed as an appeal at a board of contract
appeals. This includes bid protests as well as disputes arising from contract performance.
Although the board previously had jurisdiction over protests arising only from the
procurement of automated data processing equipment, requests for ADR in bid protest
matters may encompass all types of procurement.
The GSBCA's ADR rule provides that the parties may request a specific judge or judges
as the board neutral. The board neither encourages nor discourages such requests. This
option was included because the board recognizes that parties would be allowed to
request the services of a specific individual if they pursued ADR in the private sector, and
therefore might similarly wish to request a specific board judge.
For appeals docketed at the GSBCA, the parties make a joint request for ADR to the panel
chair. The panel chair may assume the role of the board neutral, or the parties may
request another judge to perform the role. For matters which are not docketed as appeals,
such as contract controversies arising prior to a contracting officer's final decision, or bid
protests, the parties make a joint request for ADR to the Clerk of the board. The board
Chair will then appoint a board neutral. If the parties request a specific judge, the Chair
will honor that request. If the request for ADR comes from an agency
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that normally does not have its appeals resolved at the GSBCA, the board provides its
services on a reimbursable basis.
3
Department of Veterans Affairs Board of Contract Appeals (VABCA)
The contours of the VABCA ADR initiatives are described on its web site at
http://www.va.gov/adr/contract.htm. The web site contains the following statement:
The VA program supplies a VA Board of Contract Appeals (Board) judge or hearing examiner to
serve as a neutral to help the contractor and contracting officer resolve pre-appeal contract
controversies. The Board has been providing neutrals, settlement judges, and arbitrators for a
number of years, and has used various types of ADR to help parties resolve docketed appeals. This
program expands the availability of the Board to serve as ADR neutrals in pre-appeal
controversies.
In using the program, the Board neutral assists the parties in deciding what type of ADR method
will work best for them, and it will work with contractor and contracting officer to ensure they are
satisfied with the ADR process selected. Other than their own expenses, using ADR in this program
is free to the parties. ADR is voluntary and both parties must want to use it, otherwise the dispute
must go through the formal appeal process to be resolved by traditional litigation, and the issuance
of decision by the VABCA or the Court of Federal Claims (depending on which forum the
contractor selects). If the ADR does not result in settlement, the contractor is still free to go forward
with traditional litigation, and the Board neutral who conducted the ADR will keep the ADR
discussions confidential and have no further involvement with the matter.
The policy and guidelines for this program are contained in VA Directive 7433 and VA
Handbook 7433, and are available through the board's office.
C
FAA Office of Dispute Resolution for Acquisition
Under a 1996 Congressional mandate50, the Federal Aviation Administration (FAA)
created a completely new system for acquiring goods and services separate and apart
from the statutes and regulations that govern procurement for all other federal agencies a
system known as the Acquisition Management System (AMS). With the
50 Section 348 of the FY1996 Department of Transportation Appropriations Act, Public Law 104-
50.
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AMS, the FAA opened a new Office of Dispute Resolution for Acquisition (ODRA),
which it charged with responsibility for resolving expeditiously both procurement
protests and contract disputes. Unlike any of the previously described forums, the ODRA
relies upon ADR as its predominant mode of dispute resolution, with adjudication being
reserved only when the parties do not agree upon ADR or ADR is not completely
successful in resolving the matters in controversy. To date, the majority of contract
controversies before the ODRA have been successfully resolved via ADR. The ODRA
has published a Notice of Proposed Rulemaking (NPRM) in which its proposed
procedural rules (63 Fed. Reg. 45372-45389, August 25, 1998). The FAA has received
comments on the NPRM, and anticipates issuing a final rule during calendar year 1999.
The ODRA's NPRM encourages and institutionalizes the use of ADR for resolution of
FAA's contract-related disputes. The NPRM describes mediation, neutral evaluation (the
settlement judge approach), arbitration51 and minitrials as possible techniques to be used,
and allows for "any ADR technique that is fair and reasonable and that is designed to
achieve a prompt resolution of the matter." It also stresses that these techniques are not
mutually exclusive and may be used in various combinations. For formal mediation and
adjudicative forms of ADR (minitrials and arbitration), the parties are required to execute
and file with the ODRA written ADR Agreements.
With the parties' consent, the FAA's ODRA will make available one of its staff
attorneys/Dispute Resolution Officers (DROs) to serve as an ADR neutral. The ODRA
may also provide the services of a non-FAA employee to serve as a neutral, if such an
individual is available through a neutral sharing or similar arrangement. On occasion, the
ODRA has provided a judge from the GSBCA, with which the FAA has an interagency
agreement, to serve as an arbitrator52. The NPRM also permits the parties to use the
services of an outside ADR neutral of their own choosing (a "Compensated Neutral"), the
costs for whom are to be shared by the parties under the terms of their ADR agreement.
The ODRA procedures for ADR are outlined in the NPRM and detailed more fully in an
ODRA Website Guide, which is accessible through the FAA's Web Homepage
(http:\\www.faa.gov then click on "Office of Dispute Resolution for Acquisition," "Site
contents," "ODRA Guide," and "Alternative Dispute Resolution''). The ODRA Website
Guide contains ADR "Success Stories" as well as model ADR agreement formats for use
by ODRA ADR participants. Should the parties decide against the use of ADR, they must
file with the ODRA a written explanation as to why ADR is not being used, before
51 At present, because of guidance from DoJ precluding the use of binding arbitration, the only
forms of arbitration being utilized by the ODRA are non-binding arbitration (essentially a minitrial
followed by a neutral's advisory opinion) and conditionally binding arbitration that permits the
FAA Administrator to "non-concur" with and "opt out" of the neutral's decision within 5 business
days of its issuance. Absent non-concurrence by the Administrator, the arbitral award becomes
binding on the parties.
52 Arbitration by a GSBCA judge acting as an ODRA neutral is done subject to the above-mentioned
"non-concur" procedure.
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the parties may proceed into formal adjudication in what is called the ODRA "Default
Adjudicative Process."
In practice, in order to expedite dispute resolution, the ODRA will frequently designate
two DROs at the inception of a case, one to serve as an ADR neutral and the other to
serve as the adjudicator. Informal ADR techniques (neutral evaluation and mediation)
often will continue even after formal adjudication has commenced under the Default
Adjudicative Process. This is done to afford the parties every opportunity to resolve their
dispute amicably. To preserve the confidentiality of the ADR process, the DRO serving as
the ADR neutral is precluded from taking part in any way in the adjudication. Further,
that DRO may not share with others at the ODRA his or her views of the merits of the
controversy or disclose to the adjudicating DRO the substance of settlement discussions
or statements made during the course of ADR.
D
United States Court of Federal Claims
The Court of Federal Claims offers ADR assistance to the parties under its Amended
General Order 13. See Appendix 31. Two types of non-binding ADR techniques are
available: (a) settlement judge; and (b) minitrial. Both methods are voluntary and are
intended to be employed early in the litigation process in order to minimize discovery.
Both parties must agree to use the procedures. Because the procedures involve the
application of judicial resources, the court views their use as most appropriate where the
parties anticipate a lengthy discovery period followed by a protracted trial. These
requirements typically will be met where the amount in controversy is greater than
$100,000 and trial is expected to last more than one week.
If the ADR technique used fails to produce a satisfactory settlement, the court will return
the case to the presiding judge's docket. All representations made in the course of the
selected ADR proceeding are confidential and may not be used for any reason in
subsequent litigation, except as allowed by Federal Rule of Evidence 408.
The court has a unique view on the use of a minitrial process. At the Court of Federal
Claims, this ADR technique should be employed only in those cases that involve factual
disputes and are governed by well-established principles of law. Cases that present novel
issues of law or where witness credibility is a major factor are handled more effectively
by traditional judicial methods.
Although the procedures for each minitrial should be designed to meet the needs of the
individual case, the court considers the following guidelines appropriate in most
circumstances:
Time Frame: The minitrial should be governed by strict time limitations. The entire
process, including discovery and trial, should conclude within one to
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three months.
Participants: Each party should be represented by an individual with authority to make a
final recommendation as to settlement and may be represented by counsel. The
participation of senior management/agency officials (principals) with first-hand
knowledge of the underlying dispute is highly recommended.
Discovery: Any discovery conducted should be expedited, limited in scope where
feasible, and scheduled to conclude at least two weeks prior to the minitrial. Counsel bear
a special responsibility to conduct discovery expeditiously and voluntarily in a minitrial
situation. The minitrial judge will handle any discovery disputes that the parties cannot
resolve. Discovery taken for the purpose of the minitrial may be used in further judicial
proceedings if settlement is not achieved.
Pre-Hearing Matters: At the close of discovery, the parties should meet with the minitrial
judge for a pre-hearing conference. The parties normally should provide for exchange of
brief written submittals summarizing the parties' positions and narrowing the issues in
advance of the hearing. The submittal should include a discussion of both entitlement and
damages. Contemporaneously with the exchange of the written submittals, the parties
should finalize any stipulations needed for the hearing and, where applicable, exchange
witness lists and exhibits. The parties also should establish final procedures for the
hearing.
Hearing: The hearing itself is informal and should generally not exceed one day. The
parties may structure their case to include examination of witnesses, the use of
demonstrative evidence, and oral argument by counsel. Because the rules of evidence and
procedure will not apply, witnesses will be permitted to relate their testimony in the
narrative, objections will not be permitted, and a transcript of the hearing will not be
made. The role of the minitrial judge similarly is flexible and may provide for active
questioning of witnesses. Each party should present a closing statement to facilitate the
post-hearing settlement discussions.
Post-Hearing Settlement Discussions: At the conclusion of the informal hearing, the
principals and/or counsel meet to discuss resolution of the dispute. The minitrial judge
may play an active role in the discussions or be available to render an advisory opinion
concerning the merits of the claim.
The Court of Federal Claims has a unique procedure regarding the use of non-Court of
Federal Claims third-party neutrals. Specifically, after entry of an order referring a case to
ADR, the parties are permitted to request the court's ADR
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Administrator to appoint a third-party neutral from a limited panel of experienced
attorneys trained to handle ADR. The third-party neutral shall have no conflict of interest
and shall either have experience in alternative dispute resolution or shall have expertise in
the subject matter of the lawsuit. The third-party neutral will meet with the parties and
attempt to resolve the dispute.
PRACTICE TIP: Contractors who elect to take their appeal to the
Court of Federal Claims should understand that, once litigation is
commenced in a United States federal court, only DoJ will have
settlement authority.53 In certain cases, the interests of the DoJ
and those of the contracting agency may differ. Agency personnel
combine a business and financial perspective when seeking to
evaluate and settle contract litigation. Such issues as funding
litigation support, funding settlements, funding judgments, as well
as a host of contract administration matters likely will matter a
great deal more to agency personnel than to DoJ attorneys
handling the litigation. For these and other reasons, valuations of
what constitutes an acceptable settlement range will also
frequently vary between agency counsel and counsel for DoJ.

To date, the court's ADR program has only rarely been employed to resolve contract
disputes. This may well change in time, as new judges are appointed to the court, and as
the use of ADR grows more popular generally within the federal government. Second,
DoJ's Commercial Litigation Division has traditionally taken a very conservative view
about what cases are appropriate for ADR. This, too, may change in the future, especially
considering the DoJ now is the lead agency for the government's Interagency ADR
Working Group. Nevertheless, contractors who plan at the outset to make use of ADR to
resolve their contract controversy should take into account such past resistance to ADR
use when determining whether to pursue contract controversies with the Court of Federal
Claims, rather than taking an appeal to a board of contract appeals.
E
United States District Courts
Most federal district courts54 have adopted on or more ADR processes.
53See 28 U.S.C. §516 ("except as otherwise authorized by law, the conduct of litigation in which
the United States . . . is a party . . . is reserved to officers of the Department of Justice); and 28
U.S.C. §519 ("except as otherwise authorized by law, the conduct of litigation in which the United
States . . . is a party . . . is reserved to officers of the Department of Justice."); and 5 U.S.C. §3109
("the head of an Executive . . . or military department may not employ an attorney . . . for the
conduct of litigation in which the United States . . . is a party . . . but shall refer the matter to the
Department of Justice.") See also, Executive Order 6166 (1933), reprinted in 77 Cong. Rec. 5707-
08 (1933)(consolidating, reorganizing, transferring, and abolishing certain executive agencies).
54 At present, the federal district courts have coextensive jurisdiction with the United States Court of
Federal Claims with respect to: (1) federal contract bid protests, pursuant to the Tucker Act, 28 U.S.C.
§1491 (b) (subject to a "Sunset" provision, under which the jurisdiction expires as of January 1, 2001
see 28 U.S.C. §1491, Note); and (2) federal contract claims not exceeding $10,000 in amount, pursuant
to the
(footnote continued on next page)
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According to a recent study conducted by the Federal Judicial Center and the Center for
Public Resources,55 the most frequently employed ADR techniques are mediation,
arbitration, early neutral evaluation, and various settlement mechanisms, e.g., settlement
conferences or "settlement weeks." This study provides a comprehensive review of the
various federal district court ADR initiatives. The Federal Judicial Center has posted the
text of the study on its web site at http://www.fjc.gov.
The ADRA of 1998 will prompt a renewed emphasis on the use of ADR in district courts.
Specifically, the Act requires each district court to authorize, by local rule, the use of
alternative dispute resolution processes in all civil actions. In addition, the Act requires
each district court to devise and implement its own ADR program and to encourage and
promote the use of ADR in its district. Equally important, the Act requires each district
court to "provide for the confidentiality of the ADR processes and to prohibit disclosure
of confidential dispute resolution communications." This may produce confidentiality
protections in federal courts that are even broader than those found in the ADRA of 1996.
These and other provisions of the Act will require courts to redouble their efforts to
integrate ADR into their case management efforts.
(footnote continued from previous page)
so-called "Little Tucker Act," 28 U.S.C. §1346(a)(2).
55ADR and Settlement Programs in the Federal District Courts: A Sourcebook for Judges and
Lawyers.
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XI
Lessons Learned
A
The Parties' Perspective
The following list represents an amalgamation of lessons learned from the perspective of
those who regularly participate in ADR proceedings:56
1. Contractors distinguish between those matters considered to be "routine" and those in
which the outcome could have a material adverse effect on the company. Routine matters
include those where either the dollar amount or the issue involved is not such that an
adverse decision is likely to impact substantially the fiscal or operational health of the
company. The prosecution or defense of these matters is a transactional cost of the
company part and parcel of doing business. Conventional wisdom is that transactional
matters are well suited for ADR, where parties are able to fashion innovative and cost-
effective mechanisms for resolving disputes quickly. Where a material adverse effect
hangs in the balance, however, contractors have less incentive to "bet the company" on
innovative dispute resolution techniques and are more prone to opt for litigation.
2. The informality of ADR tends to reduce interpersonal conflict between the parties and
results in a greater willingness to accept an adversary's perspective.
3. As the commitment of time and resources to an ADR proceeding grows, so will
commitment to reaching a settlement.
4. Written ADR agreements are highly recommended to help prevent confusion about the
ADR process.
5. Keep the ADR process and procedure simple.
6. Make the products of the ADR process and procedure usable in any ensuing litigation,
to the maximum extent practicable.
7. Be sure the ADR procedure provides for sufficient, but not excessive, information
exchange remember that the purpose of the information exchange is to facilitate the
development of decision-quality information on the basis of which the parties' business
representatives might agree to settle the contract controversy.
56 For another listing of "ADR Lessons Learned," see Appendix 29.
Page 81
8. Be sure to set a date certain for the submission of information that provides sufficient
time to analyze the information provided before the parties begin to exchange their
respective positions.
9. Business representatives and others involved in the ADR must be willing to commit
time as required and must coordinate and communicate with their respective ADR teams.
10. Access to business representatives/financial decision-makers by other ADR team
members is essential.
11. In every large ADR proceeding of which the authors are aware, the parties have relied
primarily on the use of documentary information and, when needed, expert assistance.
12. You never lose by doing ADR a very high percentage of cases are resolved through
use of non-binding ADR. Even where a case does not settle completely, the parties have
narrowed the contract controversy and reduced the need or time required for further
discovery. Other benefits include reduced time needed to develop the issues and try the
case.
13. Minimize or eliminate any time lag between settlement and the execution of a bilateral
contract modification by ensuring the necessary equipment, documentation, and
personnel are readily available.
14. Be flexible, be prepared to adjust, and be prepared to change any part of the ADR
plan or procedure that the parties agree is not working as desired.
15. Begin the ADR process design with the end in mind. Ensure that you identify funding
sources to pay for an anticipated settlement as you begin your ADR process design.
Equally important, be sure to contact DCAA or other government audit agency as early as
possible to secure the necessary auditor assistance regarding incurred costs audits of the
contract controversy. Last, but not least, be sure to keep all the relevant stakeholders
apprised of your plans and progress especially those whose permission your client may
need to pay funds in settlement of the contract controversy.
B
The Neutrals' Perspective
The experience of neutrals with the various Dispute Resolution Forums has been that
three key elements figure strongly in the success of any non-binding ADR Preparation,
Commitment, and Confidence.
Page 82
1. Preparation. The parties and the neutral must be thoroughly prepared before the ADR
proceeding begins.
The parties must be satisfied that they know enough about the merits and dollar value
of their respective cases, through legal research and discovery or other information
exchange, to be able to proceed. The information necessary to permit the parties to
make informed decisions will vary with the complexity of the issues involved and must
be determined on a case-by-case basis.
The neutral can help the parties refine the legal issues, focus on the information that is
relevant, and assist them in working out procedures to insure all information critical to
a resolution is disclosed.
The neutral's preparation and familiarity with the case before the mediation begins is
very important. The parties should provide the neutral with sufficient background
material before the ADR commences, so that the neutral is familiar with the issues in
controversy. In a contract controversy of any complexity, the neutral will expect the
parties to identify those documents that they consider critical and to provide a brief
position statement.
It is a common misconception that ADR has no defined procedures. Outlining within
the written ADR agreement the specific procedures to be followed is an important step
in the ADR process. The parties should tailor the procedures to the contract
controversy. The parties should consult the neutral in determining the techniques to be
used and to clarify procedures. The parties should expect the neutral to "enforce" the
procedural agreement they reach.
It is an overstatement that "the rules of evidence" do not apply in ADR proceedings.
Information that is irrelevant, that cannot be authenticated, or that lacks credibility
cannot be used to advantage in ADR. In terms of preparation for an ADR proceeding,
the parties should also be aware that the burden of proof is not changed in ADR.
Demonstrative evidence can play an important role in getting to the heart of the matter.
A picture may truly be "worth a thousand words" in ADR.
Face-to-face mediation is preferable to telephonic mediation.
It is best to know up-front how and when payment will be made in the event of a
settlement.
It is also best to execute a settlement agreement at the conclusion of an ADR
Page 83
proceeding. Therefore, as part of preparation for ADR, it is helpful for the parties to
have available for use at the ADR proceeding draft agreements that can be used once a
settlement is reached. Laptop computers and disks containing such drafts are
particularly useful, since they allow for draft terms to be negotiated, modified and
finalized in short order.
2. Commitment. The principals and counsel who participate must be committed to the
success of the ADR proceeding, must have the authority to settle, want the process to
work, and act accordingly during the mediation process.
Principals must have settlement authority if the ADR is to have any reasonable chance
of success. In those rare instances when limits are placed on a principal's authority, the
limits should be disclosed. Agreements in principle to settle which are subject to
approval by a higher authority must include a commitment to exert good faith efforts to
seek the necessary approval in a timely manner.
All of the parties with a stake in the outcome must support the process. For example,
architect-engineers, subcontractors, banks, and insurers may be potential stakeholders
and may have interests to be considered. Sometimes, another government agency may
have a funding responsibility and, therefore, a stake in the outcome.
The parties must understand that ADR is not litigation and that treating ADR as
litigation will doom it to failure. The parties must not only be familiar with ADR
procedures, but committed to making a good faith effort to use those procedures to
settle their contract controversy.
Other than with binding arbitration proceedings and ADR proceedings involving non-
binding advisory opinions, a party's primary focus should be on presenting its position
to the other side, not the neutral.
Mediation advocacy differs from litigation advocacy. It is a quiet advocacy that aims at
advancing the settlement process, while maintaining awareness that litigation remains
an option if the parties cannot bridge their differences.
3. Confidence. The parties must have confidence in the neutral and the neutral's ability to
provide an unbiased and realistic assessment of the strengths and weaknesses of a party's
case.
Keep in mind that, in non-binding ADR, the neutral is not a decision-maker. The
neutral's role is that of impartial evaluator.
Page 84
Also recognize that ex parte communications with the neutral may be essential in
facilitating discussions.
It is generally preferable that the neutral be recused from further involvement in the
matter, in the event the non-binding ADR fails to achieve a resolution of the contract
controversy. Recusal of the neutral fosters impartiality and builds confidence in the
ADR process.
Each party should expect the neutral to provide it with a candid assessment of the
strengths and weaknesses of its position, while maintaining neutrality. Do not expect
the ADR process to strengthen a weak case or, conversely, to weaken a strong case.
The parties should count on the neutral to facilitate communications and to persuade
when necessary. Expect patience, good listening skills, and a sense of humor that is
aimed at advancing the settlement process.
Success rates for non-binding ADR procedures at the Dispute Resolution Forums are
very high. In the final analysis, the success of non-binding ADRs has depended more on
the good faith commitment of the parties to making the process work for them than on
the skills of a particular neutral.
Page i

Appendices
1. Table of Acronyms 1
2. Department of Health and Human Services
2
Departmental Appeals Board ADR Procedures
3. Defense Advanced Research Projects Agency
6
(DARPA) Model ''Disputes" Clause
4. The Legal Framework for Using Alternative Dispute
8
Resolution (ADR): Relevant Materials on the Web
5. Administrative Dispute Resolution Act of 1996: What 9
You Need to Know to Make it Work for You
6. Alternative Dispute Resolution Act of 1998, Pub. L.
52
No. 105-315, 112 Stat. 2993 (Oct. 1998)
7. Federal Acquisition Regulation ADR Coverage (As
59
revised by Federal Acquisition Circular 97-09)
8. Federal Agency ADR Policy Documents on the Web 70
9. Armed Services Board of Contract Appeals (ASBCA)
"Notice Regarding Alternative Methods of Dispute 71
Resolution"
10 Memorandum of Understanding to Obtain General
Services Board of Contract Appeals (GSBCA) ADR 74
Services
11 Naval Facilities Engineering Command ADR Program 76
(Dispute Review Boards)
12 ADR Agreement Structured Settlement Discussions 78
with Possible Third-Party Assistance
Page ii

13 ADR Agreement Unassisted Mini-Trial 81


14 ADR Agreement Mediation of Litigation Pending in 86
Federal District Court
15 ADR Agreement -- Board Judge-Assisted Mediation 91
16 ADR Agreement Mediation and Early Neutral
196
Evaluation
17 ADR Agreement ASBCA Judge-Assisted Mini-Trial 100
18 ADR Agreement ASBCA Settlement Judge 106
19 ADR Agreement Summary Trial with Binding
109
Decision
20 ADR Agreement Standing Neutral and Mediation 112
21 ADR Protocol Agreement Standing Neutral 117
22 Sample ADR Contract Clause - Partnering and
120
Dispute Review Board
23 Results of Survey of Boards of Contract Appeal 123
Judges' Attitudes Toward ADR (October 1996)
24 Ethical Considerations For ADR -- A Primer 128
25 Sample ADR Settlement Agreement 132
26 Sample Contract Disputes Act Interest Computation 136
27 Available ADR Materials 137
Page iii

28 U.S. Army Litigation Center -- Alternative Disputes


Resolution Policies and Procedures Guide for Trial
Attorneys (Text, plus Enclosures 1 (CAD ADR 143
Appropriateness Checklist), 3 (CAD ADR Methods
Checklist), and 5 (BCAs ADR Sharing Agreement))
29 ADR Lessons Learned 160
30 GAO's Use of "Negotiation Assistance" and
169
"Outcome Prediction" as ADR Techniques
31 United States Court of Federal Claims Amended
175
General Order 13
Page 1
Table of Acronyms

ACRONYMDESCRIPTION
ABA American Bar Association
ADR Alternative Dispute Resolution

ADRA of Administrative Dispute Resolution Act of 1996, Pub.


1996 L. No. 104-320 (codified at 5 U.S.C. §571, et seq., and
in various subsections of 41 U.S.C. §605)
ADRA of Alternative Dispute Resolution Act of 1998, Pub. L.
1998 No. 105-315, 112 Stat. 2993 (October 30, 1998)
AFMC Air Force Materiel Command
ASBCA Armed Services Board of Contract Appeals
BCA Board of Contract Appeals
CAD (Army) Contract Appeal Division
CDA Contract Disputes Act, 41 U.S.C. §§601-613
Competition in Contracting Act, 10 U.S.C. §2304, et
CICA
seq.; 41 U.S.C. §251, et seq.
DARPA Defense Advanced Research Projects Agency
DoD United States Department of Defense
DoJ United States Department of Justice
DRB Dispute Review Board
DRO Dispute Resolution Officer
EAJA Equal Access to Justice Act, 5 U.S.C. §504
FAA Federal Aviation Administration
Federal Acquisition Regulation, Title 48, Code of
FAR
Federal Regulations
Federal Acquisition Streamlining Act, Pub. L. 103-
FASA
355, 108 Stat. 1994 (October 13, 1994)
United States Department of the Treasury, Financial
FMS Management Service
FOIA Freedom of Information Act, 5 U.S.C. §552
GAO United States General Accounting Office

GSBCA United States General Services Administration Board


of Contract Appeals

HHS United States Department of Health and Human


Services

IADRWG Interagency Alternative Dispute Resolution Working


Group
NPRM Notice of Proposed Rulemaking

ODRA (Federal Aviation Administration) Office of Dispute


Resolution for Acquisition
REA Request for Equitable Adjustment

VABCA United States Department of Veterans' Affairs Board


of Contract Appeals
Page 2
Department of Health and Human Services Departmental Appeals Board ADR Procedures
The following is excerpted from the Board's standard docketing letter:
ALTERNATIVE DISPUTE RESOLUTION: Although the appeal is now pending, the
parties may negotiate to resolve the dispute informally. The Board will assist in any way
appropriate, and can provide alternative dispute resolution services such as mediation,
early neutral evaluation and arbitration. For information on these services, call the
Director of Mediation at (202) 690-7006. [A brochure describing mediation is enclosed
for the appellant/the parties.]

<><><><><><><><><><><><>

The following is excerpted from the Board's brochure:


More than ever, managers and employees must deal with constant change -- change
which can increase conflict in the work place and in other areas of life. Most people see
conflict as destructive, and few feel equipped to handle it well. In reality, conflict is a
normal part of living and, in itself, is neither good nor bad. Properly handled, it can be a
powerful force for productive solutions and better communication.
At the Department of Health and Human Services, you have available a team of experts in
managing conflict -- whether it occurs in the work place, between organizations, or with
contractors, grantees or other customers. The HHS team can help not only with problem
solving, but also with communication skills to enhance individual or team performance.
WHAT ARE SOME CONFLICT MANAGEMENT TOOLS THAT COULD HELP YOUR
ORGANIZATION?
Modern conflict management practices include many tools to help you prevent and
resolve disputes. To begin with, there is basic training for supervisors/ employees in
better communication and conflict management skills. Then, there is the use of trained
neutrals--facilitators and mediators--to help parties in conflict define their problem,
exchange information, devise options and criteria to test options, and develop solutions.
The neutral's goal is to help the parties themselves find the solutions which best meet
their needs. The neutral keeps the parties focused on the problem, not each other, and
brings to the parties both perspective and an environment for creative problem-solving.
Depending on the parties' needs, conflict management techniques range from informal to
structured. Some techniques include:
Page 3
Mediation
A neutral third party helps resolve disputes in a manner that is acceptable to both parties.
Unlike a judge, a mediator does not render an opinion. A mediator helps the parties focus
on their interests and goals so they can come to an agreement that meets both parties'
individual and mutual needs. The process is confidential.
Facilitation
An impartial third party acts as a process guide and assists in gaining effective
participation and communication among parties trying to hold a meeting involving
complex issues or multiple decision-makers. Interest-Based Negotiation (IBN)
In contrast to positional, adversarial bargaining, in IBN a facilitator helps parties focus on
the interests underlying their positions so they can identify joint interests and derive
creative, mutually beneficial solutions.
Partnering Workshop
The partnering workshop provides a facilitated, open environment for parties to a
contract or grant to work as a team in order to discuss expectations and determine
methods for managing conflict and preventing disputes. Partnering fosters increased
communication and helps build strong working relationships among the parties.
Negotiated Rulemaking and Public Policy Dialogues
A group works together to develop public policy, by consensus. A trained facilitator
convenes representatives of interest groups that will be affected by the rule or policy, and
leads them through an interest based process to develop a proposed solution.
Focus Groups
A facilitator creates a representative "discussion group" to observe how people interact
and learn their opinions to later educate the client about the existing views on a topic.
WHAT ARE THE BENEFITS OF CONFLICT MANAGEMENT?
1. It allows the parties to retain control
2. It fosters more creative solutions
3. It is timely
Page 4
4. It is economical
5. It enhances communication
6. It improves relationships between parties
WHAT CAN THE HHS ADR TEAM DO FOR ME?
The HHS ADR Team is a recognized leader throughout the Federal Government in
providing a complete spectrum of Conflict Management services. The Team consists of
experienced professionals who will consult with you about your specific situation and
help you choose the tools that will best suit your needs. The ADR Team can provide an
expert to serve as a neutral, or design a training to better equip your office to prevent
conflict and deal effectively with it when it does arise.
Some of the services we can provide are:
TRAINING:
Conflict Management
Communication
Mediation
Negotiated Rulemaking
Interest-Based Negotiation
INTERVENTIONS:
Group Facilitation
Negotiation Facilitation
Mediation
Mediation/Arbitration
Arbitration
Negotiated Rulemaking
Focus Groups
PARTNERING:
Contracts
Grants
CONSULTATION:
ADR Design
Organizational Development
HOW CAN I GET FURTHER INFORMATION? Call (202) 690-7656 or (202) 690-6184 to
obtain more information.
<><><><><><><><><><><><>
Page 5
The following is taken from the Board's on-line Practice Manual (accessible on the World
Wide Web at http://www.hhs.gov/progorg/dab/manual.html):
VIII. Board Mediation
In addition to providing parties to a dispute a forum for resolving their differences in
adversarial fashion, the Board offers mediation services. The Board encourages the
parties to continue to negotiate to resolve or narrow the issues in dispute, and the Board
members and staff are trained in the use of mediation techniques. As described in 45
C.F.R. 16.18, the Board will provide a mediator if both parties agree and the Board deems
that mediation would be useful.
As practiced by the Board, mediation enhances the parties' own negotiations by use of a
third party (typically a Board staff attorney) who has special training in the
communication skills relevant to the kinds of disputes we have. Since mediation often
involves one-on-one meetings with each side, the mediator is specifically instructed not to
communicate with other Board personnel about the case. Mediation may involve both
individual and joint meetings. The objective is not compromise: rather, the objective is to
help each side in the dispute understand the other's point of view, with a goal of
narrowing what is in dispute or clarifying issues. Often, however, a case is resolved as a
result of achieving this goal.
It may be helpful also to note what Board mediation does not do:
1. It does not bind the parties except to the extent that they agree to be bound, and say so
in writing. Thus, it is unlike binding arbitration.
2. It does not add anything to the record except the final written agreement. The parties
may add to the record, but only to the extent they both agree.
3. It does not unduly delay the progress of a case before the Board. Even though the usual
steps leading to a Board decision may be suspended, the status during mediation is
monitored closely to ensure that the parties are continuing to work toward resolution of
the dispute. Of course, the determination of status is done in a manner to preserve the
confidentiality of the negotiations and the independence of the mediator. If mediation
fails to produce agreement, the case is promptly returned to regular adjudication.
Page 6
Defense Advanced Research Projects Agency (Darpa) Model "Disputes" Clause
ARTICLE VI: DISPUTES
A. General
Parties shall communicate with one another in good faith and in a timely and cooperative
manner when raising issues under this Article.
B. Dispute Resolution Procedures
1. Any disagreement, claim or dispute between DARPA and the Consortium
concerning questions of fact or law arising from or in connection with this Agreement,
and, whether or not involving an alleged breach of this Agreement, may be raised only
under this Article.
2. Whenever disputes, disagreements, or misunderstandings arise, the Parties shall
attempt to resolve the issue(s) involved by discussion and mutual agreement as soon as
practicable. In no event shall a dispute, disagreement or misunderstanding which arose
more than three (3) months prior to the notification made under subparagraph B.3 of
this article constitute the basis for relief under this article unless the Director of
DARPA in the interests of justice waives this requirement.
3. Failing resolution by mutual agreement, the aggrieved Party shall document the
dispute, disagreement, or misunderstanding by notifying the other Party (through the
DARPA Agreements Officer or Consortium Administrator, as the case may be) in
writing of the relevant facts, identify unresolved issues, and specify the clarification or
remedy sought. Within five (5) working days after providing notice to the other Party,
the aggrieved Party may, in writing, request a joint decision by the Director, Office of
Management Operations, and senior executive (no lower than (INSERT A LEVEL OF
EXECUTIVE FAR ENOUGH REMOVED FROM THE PROGRAM TO MAINTAIN A
GREATER LEVEL OF IMPARTIALITY) level) appointed by the CMC of the
Consortium. The other Party shall submit a written position on the matter(s) in dispute
within thirty (30) calendar days after being notified that a decision has been requested.
The Director, Office of Management Operations, and the senior executive shall conduct
a review of the matter(s) in dispute and render a decision in writing within thirty (30)
calendar days of receipt of such written position. Any such joint decision is final and
binding.
4. In the absence of a joint decision, upon written request to the Director of DARPA,
made within thirty (30) calendar days of the expiration of the time for a decision under
subparagraph B.3 above, the dispute shall be further reviewed. The Director of
DARPA
Page 7
may elect to conduct this review personally or through a designee or jointly with a
senior executive (no lower than (INSERT A LEVEL OF EXECUTIVE FAR ENOUGH
REMOVED FROM THE PROGRAM TO MAINTAIN A GREATER LEVEL OF
IMPARTIALITY) level) appointed by the CMC of the Consortium. Following the
review, the Director of DARPA or designee will resolve the issue(s) and notify the
Parties in writing. Such resolution is not subject to further administrative review and,
to the extent permitted by law, shall be final and binding.
C. Limitation of Damages
Claims for damages of any nature whatsoever pursued under this Agreement shall be
limited to direct damages only up to the aggregate amount of DARPA funding disbursed
as of the time the dispute arises. In no event shall DARPA be liable for claims for
consequential, punitive, special and incidental damages, claims for lost profits, or other
indirect damages.
Page 8
The Legal Framework for Using Alternative Dispute Resolution (ADR):
Relevant Materials on the Web
STATUTES SOURCE
Administrative
Dispute Resolution http://www.financenet.gov/iadrwg.htm
Act of 1996
Alternative Dispute http://www.adr.af.mil/Welcome.html (See
Resolution Act of General ADR Resources Electronic
1998 Documents)

EXECUTIVE ORDERS SOURCE


Executive Order 12988, http://www.adr.af.mil/Welcome.html
Civil Justice reform (See General ADR Resources
(February 1996 Electronic Documents)
Executive Order 12979, http://www.adr.af.mil/Welcome.html
Agency Procurement (See General ADR Resources
Protests (October 26, 1995 Electronic Documents)

REGULATIONS SOURCE
Federal Acquisition http://www.arnet.gov/far/ or
Regulation Coverage http://farsite.hill.af.mil
Department of Justice,
Office of the Senior
http://www.adr.af.mil/Welcome.html
Counsel for Alternative
(See Other Government ADR
Dispute Resolution (ADR) Programs Department of Justice)
Case Identification Criteria
for ADR (July 15, 1996).
Department of Defense http://www.adr.af.mil/Welcome.html
Directive 5145.5, Alternative(See General ADR Resources
Dispute Resolution Electronic Documents)
Federal Aviation
Administration Office of
http://www.faa.gov/agc
Dispute Resolution for
Acquisition - Procedures
Page 9
The Administrative Dispute Resolution Act of 1996:
What You Need to Know to Make It Work for You
By Joseph M. McDade, Esq.
Spring, 1999
Page 10
Introduction
This document focuses on those aspects of the Administrative Dispute Resolution Act of
1996 (ADRA or the Act) that establish a framework for ADR use by federal agencies. It is
intended to provide guidance to agency personnel, regardless of their area of expertise.
Accordingly, it provides where necessary, background information to ensure the reader
understands the context in which certain provisions operate.
Here is what you will find in the pages that follow.1 Section I discusses the ADRA's
general grant of authority to use ADR procedures as well as its guidelines for determining
if ADR use is appropriate. Section II outlines the Act's provisions authorizing agencies to
submit to binding arbitration. This section integrates relevant sections of the ADRA with
the Federal Arbitration Act to provide a better understanding of how binding arbitration
will work under the ADRA. Section III discusses the Act's provisions regarding statutory
guidelines about which disputes may not be appropriate for ADR.
Section IV discusses the powers provided to an arbitrator pursuant to the ADRA. Section
V discusses enforcement of arbitration agreements as well as the enforcement and
vacation of arbitration awards.
Section VI discusses the limited guidance provided by the Act regarding the qualifications
of neutrals. Sections VII and VIII discuss the authority and procedures for procuring the
services of a neutral. Section VIII integrates portions of the Competition in Contracting
Act (CICA) as well as relevant portions of the Federal Acquisition Regulations (FAR) in
order to place the ADRA's provisions in the proper context.
Section IX provides a step-by-step analysis you can use to ensure that certain information
provided in, and for the purposes of, a dispute resolution proceeding remains
confidential.
Section X addresses the amendments that the ADRA made to the Contract Disputes Act
(CDA). And last, but not least, Section XI discusses certain CDA provisions that
Congress designed to promote the use of ADR.
The paper's conclusions are found in Section XII.
1 Some may say that I have ignored the most important provisions of the ADRA of 1996 --
specifically, Section 3 of the ADRA of 1996, which requires federal agencies to take certain
concrete steps to implement its terms. I recognize the importance of this section. However, I
believe this information is addressed quite well by the Air Force ADR Program web site at
http://www.adr.af.mil. This site provides information about the ADR policies and programs
adopted by the Department of the Air Force and numerous other Federal agencies. It also provides
dozens of useful links to ADR information generally.
Page 11
Table of Contents

I. Authority to Use Third-Party Neutrals in Non-Binding 1


Alternative Dispute Resolution (ADR) Proceedings.
A. The Administrative Dispute Resolution Act of 1996
(ADRA of 1996) authorizes the voluntary use of non- 1
binding ''Dispute Resolution Proceeding[s]."
B. Elements of a Dispute Resolution Proceeding. 1
C. The ADRA of 1996 authorizes the voluntary use of
ADR and "supplement[s] rather than limit[s] other 2
available agency dispute resolution techniques."
D. An agency's decision to use or not use a non-
binding Dispute Resolution Proceeding is not subject 2
to judicial review.
II. Authority to Use Binding ADR Proceedings. 3
A. The ADRA specifically authorizes the use of binding
arbitration, but requires that specified procedures be 3
followed.
B. An agency's decision to use or not use a binding
Dispute Resolution Proceeding is not subject to 4
judicial review.
III. The ADRA of 1996 Provides Guidance on What
4
Cases May not Be Appropriate for an ADR Resolution.
A. The ADRA of 1996 provides guidelines for
4
determining if ADR use may not be appropriate.
Page 12

B. Other considerations may render ADR use 5


inappropriate.
IV. Powers Provided to an Arbitrator under the ADRA 6
of 1996.
A. Arbitrators have authority to regulate the course
6
and conduct of arbitral hearings.
B. Arbitrators have authority to administer oaths and 6
affirmations.
C. Arbitrators have authority to compel attendance of
witnesses and production of evidence at the hearing, 6
but only to the extent that the agency is otherwise
authorized to do so by law.
D. Arbitrators have authority to make awards. 6
V. Enforcement of Arbitration agreements and Awards. 7
A. Enforcement of agreements to submit a dispute to 7
arbitration.
B. Finality and enforcement of arbitration awards. 8
C. Vacation of arbitration awards. 9
VI. Qualifications of Neutrals. 10
A. The ADRA of 1996 provides little guidance
10
regarding the qualifications of neutrals.
B. The ADRA of 1996 deleted the ADRA of 1990's
requirement for a "lead agency" to establish standards 11
for neutrals (including experience, training,
affiliations, and other qualifications).
VII. Authority to Procure the Services of Neutrals. 12
A. The ADRA of 1996 authorizes agencies to procure 12
the services of neutrals.
B. Agencies are, however, required to ensure that
parties
Page 13

be "entitled to participate in the selection of an 12


arbitrator."
VIII. Streamlined Procedures for hiring Neutrals. 12
A. The ADRA of 1996 amended the Competition in
Contracting Act to permit the acquisition of neutral 12
services for ADR proceedings to occur without "full
and open competition."
B. Justifications, procedures, and approvals required
to procure the services of a neutral using "other than 13
full and open" competition vary with the anticipated
contract amount.
IX. ADRA of 1996's Confidentiality Provisions. 15
A. The ADRA of 1996 establishes a narrow
confidentiality provision aimed at protecting certain 15
communications to and generated by a neutral.
B. To qualify for the confidentiality protections of the 15
ADRA, certain threshold requirements must be met.
C. Qualifying Confidential Dispute Resolution
communications between a Neutral and a Party or
generated by the Neutral and provided to all Parties 16
are also exempt from disclosure under the Freedom of
Information Act (FOIA).
D. The application of the ADRA's confidentiality
protections to communications between: (1) a Party
and a Neutral; (2) a Party and a Party; and (3) the 18
Neutral and the Parties, require separate analysis and
may yield different results.
X. The ADRA of 1996 Amends the Contract Disputes
Act (CDA) of 1978, to Incorporate Most of the ADRA of 23
1996's Provisions.
A. "Notwithstanding any other provision of the
ADRA of 1996, contracting officers are authorized to 23
use any "alternative means of dispute resolution under
the ADRA of 1996."
Page 14

B. Contractors are held to the same claim certification


requirements that normally apply to the submission of 24
a claim. Generally, this means that contractors must
certify all contractor claims exceeding $100,000.
XI. Other Statustes have Amended the CDA to Promote 24
the Use of ADR by Contracting Officers.
A. Contracting officers are required to provide a
written explanation, citing one or more of the
conditions contained in § 572(b) of the ADRA, as to 25
why he or she declined a contractor's request to use
ADR.
B. Contractors are required to provide a written
explanation, citing one or more of the conditions 25
contained in § 572(b) of the ADRA, as to why they
declined a contracting officer's request to use ADR.
XII. Conclusion 25
ATTACHMENT:
1. The Administrative Dispute Resolution Act of 1996.
Page 15
Key Provisions of the Administrative Dispute Resolution Act of 19962
I. AUTHORITY TO USE THIRD-PARTY NEUTRALS IN NON-BINDING
ALTERNATIVE DISPUTE RESOLUTION (ADR) PROCESSING.
A. The Administrative Dispute Resolution Act of 1996 (ADRA of 1996) authorizes the
voluntary use of non-binding "Dispute Resolution Proceeding[s]." See 5 U.S.C. §
572(a).3
B. Elements of Dispute Resolution Proceeding.
1. Use of an alternative means of dispute resolution4 process;
2. Resolution of an issue in controversy;5
3. Appointment of a neutral; and
4. Specification of the parties who will participate.
See 5 U.S.C. § 571(6) (emphasis added).
2 The views and opinions expressed by the author are his own and do not represent the opinion or
position of the Department of the Air Force. I wish to acknowledge the invaluableassistance
received from the reviews and comments made by: Hon. Martin Harty, Armed Services Board of
Contract Appeals; Chris Edwards, ADR Program Manager, Department of the Air Force; Chris
Tang, ADR Program Student Intern, Department of the Air Force; Jennifer May Bergstrom and
Herman D. Levy.
3 The Administrative Dispute Resolution Act of 1996, Pub. L. No. 104-320, 110 Stat. 3870 (1996)
("ADRA of 1996") makes permanent the ADRA of 1990, Pub. L. No. 101-552, 104 Stat. 2736 as
amended by the Administrative Procedure Technical Amendments Act of 1991, Pub. L. No. 102-354.
4 This term is defined to mean "any procedure that is used to resolve an issue in controversy, including
but not limited to, conciliation, facilitation, mediation, factfinding, minitrials, arbitration and use of
ombuds, or any combination thereof." 5 U.S.C. § 571(3).
5 This term is defined as "an issue which is material to a decision concerning an administrative
program of an agency, and when there is a disagreement (A) between an agency and persons who
would be substantially affected by the decision; (B) between persons who would be substantially
affected by the decision. See 5 U.S.C. § 571(8). Under the Federal Acquisition Regulations (FAR),
this term is defined, for purpose of contract controversies, to mean "a material disagreement between
the Government and the contractor which (1) may result in a claim or (2) is all or part of an existing
claim." See FAR 33.201.
Page 16
C. The ADRA of 1996 authorizes the voluntary use of ADR and "supplement[s] rather
than limit[s] other available agency dispute resolution techniques." 5 U.S.C. § 572(c).
D. An agency's decision to use or not use a non-binding Dispute Resolution Proceeding
is not subject to judicial review. 5 U.S.C. § 581(b).
NOTE: The foregoing provisions provide objective standards for
determining when the confidentiality provisions of this Act apply.
Once the parties agree to use an ADR technique, select a neutral,
and the neutral agrees to provide the service, then the neutral has
been "appointed" and "specified parties" are participating. To
avoid disputes regarding when the ADR process began, a
memorandum to the record or a formal written ADR agreement is
recommended.

II. AUTHORITY TO USE BINDING ADR PROCEEDINGS.6


A. The ADRA specifically authorizes the use of binding arbitration, but requires that
specified procedures be followed.
1. The authority to engage in binding arbitration becomes effective only after the
agency, "in consultation with the Attorney General," promulgates arbitration
guidelines. See 5 U.S.C. § 575(c).
2. Procedural and substantive restrictions on the use of binding arbitration require
that:
a. The decision to arbitrate must be voluntary on the part of all parties to the
arbitration. See 5 U.S.C. § 575(a)(1)(agencies authorized to use binding arbitration
"whenever all parties consent"); § 575(a)(3)("An agency may not require any
person to consent to arbitration as a condition of entering into a contract or
obtaining a benefit"); and
b. An officer or employee of the agency must either:
6 For a discussion of the legal and policy arguments raised against providing the federal
government with such authority during passage of the ADRA of 1990, see generally Dauber, The
Ties That Do Not Bind: Nonbinding Arbitration in Federal Administrative Agencies. 9 Admin. L. J.
Am. U. 165 (1995).
Page 17
i. Have the authority to enter into a settlement concerning the matter; or
ii. Have specific authority from the agency to consent to the use of arbitration.
See 5 § U.S.C. 575(b).
3. The agreement to arbitrate must be in writing and must set forth the subject matter
submitted to the arbitrator. See 5 U.S.C. § 575(a)(2).7 (See Section IV, for a
discussion of some of the provisions that should be considered in drafting an
arbitration agreement.)
4. Each written agreement to arbitrate must specify the maximum award that the
arbitrator may grant and may specify other conditions limiting the range of possible
outcomes. See 5 U.S.C. § 575(a)(2).
B. An agency's decision to use or not use a binding Dispute Resolution Proceeding is
not subject to judicial review. See 5 U.S.C. § 581(b).
III. THE ADRA OF 1996 PROVIDES GUIDANCE ON WHAT CASES MAY NOT BE
APPROPRIATE FOR AN ADR RESOLUTION.
A. The ADRA of 1996 provides guidelines for determining if ADR use may not be
appropriate.
1. The parties need a definitive and authoritative decision;
2. The matter involves significant issues of government policy that require
procedural development and ADR will not assist policy development;
3. Maintaining an established policy and/or avoiding variations in decision is of
special importance;
4. The matter significantly affects non-parties;
5. A full public record of the proceeding or resolution is important; or
7 The ADRA expressly permits parties to agree to submit only certain issues in controversy to
arbitration. See § 575(a)(1)(A).
Page 18
6. The agency must maintain continuing jurisdiction over the matter with the right to
alter the resolution as circumstances demand. See 5 U.S.C. § 571(b).
B. Other considerations may render ADR use inappropriate.
1. Fraud: If a party to a proposed ADR attempt is under criminal investigation for
conduct related to the dispute to be submitted to ADR, ADR use is inappropriate.
2. Injunctive relief required: Matters requiring injunctive relief are not appropriate
for ADR.
3. Inspector general investigations: Agency personnel should be careful to
coordinate with all appropriate offices when using ADR to resolve matters that they
believe are the subject of an agency inspector general investigation.
IV. POWERS PROVIDED TO AN ARBITRATOR UNDER THE ADRA OF 1996.
A. Arbitrators have authority to regulate the course and conduct of arbitral hearings. 5
U.S.C. § 578.
B. Arbitrators have authority to administer oaths and affirmations. 5 U.S.C. § 578.
C. Arbitrators have authority to compel attendance of witnesses and production of
evidence at the hearing as authorized by section 9 of the arbitration act, but only to the
extent that the agency is otherwise authorized to do so by law.
D. Arbitrators have authority to make awards.
NOTES:
1. Because the ADRA requires each written agreement to specify
the maximum award an arbitrator may grant, agencies may not
want to agree to use binding arbitration to resolve future disputes,
but may want to restrict its use to post-dispute arbitrations. This
will permit agencies to enter into arbitration on a case-by-case
basis with a better understanding of facts and circumstances that
make its use desirable. In addition, post-dispute arbitrations will
prevent agencies from agreeing to this process in disputes that
may not be appropriate for ADR pursuant to 5 U.S.C. § 572(b).
Page 19
2. Any written agreement to use binding arbitration should state
that the arbitrator's authority is restricted to specifying who wins
and how much must be paid. Agreements should deny arbitrators
the authority to order either party to engage in specific
performance, i.e., ordering the government to restructure a
contract or program.
3. Agency counsel should be careful about using standard
arbitration agreements and procedures. Some of these procedures
contain provisions or procedures that may be not be legal for
government contracts and would therefore be unenforceable, i.e.,
agreements for the payment in advance of the receipt of the
arbitrator's services. This is, in part, why the ADRA requires
agencies to develop guidance regarding arbitration. It is
anticipated that agencies will develop unique arbitration rules and
procedures for government controversies submitted to arbitration.
4. The ADRA permits the parties to an arbitration proceeding to
agree to arbitration on the condition that the award be within a
range of possible outcomes, i.e., to agree to a "high-low"
arbitration process or perhaps even a "final offer" arbitration. See
§ 575(a)(1)(B).

V. ENFORCEMENT OF ARBITRATION AGREEMENTS AND AWARDS.


A. Enforcement of agreements to submit a dispute to arbitration.
1. The ADRA of 1996 provides that an agreement to arbitrate is enforceable pursuant
to the Federal Arbitration Act (Arbitration Act), § 4.
See 5 U.S.C. § 576. Accordingly, once the parties draft and sign an agreement to
arbitrate, they will be compelled, by a court if necessary, to submit the dispute to
arbitration.
2. Procedures for enforcing an agreement to arbitrate.
a. A party seeking to enforce a written agreement to arbitrate may petition a
district court of competent jurisdiction for an order to enforce the terms of the
agreement to arbitrate. See 9 U.S.C. § 4.
b. Procedures for initiating such an arbitration agreement enforcement proceeding
and the right of the parties to a
Page 20
hearing are outlined in the Arbitration Act. See 9 U.S.C. § 4.
B. Finality and enforcement of arbitration awards.
1. Arbitration awards do not automatically become final.
a. Before an arbitrator's award can be enforced, it must become final. Such awards
only become final 30 days after it is served on all parties. See 5 U.S.C. § 580(b).
b. An agency may extend this 30-day period for an additional 30-day period by
serving a notice of such extension on all other parties before the end of the first 30
day period. Id.
2. Once an arbitration award becomes final, it is binding on all parties pursuant to
the Arbitration Act, Sections 9 through 13. See 5 U.S.C. § 580(c). If the parties seek
to enforce an arbitrator's award, they may have options regarding how the award
will be enforced.
a. If the parties in their agreement to arbitrate agree that a judgment of the court
will be entered once an arbitration award isrendered, and specify the court to
enter the judgment, within one year after the award is rendered any party can
apply to the specified court for an order to enforce the award. See 9 U.S.C. § 9.
b. If the parties in their agreement to arbitrate agree that a judgment of the court be
entered once an arbitration award is rendered, but do not specify the court to enter
the judgment, they may apply to the United States court "in and for the district
within which the award was made" pursuant to the statutorily mandated
notification procedures. Id.
C. Vacation of arbitration awards.
1. A party may apply to a "court in and for the district wherein the award was made"
to vacate an arbitral award if one or more of the following is (are) present:
a. The award was procured by corruption, fraud, or undue means;
Page 21
b. There was evident partiality or corruption in the arbitrator;
c. The arbitrator was guilty of misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy, or any other misbehavior by which the rights of any
party may have been prejudiced; or
d. The arbitrator exceeded his/her power, or so imperfectly executed it that a
mutual, final, and definite award upon the subject matter submitted was not made.
See 9 U.S.C. § 10.
2. In the event that the award is vacated, and the time within which the agreement
required the award to be made has not expired, the court may, at its discretion, direct
a rehearing by the arbitrator. Id.
3. A person adversely affected or aggrieved by the award and who is ''other than a
party to the arbitration," may apply for vacation of an arbitrator's award if any of
the factors listed in V.C. 1.a-d, above, are present. Id.
VI. QUALIFICATIONS OF NEUTRALS.
A. The ADRA of 1996 provides little guidance regarding the qualifications of neutrals.
The Act merely requires a neutral to:
1. Be a permanent or temporary officer or employee of the federal government; or
2. Be any other individual who is acceptable to the parties to a dispute resolution
proceeding; and
3. Have no official, financial, or personal conflict of interest with respect to the
issues in controversy, unless such interest is fully disclosed in writing to all parties
and all parties agree that the neutral may serve.8 See 5 U.S.C. § 573
8 The foregoing elements appear as the definition of a "neutral" in the Federal Acquisition
Regulations (FAR) 33.201.
Page 22
B. The ADRA of 1996 deleted the ADRA of 1990's requirement for a "lead agency" to
establish standards for neutrals (including experience, training, affiliations, and other
qualifications).9
NOTE: The ADRA of 1996 adopts "a free market" approach with
regard to the qualifications of neutrals. In other words, those
qualifications necessary to convince an agency and party to select
and employ a third party neutral, subject to the limitations of 5
U.S.C. § 573, are sufficient to qualify the neutral to provide the
requested ADR services.

VII. AUTHORITY TO PROCURE THE SERVICES OF NEUTRALS.


A. The ADRA of 1996 authorizes agencies to:
1. Enter into contracts for the services of neutrals.10
See 5 U.S.C. § 573(e).
2. Use the services of one or more employees of other agencies to serve as neutrals
in Dispute Resolution Proceedings.
See 5 U.S.C. § 573(d).
3. Use, with or without reimbursement, the services and facilities of other federal
agencies, state, local and tribal governments, and private organizations. See 5 U.S.C.
§ 583.11
B. Agencies are, however, required to ensure that parties be "entitled to participate in
the selection of an arbitrator." See 5 U.S.C. § 577(a).
9 The ADRA of 1996 replaced § 573(c) of the ADRA of 1990 with new text that merely requires
"an agency" or "an interagency committee" to encourage and facilitate agency use of ADR and to
develop procedures that permit agencies to obtain the services of neutrals on an expedited basis.
10 Law generally prohibits agency officials from entering into personal service contracts.
11 The General Accounting Office has traditionally taken the view that employees being paid by one
agency should not be detailed to perform the work of another agency without reimbursement, unless
there is expressed statutory authority to do so. In a 31 Dec. 93 memorandum, however, the General
Counsel of the GAO, stated that the ADRA "clearly provides that authority."
Page 23
VIII. STREAMLINED PROCEDURES FOR HIRING NEUTRALS
A. The ADRA of 1996 amended the Competition in Contracting Act to permit the
acquisition of neutral services for ADR proceedings to occur without "full and open
competition."12
B. Justifications, procedures and approvals required to procure the services of a neutral
using "other than full and open" competition vary with the anticipated contract amount.
1. Acquisition of neutral services with an anticipated dollar value not exceeding
$2,500: These contracts13 may be awarded without soliciting competitive quotations
if the contracting officer or individual appointed in accordance with FAR 1.603-
3(b)14 considers the price reasonable.15
2. Acquisition of neutral services with an anticipated dollar value exceeding $2,500
and not exceeding $100,000 (which should be the dollar range that applies to the vast
majority of contracts for the services of private-sector neutrals):
a. These contracts are reserved exclusively for small business concerns and must
be set aside in accordance with FAR 19.5.
12 Full and open competition in which all responsible sources are permitted to compete for a
contract is the norm in government contracting. See 41 U.S.C. § 253(a) and 10 U.S.C. § 3204(c).
Exceptions to the requirement for full and open competition are also provided by law. See 10
U.S.C. § 2304(c) and 41 U.S.C. § 253(c). The ADRA of 1996 amends 10 U.S.C § 2304(c) and 41
U.S.C. § 253(c) to permit the use of "other than full and open competition" when acquiring the
"services of an expert or neutral in any part of an alternative dispute resolution process, whether or
not the expert is expected to testify."
13 Contracts for this amount are known as micro-purchases, which the FAR defines to mean the
acquisition of supplies or services, the aggregate amount of which does not exceed $2,500, except that
in the case of construction, the limit is $2,000. FAR 2.101.
14 The FAR encourages agency heads to delegate micro-purchase authority to individuals who are
employees of an executive agency or members of the Armed Forces of the United States will be using
the supplies or services being purchased. Individuals delegated this authority are not required to be
appointed on an SF 1402, but shall be appointed in writing in accordance with agency procedures.
FAR 106-3(b).
15 These contracts are not subject to the "other than full an open" justification documentation
requirements of FAR Part 6. See FAR 6.001(a)(FAR Part 6 does not apply to "contracts awarded
using the simplified acquisition procedures of part 13.").
Page 24
b. Contracting officers may solicit from only one source if the contracting officer
determines that under the circumstances of the contract action only one source is
reasonably available. FAR 13.106-2(a)(5).16
c. If the contracting officer solicits only one source, he or she must provide a
written "notation" to explain the absence of competition. FAR 13.106-2(d)(3).
3. Acquisition of neutral services with an anticipated dollar value exceeding
$100,000: FAR 6.302 governs the procedures, documentation and approvals
required by these procurements.
NOTE: The procedures and justifications for hiring an ADR
neutral are now essentially the same for agency counsel to hire an
expert to assist them in preparing for litigation or appearing as a
government witness during a trial or hearing. Agency personnel
should contact their trial attorney office to obtain the forms and
procedures used to hire such experts without "full and open"
competition.

IX. ADRA OF 1996'S CONFIDENTIALITY PROVISIONS.


A. The ADRA of 1996 establishes narrow confidentiality protections for certain
communications made to or generated by a neutral. These provisions do not provide
any new confidentiality protections for communications made between the parties
themselves. Written agreements to enter into an ADR proceeding, or a final written
agreement or arbitral award reached as a result of an ADR proceeding are not, under
the terms of the ADRA of 1996, confidential.17
B. To qualify for the confidentiality protections of the ADRA of 1996, communications
must meet certain threshold requirements:
1. The oral or written communication occurred between the time a neutral was
appointed and specified parties began participating until the termination of the ADR
process;18
16 These contracts are not subject to the "other than full and open" justification documentation,
procedures and approvals found in FAR Part 6. See FAR 6.001(a)(FAR Part 6 does not apply to
"contracts awarded using the simplified acquisition procedures of part 13.").
17 The definition of "dispute resolution communication" specifically excludes such documents. See 5
U.S.C. § 571(5).
18 5 U.S.C. § 574(a) provides that a "neutral in a dispute resolution proceeding shall not voluntarily
disclose . . . any dispute resolution communication or any communication provided in confidence to
the
(footnote continued on next page)
Page 25
2. The communication was made for the purposes of the ADR process19 and was
not discoverable before the ADR process began;20 and
3. The information was provided by a party to the neutral in confidence21 or was
generated by the neutral and provided to the parties in confidence.
C. Qualifying Confidential Dispute Resolution communications between a Neutral and
a Party or generated by the Neutral and provided to all Parties can benefit from the
following:
1. Nondisclosure: Parties and Neutrals may not voluntarily disclose qualifying
communications, see Section IX. D 1.-3., unless certain specified conditions are met.
See Section IX. D. 1. c., below.
2. Inadmissibility: Any qualifying communication disclosed in violation of the rules
specified in the ADRA shall not be admissible in any proceeding relating to the
issues in controversy with respect to which the communication was made. See 5
U.S.C. § 574(c).
3. An Exemption from disclosure under Freedom of Information Act (FOIA). See 5
U.S.C. § 574(j).22
(footnote continued from previous page)
neutral." A "dispute resolution proceeding" is defined as any "alternative means of dispute
resolution . . . in which a neutral is appointed and specified parties participate." 5 U.S.C. § 571(6).
19 This key restriction on the scope of the ADRA's confidentiality protections is found in the
definition of "dispute resolution communication," which states that it covers "any oral or written
communication prepared for the purposes of a dispute resolution proceeding . . . ." See 5 U.S.C. §
571(5).
20 5 U.S.C. § 574(f) states that "Nothing in this section shall prevent the discovery or admissibility of
any evidence that is otherwise discoverable, merely because the evidence was presented in the course
of a dispute resolution proceeding."
21 The term "in confidence" is defined to mean that the information is provided with the express intent
by the source that it not be disclosed; or under circumstances that would create the reasonable
expectation on behalf of the source that the information will not be disclosed. See 5 U.S.C. § 571(7).
22See 5 U.S.C. § 574(j) and compare § 574(b)(7)(communications "provided to or available to all the
parties to a dispute resolution proceeding" do not qualify for confidentiality protection under the
ADRA of 1996. Note also that the text of 5 U.S.C. § 574(j) merely states that qualifying
communications "between a neutral and a party" are exempt from disclosure under FOIA. The
legislative history of the ADRA of 1996, however, makes it clear that Congress intended qualifying
communications between a neutral and the parties to be covered as well. See Cong. Rec. H11449
(Sept. 27, 1996) (Representative Reed's Floor statement during the House's consideration of H.R.
4194 in which he states: "The bill provides that a document generated by a neutral and provided to
all the parties is exempt from discovery under § 574(b)(7), as well as from disclosure pursuant to
FOIA. This change will facilitate the use of
(footnote continued on next page)
Page 26
a. Only "agency records" are subject to the disclosure requirements of FOIA. See
5 U.S.C. § 552(f). Accordingly, dispute resolution communications that are not, or
do not become, agency records, are not obtainable under FOIA, i.e., oral
statements.23
b. The following general categories of dispute resolution communications may
become "agency records:"24
i. Agency personnel generate a written or electronic dispute resolution
communication.
ii. A party or nonparty participant in an ADR proceeding provides a written or
electronic dispute resolution communication to the agency, and it becomes part
of the agency's files.
iii. A party or participant submits a written dispute or electronic resolution
communication to a neutral who is a government employee (or possibly a non-
employee who works under the control of an agency)25, and a neutral retains
and makes it part of an agency's files.
iv. A neutral who is a government employee (and in some instances a non-
employee) prepares and retains a written or electronic dispute resolution
communication as part of the agency's files.
(footnote continued from previous page)
early neutral evaluation and similar ADR processes that provide an outcome prediction for both
sides. Parties are understandably reluctant to subject themselves to the risk of the neutral's opinion,
which is not based on full discovery, being used against them at trial later."). Id. (emphasis added).
23See generally, Grunewald, Freedom of Information and Confidentiality Under the Administrative
Dispute Resolution Act, 9 Admin. L. J. Am. U. 985 (1996).
24Id See also, Fordham v. Harris, 445 U.S. 169, 182-84 (1980) (stating "an agency must first either
create or obtain a record as a prerequisite to its becoming an "agency record" within the meaning of
FOIA.").
25See, e.g., Hercules, Inc. v. Marsh, 839 F.2d 1027 (4th Cir. 1988) (Army ammunition plant telephone
directory prepared at the Government's expense and for use by the government contractor that operated
the plant was an agency record under the "indicia of ownership" standard applied in Ryan v.
Department of Justice, 617 F.2d 781 (D.C. Cir. 1980).
Page 27
D. The application of the ADRA's confidentiality protections to communications
between: (1) a party and a Neutral; (2) a party and a party; and (3) the neutral and the
parties, require separate analysis and may yield different results.
1. Communications between a party and a neutral:
a. If the communications satisfy the threshold requirements for and fall within the
scope of the confidentiality protection outlined in IX. B., above.26
b. They potentially have the full protection of the ADRA of 1996's: (1)
nondisclosure rules; (2) inadmissibility rules; and (3) FOIA exemption. See §
574(a) & (b) & (j).
c. Unless:
i. All parties to the dispute resolution proceeding and the neutral consent in
writing, and, if a nonparty participant provided the communication, that
participant consents in writing. See § 574(a)(1) & (b)(2);
ii. The dispute resolution communication has already been made public. See §
574(a)(2) & (b)(3);
iii. A statute requires the dispute resolution communication to be made
public,27 but a neutral should make such communication public only if no
other person is reasonably available to disclose the communication; See §
574(a)(3) & (b)(4);
iv. A Court determines such testimony or disclosure is necessary to: (1) prevent
a manifest injustice; (2) help establish a violation of law; or (3) prevent harm to
the public health or safety of sufficient magnitude in the
26 In addition to the threshold confidentiality requirements outlined in IX. A., the ADRA requires
neutrals, subject to certain limitations, not to voluntarily disclose "any communication provided in
confidence." See § 574(a). This means that a communications made prior to the commencement of a
dispute resolution proceeding could be covered. In addition, the ADRA may also cover
communications made in confidence to the neutral, but not "for the purpose of a dispute resolution
proceeding."
27See In re Grand Jury Subpoena December 17, 1996 F. 3rd 487 (5TH Cir. 1998) (holding that the
district court erred in ruling that documents related to mediation proceedings were privileged and
protected from disclosure from the grand jury); see also In Re: March, 1994, Special Grand Jury, 897
F. Supp. 1170 (S.D.Ind. 1995)(public interest in fact-finding served by Grand Jury subpoena
outweighed settlement interested that would be served by recognizing a neutral's privilege.)
Page 28
particular case so as to outweigh the loss of confidentiality in the dispute
resolution proceedings. See § 574(a)(4) &(b)(5);
v. The dispute resolution communication is relevant to determining the
existence or meaning of an agreement or award that resulted from the dispute
resolution proceeding or to the enforcement of such an agreement or award.
See § 574(b)(6) & (g); or
If a discovery request is made upon the neutral regarding a dispute resolution
communication and the neutral notifies the parties/affected nonparty participant
of the demand; then any party/nonparty participant who within 15 calendar
days does not offer to defend a refusal by the neutral to disclose the requested
information shall have waived any objection to such disclosure. See § 574(e)
(emphasis added).
2. Communications between the parties fall outside the scope of the confidentiality
protections of the ADRA of 1996.
a. Unless a dispute resolution communication is generated by a neutral,
information that is provided to or is available to all parties to the dispute
resolution proceeding falls outside the confidentiality protections of the ADRA of
1996. See § 574(b)(7).
b. Nothing in the ADRA, however, prevents a party from using other methods of
protecting settlement discussions between parties such as: (1) seeking a protective
order from a court or board; (2) entering into an agreement pursuant to Federal
Rule of Evidence 408; or (3) simply entering into a contractual agreement that
contains confidentiality terms that will bind only those parties to the contract.
3. Communications the neutral generates and provides to the parties, e.g., a written
or oral opinion generated by the neutral as part of an Early Neutral Evaluation (ENE)
process or a factfinding effort.
a. The potential ambiguity of the text of the ADRA.
i. The text of 5 U.S.C. § 574(j) merely states that a qualifying communication
between a neutral and "a party," that becomes an agency record, is exempt
from disclosure under
Page 29
FOIA. Accordingly, it appears that communications generated by the neutral
and provided to all the parties lose their confidentiality protection.
ii. The text of 5 U.S.C. § 574(b)(7), however, states that a communications that
a neutral generates and gives to all the parties does not lose its confidentiality
protection.
iii. Some persons are unclear whether information the neutral generates retains
its confidentiality protections if provided to only to one of the parties or if it
can remain confidential only if provided to all the parties. If the former is true,
then a neutral could not, if effect, provide an early neutral evaluation to all the
parties.
b. The legislative history of the ADRA, however, is clear that the confidentiality
protections apply to communications the neutral generates and provides to all
the parties as the following quote illustrates:
H.R. 4194 also enhances the confidentiality provisions of the ADR statute. The
bill provides that a document generated by a neutral and provided to all
parties is exempt from discovery under § 574(b)(7), as well as from disclosure
pursuant to FOIA. This change will facilitate the use of early neutral evaluation
and similar ADR processes that provide an outcome prediction to both sides.
Parties are understandably reluctant to subject themselves to the risk of the
neutral's opinion, which is not based on full discovery, being used against them
at trial later. This is a change from the House passed version of H.R. 2977 [the
predecessor bill to H.R. 4194]."
See Cong. Rec. H11449 (Sept. 27, 1996) (Statement of Representative Reed made
on the floor of the House during consideration of H.R. 4194 and changes made to
ADR legislation recently passed by the House.)(emphasis added).28
c. The exceptions that apply to these communications are
28See also H. Rep. 104-841, 104th Cong. (2d Sess.) (Sept. 1996)(Joint Explanatory Statement of
the Committee of Conference regarding H.R. 2977, the predecessor bill to H.R. 4194 that
eventually became the ADRA of 1996, in which the committee stated: "In addition, a dispute
resolution communication originating from a neutral and provided to all of the parties, such as Early
Neutral Evaluation, is protected from discovery under § 574(b)(7) and from disclosure under
FOIA.").
Page 30
the same as those that apply between a neutral and a party communication. See
IX. D. 1. c., above.
NOTE: In addition to relaying on the ADRA's confidentiality
provisions, counsel should consider the following: Rule 408 of
the Federal Rules of Civil Procedure; a confidentiality contract
between the parties; a protective order by a board of contract
appeals or the Court of Federal Claims.

X. THE ADRA OF 1996 AMENDS THE CONTRACT DISPUTES ACT (CDA) OF 1978
TO INCORPORATE MOST OF THE ADRA OF 1996'S PROVISIONS.29
A. "Notwithstanding any other provision of the ADRA of 1996" contracting officers are
authorized to use any "alternative means of dispute resolution under the ADRA of
1996."30
29 Section 6 of the ADRA of 1996 amends 41 U.S.C. § 605(d) to incorporate by reference the
general provisions of the ADRA. The amendments made to 41 U.S.C. § 605(d), however, appear to
be flawed. Specifically, Unfortunately, amendments made by the ADRA of 1996 to the Contract
Disputes Act are flawed. Specifically, 41 U.S.C. § 605(d), as amended by the ADRA of 1996,
states:
Notwithstanding any other provision of this chapter, a contractor and a contracting officer may use
any alternative means of dispute resolution under subchapter IV of chapter 5 of Title 5 (as in effect
on September 30, 1995), or other mutually agreeable procedures, for resolving claims. The
contractor shall certify the claim when required to do so as provided under subsection (c)l of this
section or as other wise required by law. All provisions of subchapter IV of chapter 5 of Title 5
(as in effect on September 30, 1995) shall apply to such alternative means of dispute resolution.
Id. (emphasis added). The last sentence of this provision appears to exclude government contract
disputes from the scope of the ADRA of 1996. As written, the text above requires contracting officers
to use the terms of the ADRA of 1990 which was in effect as of September 30, 1995. Congress
recognized this drafting error and passed a technical amendment to correct this problem. See the
National Defense Authorization Act of 1998, Pub. L. No. 105-85 (Nov. 1997) (Sec. 1073(g)(3) states,
"Section 6 of the Contract Disputes Act of 1978 (41 U.S.C. 605) is amended in subsections (d) and (e)
by striking out "(as in effect on September 30, 1995)" each place it appears."). See 111 Stat. 1906.
Accordingly, the applicability of the ADRA of 1996's provisions to the CDA is no longer in question.
30 The ADRA of 1996's general grant of authority is for agencies to use alternative dispute resolution
proceedings; see 5 U.S.C. § 572(a), which among other things requires the participation of a third
party neutral. The term used above, "alternative means of dispute resolution" is much broader in that it
does not require the participation of a third party neutral. Accordingly, contracting officers may agree
to participate in ADR processes in which no third-party is present. It is, however, unclear if the
confidentiality provisions of the ADRA of 1996 apply in an "unassisted ADR" proceeding.
Page 31
B. Contractors are held to the same claim certification requirements that normally apply
to the submission of a claim.31 Generally, this means that contractors must certify all
contractor claims exceeding $100,000. See 41 U.S.C. § 605(c)(1); FAR 33.207(Note: the
FAR has not yet been amended to implement the changes required by the ADRA of
1996).
NOTE: FAR Part 33.2 provides implementing guidance on the use
of ADR in contract controversies. FAR 33.214 provides most of
the FAR's guidance on the subject. With respect to the use of
binding arbitration, you should pay special attention to two FAR
provisions. First, FAR 33.214(f) states ''[a] solicitation shall not
require arbitration as a condition of award, unless arbitration is
otherwise required by law." Second, FAR 33.214(g) states "
[b]inding arbitration, as an ADR procedure, may be agreed to
only as specified in agency guidelines. Such guidelines shall
provide advice on the appropriate use of binding arbitration and
when an agency has authority to settle an issue in controversy
through binding arbitration." The author is, at present, unaware of
a single agency that has issued the required arbitration guidelines.

XI. OTHER STATUTES HAVE AMENDED THE CDA TO PROMOTE CONTRACTING


OFFICERS USE OF ADR.
A. Contracting officers are required by law to provide a written explanation, citing one
or more of the conditions contained in § 572(b) of the ADRA, as to why he or she
declined a contractor's request to use ADR. See 41 U.S.C. § 605(e).32
B. Contractors are required by law to provide a written explanation, citing one or more
of the conditions contained in § 572(b) of the ADRA, as to why they declined a
contracting officer's request to use ADR. See 41 U.S.C. § 605(e).
XII. CONCLUSION:
The ADRA of 1996 provides much needed improvements to the legal framework for
using nonbinding ADR techniques to resolve issues in controversy. Only time will tell,
however, if Act's provisions authorizing the use of binding arbitration will be viewed as a
positive development.
31 Under the ADRA of 1990, it appeared that contractors had to certify anything that was submitted
to an ADR proceeding. Some viewed this requirement, which normally only applied to claims in
excess of $50,000, as creating an unnecessary obstacle to using ADR in small dollar contract
disputes. Congress agreed, and the foregoing provision makes this clear.
Page 32
Administrative Dispute Resolution Act of 1996
Public Law 104-320
(Compiled by Jennifer May Bergstrom)
OVERVIEW
The following document provides the text of
Administrative Dispute Resolution Act of 1990 as
amended by the the ADRA of 1996 (Pub. Law 104-320).
Sections 1 through 7 were prepared using the "redlined"
format as follows: the text of these sections appear as
normal printed text for those provisions that have not
changed; lined-through text has been deleted from the
original Act by the ADRA of 1996; and text that is
boldened and underlined have been added by the ADRA
of 1996. Sections 8 through 12 are not redlined, and
instead include only the final version of the provision's
text.

Sec. 1. Short Title


This Act may be cited as the "Administrative Dispute Resolution Act of 1996."
Sec. 2. Findings
The Congress finds that--
(1) administrative procedure, as embodied in chapter 5 of title 5, United States Code, and
other statutes, is intended to offer a prompt, expert, and inexpensive means of resolving
disputes as an alternative to litigation in the Federal courts;
(2) administrative proceedings have become increasingly formal, costly, and lengthy
resulting in unnecessary expenditures of time and in a decreased likelihood of achieving
consensual resolution of disputes;
(3) alternative means of dispute resolution have been used in the private sector for many
years and, in appropriate circumstances, have yielded decisions that are faster, less
expensive, and less contentious;
(4) such alternative means can lead to more creative, efficient, and sensible outcomes;
(5) such alternative means may be used advantageously in a wide variety of
administrative programs;
(6) explicit authorization of the use of well-tested dispute resolution techniques will
eliminate ambiguity of agency authority under existing law;
Page 33
(7) Federal agencies may not only receive the benefit of techniques that were developed
in the private sector, but may also take the lead in the further development and refinement
of such techniques; and
(8) the availability of a wide range of dispute resolution procedures, and an increased
understanding of the most effective use of such procedures, will enhance the operation of
the Government and better serve the public.
Sec. 3. Promotion of Alternative Means of Dispute Resolution
(a) Promulgation of Agency Policy.--Each agency shall adopt a policy that addresses the
use of alternative means of dispute resolution and case management. In developing such a
policy, each agency shall--
(1) consult with the Administrative Conference of the United States and the Federal
Mediation and Conciliation Service; and consult with the agency designated by, or the
interagency committee designated or established by, the President under section 573 of
title 5, United States Code, to facilitate and encourage agency use of alternative dispute
resolution under subchapter IV of chapter 5 of such title; and
(2) examine alternative means of resolving disputes in connection with--
(A) formal and informal adjudications;
(B) rulemakings;
(C) enforcement actions;
(D) issuing and revoking licenses or permits;
(E) contract administration;
(F) litigation brought by or against the agency; and
(G) other agency actions.
(b) Dispute Resolution Specialists.--The head of each agency shall designate a senior
official to be the dispute resolution specialist of the agency. Such official shall be
responsible for the implementation of--
(1) the provisions of this Act and the amendments made by this Act; and
(2) the agency policy developed under subsection (a).
(c) Training.--Each agency shall provide for training on a regular basis for the dispute
resolution specialist of the agency and other employees involved in implementing the
policy of the agency developed under subsection (a). Such training should encompass the
theory and practice of negotiation, mediation, arbitration, or related techniques. The
dispute resolution specialist shall periodically recommend to the agency head agency
employees who would benefit from similar training.
Page 34
(d) Procedures for Grants and Contracts.
(1) Each agency shall review each of its standard agreements for contracts, grants, and
other assistance and shall determine whether to amend any such standard agreements to
authorize and encourage the use of alternative means of dispute resolution.
(2) (A) Within 1 year after the date of the enactment of this Act [Nov. 15, 1990], the
Federal Acquisition Regulation shall be amended, as necessary, to carry out this Act
and the amendments made by this Act.
(B) For purposes of this section, the term 'Federal Acquisition Regulation' means the
single system of Government-wide procurement regulation referred to in section
6(a) of the Office of Federal Procurement Policy Act (41 U.S.C. 405(a)).
Sec. 4. Administrative Procedures.
(a) Administrative Hearings.--Section 556(c) of title 5, United States Code, is amended--
(1) in paragraph (6) by inserting before the semicolon at the end thereof the following:
"or by the use of alternative means of dispute resolution as provided in subchapter IV
of this chapter"; and
(2) by redesignating paragraphs (7) through (9) as paragraphs (9) through (11),
respectively, and inserting after paragraph (6) the following new paragraphs:
"(7) inform the parties as to the availability of one or more alternative means of
dispute resolution, and encourage use of such methods;
"(8) require the attendance at any conference held pursuant to paragraph (6) of at
least one representative of each party who has authority to negotiate concerning
resolution of issues in controversy;".
(b) Alternative Means of Dispute Resolution.--Chapter 5 of title 5, United States Code, is
amended by adding at the end the following new subchapter:
"Subchapter IV Alternative Means of Dispute Resolution in the Administrative Process
§571. Definitions.
§572. General authority.
§573. Neutrals.
§574. Confidentiality.
§575. Authorization of arbitration.
§576. Enforcement of arbitration agreements.
§577. Arbitrators.
§578. Authority of the arbitrator.
§579. Arbitration proceedings.
§580. Arbitration awards.
§581. Judicial review.
§582. Compilation of information. (Repealed)
§583. Support services.
§584. Authorization of appropriations.
Page 35
§571. Definitions
For the purposes of this subchapter, the term--
(1) "agency" has the same meaning as in section 551(1) of this title;
(2) "administrative program" includes a Federal function which involves protection of the
public interest and the determination of rights, privileges, and obligations of private
persons through rule making, adjudication, licensing, or investigation, as those terms are
used in subchapter II of this chapter;
(3) "alternative means of dispute resolution" means any procedure that is used, in lieu of
an adjudication as defined in section 551(7) of this title, to resolve issues in controversy,
including, but not limited to, settlement negotiations, conciliation, facilitation, mediation,
factfinding, minitrials, and arbitration arbitration, and use of ombuds, or any combination
thereof;
(4) "award" means any decision by an arbitrator resolving the issues in controversy;
(5) "dispute resolution communication" means any oral or written communication
prepared for the purposes of a dispute resolution proceeding, including any memoranda,
notes or work product of the neutral, parties or nonparty participant; except that a written
agreement to enter into a dispute resolution proceeding, or final written agreement or
arbitral award reached as a result of a dispute resolution proceeding, is not a dispute
resolution communication;
(6) "dispute resolution proceeding" means any process in which an alternative means of
dispute resolution is used to resolve an issue in controversy in which a neutral is
appointed and specified parties participate;
(7) "in confidence" means, with respect to information, that the information is provided--
(A) with the expressed intent of the source that it not be disclosed; or
(B) under circumstances that would create the reasonable expectation on behalf of the
source that the information will not be disclosed;
(8) "issue in controversy" means an issue which is material to a decision concerning an
administrative program of an agency, and with which there is disagreement--
(A) between an agency and persons who would be substantially affected by the
decision; or
(B) between persons who would be substantially affected by the decision, decision;
except that such term shall not include any matter specified under section 2302 or 7121 (c)
of this title;
(9) "neutral" means an individual who, with respect to an issue in controversy, functions
specifically to aid the parties in resolving the controversy;
(10) "party" means--
(A) for a proceeding with named parties, the same as in section 551(3) of this title; and
(B) for a proceeding without named parties, a person who will be significantly affected
by the decision in the proceeding and who participates in the proceeding;
(11) "person" has the same meaning as in section 551(2) of this title; and
(12) "roster" means a list of persons qualified to provide services as neutrals.
Page 36
§572. General authority
(a) An agency may use a dispute resolution proceeding for the resolution of an issue in
controversy that relates to an administrative program, if the parties agree to such
proceeding.
(b) An agency shall consider not using a dispute resolution proceeding if--
(1) a definitive or authoritative resolution of the matter is required for precedential
value, and such a proceeding is not likely to be accepted generally as an authoritative
precedent;
(2) the matter involves or may bear upon significant questions of Government policy
that require additional procedures before a final resolution may be made, and such a
proceeding would not likely serve to develop a recommended policy for the agency;
(3) maintaining established policies is of special importance, so that variations among
individual decisions are not increased and such a proceeding would not likely reach
consistent results among individual decisions;
(4) the matter significantly affects persons or organizations who are not parties to the
proceeding;
(5) a full public record of the proceeding is important, and a dispute resolution
proceeding cannot provide such a record; and
(6) the agency must maintain continuing jurisdiction over the matter with authority to
alter the disposition of the matter in the light of changed circumstances, and a dispute
resolution proceeding would interfere with the agency's fulfilling that requirement.
(c) Alternative means of dispute resolution authorized under this subchapter are voluntary
procedures which supplement rather than limit other available agency dispute resolution
techniques.
§573. Neutrals
(a) A neutral may be a permanent or temporary officer or employee of the Federal
Government or any other individual who is acceptable to the parties to a dispute
resolution proceeding. A neutral shall have no official, financial, or personal conflict of
interest with respect to the issues in controversy, unless such interest is fully disclosed in
writing to all parties and all parties agree that the neutral may serve.
(b) A neutral who serves as a conciliator, facilitator, or mediator serves at the will of the
parties.
(c) In consultation with the Federal Mediation and Conciliation Service, other appropriate
Federal agencies, and professional organizations experienced in matters concerning
dispute resolution, the Administrative Conference of the United States shall
Page 37
(1) establish standards for neutrals (including experience, training, affiliations,
diligence, actual or potential conflicts of interest, and other qualifications) to which
agencies may refer;
(2) maintain a roster of individuals who meet such standard and are otherwise qualified
to act as neutrals, which shall be made available upon request;
(3) enter into contracts for the services of neutrals that may be used by agencies on an
elective basis in dispute resolution proceedings; and
(4) develop procedures that permit agencies to obtain the services of neutral on an
expedited basis.
(c) The President shall designate an agency or designate or establish an interagency
committee to facilitate and encourage agency use of dispute resolution under this
subchapter. Such agency or interagency committee, in consultation with other appropriate
Federal agencies and professional organizations experienced in matters concerning
dispute resolution, shall--
(1) encourage and facilitate agency use of alternative means of dispute resolution; and
(2) develop procedures that permit agencies to obtain the services of neutrals on an
expedited basis.
(d) An agency may use the services of one or more employees of other agencies to serve
as neutrals in dispute resolution proceedings. The agencies may enter into an interagency
agreement that provides for the reimbursement by the user agency or the parties of the
full or partial cost of the services of such an employee.
(e) Any agency may enter into a contract with any person on a roster established under
subsection (c)(2) or a roster maintained by other public or private organizations, or
individual for services as a neutral, or for training in connection with alternative means of
dispute resolution. The parties in a dispute resolution proceeding shall agree on
compensation for the neutral that is fair and reasonable to the Government.
§574. Confidentiality
(a) Except as provided in subsections (d) and (e), a. neutral in a dispute resolution
proceeding shall not voluntarily disclose or through discovery or compulsory process be
required to disclose any information concerning any dispute resolution communication or
any communication provided in confidence to the neutral, unless--
(1) all parties to the dispute resolution proceeding and the neutral consent in writing,
and, if the dispute resolution communication was provided by a nonparty participant,
that participant also consents in writing;
(2) the dispute resolution communication has already been made public;
(3) the dispute resolution communication is required by statute to be made public, but a
neutral should make such communication public only if no other person is reasonably
available to disclose the communication; or
(4) a court determines that such testimony or disclosure is necessary to--
Page 38
(A) prevent a manifest injustice;
(B) help establish a violation of law; or
(C) prevent harm to the public health or safety,
of sufficient magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of parties in future cases
that their communications will remain confidential.
(b) A party to a dispute resolution proceeding shall not voluntarily disclose or through
discovery or compulsory process be required to disclose any information concerning any
dispute resolution communication, unless--
(1) the communication was prepared by the party seeking disclosure;
(2) all parties to the dispute resolution proceeding consent in writing;
(3) the dispute resolution communication has already been made public;
(4) the dispute resolution communication is required by statute to be made public;
(5) a court determines that such testimony or disclosure is necessary to--
(A) prevent a manifest injustice;
(B) help establish a violation of law; or
(C) prevent harm to the public health and safety,
of sufficient magnitude in the particular case to outweigh the integrity of dispute
resolution proceedings in general by reducing the confidence of parties in future cases
that their communications will remain confidential;
(6) the dispute resolution communication is relevant to determining the existence or
meaning of an agreement or award that resulted from the dispute resolution proceeding
or to the enforcement of such an agreement or award; or
(7) except for dispute resolution communications generated by the neutral, the dispute
resolution communication was provided to or was available to all parties to the dispute
resolution proceeding.
(c) Any dispute resolution communication that is disclosed in violation of subsection (a)
or (b), shall not be admissible in any proceeding relating to the issues in controversy with
respect to which the communication was made.
(d) (1) The parties may agree to alternative confidential procedures for disclosures by a
neutral. Upon such agreement the parties shall inform the neutral before the
commencement of the dispute resolution proceeding of any modifications to the
provisions of subsection (a) that will govern the confidentiality of the dispute resolution
proceeding. If the parties do not so inform the neutral, subsection (a) shall apply.
(2) To qualify for the exemption established under subsection (j), an alternative
confidential procedure under this subsection may not provide for less disclosure than
the confidential procedures otherwise provided under this section.
(e) If a demand for disclosure, by way of discovery request or other legal process, is
made upon a neutral regarding a dispute resolution communication, the neutral shall
make reasonable efforts to notify the parties and any affected nonparty participants of the
Page 39
demand. Any party or affected nonparty participant who receives such notice and within
15 calendar days does not offer to defend a refusal of the neutral to disclose the requested
information shall have waived any objection to such disclosure.
(f) Nothing in this section shall prevent the discovery or admissibility of any evidence that
is otherwise discoverable, merely because the evidence was presented in the course of a
dispute resolution proceeding.
(g) Subsections (a) and (b) shall have no effect on the information and data that are
necessary to document an agreement reached or order issued pursuant to a dispute
resolution proceeding.
(h) Subsections (a) and (b) shall not prevent the gathering of information for research or
educational purposes, in cooperation with other agencies, governmental entities, or
dispute resolution programs, so long as the parties and the specific issues in controversy
are not identifiable.
(i) Subsections (a) and (b) shall not prevent use of a dispute resolution communication to
resolve a dispute between the neutral in a dispute resolution proceeding and a party to or
participant in such proceeding, so long as such dispute resolution communication is
disclosed only to the extent necessary to resolve such dispute.
(j) This section shall not be considered a statute specifically exempting disclosure under
section 552(b)(3) of this title. A dispute resolution communication which is between a
neutral and a party and which may not be disclosed under this section shall also be
exempt from disclosure under section 552(b)(3).
§575. Authorization of arbitration
(a) (1) Arbitration may be used as an alternative means of dispute resolution whenever all
parties consent. Consent may be obtained either before or after an issue in controversy
has arisen. A party may agree to--
(A) submit only certain issues in controversy to arbitration; or
(B) arbitration on the condition that the award must be within a range of possible
outcomes.
(2) Any The arbitration agreement that sets forth the subject matter submitted to the
arbitrator shall be in writing. Each such arbitration agreement shall specify a maximum
award that may be issued by the arbitrator and may specify other conditions limiting
the range of possible outcomes.
(3) An agency may not require any person to consent to arbitration as a condition of
entering into a contract or obtaining a benefit.
(b) An officer or employee of an agency may offer to use arbitration for the resolution of
issues in controversy, if shall not offer to use arbitration for the resolution of issues in
controversy unless such officer or employee--
Page 40
(1) has authority would otherwise have authority to enter into a settlement concerning
the matter; or
(2) is otherwise specifically authorized by the agency to consent to the use of
arbitration.
(c) Prior to using binding arbitration under this subchapter, the head of an agency, in
consultation with the Attorney General and after taking into account the factors in section
572(b), shall issue guidance on the appropriate use of binding arbitration and when an
officer or employee of the agency has authority to settle an issue in controversy through
binding arbitration.
Page 41
§576. Enforcement of arbitration agreements
An agreement to arbitrate a matter to which this subchapter applies is enforceable
pursuant to section 4 of title 9, and no action brought to enforce such an agreement shall
be dismissed nor shall relief therein be denied on the grounds that it is against the United
States or that the United States is an indispensable party.
§577. Arbitrators
(a) The parties to an arbitration proceeding shall be entitled to participate in the selection
of the arbitrator.
(b) The arbitrator shall be a neutral who meets the criteria of section 573 of this title.
§578. Authority of the arbitrator
An arbitrator to whom a dispute is referred under this subchapter may--
(1) regulate the course of and conduct arbitral hearings;
(2) administer oaths and affirmations;
(3) compel the attendance of witnesses and production of evidence at the hearing under
the provisions of section 7 of title 9 only to the extent the agency involved is otherwise
authorized by law to do so; and
(4) make awards.
§579. Arbitration proceedings
(a) The arbitrator shall set a time and place for the hearing on the dispute and shall notify
the parties not less than 5 days before the hearing.
(b) Any party wishing a record of the hearing shall--
(1) be responsible for the preparation of such record;
(2) notify the other parties and the arbitrator of the preparation of such record;
(3) furnish copies to all identified parties and the arbitrator; and
(4) pay all costs for such record, unless the parties agree otherwise or the arbitrator
determines that the costs should be apportioned.
(c) (1) The parties to the arbitration are entitled to be heard, to present evidence material
to the controversy, and to cross-examine witnesses appearing at the hearing.
(2) The arbitrator may, with the consent of the parties, conduct all or part of the
hearing by telephone, television, computer, or other electronic means, if each party has
an opportunity to participate.
(3) The hearing shall be conducted expeditiously and in an informal manner.
(4) The arbitrator may receive any oral or documentary evidence, except that irrelevant,
immaterial, unduly repetitious, or privileged evidence may be excluded by the
arbitrator.
Page 42
(5) The arbitrator shall interpret and apply relevant statutory and regulatory
requirements, legal precedents, and policy directives.
(d) No interested person shall make or knowingly cause to be made to the arbitrator an
unauthorized ex parte communication relevant to the merits of the proceeding, unless the
parties agree otherwise. If a communication is made in violation of this subsection, the
arbitrator shall ensure that a memorandum of the communication is prepared and made a
part of the record, and that an opportunity for rebuttal is allowed. Upon receipt of a
communication made in violation of this subsection, the arbitrator may, to the extent
consistent with the interests of justice and the policies underlying this subchapter, require
the offending party to show cause why the claim of such party should not be resolved
against such party as a result of the improper conduct.
(e) The arbitrator shall make the award within 30 days after the close of the hearing, or
the date of the filing of any briefs authorized by the arbitrator, whichever date is later,
unless--
(1) the parties agree to some other time limit; or
(2) the agency provides by rule for some other time limit.
§580. Arbitration awards
(a) (1) Unless the agency provides otherwise by rule, the award in an arbitration
proceeding under this subchapter shall include a brief, informal discussion of the factual
and legal basis for the award, but formal findings of fact or conclusions of law shall not
be required.
(2) The prevailing parties shall file the award with all relevant agencies, along with
proof of service on all parties.
(b) The award in an arbitration proceeding shall become final 30 days after it is served on
all parties. Any agency that is a party to the proceeding may extend this 30-day period for
an additional 30-day period by serving a notice of such extension on all other parties
before the end of the first 30-day period.
(c) The head of any agency that is a party to an arbitration proceeding conducted under
this subchapter is authorized to terminate the arbitration proceeding or vacate any award
issued pursuant to the preceding before the award becomes final by serving on all other
parties a written notice to that effect, in which case the award shall be null and void.
Notice shall be provided to all parties to the arbitration proceeding of any request by a
party, nonparty participant or other person that the agency head terminate the arbitration
proceeding or vacate the award. An employee or agent engaged in the performance of
investigative or prosecuting functions for an agency may not, in that or a factually related
case, advise in a decision under this subsection to terminate an arbitration proceeding or
to vacate an arbitral award, except as witness or counsel in public proceedings.
(d) (c) A final award is binding on the parties to the arbitration proceeding, and may be
enforced pursuant to sections 9 through 13 of title 9. No action brought to enforce such
an
Page 43
award shall be dismissed nor shall relief therein be denied on the grounds that it is against
the United States or that the United States is an indispensable party.
(e) (d) An award entered under this subchapter in an arbitration proceeding may not serve
as an estoppel in any other proceeding for any issue that was resolved in the proceeding.
Such an award also may not be used as precedent or otherwise be considered in any
factually unrelated proceeding, whether conducted under this subchapter, by an agency,
or in a court, or in any other arbitration proceeding.
(f) An arbitral award that is vacated under subsection (c) shall not be admissible in any
proceeding relating to the issues in controversy with respect to which the award was
made.
(g) If an agency head vacates an award under subsection (c), a party to the arbitration
(other than the United States) may within 30 days of such action petition the agency head
for an award of fees and other expenses (as defined in section 504(b)(l)(A) of this title)
incurred in connection with the arbitration proceeding. The agency head shall award the
petitioning party those fees and expenses that would not have been incurred in the
absence of such arbitration proceeding, unless the agency head or his or her designee
finds that special circumstances make such an award unjust. The procedures for
reviewing applications for awards shall, where appropriate, be consistent with those set
forth in subsection (a)(2) and (3) of section 504 of this title. Such fees and expenses shall
be paid from the funds of the agency that vacated the award.
§581. Judicial Review
(a) Notwithstanding any other provision of law, any person adversely affected or
aggrieved by an award made in an arbitration proceeding conducted under this
subchapter may bring an action for review of such award only pursuant to the provisions
of sections 9 through 13 of title 9.
(b) (1) A decision by an agency to use or not to use a dispute resolution proceeding under
this subchapter shall be committed to the discretion of the agency and shall not be subject
to judicial review, except that arbitration shall be subject to judicial review under section
10(b) of title 9.
(2)A decision by the head of an agency under section 580 to terminate an arbitration
proceeding or vacate an arbitral award shall be committed o the discretion of the
agency and shall not be subject to judicial review.
§582. Compilation of information (Repealed)
The Chairman of the Administrative Conference of the United States shall compile and
maintain data on the use of alternative means of dispute resolution in conducting agency
proceedings. Agencies shall, upon the request of the Chairman of the
Page 44
Administrative Conference of the United States, supply such information as is required to
enable the Chairman to comply with this section.
§583. Support services
For the purposes of this subchapter, an agency may use (with or without reimbursement)
the services and facilities of other Federal agencies, State, local, and tribal governments,
public and private organizations and agencies, and individuals, with the consent of such
agencies, organizations, and individuals. An agency may accept voluntary and
uncompensated services for purposes of this subchapter without regard to the provisions
of section 1342 of title 31.''
§584. Authorization of appropriations
There are authorized to be appropriated such sums as may be necessary to carry out the
purposes of this subchapter.
Sec. 5. Judicial Review of Arbitration Awards.
Section 10 of title 9, United States Code, is amended--
(1) by designating subsections (a) through (e) as paragraphs (1) through (5), respectively;
(2) by striking out "In either" and inserting in lieu thereof "(a) in any"; and
(3) by adding at the end thereof the following:
"(b) The United States district court for the district wherein an award was made that was
issued pursuant to section 580 of title 5 may make an order vacating the award upon the
application of a person, other than a party to the arbitration, who is adversely affected or
aggrieved by the award, if the use of arbitration or the award is clearly inconsistent with
the factors set forth in section 572 of title 5.".
Sec. 6. Government Contract Claims.33
(a) Alternative Means of Dispute Resolution.--Section 6 of the Contract Disputes Act of
1978 (41 U.S.C. 606) is amended by adding at the end the following new subsections:
"(d) Notwithstanding any other provision of this Act, a contractor and a contracting
officer may use any alternative means of dispute resolution under subchapter IV of
chapter 5 of title 5, or other mutually agreeable procedures, for resolving claims. In a
33 The amendments made by the ADRA of 1996 to the CDA were flawed. As codified pursuant to
the ADRA of 1996's amendments, the CDA required contracting officers to use the authority found
in the ADRA of 1990 (which was in effect on September 30, 1995), not that found in the ADRA of
1996. This was not the result Congress intended to achieve. Congress recently made a techincal
amendment to the CDA to correct this oversight in the National Defense Authorization Act for FY
1998. See Pub. L. No. 105-85, Sec. 1074(g)(3)("Section 6 of the Contract Disputes Act of 1978 (41
U.S.C. 605) is amended in subsections (d) and (e) by striking out "(as in effect of September 30,
1995)" each place it appears").
Page 45
case in which such alternative means of dispute resolution or other mutually agreeable
procedures are used, the contractor shall certify that the claim is made in good faith, that
the supporting data are accurate and complete to the best of his or her knowledge and
belief, and that the amount requested accurately reflects the contract adjustment for which
the contractor believes the Government is liable. The contractor shall certify the claim
when required to do so as provided under subsection (c)(1) or as otherwise required by
law. All provisions of subchapter IV of chapter 5 of title 5 shall apply to such alternative
means of dispute resolution.
"(e) The authority of agencies to engage in alternative means of dispute resolution
proceedings under subsection (d) shall cease to be effective on October 1, 1995, except
that such authority shall continue in effect with respect to then pending dispute resolution
proceedings which, in the judgment of the agencies that are parties to such proceedings,
require such continuation, until such proceedings terminate."
(b) Judicial Review of Arbitral Awards.--Section 8(g) of the Contract Disputes Act of
1978 (41 U.S.C. 607(g)) is amended by adding at the end the following new paragraph:
"(3) An award by an arbitrator under this Act shall be reviewed pursuant to sections 9
through 13 of title 9, United States Code, except that the court may set aside or limit any
award that is found to violate limitations imposed by Federal statute."
Sec. 7. Federal Mediation and Conciliation Service.
Section 203 of the Labor Management Relations Act, 1947 (29 U.S.C. 173) is amended by
adding at the end the following new subsection:
"(f) The Service may make its services available to Federal agencies to aid in the
resolution of disputes under the provisions of subchapter IV of chapter 5 of title 5, United
States Code. Functions performed by the Service may include assisting parties to disputes
related to administrative programs, training persons in skills and procedures employed in
alternative means of dispute resolution, and furnishing officers and employees of the
Service to act as neutrals. Only officers and employees who are qualified in accordance
with section 573 of title 5, United States Code, may be assigned to act as neutrals. The
Service shall consult with the Administrative Conference of the United States and other
agencies the agency designated by, or the interagency committee designated or established
by, the President under section 573 of title 5, United States Code, in maintaining rosters of
neutrals and arbitrators, and to adopt such procedures and rules as are necessary to carry
out the services authorized in this subsection."
Sec. 8. Government Tort and Other Claims.
(a) Federal Tort Claims.--Section 2672 of title 28, United States Code, is amended by
adding at the end of the first paragraph the following: "Notwithstanding the proviso
contained in the preceding sentence, any award, compromise, or settlement may be
Page 46
effected without the prior written approval of the Attorney General or his or her designee,
to the extent that the Attorney General delegates to the head of the agency the authority to
make such award, compromise, or settlement. Such delegations may not exceed the
authority delegated by the Attorney General to the United States attorneys to settle claims
for money damages against the United States. Each Federal agency may use arbitration, or
other alternative means of dispute resolution under the provisions of subchapter IV of
chapter 5 of title 5, to settle any tort claim against the United States, to the extent of the
agency's authority to award, compromise, or settle such claim without the prior written
approval of the Attorney General or his or her designee."
(b) Claims of the Government.--Section 3711(a)(2) of title 31, United States Code, is
amended by striking out "$20,000 (excluding interest)" and inserting in lieu thereof
"$100,000 (excluding interest) or such higher amount as the Attorney General may from
time to time prescribe."
Sec. 9. Use of Nonattorneys.
(a) Representation of Parties.--Each agency, in developing a policy on the use of
alternative means of dispute resolution under this Act, shall develop a policy with regard
to the representation by persons other than attorneys of parties in alternative dispute
resolution proceedings and shall identify any of its administrative programs with
numerous claims or disputes before the agency and determine--
(1) the extent to which individuals are represented or assisted by attorneys or by
persons who are not attorneys; and
(2) whether the subject areas of the applicable proceedings or the procedures are so
complex or specialized that only attorneys may adequately provide such representation
or assistance.
(b) Representation and Assistance by Nonattorneys.--A person who is not an attorney
may provide representation or assistance to any individual in a claim or dispute with an
agency, if--
(1) such claim or dispute concerns an administrative program identified under
subsection (a);
(2) such agency determines that the proceeding or procedure does not necessitate
representation or assistance by an attorney under subsection (a)(2); and
(3)such person meets any requirement of the agency to provide representation or
assistance in such a claim or dispute.
(c) Disqualification of Representation or Assistance.--Any agency that adopts regulations
under subchapter IV of chapter 5 of title 5, United States Code, to permit representation
or assistance by persons who are not attorneys shall review the rules of practice before
such agency to--
Page 47
(1) ensure that any rules pertaining to disqualification of attorneys from practicing
before the agency shall also apply, as appropriate, to other persons who provide
representation or assistance; and
(2) establish effective agency procedures for enforcing such rules of practice and for
receiving complaints from affected persons.
Sec. 10. Definitions.
As used in this Act, the terms 'agency', 'administrative program', and 'alternative means of
dispute resolution' have the meanings given such terms in section 571 of title 5, United
States Code (enacted as section 581 of title 5, United States Code, by section 4(b) of this
Act, and redesignated as section 571 of such title by section 3(b) of the Administrative
Procedure Technical Amendments Act of 1991).
See. 11. Sunset Provision.
The authority of agencies to use dispute resolution proceedings under this Act and the
amendments made by this Act shall terminate on October 1, 1995, except that such
authority shall continue in effect with respect to then pending proceedings which, in the
judgment of the agencies that are parties to the dispute resolution proceedings, require
such continuation, until such proceedings terminate.
The following sections, 7, 11 and 12, are strictly the text of the corrections as
presented in the ADRA of 1996. For the ease of reading, there has been no
attempt to integrate the changes to the text of the amended U.S. Code
provisions.
SEC. 7. Amendments on Acquiring Neutrals
Section 7 of the Administrative Dispute Resolution Act of 1996 contained amendments
regarding the expedited hiring of neutrals. These amendments changed the language
found at 10 U.S.C. § 2304(c)(3)(C) as they apply to Defense Agency contracts and at 41
U.S.C. § 253(c)(3)(C) as they apply to Civilian Agency contracts. 3435
34Sec. 7 Amendments on Acquiring Neutrals.
(a) Expedited Hiring of Neutrals.--
(1) Competitive Requirements in Defense Agency Requirements.
(2) Competitive Requirements in Federal Contracts.
The expedited hiring procedures codified at 10 U.S.C. § 2304(c)(3)(C) as enacted by the
Administrative Dispute Resolution Act of 1996 as they apply to the Defense Agency Contracts reads
as follows:
(c) The head of an agency may use procedures other than competitive procedures only when
<><><><><><><><><><><><>
(footnote continued on next page)
Page 48
SEC. 11. Reauthorization of Negotiated Rulemaking Act of 1990.
(a) Permanent Reauthorization.-Section 5 of the Negotiated Rulemaking Act of 1990
(Public Law 101-648; 5 U.S.C. 561 note) is repealed.
(b) Closure of Administrative Conference-
(1) In General- Section 569 of title 5, United States Code, is amended--
(A) by amending the section heading to read as follows: 'Sec. 569. Encouraging
negotiated rulemaking'; and
(B) by striking subsections (a) through (g) and inserting the following:
'(a) The President shall designate an agency or designate or establish an interagency
committee to facilitate and encourage agency use of negotiated rulemaking. An agency
that is considering, planning, or conducting a negotiated rulemaking may consult with
such agency or committee for information and assistance.
'(b) To carry out the purposes of this subchapter, an agency planning or conducting a
negotiated rulemaking may accept, hold, administer, and utilize gifts, devises, and
bequests of property, both real and personal if that agency's acceptance and use of such
gifts, devises, or bequests do not create a conflict of interest. Gifts and bequests of money
and proceeds from sales of other property received as gifts, devises, or bequests
(footnote continued from previous page)
(3) it is necessary to award the contract to a particular source or sources in order (A) to maintain a
facility, producer, manufacturer, or other supplier available for furnishing property or services in
case of a national emergency or to achieve industrial mobilization, (B) to establish or maintain an
essential engineering, research, or development capability to be provided by an educational or
other nonprofit institution or a federally funded research and development center, or (C) to procure
the services of an expert for use, in any litigation or dispute (including any reasonably foreseeable
litigation or dispute) involving the Federal Government, in any trial, hearing or proceeding before
any court, administrative tribunal, or agency, or agency, or to procure the services of an expert or
neutral for use in any part of an alternative dispute resolution process, whether or not the expert is
expected to testify;
<><><><><><><><><><><><>
35 The expedited hiring procedures codified at 41 U.S.C. § 253(c)(3)(C) as enacted by the
Administrative Dispute Resolution Act of 1996 as they apply to the Civilian Agency Contracts reads
corrected as follows:
(c) The head of an agency may use procedures other than competitive procedures only when
<><><><><><><><><><><><>
(3) it is necessary to award the contract to a particular source or sources in order (A) to maintain a
facility, producer, manufacturer, or other supplier available for furnishing property or services in case
of a national emergency or to achieve industrial mobilization, (B) to establish or maintain an essential
engineering, research, or development capability to be provided by an educational or other nonprofit
institution or a federally funded research and development center, or (C) to procure the services of an
expert for use, in any litigation or dispute (including any reasonably foreseeable litigation or dispute)
involving the Federal Government, in any trial, hearing or proceeding before any court, administrative
tribunal, or agency, or agency, or to procure the services of an expert or neutral for use in any part of
an alternative dispute resolution process, whether or not the expert is expected to testify;
<><><><><><><><><><><><>
Page 49
shall be deposited in the Treasury and shall be disbursed upon the order of the head of
such agency. Property accepted pursuant to this section, and the proceeds thereof, shall be
used as nearly as possible in accordance with the terms of the gifts, devises, or bequests.'.
(2) Technical and Conforming Amendment- The table of sections for chapter 5 of title
5, United States Code, is amended by striking the item relating to section 569 and
inserting the following:
'569. Encouraging negotiated rulemaking.'.
(c) Expedited Hiring of Convenors and Facilitators-
(1) Defense Agency Contracts - Section 2304(c)(3)(C) of title 10, United States Code, is
amended by inserting 'or negotiated rulemaking' after 'alternative dispute resolution'.
(2) Federal Contracts - Section 303(c)(3)(C) of the Federal Property and Administrative
Services Act of 1949 (41 U.S.C. 253(c)(3)(C)), is amended by inserting or negotiated
rulemaking' after 'alternative dispute resolution'.
(d) Authorization of Appropriations-
(1) In General-Subchapter III of title 5, United States Code, is amended by adding at
the end thereof the following new section: 'Sec. 570a. Authorization of appropriations
'There are authorized to be appropriated such sums as may be necessary to carry out
the purposes of this subchapter.'.
(2) Technical and Conforming Amendment- The table of sections for chapter 5 of title
5, United States Code, is amended by inserting after the item relating to section 570 the
following:
'570a. Authorization of appropriations.'.
(e) Negotiated Rulemaking Committees-The Director of the Office of Management and
Budget shall--
(1) within 180 days of the date of the enactment of this Act, take appropriate action to
expedite the establishment of negotiated rulemaking committees and committees
established to resolve disputes under the Administrative Dispute Resolution Act,
including, with respect to negotiated rulemaking committees, eliminating any redundant
administrative requirements related to filing a committee charter under section 9 of the
Federal Advisory Committee Act (5 U.S.C. App.) and providing public notice of such
committee under section 564 of title 5, United States Code; and
(2) within one year of the date of the enactment of this Act, submit recommendations
to Congress for any necessary legislative changes.
SEC. 12. Jurisdiction of the United States Court of Federal Claims and the District Courts
of the United States: Bid Protests.
(a) Bid Protests - Section 1491 of title 28, United States Code, is amended
(1) by redesignating subsection (b) as subsection (c);
(2) in subsection (a) by striking out paragraph (3); and
(3) by inserting after subsection (a), the following new subsection:
Page 50
'(b)(1) Both the Unites States Court of Federal Claims and the district courts of the United
States shall have jurisdiction to render judgment on an action by an interested party
objecting to a solicitation by a Federal agency for bids or proposals for a proposed
contract or to a proposed award or the award of a contract or any alleged violation of
statute or regulation in connection with a procurement or a proposed procurement. Both
the United States Court of Federal Claims and the district courts of the United States shall
have jurisdiction to entertain such an action without regard to whether suit is instituted
before or after the contract is awarded.
'(2) To afford relief in such an action, the courts may award any relief that the court
considers proper, including declaratory and injunctive relief except that any monetary
relief shall be limited to bid preparation and proposal costs.
'(3) In exercising jurisdiction under this subsection, the courts shall give due regard to
the interests of national defense and national security and the need for expeditious
resolution of the action.
'(4) In any action under this subsection, the courts shall review the agency's decision
pursuant to the standards set forth in section 706 of title 5.'.
(b) Effective Date- This section and the amendments made by this section shall take effect
on December 31, 1996 and shall apply to all actions filed on or after that date.
(c) Study- No earlier than 2 years after the effective date of this section, the United States
General Accounting Office shall undertake a study regarding the concurrent jurisdiction
of the district courts of the United States and the Court of Federal Claims over bid
protests to determine whether concurrent jurisdiction is necessary. Such a study shall be
completed no later than December 31, 1999, and shall specifically consider the effect of
any proposed change on the ability of small businesses to challenge violations of Federal
procurement law.
(d) Sunset- The jurisdiction of the district courts of the United States over the actions
described in section 1491(b)(1) of title 28, United States Code (as amended by subsection
(a) of this section) shall terminate on January 1, 2001 unless extended by Congress. The
savings provisions in subsection (e) shall apply if the bid protest jurisdiction of the
district courts of the United States terminates under this subsection.
(e) Savings Provisions-
(1) Orders- A termination under subsection (d) shall not terminate the effectiveness of
orders that have been issued by a court in connection with an action within the
jurisdiction of that court on or before December 31, 2000. Such orders shall continue
in effect according to their terms until modified, terminated, superseded, set aside, or
revoked by a court of competent jurisdiction or by operation of law.
(2) Proceedings and Applications- (A) a termination under subsection (d) shall not
affect the jurisdiction of a court of the United States to continue with any proceeding
that is pending before the court on December 31, 2000.
(B) Orders may be issued in any such proceeding, appeals may be taken therefrom,
and payments may be made pursuant to such orders, as if such termination had
Page 51
not occurred. An order issued in any such proceeding shall continue in effect until
modified, terminated, superseded, set aside, or revoked by a court of competent
jurisdiction or by operation of law.
(C) Nothing in this paragraph prohibits the discontinuance or modification of any
such proceeding under the same terms and conditions and to the same extent that
proceeding could have been discontinued or modified absent such termination.
(f) Nonexclusivity of GAO Remedies- In the event that the bid protest jurisdiction of the
district courts of the United States is terminated pursuant to subsection (d), then section
3556 of title 31, United States Code, shall be amended by striking 'a court of the United
States or' in the first sentence. Speaker of the House of Representatives. Vice President of
the United States and President of the Senate.
Page 52
Alternative Dispute Resolution Act of 1998, PUB. L. NO. 105-315, 112 STAT. 2993 (Oct.
1998)
SECTION 1. SHORT TITLE.
This Act may be cited as the "Alternative Dispute Resolution Act of 1998".
SEC. 2. FINDINGS AND DECLARATION OF POLICY.
Congress finds that
(1) alternative dispute resolution, when supported by the bench and bar, and utilizing
properly trained neutrals in a program adequately administered by the court, has the
potential to provide a variety of benefits, including greater satisfaction of the parties,
innovative methods of resolving disputes, and greater efficiency in achieving settlements;
(2) certain forms of alternative dispute resolution, including mediation, early neutral
evaluation, minitrials, and voluntary arbitration, may have potential to reduce the large
backlog of cases now pending in some Federal courts throughout the United States,
thereby allowing the courts to process their remaining cases more efficiently; and
(3) the continued growth of Federal appellate court-annexed mediation programs suggests
that this form of alternative dispute resolution can be equally effective in resolving
disputes in the Federal trial courts; therefore, the district courts should consider including
mediation in their local alternative dispute resolution programs.
SEC. 3. ALTERNATIVE DISPUTE RESOLUTION PROCESSES TO BE AUTHORIZED
IN ALL DISTRICT COURTS.
Section 651 of title 28, United States Code, is amended to read as follows:
"Sec. 651. Authorization of alternative dispute resolution
"(a) Definition.--For purposes of this chapter, an alternative dispute resolution process
includes any process or procedure, other than an adjudication by a presiding judge, in
which a neutral third party participates to assist in the resolution of issues in controversy,
through processes such as early neutral evaluation, mediation, minitrial, and arbitration as
provided in sections 654 through 658.
"(b) Authority.--Each United States district court shall authorize, by local rule adopted
under section 2071(a), the use of alternative dispute resolution processes in all civil
actions, including adversary proceedings in bankruptcy, in accordance with this chapter,
Page 53
except that the use of arbitration may be authorized only as provided in section 654. Each
United States district court shall devise and implement its own alternative dispute
resolution program, by local rule adopted under section 2071(a), to encourage and
promote the use of alternative dispute resolution in its district.
"(c) Existing Alternative Dispute Resolution Programs.--In those courts where an
alternative dispute resolution program is in place on the date of the enactment of the
Alternative Dispute Resolution Act of 1998, the court shall examine the effectiveness of
that program and adopt such improvements to the program as are consistent with the
provisions and purposes of this chapter.
"(d) Administration of Alternative Dispute Resolution Programs.--Each United States
district court shall designate an employee, or a judicial officer, who is knowledgeable in
alternative dispute resolution practices and processes to implement, administer, oversee,
and evaluate the court's alternative dispute resolution program. Such person may also be
responsible for recruiting, screening, and training attorneys to serve as neutrals and
arbitrators in the court's alternative dispute resolution program.
"(e) Title 9 Not Affected.--This chapter shall not affect title 9, United States Code.
"(f) Program Support.--The Federal Judicial Center and the Administrative Office of the
United States Courts are authorized to assist the district courts in the establishment and
improvement of alternative dispute resolution programs by identifying particular practices
employed in successful programs and providing additional assistance as needed and
appropriate.".
SEC. 4. JURISDICTION.
Section 652 of title 28, United States Code, is amended to read as follows:
"Sec. 652. Jurisdiction
"(a) Consideration of Alternative Dispute Resolution in Appropriate Cases.--
Notwithstanding any provision of law to the contrary and except as provided in
subsections (b) and (c), each district court shall, by local rule adopted under section
2071(a), require that litigants in all civil cases consider the use of an alternative dispute
resolution process at an appropriate stage in the litigation. Each district court shall provide
litigants in all civil cases with at least one alternative dispute resolution process, including,
but not limited to, mediation, early neutral evaluation, minitrial, and arbitration as
authorized in sections 654 through 658. Any district court that elects to require the use of
alternative dispute resolution in certain cases may do so only with respect to mediation,
early neutral evaluation, and, if the parties consent, arbitration.
Page 54
''(b) Actions Exempted From Consideration of Alternative Dispute Resolution.--Each
district court may exempt from the requirements of this section specific cases or
categories of cases in which use of alternative dispute resolution would not be
appropriate. In defining these exemptions, each district court shall consult with members
of the bar, including the United States Attorney for that district.
"(c) Authority of the Attorney General.--Nothing in this section shall alter or conflict with
the authority of the Attorney General to conduct litigation on behalf of the United States,
with the authority of any Federal agency authorized to conduct litigation in the United
States courts, or with any delegation of litigation authority by the Attorney General.
"(d) Confidentiality Provisions.--Until such time as rules are adopted under chapter 131
of this title providing for the confidentiality of alternative dispute resolution processes
under this chapter, each district court shall, by local rule adopted under section 2071(a),
provide for the confidentiality of the alternative dispute resolution processes and to
prohibit disclosure of confidential dispute resolution communications.".
SEC. 5. MEDIATORS AND NEUTRAL EVALUATORS.
Section 653 of title 28, United States Code, is amended to read as follows:
"Sec. 653. Neutrals
"(a) Panel of Neutrals.--Each district court that authorizes the use of alternative dispute
resolution processes shall adopt appropriate processes for making neutrals available for
use by the parties for each category of process offered. Each district court shall
promulgate its own procedures and criteria for the selection of neutrals on its panels.
"(b) Qualifications and Training.--Each person serving as a neutral in an alternative
dispute resolution process should be qualified and trained to serve as a neutral in the
appropriate alternative dispute resolution process. For this purpose, the district court may
use, among others, magistrate judges who have been trained to serve as neutrals in
alternative dispute resolution processes, professional neutrals from the private sector, and
persons who have been trained to serve as neutrals in alternative dispute resolution
processes. Until such time as rules are adopted under chapter 131 of this title relating to
the disqualification of neutrals, each district court shall issue rules under section 2071(a)
relating to the disqualification of neutrals (including, where appropriate, disqualification
under section 455 of this title, other applicable law, and professional responsibility
standards).".
SEC. 6. ACTIONS REFERRED TO ARBITRATION.
Section 654 of title 28, United States Code, is amended to read as follows:
Page 55
"Sec. 654. Arbitration
"(a) Referral of Actions to Arbitration.--Notwithstanding any provision of law to the
contrary and except as provided in subsections (a), (b), and (c) of section 652 and
subsection (d) of this section, a district court may allow the referral to arbitration of any
civil action (including any adversary proceeding in bankruptcy) pending before it when
the parties consent, except that referral to arbitration may not be made where
"(1) the action is based on an alleged violation of a right secured by the Constitution of
the United States;
"(2) jurisdiction is based in whole or in part on section 1343 of this title; or
"(3) the relief sought consists of money damages in an amount greater than $150,000.
"(b) Safeguards in Consent Cases.--Until such time as rules are adopted under chapter 131
of this title relating to procedures described in this subsection, the district court shall, by
local rule adopted under section 2071(a), establish procedures to ensure that any civil
action in which arbitration by consent is allowed under subsection (a)
"(1) consent to arbitration is freely and knowingly obtained; and
"(2) no party or attorney is prejudiced for refusing to participate in arbitration.
"(c) Presumptions.--For purposes of subsection (a) (3), a district court may presume
damages are not in excess of $150,000 unless counsel certifies that damages exceed such
amount.
"(d) Existing Programs.--Nothing in this chapter is deemed to affect any program in
which arbitration is conducted pursuant to section title IX of the Judicial Improvements
and Access to Justice Act (Public Law 100-702), as amended by section 1 of Public Law
105-53.".
SEC. 7. ARBITRATORS.
Section 655 of title 28, United States Code, is amended to read as follows:
"Sec. 655. Arbitrators
"(a) Powers of Arbitrators.--An arbitrator to whom an action is referred under section 654
shall have the power, within the judicial district of the district court which referred the
action to arbitration
"(1) to conduct arbitration hearings;
Page 56
"(2) to administer oaths and affirmations; and
"(3) to make awards.
"(b) Standards for Certification.--Each district court that authorizes arbitration shall
establish standards for the certification of arbitrators and shall certify arbitrators to
perform services in accordance with such standards and this chapter. The standards shall
include provisions requiring that any arbitrator
"(1) shall take the oath or affirmation described in section 453; and
"(2) shall be subject to the disqualification rules under section 455.
"(c) Immunity.--All individuals serving as arbitrators in an alternative dispute resolution
program under this chapter are performing quasi-judicial functions and are entitled to the
immunities and protections that the law accords to persons serving in such capacity.".
SEC. 8. SUBPOENAS.
Section 656 of title 28, United States Code, is amended to read as follows:
"Sec. 656. Subpoenas
"Rule 45 of the Federal Rules of Civil Procedure (relating to subpoenas) applies to
subpoenas for the attendance of witnesses and the production of documentary evidence at
an arbitration hearing under this chapter.".
SEC. 9. ARBITRATION AWARD AND JUDGMENT.
Section 657 of title 28, United States Code, is amended to read as follows:
"Sec. 657. Arbitration award and judgment
"(a) Filing and Effect of Arbitration Award.--An arbitration award made by an arbitrator
under this chapter, along with proof of service of such award on the other party by the
prevailing party or by the plaintiff, shall be filed promptly after the arbitration hearing is
concluded with the clerk of the district court that referred the case to arbitration. Such
award shall be entered as the judgment of the court after the time has expired for
requesting a trial de novo. The judgment so entered shall be subject to the same
provisions of law and shall have the same force and effect as a judgment of the court in a
civil action, except that the judgment shall not be subject to review in any other court by
appeal or otherwise.
Page 57
"(b) Sealing of Arbitration Award.--The district court shall provide, by local rule adopted
under section 2071(a), that the contents of any arbitration award made under this chapter
shall not be made known to any judge who might be assigned to the case until the district
court has entered final judgment in the action or the action has otherwise terminated.
"(c) Trial de Novo of Arbitration Awards.
"(1) Time for filing demand.--Within 30 days after the filing of an arbitration award
with a district court under subsection (a), any party may file a written demand for a
trial de novo in the district court.
"(2) Action restored to court docket.--Upon a demand for a trial de novo, the action
shall be restored to the docket of the court and treated for all purposes as if it had not
been referred to arbitration.
"(3) Exclusion of evidence of arbitration.--The court shall not admit at the trial de novo
any evidence that there has been an arbitration proceeding, the nature or amount of any
award, or any other matter concerning the conduct of the arbitration proceeding, unless
"(A) the evidence would otherwise be admissible in the court under the Federal
Rules of Evidence; or
"(B) the parties have otherwise stipulated.".
SEC. 10. COMPENSATION OF ARBITRATORS AND NEUTRALS.
Section 658 of title 28, United States Code, is amended to read as follows:
"Sec. 658. Compensation of arbitrators and neutrals
"(a) Compensation.--The district court shall, subject to regulations approved by the
Judicial Conference of the United States, establish the amount of compensation, if any,
that each arbitrator or neutral shall receive for services rendered in each case under this
chapter.
"(b) Transportation Allowances.
Under regulations prescribed by the Director of the Administrative Office of the United
States Courts, a district court may reimburse arbitrators and other neutrals for actual
transportation expenses necessarily incurred in the performance of duties under this
chapter.".
SEC. 11. AUTHORIZATION NOF APPROPRIATIONS.
Page 58
There are authorized to be appropriated for each fiscal year such sums as may be
necessary to carry out chapter 44 of title 28, United States Code, as amended by this Act.
SEC. 12. CONFORMING AMENDMENTS.
(a) Limitation on Money Damages.--Section 901 of the Judicial Improvements and Access
to Justice Act (28 U.S.C. 652 note), is amended by striking subsection (c).
(b) Other Conforming Amendments.
(1) The chapter heading for chapter 44 of title 28, United States Code, is amended to
read as follows:
"CHAPTER 44--ALTERNATIVE DISPUTE RESOLUTION".
(2) The table of contents for chapter 44 of title 28, United States Code, is amended to
read as follows:
"Sec.
"651. Authorization of alternative dispute resolution.
"652. Jurisdiction.
"653. Neutrals.
"654. Arbitration.
''655. Arbitrators.
"656. Subpoenas.
"657. Arbitration award and judgment.
"658. Compensation of arbitrators and neutrals.".
(3) The item relating to chapter 44 in the table of chapters for Part III of title 28, United
States Code, is amended to read as follows:
"44. Alternative Dispute Resolution............................651".
Approved October 30, 1998.
LEGISLATIVE HISTORY--H.R. 3528:
---------------------------------------------
HOUSE REPORTS: No. 105-487 (Comm. on the Judiciary).
CONGRESSIONAL RECORD, Vol. 144 (1998):
Apr. 21, considered and passed House.
Oct. 7, considered and passed Senate, amended.
Oct. 10, House concurred in Senate amendments.
Page 59
Federal Acquisition Regulation ADR Coverage (As Revised by Acquisition Circular 97-
09)
FAR PART 6
SUBPART 6.3--OTHER THAN FULL AND OPEN COMPETITION
[NOTE: EMPHASIS ADDED FOR THE ADR COVERAGE IN PART 6]

<><><><><><><><><><><><>

6.302-3 Industrial mobilization; engineering, developmental, or research capability; or


expert services.
(a) Authority. (1) Citations: 10 U.S.C. 2304(c)(3) or 41 U.S.C. 253(c)(3).

<><><><><><><><><><><><>

(2) Full and open competition need not be provided for when it is necessary to award the
contract to a particular source or sources in order--

<><><><><><><><><><><><>

(iii) To acquire the services of an expert for any current or anticipated litigation or
dispute.

<><><><><><><><><><><><>

(3) Use of the authority in paragraph (a)(2)(iii) of this section may be appropriate when it
is necessary to acquire the services of either--
(i) An expert to use, in any litigation or dispute (including any reasonably foreseeable
litigation or dispute) involving the Government in any trial, hearing, or proceeding before
any court, administrative tribunal, or agency, whether or not the expert is expected to
testify. Examples of such services include, but are not limited to:
(A) Assisting the Government in the analysis, presentation, or defense of any claim or
request for adjustment to contract terms and conditions, whether asserted by a contractor
or the Government, which is in litigation or dispute, or is anticipated to result in dispute
or litigation before any court, administrative tribunal, or agency, or
(B) Participating in any part of an alternative dispute resolution process, including but
not limited to evaluators, fact finders, or witnesses, regardless of whether the expert is
expected to testify; or
(ii) A neutral person, e.g., mediators or arbitrators, to facilitate the resolution of issues
in an alternative dispute resolution process.
Page 60
(c) Limitations. Contracts awarded using this authority shall be supported by the written
justifications and approvals described in 6.303 and 6.304.
FAR PART 24
SUBPART 24.2 FREEDOM OF INFORMATION ACT
[NOTE: EMPHASIS ADDED FOR THE ADR COVERAGE IN PART 24]
Subpart 24.2--Freedom of Information Act

<><><><><><><><><><><><>

24.202 Prohibitions.
(a) A proposal in the possession or control of the Government, submitted in response to a
competitive solicitation, shall not be made available to any person under the Freedom of
Information Act. This prohibition does not apply to a proposal, or any part of a proposal,
that is--
(1) In the possession or control of NASA or the Coast Guard; or
(2) Set forth or incorporated by reference in a contract between the Government and
the contractor that submitted the proposal. (See 10 U.S.C. 2305(g) and 41 U.S.C.
253b(m).)
(b) No agency shall disclose any information obtained pursuant to 15.403-3(b) that is
exempt from disclosure under the Freedom of Information Act. (See 10 U.S.C. 2306a(d)
(2)(C) and 41 U.S.C. 254b(d)(2)(C).)
(c) A dispute resolution communication that is between a neutral person and a party to
alternative dispute resolution proceedings, and that may not be disclosed under 5
U.S.C. 574, is exempt from disclosure under the Freedom of Information Act (5 U.S.C.
552(b)(3)).
Page 61
FAR PART 33
SUBPART 33.2 DISPUTES AND APPEALS
[NOTE: EMPHSIS ADDED FOR THE ADR COVERAGE IN PART 33]
Subpart 33.2--Disputes and Appeals
33.201 Definitions.
"Accrual of a claim" occurs on the date when all events, which fix the alleged liability of
either the Government or the contractor and permit assertion of the claim, were known or
should have been known. For liability to be fixed, some injury must have occurred.
However, monetary damages need not have been incurred.
"Alternative dispute resolution (ADR)" means any type of procedure or combination of
procedures voluntarily used to resolve issues in controversy. These procedures may
include, but are not limited to, conciliation, facilitation, mediation, fact-finding,
minitrials, arbitration, and use of ombudsmen.
"Claim," as used in this part, means a written demand or written assertion by one of the
contracting parties seeking, as a matter of right, the payment of money in a sum certain,
the adjustment or interpretation of contract terms, or other relief arising under or relating
to the contract. A claim arising under a contract, unlike a claim relating to that contract, is
a claim that can be resolved under a contract clause that provides for the relief sought by
the claimant. However, a written demand or written assertion by the contractor seeking
the payment of money exceeding $100,000 is not a claim under the Contract Disputes Act
of 1978 until certified as required by the Act and 33.207. A voucher, invoice, or other
routine request for payment that is not in dispute when submitted is not a claim. The
submission may be converted to a claim, by written notice to the contracting officer as
provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon
in a reasonable time.
"Defective certification," as used in this subpart, means a certificate which alters or
otherwise deviates from the language in 33.207(c) or which is not executed by a person
duly authorized to bind the contractor with respect to the claim. Failure to certify shall not
be deemed to be a defective certification.
"Issue in controversy" means a material disagreement between the Government and the
contractor which
(1) May result in a claim or
(2) Is all or part of an existing claim.
Page 62
"Misrepresentation of fact," as used in this part, means a false statement of substantive
fact, or any conduct which
leads to the belief of a substantive fact material to proper understanding of the matter in
hand, made with intent to deceive or mislead.
"Neutral person," as used in this subpart, means an impartial third party, who serves as
a mediator, fact finder, or arbitrator, or otherwise functions to assist the parties to
resolve the issues in controversy. A neutral person may be a permanent or temporary
officer or employee of the Federal Government or any other individual who is
acceptable to the parties. A neutral person shall have no official, financial, or personal
conflict of interest with respect to the issues in controversy, unless such interest is fully
disclosed in writing to all parties and all parties agree that the neutral person may
serve (5 U.S.C. 583).
33.202 Contract Disputes Act of 1978.
The Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613) (the Act), establishes
procedures and requirements for asserting and resolving claims subject to the Act. In
addition, the Act provides for--
(a) The payment of interest on contractor claims;
(b) Certification of contractor claims; and
(c) A civil penalty for contractor claims that are fraudulent or based on a
misrepresentation of fact.
33.203 Applicability.
(a) Except as specified in paragraph (b) of this section, this part applies to any express or
implied contract covered by the Federal Acquisition Regulation.
(b) This subpart does not apply to any contract with--
(1) A foreign government or agency of that government, or
(2) An international organization or a subsidiary body of that organization, if the
agency head determines that the application of the Act to the contract would not be in
the public interest.
(c) This part applies to all disputes with respect to contracting officer decisions on matters
"arising under" or "relating to" a contract. Agency Boards of Contract Appeals (BCA's)
authorized under the Act continue to have all of the authority they possessed before the
Page 63
Act with respect to disputes arising under a contract, as well as authority to decide
disputes relating to a contract. The clause at 52.233-1, Disputes, recognizes the "all
disputes" authority established by the Act and states certain requirements and limitations
of the Act for the guidance of contractors and contracting agencies. The clause is not
intended to affect the rights and obligations of the parties as provided by the Act or to
constrain the authority of the statutory agency BCA's in the handling and deciding of
contractor appeals under the Act.
33.204 Policy.
The Government's policy is to try to resolve all contractual issues in controversy by
mutual agreement at the contracting officer's level. Reasonable efforts should be made to
resolve controversies prior to the submission of a claim. Agencies are encouraged to use
ADR procedures to the maximum extent practicable. Certain factors, however, may make
the use of ADR inappropriate (see 5 U.S.C. 572(b)). Except for arbitration conducted
pursuant to the Administrative Dispute Resolution Act (ADRA), (5 U.S.C. 571, et seq.)
agencies have authority which is separate from that provided by the ADRA to use ADR
procedures to resolve issues in controversy. Agencies may also elect to proceed under
the authority and requirements of the ADRA.
33.205 Relationship of the Act to Public Law 85-804.
(a) Requests for relief under Public Law 85-804 (50 U.S.C. 1431-1435) are not claims
within the Contract Disputes Act of 1978 or the Disputes clause at 52.233-1, Disputes, and
shall be processed under Part 50, Extraordinary Contractual Actions. However, relief
formerly available only under Public Law 85-804; i.e., legal entitlement to rescission or
reformation for mutual mistake, is now available within the authority of the contracting
officer under the Contract Disputes Act of 1978 and the Disputes clause. In case of a
question whether the contracting officer has authority to settle or decide specific types of
claims, the contracting officer should seek legal advice.
(b) A contractor's allegation that it is entitled to rescission or reformation of its contract in
order to correct or mitigate the effect of a mistake shall be treated as a claim under the
Act. A contract may be reformed or rescinded by the contracting officer if the contractor
would be entitled to such remedy or relief under the law of Federal contracts. Due to the
complex legal issues likely to be associated with allegations of legal entitlement,
contracting officers shall make written decisions, prepared with the advice and assistance
of legal counsel, either granting or denying relief in whole or in part.
(c) A claim that is either denied or not approved in its entirety under paragraph (b) of this
section may be cognizable as a request for relief under Public Law 85-804 as implemented
by Part 50. However, the claim must first be submitted to the contracting officer for
consideration under the Contract Disputes Act of 1978 because the claim is not
Page 64
cognizable under Public Law 85-804, as implemented by Part 50, unless other legal
authority in the agency concerned is determined to be lacking or inadequate.
33.206 Initiation of a claim.
(a) Contractor claims shall be submitted, in writing, to the contracting officer for a
decision within 6 years after accrual of a claim, unless the contracting parties agreed to a
shorter time period. This 6-year time period does not apply to contracts awarded prior to
October 1, 1995. The contracting officer shall document the contract file with evidence of
the date of receipt of any submission from the contractor deemed to be a claim by the
contracting officer.
(b) The contracting officer shall issue a written decision on any Government claim
initiated against a contractor within 6 years after accrual of the claim, unless the
contracting parties agreed to a shorter time period. The 6-year period shall not apply to
contracts awarded prior to October 1, 1995, or to a Government claim based on a
contractor claim involving fraud.
33.207 Contractor certification.
(a) Contractors shall provide the certification specified in paragraph (c) of this section
when submitting any claim exceeding $100,000.
(b) The certification requirement does not apply to issues in controversy that have not
been submitted as all or part of a claim.
(c) The certification shall state as follows:
I certify that the claim is made in good faith; that the supporting data are accurate and
complete to the best of my knowledge and belief; that the amount requested accurately
reflects the contract adjustment for which the contractor believes the Government is
liable; and that I am duly authorized to certify the claim on behalf of the contractor.
(d) The aggregate amount of both increased and decreased costs shall be used in
determining when the dollar thresholds requiring certification are met (see example in
15.403-4(a)(l)(iii) regarding cost or pricing data).
(e) The certification may be executed by any person duly authorized to bind the
contractor with respect to the claim.
(f) A defective certification shall not deprive a court or an agency BCA of jurisdiction
over that claim. Prior to the entry of a final judgment by a court or a decision by an
Page 65
agency BCA, however, the court or agency BCA shall require a defective certification to
be corrected.
33.208 Interest on claims.
(a) The Government shall pay interest on a contractor's claim on the amount found due
and unpaid from the date that--
(1) The contracting officer receives the claim (certified if required by 33.207(a)); or
(2) Payment otherwise would be due, if that date is later, until the date of payment.
(b) Simple interest on claims shall be paid at the rate, fixed by the Secretary of the
Treasury as provided in the Act, which is applicable to the period during which the
contracting officer receives the claim and then at the rate applicable for each 6-month
period as fixed by the Treasury Secretary during the pendency of the claim. (See 32.614
for the right of the Government to collect interest on its claims against a contractor.)
(c) With regard to claims having defective certifications, interest shall be paid from either
the date that the contracting officer initially receives the claim or October 29, 1992,
whichever is later. However, if a contractor has provided a proper certificate prior to
October 29, 1992, after submission of a defective certificate, interest shall be paid from
the date of receipt by the Government of a proper certificate.
33.209 Suspected fraudulent claims.
If the contractor is unable to support any part of the claim and there is evidence that the
inability is attributable to misrepresentation of fact or to fraud on the part of the
contractor, the contracting officer shall refer the matter to the agency official responsible
for investigating fraud.
33.210 Contracting officer's authority.
Except as provided in this section, contracting officers are authorized, within any specific
limitations of their warrants, to decide or resolve all claims arising under or relating to a
contract subject to the Act. In accordance with agency policies and 33.214, contracting
officers are authorized to use ADR procedures to resolve claims. The authority to decide
or resolve claims does not extend to--
(a) A claim or dispute for penalties or forfeitures prescribed by statute or regulation that
another Federal agency is specifically authorized to administer, settle, or determine; or
Page 66
(b) The settlement, compromise, payment, or adjustment of any claim involving fraud.
33.211 Contracting officer's decision.
(a) When a claim by or against a contractor cannot be satisfied or settled by mutual
agreement and a decision on the claim is necessary, the contracting officer shall--
(1) Review the facts pertinent to the claim;
(2) Secure assistance from legal and other advisors;
(3) Coordinate with the contract administration office or contracting office, as
appropriate; and
(4) Prepare a written decision that shall include a--
(i) Description of the claim or dispute;
(ii) Reference to the pertinent contract terms;
(iii) Statement of the factual areas of agreement and disagreement;
(iv) Statement of the contracting officer's decision, with supporting rationale;
(v) Paragraph substantially as follows:
This is the final decision of the Contracting Officer. You may appeal this decision to
the agency board of contract appeals. If you decide to appeal, you must, within 90
days from the date you receive this decision, mail or otherwise furnish written notice
to the agency board of contract appeals and provide a copy to the Contracting
Officer from whose decision this appeal is taken. The notice shall indicate that an
appeal is intended, reference this decision, and identify the contract by number. With
regard to appeals to the agency board of contract appeals, you may, solely at your
election, proceed under the board's small claim procedure for claims of $50,000 or
less or its accelerated procedure for claims of $100,000 or less. Instead of appealing
to the agency board of contract appeals, you may bring an action directly in the
United States Court of Federal Claims (except as provided in the Contract Disputes
Act of 1978, 41 U.S.C. 603, regarding Maritime Contracts) within 12 months of the
date you receive this decision; and
(vi) Demand for payment prepared in accordance with 32.610(b) in all cases where
the decision results in a finding that the contractor is indebted to the Government.
(b) The contracting officer shall furnish a copy of the decision to the contractor by
certified mail, return receipt requested, or by any other method that provides evidence of
Page 67
receipt. This requirement shall apply to decisions on claims initiated by or against the
contractor.
(c) The contracting officer shall issue the decision within the following statutory time
limitations:
(1) For claims of $100,000 or less, 60 days after receiving a written request from the
contractor that a decision be rendered within that period, or within a reasonable time
after receipt of the claim if the contractor does not make such a request.
(2) For claims over $100,000, 60 days after receiving a certified claim; provided,
however, that if a decision will not be issued within 60 days, the contracting officer
shall notify the contractor, within that period, of the time within which a decision will
be issued.
(d) The contracting officer shall issue a decision within a reasonable time, taking into
account--
(1) The size and complexity of the claim;
(2) The adequacy of the contractor's supporting data; and
(3) Any other relevant factors.
(e) The contracting officer shall have no obligation to render a final decision on any claim
exceeding $100,000 which contains a defective certification, if within 60 days after receipt
of the claim, the contracting officer notifies the contractor, in writing, of the reasons why
any attempted certification was found to be defective.
(f) In the event of undue delay by the contracting officer in rendering a decision on a
claim, the contractor may request the tribunal concerned to direct the contracting officer
to issue a decision in a specified time period determined by the tribunal.
(g) Any failure of the contracting officer to issue a decision within the required time
periods will be deemed a decision by the contracting officer denying the claim and will
authorize the contractor to file an appeal or suit on the claim.
(h) The amount determined payable under the decision, less any portion already paid,
should be paid, if otherwise proper, without awaiting contractor action concerning
appeal. Such payment shall be without prejudice to the rights of either party.
Page 68
33.212 Contracting officer's duties upon appeal.
To the extent permitted by any agency procedures controlling contacts with agency BCA
personnel, the contracting officer shall provide data, documentation, information, and
support as may be required by the agency BCA for use on a pending appeal from the
contracting officer's decision.
33.213 Obligation to continue performance.
(a) In general, before passage of the Act, the obligation to continue performance applied
only to claims arising
under a contract. However, Section 6(b) of the Act authorizes agencies to require a
contractor to continue contract performance in accordance with the contracting officer's
decision pending final decision on a claim relating to the contract. In recognition of this
fact, an alternate paragraph
is provided for paragraph (h) of the clause at 52.233-1, Disputes. This paragraph shall be
used only as authorized by agency procedures.
(b) In all contracts that include the clause at 52.233-1, Disputes, with its Alternate I, in the
event of a dispute not arising under, but relating to, the contract, the contracting officer
shall consider providing, through appropriate agency procedures, financing of the
continued performance; provided, that the Government's interest is properly secured.
33.214 Alternative dispute resolution (ADR).
(a) The objective of using ADR procedures is to increase the opportunity for relatively
inexpensive and expeditious resolution of issues in controversy. Essential elements of
ADR include
(1) Existence of an issue in controversy;
(2) A voluntary election by both parties to participate in the ADR process;
(3) An agreement on alternative procedures and terms to be used in lieu of formal
litigation; and
(4) Participation in the process by officials of both parties who have the authority to
resolve the issue in controversy.
(b) If the contracting officer rejects a contractor's request for ADR proceedings, the
contracting officer shall 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. In any case where a
Page 69
contractor rejects a request of an agency for ADR proceedings, the contractor shall
inform the agency in writing of the contractor's specific reasons for rejecting the request.
(c) ADR procedures may be used at any time that the contracting officer has authority to
resolve the issue in controversy. If a claim has been submitted, ADR procedures may be
applied to all or a portion of the claim. When ADR procedures are used subsequent to
the issuance of a contracting officer's final decision, their use does not alter any of the
time limitations or procedural requirements for filing an appeal of the contracting
officer's final decision and does not constitute a reconsideration of the final decision.
(d) When appropriate, a neutral person may be used to facilitate resolution of the issue
in controversy using the procedures chosen by the parties.
(e) The confidentiality of ADR proceedings shall be protected consistent with 5 U.S.C.
574.
(f) (1) A solicitation shall not require arbitration as a condition of award, unless
arbitration is otherwise required by law. Contracting officers should have flexibility to
select the appropriate ADR procedure to resolve the issues in controversy as they arise.
(2) An agreement to use arbitration shall be in writing and shall specify a maximum
award that may be issued by the arbitrator, as well as any other conditions limiting
the range of possible outcomes.
(g) Binding arbitration, as an ADR procedure, may be agreed to only as specified in
agency guidelines. Such guidelines shall provide advice on the appropriate use of
binding arbitration and when an agency has authority to settle an issue in controversy
through binding arbitration.
33.215 Contract clause.
The contracting officer shall insert the clause at 52.233-1, Disputes, in solicitations and
contracts, unless the conditions in 33.203(b) apply. If it is determined under agency
procedures that continued performance is necessary pending resolution of any claim
arising under or relating to the contract, the contracting officer shall use the clause with its
Alternate I.
Page 70
Federal Agency ADR Policy Documents on the Web
Selected
SOURCE
Policies
President of
the United http://www.financenet.gov/iadrwg.htm
States
Defense http://www.adr.af.mil (See Other Government
Logistics
ADR Programs Defense Logistics Agency)
Agency

Department of http://www.adr.af.mil (See Air Force ADR


the Air Force Program Secretary of the Air Force Memorandum
(Apr. 1998)
Department of http://www.adr.af.mil (See Other ADR Resources
the Army Electronics Documents Sample Policies)
Department of http://www.adr.af.mil (See Other Government
Justice ADR Programs Department of Justice)
Department of http://www.adr.af.mil (See Other Government
the Navy ADR Programs Department of the Navy
Department of http://www.adr.af.mil (See Other Government
Veterans ADR Programs Department of Veterans Affairs
Affairs
Note: For Other Federal Government Entities Not Listed Above,
see generally
http://www.adr.af.mil (Other Government ADR Programs) and
http://www.financenet.gov/iadrwg.htm.
Page 71
Armed Services Board of Contract Appeals ''Notice Regarding Alternative Methods of
Dispute Resolution"
ARMED SERVICES BOARD OF CONTRACT APPEALS
SKYLINE SIX
5109 LEESURG PIKE
FALLS CHURCH, VA 22041-3208
NOTICE REGARDING ALTERNATIVE METHODS OF DISPUTE RESOLUTION
The Contract Disputes Act of 1978, 41 U.S.C. § 607, states that boards of contract appeals
"shall provide to the fullest extent practicable, informal, expeditious, and inexpensive
resolution of disputes." Resolution of a dispute at the earliest stage feasible by the fastest
and least expensive method possible, benefits both parties. To that end, the Board
suggests that the parties consider Alternative Disputes Resolution (ADR) procedures.
The ADR methods described in this Notice are intended to suggest techniques which have
worked in the past. Any method which brings the parties together in settlement, or partial
settlement, of their disputes is a good method. The ADR methods listed are not intended
to preclude the parties use of other ADR techniques which do not require the Board's
participation, such as settlement negotiations, fact finding conferences or procedures,
mediation, or minitrials not involving use of the Board's personnel. The ADR methods
described below are designed to supplement existing "extrajudicial" settlement techniques,
not to replace them. Any method, or combination of methods, including one which will
result in a binding decision, may be selected by the parties without regard to the dollar
amount in dispute.
Requests to the Board to utilize ADR procedures must be made jointly by the parties. If an
ADR method involving the Board's participation is requested by the parties, the presiding
administrative judge or member of the Board's Legal staff will forward the request to the
Board's Chairman for consideration. Unilateral request or motions seeking ADR will not
be considered. The presiding administrative judge or member of the Board's legal staff
may also schedule a conference to explore the desirability and selection of an ADR
method. If a nonbinding ADR method involving the Board's participation is requested
and approved by the Chairman, a settlement judge or a neutral advisor will be
Page 72
appointed. Usually the person appointed will be an administrative judge or hearing
examiner employed by the Board.
If a non-binding ADR method fails to resolve the dispute, the appeal will be restored to
the active docket for processing under the Board's Rules. To facilitate full, frank and open
discussion and presentations, any settlement judge or neutral advisor who has participated
in a non-binding ADR procedure which has failed to resolve the underlying dispute will
ordinarily not participate in the restored appeal. Further, the judge or advisor will not
discuss the merits of the appeal or substantive matters involved in the ADR proceedings
with other Board personnel. Unless the parties explicitly request to the contrary, and such
request is approved by the Chairman, the assigned ADR settlement judge or neutral
advisor will be recused from consideration of the restored appeal.
Written material prepared specifically for use in an ADR proceeding, oral presentations
made at an ADR proceeding, and all discussions in connection with such proceedings
between representatives of the parties and a settlement judge or a neutral advisor are
confidential and, unless otherwise specifically agreed by the parties, inadmissible as
evidence in any pending or future Board proceeding involving the parties or matter in
dispute. However, evidence otherwise admissible before the Board is not rendered
inadmissible because of its use in a ADR proceeding.
Guidelines, procedures, and requirements implementing the ADR method selected will be
prescribed by agreement of the parties and the settlement judge or neutral advisor. ADR
methods can be used successfully at any stage of the Litigation. Adoption of an ADR
method as early in the appeal process as feasible will eliminate substantial cost and delay.
Generally, ADR proceedings will be concluded within 120 days following approval of
their use by the Chairman.
The following ADR methods are consensual and voluntary. Both parties and the Board
must agree to use of any of these methods.
1. Settlement Judge: A "settlement judge" is an administrative judge or hearing examiner
who will not hear or have any formal or informal decision-making authority in the appeal
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 settlement judge. The agenda for meetings
with the settlement judge will be flexible to accommodate the requirements of the
individual appeal. To further the settlement effort, the settlement judge may meet with the
parties either jointly or individually. A settlement judge's recommendations are not
binding on the parties.
Page 73
2. Minitrial: The minitrial is a highly flexible, expedited, but structured, procedure where
each party presents an abbreviated version of its position to principals of the parties who
have full contractual authority to conclude a settlement and to a Board-appointed neutral
advisor. The parties determine the form of presentation without regard to customary
judicial proceedings and rules of evidence. Principals and the neutral advisor participate
during the presentation of evidence in accordance with their advance agreement on
procedure. Upon conclusion of these presentations, settlement negotiations are conducted.
The neutral advisor may assist the parties in negotiating a settlement. The procedures for
each minitrial will be designed to meet the needs of the individual appeal. The neutral
advisor's recommendations are not binding.
3. Summary Trial With Binding Decision: A summary trial with binding decision is a
procedure whereby the scheduling of the appeal is expedited and the parties try their
appeal informally before an administrative judge or panel of judges. A summary, "bench"
decision generally will be issued upon conclusion of the trial or a summary written
decision will be issued no later than ten days following the later of conclusion of the trial
or receipt of a trial transcript. The parties must agree 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. The length of trial and the extent to which scheduling of the appeal is
expedited will be tailored to the needs of each particular appeal. Pretrial, trial, and post-
trial procedures and rules applicable to appeals generally will be modified or eliminated to
expedite resolution of the appeal.
4. Other Agreed Methods: The parties and the Board may agree upon other informal
methods which are structured and tailored to suit the requirements of the individual
appeal.
The above-listed ADR procedures are intended to shorten and simplify the Board's more
formalized procedures. Generally, if the parties resolve their dispute by agreement, they
benefit in terms of cost and time savings and maintenance or restoration of amicable
relations. The Board will not view the parties' participation in ADR proceedings as a sign
of weakness. Any method adopted for dispute resolution depends upon both parties
having a firm, good faith commitment to resolve their differences. Absent such intention,
the best structured dispute resolution procedure is unlikely to be successful.
Page 74
Memorandum of Understanding to Obtain GSBCA ADR Services

1 If the agency desires to divide these costs with the other party to a dispute, it shall do so by
separate arrangement. The [agency] agrees to be responsible for reimbursing the GSBCA for all of
these costs
Page 75
Page 76
Naval Facilities Engineering Command ADR Program (Dispute Review Boards)
ALTERNATIVE DISPUTE RESOLUTION. Over the past 20 years the Naval Facilities
Engineering Command (NAVFAC) has actively pursued ADR procedures to resolve
contractual disputes. Although exact numbers are unknown, it is estimated that NAVFAC
has used over 400 ADR procedures since 1990, with a satisfactory resolution rate of
approximately 80%. The ADR procedures used by NAVFAC include structured
settlements, mini-trials, settlement judges, and non-binding arbitration. In addition, as part
of the litigative process, NAVFAC has used summary binding Armed Services Board of
Contract Appeals procedures. However, unique to NAVFAC, is the use of disputes
resolution boards (DRBs).
NAVFAC currently uses four types of DRBs:
Chief's Board: The Command Award and Review Board, otherwise known as the "Chief's
Board," is a Board at NAVFACHQ that reports directly to the Commander,
NAVFACENGCOM. The Board is used for the purpose of selecting contractors and
performing other contract actions. With regards to ADR, the Chief's Board is a three-
person panel comprised of senior NAVFAC acquisition and legal personnel. The Board's
chairman is the Commander, the Vice-Commander, or the Director of Acquisition. The
purpose of the Chief's Board is to provide a means of dispute resolution on claims that
exceed $1,000,000, prior to the issuance of a Contracting Officer's Final Decision
(COFD).
Modified Chiefs Board: A three person panel that includes a NAVFAC decision-maker,
usually a senior contracting officer, a Contractor decision-maker, usually the president of
the company, and a neutral advisor, usually an ASBCA judge. If the claim exceeds
$1,000,000, the senior contracting officer will be from NAVFACHQ. If the claim is less
than $1,000,000, the senior contracting officer usually is the EFD/EFA/PWC Chief of the
Contracts Office. The purpose of the Modified Chief's Board is to provide a method of
dispute resolution on claims of any amount. The Board is usually convened at the
EFD/EFA/PWC. It can be used both prior to and after the issuance of a COFD.
EFD/EFA/PWC Contracts Review Board: A three-person panel of senior EFD personnel,
which includes a Level III Contracting Officer, Chief Counsel, and a senior CEC Officer.
The Board is usually convened at the EFD/EFA/PWC. The purpose of the Board is to
provide a method of dispute resolution on claims within the final decision authority of the
activity, prior to the issuance of a COFD. In its traveling mode, usually known as a
Disputes Review Board, the Board consists of a single contracting officer and usually is
convened at the job site.
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EFD/EFA/PWC Claims Board: A three-person panel consisting of a contracting officer,
counsel, and a technical representative. The Board is usually convened for each claim that
is forwarded from the field office. The Board's purpose is to review the claim to
determine entitlement. If entitlement is discovered the panel may convene an EFD
Contracts Review Board or remand to the field for settlement. Generally, the contractor is
not permitted to present its case to the Claims Board.
The key points of NAVFAC's DRBs are shown below:
The DRB is comprised of NAVFAC officials who come to the hearing without bias, with
the intent to resolve the dispute, and have the authority to act.
The DRB is best suited to situations where there appears to be room for compromise,
where there are debatable issues of fact and where an equitable solution is possible.
The DRB process is strictly voluntary. The contractor may withdraw participation at any
time and resume the normal claims litigation process. Further, the recommendation of the
DRB is non-binding on the contractor.
The DRB is intended to hear informal presentations from both the Administrative
Contracting Officer and contractor personnel. The presentations will be limited to a
reasonable amount of time.
The DRB is not a legal proceeding, which usually restricts the participation of attorneys
for both parties in a counsel role; however, attorneys have participated in an advisory
role. Further, usually no written transcripts will be made of the proceedings and there is a
restriction on the use of the DRB proceedings in any future appeal.
The DRB procedures are flexible and the DRB agreement may be changed on a case by
case basis to better serve the interests of both parties.
Points of Contact:
John F. McElhenny
Naval Facilities Engineering Command
(703) 325-7656
and/or
Audrey Van Dyke, Esq.
Naval Facilities Engineering Command (202) 685-1931
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Alternative Dispute Resolution Agreement Structured Settlement Discussions with
Possible Third Party Assistance
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Alternative Dispute Resolution Agreement -- Unassisted Mini-Trial

36 Alternatively, a specific stay of proceeding.


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37 Provisions need to be tailored to assure no restrictions on DCAA Access to or use of data and to
assure at least the minimum necessary contractor cooperation. Tension is between government need
for maximum information with no or minimal discovery and contractor's desire to provide as little
discovery as possible via the audit process.
38 Documents should be limited to the essential information not already in each party's possession and
not obtainable by other means.
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39 Should be in agreement even if first three paragraphs or equivalent are not used.
40 These paragraphs should be tailored to fit the specific situation.
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41 This sentence is optional.


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42 Optional when subcontractors are involved.


43 Assumes neither binding arbitration nor summary disposition is being employed.
44 NOTE: Page limitations (10-50) are normally beneficial and desirable.
45 Tailor to situation.
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Alternative Dispute Resolution Agreement -- Mediation of Litigation Pending in Federal
Court
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Alternative Dispute Resolution Agreement -- Board Judge-Assisted Mediation
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Alternative Dispute Resolution Agreement -- Mediation and Early Neutral Evaluation
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Alternative Dispute Resolution Agreement -- ASBCA Judge-Assisted Mini-Trial
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Alternative Dispute Resolution Agreement -- ASBCA Settlement Judge
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Alternative Dispute Resolution Agreement -- Summary Trial with Binding Decision
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Alternative Dispute Resolution Agreement -- Standing Neutral and Mediation

1 Appendix A to Alternative Dispute Resolution Protocol Agreement between the Department of


Army, Industrial Operations Command and Lockheed Martin Ordnance Systems, Inc. under
HYDRA-70 Systems Contract DAAA09-95-C-0028 (HYDRA-70 Rocket System Partnering
Conference January 30-February 1, 1996).
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2 The forum for the initial conference may be either a personal meeting or telephone conference at
the discretion of the Standing Neutral and the parties.
3 Position papers and other arguments posed by the contractor in furtherance of this ADR procedure
shall be marked to prohibit confusion as to the intent of the document. The following marking is
recommended:
''This paper is submitted under the ADR Agreement between the parties in furtherance of settlement,
and is not to be construed as a claim or request for final decision. The contractor retains his rights to
submit a claim or request for final decision at a later date if no resolution is reached."
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4 All negotiations, documentation and statements pursuant to this agreement are considered
confidential and shall be treated as compromise and settlement negotiations for the purposes of all
applicable rules of evidence and statute, including but not limited to Federal Rules of Evidence
(FRE), Rule 408 and 5 U.S.C. Sections 573 and 574. The parties and the Standing Neutral shall not
voluntarily disclose these dispute resolution communications. If the Standing Neutral or the parties
receive a demand for disclosure, they shall notify the neutral and other party.
5 This statement will not be admissible in any subsequent judicial or administrative proceeding
regarding this or any other dispute between the parties. Furthermore, neither party may compel
testimony of the Standing Neutral relating to these proceedings in any subsequent judicial or
administrative proceeding regarding this or any other dispute between the parties.
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Protocol Agreement Attachment1
Objectives, Processes and Principles of the Standing Neutral
The Standing Neutral's Objective
The Standing Neutral will act as a neutral third party and not as an agent of any party to
the negotiation. The Standing Neutral's responsibility is to facilitate the parties in their
own resolution of the issues identified by the parties. The Standing Neutral will endeavor
to remain familiar with the _________ program through attendance at quarterly program
reviews. The Standing Neutral will remain acquainted with milestones, turning points and
issues that may become disputes between the parties. It is the intent of the contractual
parties to keep disagreements that may fall under the Contract Disputes Act from delaying
or adversely affecting the performance of the contract or the relationships of the parties. It
shall be the objective of the Standing Neutral to assist the parties in achieving this result.
Process
1. The Standing Neutral shall be kept informed about the status of the contract, and
specifically about any issues that might arise that may effect contract performance, or may
lead to a dispute under the contract. Both parties hold an obligation to keep the Standing
Neutral informed. It is expected that the Standing Neutral will be invited to and informed
about all quarterly review meetings, or other such discussions relating to contract status.
2. It is anticipated that the parties will not formally engage the service of the Standing
Neutral until the parties have attempted settlement through the step negotiation process
laid out in the "Issue Resolution Chart" established at the Partnering Conference, and that
such negotiations have reached their final step and failed.
3. The Standing Neutral must at all times remain unbiased relating to the parties or an
issue in controversy. If the Standing Neutral finds that he cannot be unbiased, or that a
conflict of interest might exist, he shall excuse himself from participation in the specific
issue creating the bias or conflict.
1 Attachment to Alternative Dispute Resolution Protocol Agreement between the Department of
Army, Industrial Operations Command and Lockheed Martin Ordnance Systems, Inc. under
HYDRA-70 Systems Contract DAAA09-95-C-0028.
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4. After initial review of the facts, and review of the position papers supplied by the
parties, the Standing Neutral shall advise the parties of a recommended resolution to the
dispute within 20 working days of the initial conference, or receipt of the parties' written
positions in the event the Standing Neutral has requested written positions. This
recommendation is not limited to settlement terms, but may include recommendations for
further fact finding, continued negotiation, or other actions deemed appropriate by the
Standing Neutral to assist the parties in a proper resolution of the issue(s).
Principles
1. The Standing Neutral will inform himself of the facts, issues, positions, interest,
documents, and supporting argument relating to a disputed matter. It is the purpose of the
Standing Neutral to foster the negotiations between the parties, not to become involved in
the substantive issues. The Standing Neutral may do this by:
a. facilitating communications between the parties:
1) restating positions,
2) clarifying statements and arguments,
3) setting ground rules for discussion (such as no interruptions, no unsubstantiated
allegations, etc),
4) separating emotions and personality from the issue
b. helping clarify the parties' positions:
1) separating facts from allegations,
2) separating legal issues from factual issues,
3) helping the parties narrow and define the issues,
4) finding where the parties agree, and where they disagree,
5) separating the parties stated positions from their real interests
6) striving to obtain first hand knowledge of the facts or talk to those with first hand
knowledge
c. assisting in settlement:
1) finding areas of mutual interest
2) identifying innovative solutions or recommended settlements
3) seeking win-win strategies
4) evaluating the parties positions and advising of logical weaknesses
5) helping the parties to stay focused on the big picture and the Partnering charter
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d. evaluating the parties' approach and the propriety of ADR
1) is the disagreement over a need for revenge
2) do the parties believe that compromise equals defeat
3) is a final third party decision necessary to prevent disruption or recurrence of
disagreements in the future
4) are the parties rigidly positioned or unyieldingly confident in their position
5) is there no authority by the parties to settle
- issue outside of the contract
- an issue of fraud of other criminal activity might be involved
- an issue of bankruptcy might be involved
- no warrant or actual authority granted to a negotiator
- settlement prevented by policy of the organization
2. The Standing Neutral is not limited to the activities identified above, but is expected to
act in accordance with those activities as the Standing Neutral deems necessary. Should
ADR not appear appropriate for any of the reasons set forth in paragraph 4.d. above, the
Standing Neutral shall identify his concerns with counsel for both parties and the
[Agency] ADR Coordinator.
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Sample ADR Contract Clause (Partnering and Dispute Review Board)
The contractor and the government are both interested in the timely, efficient and fair
resolution of disputes. Based on the mutual desire for a system of resolving disputes that
meets these goals and the Administrative Dispute Resolution Act of 1990, the Contractor
and the Government agree to the use of the following procedures under this contract for
disposition of disputes:
A. Partnering
The contractor and the government will develop the use of partnering for dispute
avoidance. Partnering is used to build an environment that encourages open
communication and fosters the achievement of mutual goals. This process should assist
both parties in identifying and solving problems before they become issues in
controversy.
B. Dispute Review Board
Controversial issues that cannot be resolved using the normal negotiation process through
the Procuring Contracting Officer shall be submitted to a dispute review board (DRB).
The DRB will consist of three independent members who are employees of neither the
government nor the contractor. The DRB members will provide an independent
evaluation of entitlement which shall include the basis for any recommendations. The
contractor and the government agree that the DRB written opinions will be admissible in
any litigation arising between the contractor and the government related to or arising
under this contract.
1. Board Membership
a. The contractor and the government will each propose a list of three candidates
that they nominate for DRB membership. The contractor and the government will
each select one member from the other party's list. The two selected members of the
DRB will then select the third member of the DRB who will act as DRB chairperson.
b. Board members must be neutral, act impartially, and not have any official,
financial, or personal conflict of interest to any dispute issue before or during their
service on the DRB, unless such interest is fully disclosed in writing to the contractor
and the government and they both agree that the individual may serve on the DRB.
(See FAR 33.201). DRB members must also agree not to discuss future employment
or financial matters with the contractor or the government during the members'
tenure on the DRB.
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c. Should replacing a DRB member become necessary, the replacement member
shall be appointed in the same manner as the original member. The selection of a
replacement DRB member shall begin promptly upon notification of the need for a
replacement and shall be complete within six weeks.
2. DRB Agreement
a. The contractor, the government and all DRB members shall execute a DRB
agreement within four weeks after selection of the DRB members. This agreement
shall provide for the fees, expense reimbursement and method of payment for the
DRB members. The DRB agreement shall incorporate by reference this ADR
provision.
3. Operation of the DRB
a. The DRB shall formulate its own operating procedures, and any modifications to
these procedures, with concurrence from the contractor and the government. The
operating procedures shall be consistent with the goals mentioned in the first
paragraph of this clause.
b. Regular meetings of the DRB members, the contractor and the government shall
be held. Each meeting shall consist of a description of the work accomplished since
the previous meetings, current status of the program schedule, potential or
anticipated problems and proposed solutions, and any ongoing controversial issues.
The contractor shall prepare minutes of regular meetings and circulate them for
approval.
c. The contractor or the government may each request that the DRB review any
controversial issue arising under or related to this contract which has not been
resolved through negotiations. All requests to the DRB shall be submitted in writing
to both the DRB and to the other involved party. The request for review of the issue
shall clearly state the specific issue(s) in full detail.
d. The contractor and the government shall have 15 days to submit position papers
to the DRB with copies provided to the other interested party. The position paper
shall provide a comprehensive statement of the specific facts regarding the parties'
positions on the issues in the case. Unless specifically agreed to by the other
involved parties prior to the submission date, no position paper shall exceed thirty
pages.
e. When an issue is submitted to the DRB it may be heard at the next regular DRB
meeting or a special meeting may be convened, as agreed by everyone. The review
shall be conducted at a neutral location. The party requesting the review will first
present its position, followed by the other party. During the review the Contractor
and the Government shall each be provided the full opportunity to present all of
their evidence, documentation and testimony. The DRB members may ask questions,
request clarification or ask for additional data. Copies of all information provided
the DRB by
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one party shall be provided to the other party. Transcripts of the meeting will be
prepared.
f. After the review is concluded, the DRB shall meet to formulate its
recommendations. The DRB recommendations, complete with explanations of its
reasoning, shall be submitted to the Contractor and the Government as a written
report. The recommendations shall be based on the pertinent provisions of the
contract, applicable laws and regulations, and the facts and circumstances involved
in the issue. It is important for the DRB to express clearly and completely the logic
and reasoning leading to the recommendation, so that both parties fully understand
it.
g. After issuance of the DRB recommendations, the Contractor and the Government
have two weeks to accept or reject the recommendations and reach a final
settlement. (This does not include the administrative time for preparing any contract
amendment which may be required.) This provision takes precedence over FAR
52.233-1, Disputes clause, up to this point. Recommendations that have not been
accepted or issues that have not been resolved by the end of this period shall revert
back to the normal disputes process as defined in FAR 52.233-1 unless an extended
settlement period is agreed to by both parties.
h. Position papers, exhibits and oral arguments made by the Contractor and the
Government to the DRB as well as the written opinions of the DRB shall not be
confidential and shall be admissible in any subsequent litigation between the
Contractor and the Government arising under or related to this contract. All requests
by the contractor for contract price adjustment shall be subject to audit by the
Defense Contract Audit Agency (DCAA). None of these processes shall alter the
terms of the contract, nor the requirements for the appropriate certifications.
i. ADR Administration Costs. The contractor is responsible for contracting for the
DRB members once membership has been established. This contract includes cost
reimbursable line items to pay for this expense and the other ADR administrative
expenses as a direct charge. The contractor may not use this line item to pay for any
ADR settlement costs.
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The Following Is a Retyped Copy of a Survey on ADR Compiled by ASBCA Judge
Martin J. Harty
Results of Survey of
Boards of Contract Appeals (BCA) Judges' Attitudes
Towards Alternative Dispute Resolution (ADR)
October 1996
I. Introduction
A. The survey was conducted during October 1996 and updates a similar survey
conducted in late September and early October, 1994. The numbers presented should
be considered estimates and are aimed at providing a rough order of magnitude.
B. Over 80 percent of the BCA judges responded. This compares to a roughly 85
percent response to the 1994 survey. Of the judges responding, almost all had
participated in at least one ADR proceeding, although not necessarily within the last
two years. (In the previous study, over 80 percent of the judges reported participating
in at least one ADR proceeding.)
C. For purposes of defining ADR techniques, the ASBCA's ''Notice Regarding
Alternative Methods of Dispute Resolution" was used. The notice describes three basic
techniques. One is binding: the summary trial with binding decision. The other two
methods are non-binding: the settlement judge and minitrial.
II. Scope of ADR Activity at the BCA's
A. Some measurements of ADR activity:
1. From 1987 through fiscal year 1994, there were roughly 216 ADR requests,
covering 330 appeals. In the case of the ASBCA, for example, there were 93 requests
for ADR, covering 164 appeals, with most ADR activity beginning in fiscal year
1990.
2. For fiscal year 1994, the ASBCA received 19 requests, covering 29 appeals. Five
of the requests were for binding ADR and the remaining 14 requests were for non-
binding ADR, with 10 requests for a settlement judge and 4 requests for minitrials.
The other boards identified 12 requests.
3. For fiscal year 1995, the boards received ADR requests covering 107 appeals. The
ASBCA received 31 requests for ADR, covering 61 appeals.
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Of the requests, 12 were for binding ADR and the remaining 19 requests were for
non-binding ADR, with 17 requests for a settlement judge and 2 requests for a
minitrial. The other boards reported receiving requests covering 46 appeals.
4. For fiscal year 1996, the boards received ADR requests covering 169 appeals. The
ASBCA received 42 requests covering 53 appeals. Of the 42 requests, 21 were for
binding ADR and the other 21 requests were for non-binding ADR, with 16 requests
for a settlement judge and 5 requests for minitrials. The other boards reported
receiving requests covering 116 appeals.
B. Many judges felt that the increased focus on ADR by the Government and the
private sector has had an impact at their board, although no one would say it was
dramatic. Many observed that ADR has been available at the boards for sometime.
Some pointed to an increase in ADR activity itself as evidence of the effect. Others
expressed the feeling that the parties were more willing to consider settlement. As a
result, they believed more cases were settling, and settling earlier. A few speculated that
a change in attitudes has resulted in more settlements at the contracting officer level
and, consequently, fewer appeals.
III. Support for ADR
A. Over 85 percent believe that encouraging the parties to engage in ADR should be an
integral part of board proceedings. This compares to 70 percent in the 1994 survey.
The remaining judges felt that it was enough to simply make the parties aware of the
availability of the procedure. A number of judges who would encourage use of ADR
pointed out that the potential for a faster, less expensive disposition of the appeal
served the Contract Disputes Act's goal of informal, expeditious resolution of disputes.
Though more judges are willing to "encourage" the use of ADR, all would draw the
line at being seen as coercing the parties. As in the 1994 study, they share a concern
with those who would maintain a more neutral stance about "pressing" the parties to
adopt an ADR procedure for the resolution of their dispute. More than one judge
pointed out that compelling the parties to participate in a non-binding ADR could
undermine the chances for success. In summary, ADR is viewed as an important "tool''
for dispute resolution, but not one that should be forced on the parties.
B. The 1994 survey confirmed the willingness of over 80 percent of the judges to act as
a neutral in an ADR proceeding even before an appeal was docketed. (Resource
constraints and the demands of dealing with docketed appeals were of particular
concern to some of those who responded negatively.) In addition, almost 85 percent
were willing to stay a proceeding while the parties engaged in ADR independent of
their board and then enter the settlement as a board judgment. Board Chairs responding
to the October 1996 survey again confirmed their willingness to have board judges
serve as neutrals before an appeal was docketed and to stay a proceeding to allow an
ADR effort independent of the board in an appropriate case.
C. During fiscal years 1995 and 1996, very few ADR requests were turned down. The
only reported rejections occurred at the ASBCA where two judges reported turning
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down requests. Of those judges responding to the 1994 survey, only six judges
reported turning down a request for ADR.
1. The low rejection rate is attributable in large measure to the requirement, formal
or informal, of a number of boards that the request for ADR be joint.
2. The reasons given in the 1994 survey for refusing a request was that it was either
not joint or the presiding judge believed one of the parties was not committed to the
process. The latter reason was cited by the two judges turning down requests in
fiscal years 1995 and 1996.
IV. Cases Appropriate for ADR
A. Judges continue to consider all ADR techniques effective in resolving disputes.
Almost all are unwilling to rule out any case for ADR, particularly if the parties believe
the process could work for their case.
B. The following types of cases were identified as particularly suitable for ADR:
1. Small dollar cases, particularly where litigation costs would seriously erode any
award.
2. Non-complex cases with relatively clear-cut factual or legal issues.
3. Cases where only quantum is in dispute.
4. Large, factually complex claims where both parties recognize some liability.
Judgment must be exercised in the selection of the ADR technique to be used.
Binding ADR techniques were suggested for cases in categories 1 and 2, while non-
binding ADR was suggested for cases in category 4.
V. Binding ADR (Summary Trial with Binding Decision)
A. Binding ADR accounted for roughly 40 percent of the ADR proceedings from 1987
through fiscal year 1994. In fiscal years 1995 and 1996, binding ADR accounted for
roughly 45 percent of the total ADR requests at the ASBCA, and roughly 15 percent of
the overall activity at the other boards.
B. From the judges' perspective, binding ADR is working satisfactorily. It offers an
inexpensive, expeditious resolution of disputes through the use of a non-precedential
bottom line decision which may not be appealed. However, there is also a recognition
by the judges that care must be taken because the truncated proceeding may increase
the risk of error.
VI. Non-binding ADR (Settlement Judge and Minitrial)
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A. Non-binding ADR accounted for roughly 60 percent of the ADR proceedings from
1987 through fiscal year 1994. The settlement judge approach was used in roughly 50
percent of the procedures, with minitrials or modifications thereof accounting for the
remaining 10 percent. For fiscal years 1995 and 1996, non-binding ADR accounted for
roughly 55 percent of the ADR requests received by the ASBCA and roughly 85
percent of the ADR activity at the other boards.
B. The overall success rate for non-binding ADRs continues at the 90 to 95 percent
level reported in the 1994 survey.
C. Three key elements contributing to the likelihood of success of a non-binding ADR
were identified:
1. The parties and the neutral advisor must be thoroughly prepared before the ADR
begins. This means the parties must be satisfied that they know enough about their
respective cases through discovery or otherwise to proceed.
2. The principals who participate in the ADR must have the authority to settle and
must want the process to work. Several judges emphasized the importance of
making certain that all of the parties with a stake in the outcome were behind the
process. Subcontractors, banks and insurers were mentioned as potential
stakeholders.
3. The parties must have confidence in the neutral advisor and the neutral advisor's
ability to provide an unbiased and realistic assessment of the strength and
weaknesses of a party's case. A number or judges stressed the value of ex parte
communications in facilitating discussions and the importance of recusal of the
neutral if the ADR fails.
D. In describing their role in the process, the judges emphasized the importance of
keeping in mind that the role is one of a neutral facilitator, not a decision maker.
1. All stressed the importance of providing the parties with a candid assessment of
their positions, while maintaining neutrality. Some cautioned against becoming so
intent on helping the parties achieve a settlement that the neutral forgets his or her
role.
2. The ability to facilitate communication between the parties was identified as an
important skill. Patience, good listening skills and a sense of humor were among the
traits often mentioned as important for any facilitator.
E. The major concern with the non-binding ADR process remains the non-productive
use of board resources when the ADR fails since the matter must then be assigned to
another judge because of the recusal policy. A few judges suggested that consolidation
of the areas of agreement and highlighting the areas that remain in dispute by the
parties, with the neutral's assistance, might eliminate some duplication of effort.
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VII. The Settlement Process in General
A. In the 1994 survey, over 90 percent of the judges reported discussing settlement
during prehearing conferences. Over 80 percent of the judges indicated that they
offered to aid in settlement at anytime during the case.
B. Over 95 percent of the judges responding to the October 1996 survey indicated that
they discuss settlement during prehearing conferences and over 90 percent indicated
that they offer to aid in settlement at anytime during the case.
C. As was true during the 1994 survey, most felt that more cases should settle.
However, there was a suggestion by some that the pool of cases that should settle was
shrinking. The October 1996 survey reaffirmed the reasons most frequently cited in the
1994 survey for why cases that should settle do not. The most frequently cited reasons
are:
1. Emotional involvement preventing realistic assessment of case.
2. Lack of preparation by one or both of the parties.
3. Breakdown in communication due to personality conflicts.
D. A majority of the contract appeals cases that are filed are settled. This fact was
emphasized by many of the judges responding to the 1994 survey. Some of them
observed that the role judges play during the appeal process fosters settlement apart
from one of the "formal" ADR procedures. On the other hand, many cases were settled
without any active role being played by the judge. When asked in the October 1996
survey to assess the percentage of cases that settled as a result of the judge's exploration
of settlement possibilities, estimates varied widely and many were unwilling to
speculate. A rough estimate would be that one-third of the cases settle because of the
judge's involvement.
E. In summary, ADR is viewed as an important tool for dispute resolution and support
for its use is strong among the judges.
prepared by:

MARTIN J. HARTY
Administrative Judge
Armed Services Board
of Contract Appeals
31 October 1996
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Ethical Considerations for ADR -- a Primer
By Nicholas P. Retson, Esq.
1. General Ethical Considerations
It is quite easy in an ADR setting for the attorneys involved to forget what role they are
playing and what, if any, professional ethical standards apply. Most lawyers do not
differentiate between their ADR activities and their legal practice duties.46 The following
is a brief discussion of some of the special ethical considerations that apply to lawyers
who are representing parties in an ADR. It also looks at the rules as they apply to neutrals
- whether they are an attorney or not.
As a general rule, with court-sanctioned ADR processes, a higher level of ethical
standards will be expected of the participants.47 In normal, unassisted negotiation, the
attorneys have only a duty of fair play and must disclose facts only when so specifically
requested by the other side or when voluntary disclosure is advantageous to their client.
In court sanctioned ADR, participating attorneys may be expected to conduct themselves
as "officers of the court" and, accordingly, half-truths may not be acceptable.
The ADR technique being used might also affect the ethical considerations of the
attorneys involved. For example, in mediation, there is no prohibition against ex parte
communications with the mediator. Indeed, this ability to communicate outside the
presence of the other party is critical to a mediator's ability to facilitate negotiations
between the parties. However, in arbitration, which is more like a court proceeding, ex
parte communications are precluded.48 The rules of the court or board where the dispute
has been filed might also affect ethical considerations. Armed Services Board of Contract
Appeals (ASBCA) Rule 34 prohibits ex parte communications with the judges on matters
at issue in a pending appeal before the Board. If an ASBCA judge is acting as a mediator
under a Board sanctioned ADR process, then the parties need to waive this rule by means
of a provision within a Board-approved ADR agreement, so that the Board neutral can
engage in ex parte communications.
46N.J. Panel Finds ADR is Part of Law Practice, Vol. 12, No. 7, ALTERNATIVES, p. 87, Center
for Public Resources (CPR) (July 1994).
47See, Meyerson, Bruce E., Telling the Truth in Mediation: Mediator Owed Duty of Candor,
DISPUTES RESOLUTION MAGAZINE, p. 17 (Winter 1997). Author looks at ABA Model Rule 4.1,
among others, noting that the same general rules that one adheres to in presenting information to a
judge should also apply when practicing before a mediator. When dealing with a mediator, a lawyer
(1) must not affirmatively lie about material facts; (2) cannot knowingly misstate the law; and, (3) may
have an affirmative duty to disclose facts to the mediator if lawyer concludes that the settlement is
going to be based upon lack of material information to the other party.
48 Wylie, John G., Mediation vs. Arbitration Ethics, Vol.4, No. 2, ADR NEWS p. 2., Alternative
Disputes Resolution Section of the State Bar of Wisconsin (Spring 1998).
Page 129
In terms of professional conduct, attorneys must always look to the specific governing
ethical rules issued and applied by their state or other licensing authorities. There are also
two professional codes for attorneys that are widely referred to for purposes of ADR49.
The first is the American Bar Association (ABA) Model Rules of Professional Conduct
(hereinafter Model Rules or 'MR'); and the second is the Model Standards of Conduct for
Mediators (hereinafter Model Standards). The Model Standards was prepared jointly by
the American Arbitration Association (AAA); the Litigation Section and the Dispute
Resolution Section of the American Bar Association (ABA)50, and the Society of
Professionals in Dispute Resolution (SPIDR). The Model Rules and Model Standards are
often used as the default governing standards, when no other specific rules apply or when
they have been adopted verbatim by licensing agencies or organizations.
2. Considerations for Neutrals.
ADR neutrals have duties relating to their conduct of ADR proceedings which may run in
several directions.51 The Model Standards address a neutral's duties in the context where
the neutral acts solely as a mediator. These duties can be summarized as follows:
i. Of primary importance is the neutral's duty to the parties to the dispute. The neutral
must have the proper qualifications to help the parties carry out the ADR and must be
responsible to help the parties become educated to the role of the neutral in the ADR
process being undertaken. (see Standards I and IV).
ii. The neutral must remain unbiased and impartial throughout the proceeding. Any real
or potential conflicts of interest must be disclosed and the neutral must thereafter
withdraw from further participation unless the parties specifically agree. (Standards II
& III).
iii. Often parties provide information to the neutral in confidence. The neutral must
ensure that such information is not disclosed to the other party without proper
authorization to do so. (Standard V).
iv. Ensuring that the proceedings are conducted in a fair and diligent manner,
consistent with the parties' desires, is another duty of the neutral. (Standard VI).
49 There are numerous other ethical codes and standards prepared by ADR organizations, e.g., The
Code of Ethics for Arbitrators in Commercial Disputes, prepared by the American Arbitration
Association.
50 The Model Standards as set forth in this article have not yet been considered by the American Bar
Association House of Delegates and do not constitute the policy of the American Bar Association.
51 Menkel-Meadow, Carrie; Professional Responsibility for Third-Party Neutrals, Vol. 11, No. 9
ALTERNATIVES, p. 129, Center for Public Resources (CPR) (Sept. 1995)
Page 130
v. Neutrals must be truthful in advertising their skills, and their solicitation of business
(Standard VII) and must fully disclose and explain their fees and charges to the parties
(Standard VIII).
Neutrals must take an active role to ensure the integrity of the overall ADR process. Also,
neutrals might owe a duty to some key nonparty to the ADR; and, if appropriate, should
see that such an interested nonparty be offered an opportunity to join the ADR. In a
Government contract controversy, this might include a key subcontractor, a surety, or
someone from the program office that manages the funds for the project. Neutrals also
owe a duty to not interfere with the professional relationships between the parties and
other professionals, e.g., attorneys, accountants, etc.
Neutrals have the added duty of ensuring they alert everyone to the nature and limits of
their role in ADR, i.e., as strictly providing facilitative mediation or as also providing
some evaluation of the controversy. If the neutral is also an attorney and will be asked to
provide some legal evaluation of the dispute, then the attorney must look to the
professional responsibility standards for attorneys, including the ABA's Model Rules.
When acting as a mediator, the ABA's new Ethical Rule (ER) 5.7 covering
"Responsibilities Regarding Law-Related Services"52 might apply. To avoid potential
difficulties with this Rule, any attorney serving as an ADR neutral should advise the
parties, especially when they are not represented by counsel, that no attorney-client
relationship exists between the neutral and the disputants and that the neutral is not
providing legal services to the parties.53
52 (a) A lawyer shall be subject to the Rules of Professional Conduct with respect to the provision
of law related services, as defined in Paragraph (b) if the law related services are provided:
(1) by the lawyer in circumstances that are not distinct from the lawyer's provision of legal
services to clients;
(2) or by a separate entity controlled by the lawyer individually or with others if the lawyer fails
to take reasonable measures to assure that a person obtaining the law related services knows that
the services of the separate entity are not legal services and that the protections of the client-
lawyer relationship do not exist.
(b) The term "law-related services" denotes services that might reasonable be performed in
conjunction with and in substance are related to the provision of legal services, that are not
prohibited as the unauthorized practice of law provided by a non-lawyer.
53 Meyerson, Bruce E., New ABA Rule Affects Lawyer-Mediators, Vol. 1, No 2, DISPUTES
RESOLUTION MAGAZINE (Summer 1994).
Page 131
3. Considerations for Attorneys Representing Clients
For ADR, commentators group the applicable ethical standards into five areas: advising
the client, advocacy, truthfulness, confidentiality, and drafting agreements. Some
applicable standards found in the ABA's Model Rules are summarized below.
The client must be kept informed at all times about the dispute and the attorney should
quickly respond to requests for information about the dispute. (MR 1.4)
The attorney must exercise independent professional judgment and advocate the clients'
interests. These positions must be made in good faith and supported by the law.
Lawyers must always communicate with the other party only through its counsel (MR
1.16) and must take reasonable efforts to expedite the matter in dispute (MR 3.2).
Clearly, attorneys must never knowingly make a false statement of fact or law nor fail
to disclose a material fact, when it is necessary to avoid assisting in a criminal act (MR
4.2). Care must be exercised to ensure that "puffing" does not turn into knowingly
falsifying key facts or evidence. Nor should an attorney threaten criminal sanctions to
gain advantage in an ADR.
One must not release information involved in the dispute unless the client agrees to
your doing so. (MR 1.6). In an ADR, if the neutral is under a confidentiality agreement,
attorneys have more leeway to disclose confidences. The mediator can use this
information to help structure potential solutions with the parties. (MR 1.6)
No settlement agreement should be prepared which provides a gift to the attorney
drafting it, including the beneficial interests in literary or media rights based upon the
representation. (MR 1.8).
Adhering to the ethical standards can preserve the integrity of the ADR process and serve
to further the chances for ultimate success. Failure to adhere to such standards can only
serve to undermine the process. For example, intentionally making a false material
statement might constitute grounds for voiding an ADR settlement agreement.
References
1. Cooley, John W., Mediation Advocacy, (NITA, 1996)
2. Coulson, Robert; Business ArbitrationWhat You Need To Know, (5th Ed, American
Arbitration Association, 1993)
3. Goldberg, Sander & Rogers, Dispute Resolution - Negotiation, Mediation, And Other
Processes, (2nd Ed., Little Brown & Co., 1992)
4. Guernsey, Thomas F., A Practical Guide to Negotiations, (NITA, 1996)
5. Nolan-Haley, Jaqueline M., Alternate Dispute Resolution, (West 1992)
Page 132
ADR Settlement Agreement
Page 133
Page 134
Page 135
Page 136
Sample CDA Interest Computation
CDA interest on the total principal amount being sought for the Claim items, $5,131,399,
would accrue beginning on the date the Contracting Officer (''CO") received the Claim, 15
August 1991. Assuming payment of this principal amount on June 30, 1997, a total of
$2,014,419 in CDA interest would be due along with that principal payment. This amount
was derived as follows:
(a) (b) (c) (d) (e)
Annual Interest Daily No. of
Dates Total
Rate Rate54 Days
8/15/91 - .08500 .0002328 139 .0323592
12/31/91
1/1/92-6/30/92 .06875 .0001883 181 .0340823
7/1/92- .07000 .0001917 184 .0352728
12/31/92
1/1/93-6/30/93 .06500 .0001780 181 .0322180
7/1/93- .05625 .0001541 184 .0283544
12/31/93
1/1/94-6/30/94 .05500 .0001506 181 .0272586
7/1/94- .07000 .0001917 184 .0352728
12/31/94
1/1/95-6/30/95 .08125 .0002226 181 .0402906
7/1/95-
.06375 .0001746 184 .0321264
12/31/95
1/1/96-6/30/96 .05875 .0001609 181 .0291229
7/1/96-
.07000 .0001917 184 .0352728
12/31/96
1/1/97-6/30/97 .06375 .0001746 181 .0316026
TOTAL .3925672
$5,131,399 (Principal) × .3925672 (Accrued Interest Rate) =
$2,014,419 Total CDA Interest Due
54 Daily Rate (c) equals Annual Interest Rate (b) divided by 365.
Page 137
Available ADR Materials
1. ON-LINE ADR ARTICLES:55
ADR Resources: This site contains more than forty essays on mediation
(http://adrr.com)
American Arbitration Association's Dispute Resolution Journal: This site contains
selected articles for AAA's award-winning publication, the Dispute Resolution Journal
(http://www.adr.org/drj/drj.html)
Center for Public Resources (CPR): This site contains selected articles from CPR's
well-regarded news monthly on new uses of ADR by corporations, firms, government
agencies, and the courts (http://www.cpradr.org/alt_scrn.htm)
NOVA Southeastern University, School of Social and Systemic Studies, ADR On-Line
Papers: This site contains a number of good articles on ADR in general and mediation
in particular (http://www.nova.edu/ssss/DR/papers.html)
The Alternative Newsletter: A Resource Newsletter on Dispute: This newsletter
contains an extremely comprehensive review of recent developments, articles, and
other items of interest in the field of ADR (http://www.mediate.com/tan/)
II. ADR BIBLIOGRAPHIES56
RAND Bibliography: Outcomes/Costs of Dispute Resolution
(http://www.rand.org/centers/icj/ICJ.bib/outcomes.html#costs)
RAND Bibliography: Dispute Resolution;
(http://www.rand.org/centers/icj/ICJ.bib/dispute_res.html)
Center for Public Resources: Provides a list of books and articles that have received
top honors from CPR. This bibliography provides a wealth of
55This information comes from the Air Force ADR Program Website at http://www.adr.af.mil]
56 Id.
Page 138
information regarding ADR writing of both a practical and theoretical character
(www.cpradr.org/biblio.htm)
III. LAW REVIEW ARTICLES57
A. Evaluation of ADR
Jethro K. Lieberman & James F. Henry, Lessons from the Alternative Dispute
Resolution Movement, 53 U. Chi. L. Rev. 424 (1986).
Richard A. Posner, The Summary Jury Trial and Other Methods of Alternative
Dispute Resolution: Some Cautionary Observations, 53 U. Chi. L. Rev. 366 (1986).
Marc Galanter & Mia Cahill, "Most Cases Settle": Judicial Promotion and Regulation
of Settlements, 46 Stan. L. Rev. 1339 (1994)(Described by some as an excellent
review of the complicated "state of the art" in empirical research of ADR).
Carrie Menkel-Meadow, Durkheimian Epiphanies: The Importance of Engaged
Social Science in Legal Studies, 18 Fla. St. U. L. Rev. 91 (1990)(Discusses the
importance of empirical research about law and its operation and its relation to legal
education.)
John P. Esser, Evaluations of Dispute Processing: We Do Not Know What We Think
and We Do Not Think What We Know, 66 Denv. U. L. Rev. 499 (1989)(Described
as an incisive analysis of the problems of evaluating dispute processing programs).
Jessica Pearson & Nancy Thoennes, Divorce Mediation: An Overview of Research
Results, 19 Colum. J.L. & Soc. Probs. 451 (1985)(Reviews research in this field and
finds evaluations of the mediation process to be generally more favorable than
evaluations of adversarial proceedings.)
Edward Brunet, Questioning the Quality of Alternative Dispute Resolution, 62 Tul.
L. Rev. 1 (1987)(Focuses on selected qualitative justice values crucial to
understanding ADR and concentrating on how well ADR achieved these values.)
B. ADR Policy
1. Generally
57 Id.
Page 139
Edward D. Re, The Causes of Popular Dissatisfaction with the Legal Professions,
68 St. John's L. Rev. 85 (1994).
John Hasnas, The Myth of the Rule of Law, 1995 Wis. L. Rev.
Lynn A. Kerbeshian, ADR: To be or . . . ? 70 N.D. L. Rev. 381 (1994).
Edward Brunet, Questioning the Quality of Alternative Dispute Resolution, 62
Tul. L. Rev. 1 (1987).
Roger C. Cramton, Delivery of Legal Services to Ordinary Americans, 44 Case W.
Res. 531 (1994).
Charlene Stukenborg, Comment, The Proper Role of Alternative Dispute
Resolution in Environmental Conflicts, 19 U. Dayton L. Rev. 1305 (1994).
Carrie Menkel-Meadow, Pursuing Settlement in an Adversary Culture: A Tale of
Innovation Co-Opted or "The Law of ADR," 19 Fla. St. U. L. Rev. 1 (1991/1992).
Craig A. McEwen, Pursuing Problem-Solving or Predictive Settlements, 19 Fla.
St. U. L. Rev. 77 (1991/1992).
Marc Galanter, Predators and Parasites: Lawyer-Bashing and Civil Justice, 28 Ga.
L. Rev. 633 (1994).
Craig Kubey, You Don't Always Need a Lawyer: How to Resolve Your Legal
Disputes Without Costly Litigation, 105 Harv. L. Rev. 1819 (1992).
Edwin H. Greenebaum, Lawyers' Agenda for Understanding Alternative Dispute
Resolution, 68 Ind. L.J. 771 (1993).
Lauren K. Robel, Private Justice and the Federal Bench, 68 Ind. L.J. 891 (1993).
R. Gaull Silberman et al., Alternative Dispute Resolution of Employment
Discrimination Claims, 54 La. L. Rev. 1533 (1994).
George H. Singer, Employing Alternative Dispute Resolution: Working at Finding
Better Ways to Resolve Employer-Employee Strife, 72 N.D. L. Rev. 299 (1996).
Michael G. Liffrig, Which is the Fairest Court of All? The Case for a Private Court
System, 70 N.D. L. Rev. 353 (1994).
Keith Werhan, Delegalizing Administrative Law, 1996 U. Ill. L. Rev. 423.
Page 140
Carrie Menkel-Meadow, Is Altruism Possible in Lawyering? 8 Ga. St. U. L. Rev.
385 (1992).
2. Policy of Promoting Settlement
Marc Galanter, Mia Cahill, "Most Cases Settle": Judicial Promotion and
Regulation of Settlements, 46 Stan. L. Rev. 1339 (1994).
Kent D. Syverud, The Duty to Settle, 76 Va. L. Rev. 1113 (1990).
David Luban, Settlements and the Erosion of the Public Realm, 83 Geo. L.J. 2619
(1995).
Stephen McG. Bundy, The Policy in Favor of Settlement in an Adversary System,
44 Hastings L.J. 1 (1992).
David A. Rammelt "Inherent Power" and Rule 16: How Far Can a Federal Court
Push the Litigant Toward Settlement? 65 Ind. L.J. 965 (1990).
Samuel R. Gross & Kent D. Syverud, Getting to No: A Study of Settlement
Negotiations and the Selection of Cases for Trial, 90 Mich. L. Rev. 319 (1991).
William L. Adams, Lets Make a Deal: Effective Utilization of Judicial Settlements
in State and Federal Courts, 72 Or. L. Rev. 427 (1993).
Hon. Frank Evans & Shadow Sloan, Resolving Employment Disputes Through
ADR Processes, 37 S. Tex. L. Rev. 745 (1996).
Samuel R. Gross & Kent D. Syverud, Don't Try: Civil Jury Verdicts in a System
Geared to Settlement, 44 UCLA L. Rev. 1 (1996).
Judith Resnick, Whose Judgment? Vacating Judgments, Preferences for
Settlement, and the Role of Adjudication at the Close of the Twentieth Century,
41 UCLA L. Rev. 1471 (1994).
Kevin C. McMunigal, The Costs of Settlement: the Impact of Scarcity of
Adjudication on Litigating Lawyers, 37 UCLA L. Rev. 833 (1990).
Carrie Menkel-Meadow, Pursuing Settlement in an Adversary Culture: A Tale of
Innovation Co-opted or " The Law of ADR," 19 Fla. St. U. L. Rev. 1 (1991/1992).
Carrie Menkel-Meadow, For and Against Settlement: Uses and Abuses of the
Mandatory Settlement Conference, 33 UCLA L. Rev. 485 (1985).
Page 141
Andrew W. McThenia & Thomas L. Shaffer, For Reconciliation, 94 Yale L.J.
1660 (1985).
3. ADR Critics Generally
Kim Dayton, The Myth of Alternative Dispute Resolution in the Federal Courts,
76 Iowa L. Rev. 889 (1991).
Eric K. Yamamota, ADR: Where Have the Critics Gone? 36 Santa Clara L. Rev.
1055 (1996).
Hon. Rodney S. Webb, Court-Annexed "ADR" -- A Dissent, 70 N.D.L. Rev. 229
(1994).
Hon. Bruce E. Bohlman & Erick J. Bohlman, Wandering in the Wilderness of
Dispute Resolution: When Do We Arrive at the Promised Land of Justice? 70
N.D. L. Rev. 235 (1994).
Owen M. Fiss, Against Settlement, 93 Yale L.J. 1073 (1984).
Trina Grillo, The Mediation Alternative: Process Dangers for Women, 100 Yale
L.J. 1545 (1991).
Penelope E. Bryan, Killing Us Softly: Divorce Mediation and the Politics of
Power, 40 Buff. L. Rev. 441 (1992).
Richard Delgado et al., Fairness and Formality: Minimizing the Risk of Prejudice
in Alternative Dispute Resolution, 1985 Wis. L. Rev. 1359.
Judith Resnick, Managerial Judges, 96 Harv. L. Rev. 374 (1982).
Stephen C. Yeazell, The Misunderstood Consequences of Modern Civil Process,
1994 Wis. L. Rev. 631.
Laura Nader, Controlling Processes in the Practice of Law: Hierarchy and
Pacification in the Movement to Re-Form Dispute Ideology, 9 Ohio St. J. on Disp.
Resol. 1 (1993).
III. MEDIATION
Page 142
Caroline Turner English, Mediator Immunity, 63 Geo. Wash. L. Rev. 759 (1996).
Alan Kirtley, The Mediation Privilege's Transition from Theory to Implementation:
Designing a Mediation Privilege Standard to Protect Mediation Participants, the Process
and the Public Interest, 1995 J. Disp. Resol. 1 (1995).
Chester A. Bailey, The Role of Mediation in the USDA, 73 Neb. L. Rev. 142 (1994).
Richard M. Calkins, Mediation: The Gentler Way, 41 S.D.L. Rev. 277 (1996).
Newton R. Russell, Comment, Mediation: The Need and a Plan for Voluntary
Certification, 30 U.S.F. L. Rev. 613 (1996).
James C. Alfini, Trashing, Bashing and Hashing it Out: Is This the End of "Good
Mediation"? 19 Fla. St. U. L. Rev. 47 (1991/1992).
Phyllis Gangel-Jacobs, Some Words of Caution About Divorce Mediation, 23 Hofstra
L. Rev. 825 (1995).
Jay Folberg, Certification of Mediators in California: An Introduction, 30 U.S.F. L.
Rev. 609 (1996).
Jennifer Gerarda Braun & Ian Ayres, Economic Rationales for Mediation, 80 Va. L.
Rev. 323 (1994).
IV. EARLY NEUTRAL EVALUATION
Kathryn L. Hale, Note, Nonbinding Arbitration: An Oxymoron? 24 U. Tol. L. Rev.
1003 (1993).
V. DISCOVERY
Justice William H. Erickson, Limited Discovery and the Use of Alternative Dispute
Resolution, 71 Deny. U. L. Rev. 303 (1994).
VI. CORPORATE ADR
Catherine Cronin-Harris, Mainstreaming: Systematizing Corporate Use of ADR, 59 Alb.
L. Rev. 847 (1996).
Robert T. Kenagy, Whirlpool's Search for Efficient and Effective Dispute Resolutions,
59 Alb. L. Rev. 895 (1996).
Page 143
Office of the Chief Trial Attorney US Army Litigation Center
ARLINGTON, VIRGINA

Alternative Disputes Resolution


Policies and Procedures Guide
for
Trail Attorneys
Page 144
Introduction
The use of Alternative Disputes Resolution (ADR) techniques to resolve contract disputes
continues to grow. Throughout the Army ADR has successfully been used both in large,
complex cases as well as in smaller disputes that many would consider routine in nature.
In all instances the use of ADR resulted in significant savings in time and resources. As
more and more professionals learn when and how to use ADR effectively they find new
and different ways to efficiently apply ADR techniques to solve business disputes.
This ADR Policy and Procedure Guide is designed primarily for use by members of the
Army Contract Appeals Division (CAD). It provides suggestions on how to analyze a
particular dispute for its ADR potential and provides a ready ADR reference guide.
Others outside of CAD are welcome, and encouraged, to use it as a guide whenever they
are considering ADR as a tool for disputes resolution.
NICHOLAS P. RETSON
COL, JA
ARMY CHIEF TRIAL ATTORNEY
Many of the materials in this guide would not have been possible
without support from the other legal members of the Acquisition
Working Group of the DoD ADR Coordinating Committee: Joe
McDade (Air force); Mark Wilkoff (Navy); George Sisson
(Defense Logistics Agency); and Frank Carr (Corps of
Engineers). I thank them for their assistance, contributions, and
suggestions. Thanks also to Judge Martin Harty of the Armed
Services Board of Contract Appeals for sharing his sample
agreements and judges survey. A special thanks to LTC Ralph
Littlefield, LTC Steve Dooley, and MAJ Sam Stevenson of
Contract Appeals Division for their writing and researching
contributions and to Sondra Wood for her administrative support.
Page 145
Table of Contents

Introduction i
Table of Contents ii
Alternate Dispute Resolution Policies and Procedures 1
1. Application 1
2. Purpose 1
3. Policy 1
4. Procedures 1
a. ADR Team Chief 1
b. ADR Timing 1
c. Determining Whether ADR Is Appropriate 2
d. Determining an Appropriate ADR Method 2
e. ADR Forum 3
f. Required Approvals to Conduct ADR 4
g. Requirements in Utilizing ADR 4
h. Settlement ADR 5
i. After-Action Report 6
5. References and Resources 6
1-
Enclosure 1: CAD ADR Appropriateness Checklist
1
Enclosure 2: Survey Results of BCA Judges' Attitudes 2-
Towards ADR 1
Page 146

Enclosure 3: CAD ADR Methods Checklist 3-1


Enclosure 4: ASBCA Notice Regarding Alternative 4-1
Methods of Dispute Resolution
Enclosure 5: BCAs ADR Sharing Arrangement 5-1
6-
Enclosure 6: A. Sample Agreement A-
1
6-
B. Navy Sample ADR Agreement B-
1
6-
C. ASBCA Sample Agreement - Settlement Judge C-
1
6-
D. ASBCA Sample Agreement - Mini-Trial D-
1
6-
E. ASBCA Sample Agreement - Summary Trial E-
1
Enclosure 7: CAD Sample ADR Settlement Goals 7-1
Memorandum
Enclosure 8: CAD ADR Evaluation Report Form 8-1
Enclosure 9: DoD & HQDA Policy Statements on ADR 9-1
(excerpts)
Enclosure 10: The ADR Act of 1996 - What You Need 10-
To Know To Make it Work For You. Attachment: Full 1
Text of ADR Act of 1996
Page 147
1. APPLICATION.
a. Attorneys in the Army Contract Appeals Division (CAD) are to use the following
policies and procedures when considering the use of alternative dispute resolution
(ADR) techniques facilitated by a third-party neutral. Although CAD considers
negotiated settlements not using third-party ADR procedures to be a form of ADR
resolution (basic settlements), they are outside the scope of this memorandum.
b. Non-CAD personnel are welcome to use these policies and procedures as guides
when making their own decisions about the applicability of ADR to a particular
dispute.
2. PURPOSE. This memorandum is designed to:
a. Provide a framework for decisions concerning whether to utilize ADR procedures.
b. Provide guidance in utilizing ADR procedures.
3. POLICY.
a. Federal Government policy favors the use of ADR in resolving Government
business disputes (see, e.g., FAR 33.204). Although ADR is not appropriate in every
dispute, it can greatly facilitate the resolution of disputes when it is properly used.
b. It is the policy of the Army Chief Trial Attorney (CTA) to assist the Army to
efficiently and expeditiously resolve its business disputes. Proper use of ADR
techniques by CAD Trial Attorneys helps carry out this policy and supports CAD's
''Partners In Litigation" initiatives.
4. PROCEDURES.
a. ADR Team Chief. The CTA will appoint an "ADR Team Chief' to coordinate CAD's
ADR efforts, to collect data and lessons learned, and to assist non-CAD personnel on
ADR matters.
b. ADR Timing.
(1) Prior to Notice of Appeal. Contracting Officers or field attorneys may request
CAD's assistance in resolving a dispute prior to the filing of an appeal. After
consultation with their Team Chief, and to the extent practicable, Trial Attorneys are
encouraged to assist field personnel in resolving disputes through informal
procedures. These procedures can include, but are not limited to, MACOM or other
command dispute resolution procedures, and ADR conducted IAW this policy
memorandum. Such assistance supports CAD's efforts to have disputes resolved at
the lowest possible level and, if not resolved, to have the Army's evidence as
organized as possible when the appeal arrives at CAD. At this stage in a dispute
CAD has only limited knowledge of the key facts. Advice should be focused on
informing field personnel about available options.
Page 148
(2) After Appeal is Initiated. Trial Attorneys will more commonly encounter the
opportunity to utilize ADR after an appeal is filed with the Armed Services Board of
Contract Appeals (ASBCA). In this situation the three main considerations are:
(a) Is ADR appropriate?
(b) If ADR is appropriate, what ADR method will be used?
(c) Will the ADR be conducted by the ASBCA pursuant to its procedures, or will
it be conducted using a non-affiliated third party with procedures agreed to
between the parties?
c. Determining Whether ADR is Appropriate.
(1) General. Trial Attorneys will analyze each assigned appeal IAW the enclosed
ADR Appropriateness Checklist to determine whether using ADR is appropriate
(Encl. 1). This analysis will be done not later than the time of filing the
Government's answer (or equivalent stage of the appeal if for some reason a
Government answer will not be filed). It will be analyzed again at appropriate stages
throughout the appeal such as after completion of written discovery, after
completion of depositions, or when either side expresses an interest in settlement.
Trial Attorneys should also consider requesting a Rule 11 submission, if appropriate,
at each of these stages. A copy of the CAD ADR Appropriateness Checklist will be
included in each new case file.
(2) Survey of Board Judges. The results of a survey of Boards of Contract Appeals
judges appears as Enclosure 2. It provides useful insight into their perspective on the
usefulness of ADR.
d. Determining an Appropriate ADR Method.
(1) General. Every ADR technique or method has its own strengths and weaknesses.
If the Trial Attorney determines that ADR is appropriate, the next step is to
determine the appropriate method for conducting the ADR. Trial Attorneys shall use
the enclosed ADR Methods Checklist to determine the ADR method most
appropriate for the particular case (Encl. 3).
(2) Legal Authority. The primary sources of authority for utilizing ADR are 41 USC
§ 605(d) (the Contract Disputes Act), FAR 33.214 (Alternative Dispute Resolution),
and 5 USC Subchapter IV (Alternative Means of Dispute Resolution in the
Administrative Process), as amended by PL 104-320 (the Administrative Dispute
Resolution Act of 1996 [ADRA]). The statutory authority in Title 5 of the USC
includes a number of provisions that may not be applicable when proceeding under
the authority of the Contract Disputes Act and FAR. Therefore, in determining an
appropriate ADR method, the Trial Attorney must concurrently examine the sources
of authority to determine which source is most appropriate
Page 149
for use in the particular appeal. The full text of the ADRA and a helpful commentary
about its contents appear at Enclosure 10.
(3) ASBCA Methods. The ASBCA's Notice Regarding Alternative Methods of
Dispute Resolution ("ADR Notice"), refers to three methods for conducting ADR:
settlement judge, minitrial, and summary trial with binding decision (Encl. 4). It also
provides for "other informal methods which are structured and tailored to suit the
requirements of the individual appeal."
(4) Restriction on ADR Methods. CAD attorneys are not limited to ADR methods
specified in the ADR Notice. They may employ any appropriate ADR method,
except that binding arbitration will not be proposed or utilized without the Chief
Trial Attorney's (CTA) or Deputy CTA (DCTA) approval. This restriction is
imposed because of special statutory requirements and the fact that arbitration is one
of the least preferred ADR methods. Generally, ASBCA-sponsored Summary Trial
with Binding Decision will be used instead. Attorneys proposing binding arbitration
will submit a written request to utilize binding arbitration through their Team Chief
to the CTA. The request will include:
(a) A short summary of the case and its present status.
(b) A summary of factors relevant to the decision whether to use binding
arbitration, including a notation of the Contracting Officer's concurrence in the
proposal (may be telephonic).
(c) Justification for the use of binding arbitration satisfying the requirements of
applicable guidance established pursuant to 5 USC § 575(c) (Added by PL 104-
320). [Note: As of the date of this memorandum, the Department of Defense has
not yet issued guidance implementing the statutory authorization to conduct
binding arbitration. Until such DoD guidance is issued, the Army has no legal
authority to participate in any binding arbitration ADRs other than those approved
by the Board.]
(d) The proposed source(s) for an arbitrator, the probable expense to employ an
arbitrator, and the party or parties who will pay this expense.
e. ADR Forum. Trial Attorneys should also consider whether the ADR will be
conducted by the ASBCA LAW its ADR Notice, by a judge from another Board, or by
a third-party neutral not affiliated with the Board. Requests for ASBCA judges or
judges from other Boards of Contract Appeals will be made by letter to the appropriate
Board Chairman, unless the Board specifies another procedure. The following
priorities apply in selecting the ADR forum. Unless authorized by the CTA a lower-
priority option will not be used unless all higher-priority options are unavailable.
Funds for cost associated with a neutral are the responsibility of the contracting
command.
(1) An ASBCA judge appointed by the Chairman [generally no added costs
involved].
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(2) A judge from another Board of Contract Appeals, appointed by its Chairman
[may have to pay costs and salaries; but see, BCA-ADR Sharing Arrangement (Encl.
5)].
(3) A third-party neutral not affiliated with a Board of Contract Appeals [generally
must pay for cost and or fees].
f. Required Approvals to Conduct ADR.
(1) Consultation with Team Chief. Trial Attorneys will consult with their Team
Chief prior to concurring in a proposal to conduct ADR or completing an ADR
agreement. Team Chiefs will consult with the DCTA or CTA if the amount in
controversy, the nature of the issues, and the potential for higher-level (MACOM or
above) interest in the outcome so warrant.
(2) Contracting Officer's Approval Required. The appropriate Contracting Officer
must approve use of ADR and the particular ADR method proposed for use. It is the
Trial Attorney's responsibility to ensure that the Contracting Officer and the field
attorney fully understand the potential limitations and benefits of a selected ADR
procedure.
(3) Board Approval. When utilizing an ADR method involving a third-party neutral
from a Board of Contract Appeals other than the ASBCA or a non-affiliated third-
party neutral, the parties will notify the ASBCA of the intended action and seek a
stay in the appeal so that the ADR proceeding can take place.
g. Requirements in Utilizing ADR. When the Trial Attorney, Contracting Officer, and
the Appellant are all in agreement that ADR is appropriate, certain steps must be taken.
The following guidelines apply:
(1) ADR Agreement - General. Agreements to conduct ADR will be reduced to
writing and signed by the Contracting Officer and Appellant's counsel (or Appellant,
if pro se). Trial Attorneys will review relevant provisions of the agreement with the
Contracting Officer and field counsel before it is signed. This review will include the
Government's waiver of appeal rights (if necessary) and discussion of other
differences between formal litigation and the proposed ADR method. Sources and
availability of funds for paying amounts agreed to in the ADR proceeding will also
be addressed. The Trial Attorney will also ensure that the Contracting Officer
secures any local or MACOM approvals required for participation in ADR.
(2) ADR Agreement - Content. The content of ADR agreements will accurately
reflect the parties' agreement based on the specifics of each case. The agreement
should always describe the method of ADR being used and the role of the third-
party neutral. Some sample ADR agreements are attached at Enclosure 6. These can
be modified for your particular ADR case. The following issues should also be
considered for inclusion in the agreement.
(a) Cost-sharing arrangements for ADR expenses.
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(b) Timing, method, and scope of discovery.
(c) Timely, method and scope of pre-ADR submissions such as position papers
and exhibits.
(d) Restrictions on use of materials generated for or presented in the ADR
proceeding.
(e) The identity of the principals who will represent each party in the ADR.
Consider the benefits and weaknesses of designating someone other than the
original Contracting Officer as the Government's primary representative in the
ADR. In some cases it is preferable to use a representative that has no "emotional"
attachment to the original Government position.
h. Settlement ADR. Settlement ADR includes, but is not limited to, the ASBCA's
Settlement Judge and Minitrial methods of ADR. In settlement ADR, the parties, not
the ASBCA, determine the outcome of the appeal. The Government's representative
must have settlement authority. CAD Trial Attorneys do
not have settlement authority. Only a contracting officer can speak for the Government
in settling an ASBCA appeal. However, AFARS 33.212-90-7(a)(2) provides that
Contracting Officers "shall consult with the Chief Trial Attorney before accepting a
contractor's offer of settlement and before making a settlement offer to the contractor."
Post facto consultation with the CTA is contrary to the expectation that a full and
binding settlement will be reached during the ADR proceeding. The following
procedures will therefore be used to maximize the probability of success at settlement
ADR proceedings.
(1) When a settlement ADR agreement is approved by the parties the Trial Attorney
will prepare a short memorandum to the CTA or appropriate delegee. A sample
memorandum is enclosed (Encl. 7). The memorandum will include a copy of the
settlement ADR agreement, will discuss the case background and factors relevant to
the ADR, and will discuss the Government's goals in the settlement, including a
target settlement amount (if appropriate). The Government's goals and target
settlement amount should be based on the Trial Attorney's assessment of litigation
risk and other factors relevant to the proposed settlement. Upon the CTA's (or
delegee's) concurrence, the Trial Attorney is authorized to represent the CTA in
consultation with the Contracting Officer during the course of the settlement ADR
process in satisfaction of the AFARS 33.212-90-7(a)(2) requirement.
(2) Occasionally, successful settlement may require agreement to a provision that
would be significantly more onerous to the Government than was contemplated in
the Trial Attorney's settlement ADR memo-randum to the CTA or delegee. If this is
the case, the Trial Attorney should, if possible, contact the CTA or appropriate
delegee to discuss the issue.
(3) Trial Attorneys will not request or participate in joint requests that specify a
specific ASBCA judge to be assigned to the settlement ADR.
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i. After-Action Report. Trial Attorneys and Contracting Officers will prepare a short
after-action report following completion of ADR proceedings, to be submitted through
the Team Chief to the CTA. A copy will be filed in the appeal file. A sample after-
action report is enclosed (Encl. 8).
5. REFERENCES AND RESOURCES.
a. References.
(1) 5 USC, Subchapter IV, § 571 et seq., as amended by PL 104-320.
(2) 41 USC § 605, as amended by PL 104-320.
(3) Executive Order No. 12778, 23 October 1991.
(4) FAR 33.201, 33.204, 33.207, 33.212, 33.214.
(5) DoD Directive 5145.5 (22 APR 96)
(6) Sec Army Policy Letter (25 Jul 95)
(7) Asst Sec Army (RD & A) Policy Letter (1 May 96)
b. Resources.
(1) CAD ADR Appropriateness Checklist (Encl. 1).
(2) Survey Results of BCA Judges' Attitudes Towards ADR (Encl. 2).
(3) CAD ADR Methods Checklist (Encl. 3).
(4) ASBCA Notice Regarding Alternative Methods of Dispute Resolution (Encl. 4).
(5) BCAs ADR Sharing Agreement (Encl. 5).
(6) Sample ADR Agreements (Encl. 6).
(7) Sample CAD ADR Settlement Goals Memorandum (Encl. 7).
(8) CAD ADR After-Action Report Form (Encl. 8).
(9) DoD & HQDA Policy Statements on ADR (excerpts) (Encl. 9).
(10) Air Force Paper entitled "The ADR Act of 1996 - What You Need To Know To
Make It Work For You" (Encl. 10).
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(c) Point of Contact
The Contract Appeals Division "ADR Team Chief' may be contacted if you have
questions concerning use of ADR procedures and a Trial Team Chief has not yet been
assigned. Call (703) 696-1500 or DSN 426-1500, and ask for the ADR Team Chief.
Saved: k: \adrseri\adrpol.doc
(updated 11 June 1997)
Use the following factors, to the extent relevant in the particular appeal, in determining
whether ADR procedures are appropriate:
a. General Considerations.
(1) Will using ADR be more cost efficient, faster, or enhance the opportunities for a
better result than litigation or traditional settlement negotiations?
(2) Will using ADR otherwise benefit the case, such as by narrowing the issues or
expediting critical discovery?
b. Factors Favoring ADR.
(1) There is a continuing relationship between the parties.
(2) There may be benefits from either party hearing directly from the opposing party.
(3) Either party would be influenced by the opinion of a neutral third party.
(4) The opposing party does not have a realistic view of the case, but may be
influenced by a strong presentation.
(5) The parties have expressed a desire to settle or give indications that they do not
want to litigate the case.
(6) Either party needs a swift resolution.
(7) The case is factually and/or technically complex.
(8) The forum or decision maker is unfavorable.
(9) Flexibility is desired in the remedies that may be given.
(10) Trial preparation will be substantially more difficult, costly, or lengthy than
preparation for ADR.
(11) There is need to avoid an adverse precedent.
(12) The dispute is primarily factual, and the applicable law is well-settled.
(13) Each party's position has some merit, but its value may be overstated.
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(14) No further discovery is required, or limited expedited discovery will suffice, for
each side to adequately assess its case.
(15) Use of a third-party neutral may overcome hostility or personality conflicts that are
hindering settlement.
c. Factors Disfavoring ADR.
(1) A definitive or authoritative resolution of the matter is required for precedential
value, and an ADR proceeding is not likely to be accepted generally as an authoritative
precedent (5 USC § 572(b)(1)).
(2) The matter involves or may bear upon significant questions of Government policy
that require additional procedures before a final resolution may be made, and such a
proceeding would not likely serve to develop a recommended policy for the agency (5
USC § 572(b)(2)).
(3) Maintaining established policies is of special importance, so that variations among
individual decisions are not increased and an ADR proceeding would not likely reach
consistent results among individual decisions (5 USC § 572(b)(3)).
(4) The outcome would significantly affect nonparties (5 USC § 572(b)(4)).
(5) A full public record of the proceeding is important, and an ADR proceeding cannot
provide such a record (5 USC § 572(b)(5)).
(6) The agency must maintain continuing jurisdiction over the matter with authority to
alter the disposition of the matter in the light of changed circumstances, and a dispute
resolution proceeding would interfere with the agency's fulfilling that requirement (5
USC § 572(b)(6)).
(7) The dispute is primarily over issues of law.
(8) The case is likely to settle soon without outside assistance.
(9) The case is likely to be resolved efficiently by motion.
(10) The Appellant/opposing counsel are not trustworthy, or there is need for
continuing Board supervision of one of the parties.
(11) The case involves fraud (this bars settlement, whether through formal ADR or
otherwise).
(12) The cost of using ADR would probably be greater (in time and money) than the
costs of pursuing litigation.
(13) The other side's case is without merit, so that there is no basis for compromising
the Government's position.
(14) The other side has no real motivation to settle.
(15) More time is needed to evaluate each side's position and settlement possibilities.
revised 11 Jun 97
Page 155
Use the following definitions and factors, to the extent relevant in the particular appeal, in
determining which ADR technique is appropriate. This list is not exhaustive and any
technique can be agreed to by the parties, subject to applicable legal, regulatory and policy
restrictions.
a. Fact-Finding (Early Neutral Case Evaluator/Expert).
(1) Definition. Involves a third-party neutral, selected by the parties, who investigates
the relevant issues. The neutral usually has specific subject-matter expertise relevant to
the issues, and can help narrow the disputed factual/technical issues.
(2) Factors Favoring Use.
(a) There is a good probability that the case can be settled, but the parties disagree on
the amount of damages.
(b) The dispute is complex, and the parties desire to narrow the issues in
controversy, but have been unable to do so on their own.
(c) The dispute is fact-intensive and is likely to be resolved once the parties agree on
facts or their interpretation, and assessment by an expert will assist this.
(d) The opposition needs a realistic view of the case.
b. Mediation.
(1) Definition. The parties retain a third-party neutral to assist in negotiating a
settlement. The process is confidential and non-binding, and essentially represents an
extension of settlement negotiations with the participation of a mutually acceptable
neutral. The parties maintain control of the process, which is extremely flexible. The
ASBCA ADR format most closely akin to mediation is the Settlement Judge procedure.
(2) Factors Favoring Use.
(a) A negotiated settlement is more likely if the participants can be emotionally
distanced from the controversy.
(b) Negotiations have reached an impasse, and creative problem solving may resolve
the dispute.
(c) The advice/assistance of a knowledgeable neutral respected by both parties will
assist in reaching a solution.
(d) There is a continuing relationship among the parties.
(e) The disputed facts are not technical, and don't require subject-matter expertise.
(f) There is risk of unfavorable precedent.
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(g) Either side can benefit from hearing directly from the opposing party (i.e., not
filtered through counsel).
(h) The opposition needs a realistic view of the case.
(i) There is need for flexibility in the desired relief.
(j) The parties have at least partially developed the facts through discovery, and
there is recognition by each party of at least some merit to the other side's case.
c. Mini-Trial.
(1) Definition. The mini-trial is a highly-flexible, expedited, but structured procedure
where each party presents an abbreviated version of its position to principals of the
parties who have full contractual authority to conclude a settlement and, under ASBCA
procedures, to a Board-appointed neutral advisor. The neutral advisor may provide
non-binding findings or recommendations to the parties.
Following the parties' presentations they engage in settlement negotiations, which may
be assisted by the neutral advisor.
(2) Factors Favoring Use.
(a) The case is complex, senior-level decision makers are willing to devote a
significant amount of time to resolve the dispute, and the cost or delay resulting
from litigation would greatly diminish the benefit of resolving the disputes.
(b) The factual issues are simple, but would take an excessive amount of time to
present in a traditional forum.
(c) The factual issues are complex and would normally require expert testimony for
resolution.
(d) The attorneys can equitably summarize the facts to the fact-finder, without the
necessity of lengthy cross-examination.
d. Summary Trial with Binding Decision
(1) Definition. This is an ASBCA procedure in which the appeal schedule is expedited
and the parties try the appeal informally before a judge or panel of judges. A summary,
"bench" decision generally will be issued at the conclusion of the hearing or within 10
days thereafter. This procedure is similar to binding arbitration in that the decision is
final and all appeal rights are waived.
(2) Factors Favoring Use.
(a) The issues are amenable to immediate resolution by the presiding judge.
(b) The parties prefer an immediate ruling on the issues.
(c) There is risk of unfavorable precedent.
(d) The parties have at least partially developed the facts through discovery, so that
further trial preparation can be completed swiftly and economically.
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e. Arbitration.
(1) Definition. Involves a neutral third party arbitrator who reviews evidence and hears
arguments on issues agreed to by the parties, and then issues a decision. That decision
can either be advisory (non-binding) or binding depending upon how the parties set up
the ADR. In binding arbitration the decision is final and binding.
(2) Factors Favoring Use.
(a) The parties disagree on the amount of damages.
(b) There are no complex factual issues involving several areas of expertise, but the
parties disagree on the facts.
(c) The parties seek a relatively quick decision.
(d) The amount in controversy is small enough that an adverse decision would not
be overly onerous to the parties.
Revised 11 Jun 97
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BOARDS OF CONTRACT APPEALS-ALTERNATIVE DISPUTE RESOLUTION (BCA-
ADR) SHARING ARRANGEMENT
A number of Boards of Contract Appeals (BCAs) are participating in an interagency
sharing arrangement, the purpose of which is to make neutral BCA personnel available to
the Government and Federal contractors for use in Alternative Dispute Resolution (ADR).
The BCAs are an excellent source of impartial and cost effective neutrals with specific
expertise appropriate for assisting in the resolution of Government contracting disputes,
whose use might be optimized through the BCA-ADR Sharing Arrangement. Under this
Arrangement participating Boards provide their services free of charge.
OBTAINING A NEUTRAL THROUGH THE BCA-ADR SHARING ARRANGEMENT:
Parties are encouraged to look first to obtaining ADR services from the Board that would
normally handle the matter. Agency contracting officials or Federal contractors who are
interested in using the BCA-ADR Sharing Arrangement, and obtaining BCA personnel
from other agencies to serve as neutrals, should contact the Chair of the Board that would
normally handle the matter. Upon receiving a request from a neutral from another Board,
the Chair will promptly take the necessary steps to obtain a neutral through the BCA-ADR
Sharing Arrangement. Board Chairs, recognizing the need for a quick response, will act
upon ADR requests expeditiously.
MEDIATOR SKILLS TRAINING:
Mediator skills training has been provided to a number of BCA personnel serving as
mediators. Based on need, additional mediator skills training courses are planned for the
future.
MONITORING ADR USAGE:
The Chairs will monitor ADR usage at their respective Boards.
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BCAs PARTICIPATING IN THE BCA-ADR SHARING ARRANGEMENT:
Armed Services BCA, Department of Agriculture BCA, Department of Energy BCA,
Corps of Engineers BCA, Department of the Interior BCA, Department of Housing and
Urban Development BCA, Department of Labor BCA, Postal Service BCA, Department of
Transportation BCA, Department of Veterans Affairs BCA.
STATEMENT FROM THE CHAIRS SETTING FORTH THE GENERAL PRINCIPLES
AND GUIDANCE FOR USING THE BCA-ADR SHARING ARRANGEMENT:
Alternative Dispute Resolution (ADR) techniques offer the potential for a faster, less
expensive disposition of contract disputes. The Boards of Contract Appeals (BCAs) are
committed to fostering the use of ADR in appropriate Government contract-related
matters and will continue to make Board personnel available to participate in ADR
proceedings in protest, pre-appeal matters and post-appeal disputes.
The BCAs offer a wide choice of ADR techniques as an option to traditional dispute
resolution procedures. Assistance is also available in designing ADR arrangements that
will best serve the parties' interests in resolving a particular dispute. Parties who are
interested in pursuing ADR should consult the procedures and or rules or practice of
the BCA that would typically handle the matter.
Most of the BCAs also participate in an arrangement in which BCA personnel can be
made available to conduct ADR processes for other agencies. Under the BCA-ADR
Sharing Arrangement, the Boards may provide their services free of charge.
Agency contracting officials or Federal contractors who are interested in using BCA
personnel from another agency should contact the Chair of the Board that would
normally handle the matter. Chairs can suggest the names of personnel from other Boards
who can be made available to conduct ADR processes.
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ADR Lessons Learned
By LTC Richard J. Anderson
Army Contract Appeals Division
I. ADR saves the time necessary to litigate a contract dispute.
a. Typical contract dispute takes years to resolve, involves a slow discovery process,
and produces entrenched positions.
b. ADR almost always produces quicker resolution.
(1) In July 1992, the contractor submitted a claim for $367,000 related to 93
allegations of defective specifications, changes, and delay. In April, 1997, the parties
agreed to mediation by an ASBCA Judge. In September, 1997, after the mediation,
the parties settled for $130,000. The trial attorney indicated the parties saved eight
months time, six more months to prepare for trial, 30 days of depositions, and a 30-
day trial.
(2) Legal Counsel's comment on use of a mini-trial to settle a $4 million dispute:
''Three years of litigation were compressed into three months and consequently the
workforce was spared substantial disruptions from its normal mission."
(3) The Contracting Officer's comments on use of mediation: "ADR has been the
quickest method of dispute resolution I have encountered (6 months vs. who knows
how many years it could have taken). The speed of resolution assisted with the
accurate representation of our case."
II. General Rule - Litigate to Win, ADR to Win-Win.
a. Usually litigate a clear winner.
(1) The Army had a clear winter. The contractor
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claimed the Army entered into an implied-in-fact contract by encouraging the
contractor to move its production line for the manufacture of small caliber
ammunition and to acquire long lead items. The Army, despite its past practice of
splitting contract awards between this contractor an the other contractor in the
Restricted Supply Base, specifically indicated in the relevant solicitation that a 100%
award might be made to once contractor. The Appellant brought its claim for $6
million when a 100% award was made to the other contractor. An ASBCA Judge
acting as an early neutral evaluator expressed his view that the Army's position, that
there was no implied-in-fact contract, had an 80% chance of success in litigation.
Thereafter, in consideration of a full release from liability, the Army agreed to pay
the contractor $200,000 representing its costs of keeping its production line in a
standby status.
(2) A Contracting Officer commented, "In our case, prior to entering ADR, we
firmly felt that our position was strong to win in court. However, our arbitrator, who
had both Government and private law experience, felt we had significant risk.
Hearing this risk assessment set us on the course to settlement." The contractor
settled for $295,000 on a $438,000 claim.
b. ADR can also produce a clear winner.
(1) After consideration of the Rule 4 file, two additional Government exhibits, and
the sworn testimony of three witnesses who were subject to cross examination, an
ASBCA Judge, in an ADR forum of summary trial with binding decision, rendered
the following decision, quoted in its entirety:
The contract was ambiguous. To the extent the ambiguity was patent, appellant made no
inquiry. To the extent the ambiguity was latent, appellant did not rely upon the interpretation it
now advances at the time it submitted its bid. [case citation]. The
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appeal is denied.
(2) The Army terminated a contract for Huey helicopter stabilizer tubes due to the
contractor's default. The parties signed an ADR agreement providing for summary
disposition by one judge, within seven days of a one-day hearing, without findings
of fact, conclusions of law, or right of appeal. After the one-day hearing, the
ASBCA Judge issued a one-page opinion upholding the default termination and
denying the appeal.
III. The parties really control the process.
a. Judges do not force parties into ADR.
(1) "This ADR succeeded because each side sincerely wanted to settle the appeals. I
do not believe either side intended to use the ADR as an opportunity to make a trial
run rather, the parties were genuinely looking for a way to break the impasse that
had developed in their earlier negotiations."
(2) A Contracting Officer commented, "I would not recommend ADR if parties are
either unwilling, or based on the facts of the case, are not capable of compromise."
b. Parties construct whatever type of ADR they prefer.
(1) "The ADR agreement and process must be tailored for each specific case. The
attorneys must put a great deal of effort into framing the issues to be presented at the
ADR, in refining the nature and order of presentations, and in determining which
individuals should be present and exactly what their roles will be, obtaining
settlement authority, etc."
(2) "Allow for flexibility in the process/agenda-do not be afraid to tell the mediator
this diversion or
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change in scheduling in process is not acceptable at this time - the mediator is there
to keep the parties focused on the main issues, intervene should discussions become
too adversarial, and assist in
control; however, ultimately the parties are in control and can suggest options to the
mediator's agenda if the parties are not satisfied."
(3) Examples of agreements reached:
a. Waive further motions.
b. Limit each party's hearing presentation to three hours.
c. ADR can be initiated at any stage of the disputes process.
(1) Prior to filing a claim.
(2) After notice of appeal.
(3) During discovery.
(4) After discovery.
(5) After the hearing has begun.
Contractor sought approximately $140,000 for delay and other costs for installing a
low temperature refrigeration system. After concluding the first of five days of a
scheduled hearing, the parties and the Judge agreed to a summary trial with binding
decision. The Judge heard three witnesses. On the fourth day scheduled for hearing,
the Judge mediated the dispute and, on the fifth day, the parties settled for $43,000.
The parties agreed to ADR at such a late date in order to resolve the dispute without
further litigation.
(6) Legal counsel's comment on use of a mini-trial
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initiated prior to a contracting officer's final decision: "All aspects of the case,
including the decision to settle, remained at the local level at all times. Instead of
outside authorities compelling a settlement, the ultimate bill payer made the
decision."
(7) Contracting Officer comment: "I really think ADR is the way to go when you can
get the parties to agree to use it. But I think we have to use it only after is has
become evident that there is a real impasse. It can't be a substitute for negotiation,
and we can't allow it to become a fast track method to get around dealing with the
[contracting officer]."
IV. No ADR without facts on the table.
a. Contractors prefer less discovery.
b. Generally, the optimum time to agree to ADR is after the close of discovery.
"Conduct a fair amount of discovery prior to commencement-PREPARATION and
KNOWLEDGE are the keys; more so in negotiation."
c. ADR can proceed with limited discovery.
d. Contractor sought $162,000 in dispute regarding what contract meant when in
required applying an insulation finish system to family housing. Contractor wanted to
use a machine and the Army required application by trowel. Although the Army
conducted no depositions, it insisted that written discovery was fully answered prior to
agreeing to a summary trial with binding decision. In the trial, the ASBCA Judge
determined that the contractor was not entitled to recover on its claim.
e. The necessity of an audit.
In a $1.2 million dispute, the parties agreed to ADR and, despite pressure from the
contractor, the Army waited eight
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months to begin the conduct of ADR, while awaiting on a DCAA audit report. During
the ADR, "We used the audit extensively as a base line for discussions."
V. A Sitting Board Judge can be the Best Neutral.
a. Sitting Board judges have the requisite knowledge, expertise, and authority.
Under a contract for radiology technologist services at an Army medical center, the
contractor sought $195,000 and the dispute settled after mediation by an ASBCA Judge.
The dispute involved interpretation of an indefinite quantity contract that provided for
a guaranteed minimum in the base year but not in the option years. The Judge
determined there had been a constructive T4C in the option years. The parties were
unable to agree on a methodology for determining the T4C costs, but the Judge
nevertheless persuaded each side to settle for $35,000.
c. Compensated neutrals can be expensive.
"Frankly, I was shocked at the cost of the mediator. He wanted $350.00 per hour plus
all of his travel and administrative expenses. He also wanted to be paid at the $350.00
per hour rate while in transit to and from [the ADR site] . . .We finally compromised at
$175.00 per hour while he was in transit."
VI. Mediation vs. Evaluation.
a. Contractors like mediation.
b. A mediator simply helps the parties to talk to each other.
c. A mediator will not evaluate a case unless asked (and maybe not even then).
"We had requested that the arbitrator issue an opinion on who would be the likely
winner if litigated. On 12 July 1996
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we received the arbitrator's decision which did not identify a likely winner. Rather, the
decision stated both sides were at risk based on the facts presented. . . . However, the
decision did point out the relative strengths and weaknesses of each party's case, which
in itself would become the basis of settling this dispute."
VII. Presentation of evidence.
a. Generally better to submit a position paper before the ADR.
(1) In an ADR involving a T4D and $23,000 claim, the parties agreed to an optional
position paper containing a statement of the issues and key legal authority, not to
exceed three pages in length.
(2) "Position papers and replies prior to the mediation are excellent tools. It further
focused the issues and allowed time to analyze strengths/weaknesses in both
positions. It avoided surprise within the process; a result that could undermine a
party's position."
(3) "If position papers are not used, ensure the process allows for talking papers,
slides or other 'visual' data as this assists both parties in keeping focused and can be
a persuasive tool because they provide a 'visual rationalization' and explanation
necessary for persuasion."
b. Attorneys can present position.
In an initial ADR session, the contractor's counsel indicated to all, including the Army's
witnesses, that the Army would have to pay attorney's fees if it lost and Army counsel
indicated to all, including the contractor's witnesses, that litigation could take several
years, prompting Army counsel to remark, "Next time we may want to simply have the
attorneys make their presentations in closed session with the mediator."
c. Principals are better presenters of evidence than attorneys.
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d. "Viewgraphs are essential."
VIII. What to bring to the table.
a. Someone with the facts.
Contractor sought $559,00 and the parties settled for $200,000 in a dispute involving
the cleaning of tables and chairs. Contractor contended it cleaned the entirety of tables
and chairs in a dining facility three times a day. Other evidence indicated cleaning only
once a day. Parties settled on the basis of one cleaning per day. Trial attorney observed
after the ADR that he wished he had brought to the ADR witnesses who would indicate
that the cleanings occurred only once a day. The trial attorney did present to the
mediation Judge a videotape showing that it took less than the 20 seconds the
contractor contended it took to clean.
b. Someone with authority to settle.
c. An unbiased person, other than the contracting officer.
(1) "Government neutrality is a powerful tool. By approaching the case with an open
mind and from a position of neutrality, the Government attorney can persuasively
give both Principal Representatives his or her reaction to the contractor's
presentation."
(2) "The principal representatives were the key to successful negotiations. The
principals were very senior individuals within their respective organizations and had
not had any personal involvement in the events that led to the dispute."
d. A person with the equivalent stature of the contractor's principal.
e. Money of a certain amount, known to be available, and which the Government is
willing to put on the table.
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IX. Procedures.
a. One trial attorney not comfortable after ADR with the absence of a transcript.
b. "The no cross examination rule is helpful. Witnesses are more relaxed and they
volunteer information more freely knowing that they will not be grilled by opposing
counsel."
c. Appeal.
d. Attorney's fees.
e. Settlement Agreement.
f. "The physical space utilized for the mediation was critical. We were able to meet in
one session room and then split off into separate rooms for private sessions. The
mediator could easily move from one room to the other carrying offers and
counteroffers. Without a secure and properly arranged physical space, we could not
have achieved a successful result."
g. "Do not allow the mediator to assess either party's position in the joint
meetingrequire that his/her assessment be reserved for individual meetings after the
initial round of discussions."
X. Conclusion.
a. ADR gets the parties to talk to each other.
b. ADR is quicker and more flexible than litigation.
c. ADR can be used to maintain a continuing relationship.
"It was my perception that relations between the parties had become strained as the
issue dragged on over several years. This [ADR] resolution gave them a new
opportunity to better relations not only to solve problems after the fact, but to preclude
problems arising in contract administration and management."
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GAO's Use of "Negotiation Assistance" and ''Outcome Prediction" as ADR Techniques58
by Daniel I. Gordon
Beginning in June 1998, bid protest practitioners may have heard reference to what
sounded like new forms of alternative dispute resolution (ADR) in their dealings with the
General Accounting Office (GAO). This article sets out the context and the meaning of
the new terminology.
GAO's bid protest process itself has often been recognized as a form of ADR. As required
by the Competition in Contracting Act of 1984 (CICA), it is a relatively "inexpensive and
expeditious" way for parties to resolve a protest without going to court. 31 U.S.C. §
3554(a)(1) (1994). While GAO's process has become more formal than it was in past
decades, it remains far less expensive and less formal than court litigation. GAO also
issues decisions in bid protests relatively promptly: the statutory time limit was shortened
in 1996 to 100 calendar days, and GAO issues many of its decisions well before the 100th
day. Expenses are kept down at GAO by the fact that the protester does not need an
attorney, and, indeed, in a significant proportion of protests (particularly those that do not
involve complex evaluation issues), the protester files without an attorney. Moreover, the
protester has a right to a stay of the procurement process under CICA (as long as the
protest is filed within the required timeframe and the agency does not make a
determination that would allow an "override" of the stay), see 31 U.S.C. § 3553(d)-(e), so
the expensive process of moving for a temporary restraining order or preliminary
injunction is unnecessary. In addition, GAO has over the years often served as a neutral
forum where the parties can discuss mutually acceptable resolution of their disputes.
Nonetheless, GAO has recognized the time and expense entailed in pursuing a bid protest
through to issuance of a decision--even 100 days can seem like a very long time to an
agency trying to move forward with a procurement or to a protester waiting for a
decision. As a result, GAO continues to actively explore ways to implement alternative
processes that will shorten the time to resolve a case, and ADR was therefore a natural
place to turn. Against that background, Anthony H. Gamboa, GAO's Senior Associate
General Counsel in charge of the bid protest unit, wrote a letter dated September 23, 1996
to the senior procurement executive at all federal agencies, in which he announced GAO's
determination to make greater use of ADR techniques to resolve bid protests. The letter
pointed out that ADR techniques might be implemented on GAO's initiative or at the
request of a party. The letter also raised the possibility of ADR being used to review
agency action before a protest has actually been filed.
58 A slightly different version of this article was printed in Federal Contracts Report, Vol. 71, No.
3, pp. 72-74 (Jan. 18, 1999), copyright 1999 by The Bureau of National Affairs, Inc. (800-372-
1033) http://www.bna.com and it is reprinted here with permission.
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The result was a significant increase in the number of cases resolved through ADR in
fiscal years 1997 and 1998more than 140 over the 2 years. In discussions during the
course of fiscal 1998 between GAO representatives and its "customers," both agencies
and private sector attorneys, the desire to see ADR used even more often was a common
topic. In response, in May and June 1998, GAO held a series of four workshops, attended
by all GAO bid protest attorneys, to review the subject of ADR in the context of the bid
protest process. The workshops, in addition to introducing the terms for the two specific
kinds of ADR discussed below, helped expand and make uniform practices that, in
various forms, GAO has been following for years.
ADR was defined, for purposes of the bid protest process at GAO, as a procedure
designed to resolve a dispute more promptly than through issuance of a written decision.
This definition recognizes that ADR may be used not only in a bid protest, but also in a
request for reconsideration or a cost claim. It was recognized that ADR, albeit without
that name, has long been a part of the case management process at GAO. After review of
the various kinds of ADR, it was concluded that only nonbinding ADR is practicable at
GAO, since an opinion from a GAO attorney can bind the agency only when it has been
gone up the review ladder and become the opinion of the Comptroller General.
Accordingly, ADR, when used successfully at GAO, will lead either to the agency's
voluntarily taking corrective action or to the protester's voluntarily withdrawing the
protest, request for reconsideration, or cost claim. If the parties refuse to take that action,
the case will go to decision and review.
Among the kinds of nonbinding ADR that are used elsewhere, two kinds were selected
for use at GAO: negotiation assistance and outcome prediction. Of these, negotiation
assistance is the less novel for GAO; outcome prediction is the more experimental form.
GAO has been practicing negotiation assistance ADR, albeit without that label, for many
years. In this form of ADR, there is a realistic chance of reaching a "win/win" solution in
which all parties are satisfied. The most common situations where that is the case are
challenges to a solicitation or cost claims (indeed, these two situations are so often
susceptible of settlement through ADR that that possibility may be raised before an
agency report has been submitted). It is not surprising that these cases usually involve
only two parties. Once a third party is involved--typically, in a protest challenging an
award to the intervenor--there is usually little chance of finding a resolution that satisfies
all parties. Even when there are only two parties, there may be no realistic chance of
settling--and thus no point in undertaking negotiation assistance ADR. If, for example, a
protester is challenging a solicitation's terms as unduly restrictive but has already lost an
agency-level protest raising the same issues and the agency concludes that the protester is
unwilling to compromise on a point that the agency deems vital, the agency may refuse to
negotiate at GAO, so that ADR would be futile. In negotiation assistance ADR, the parties'
willingness to undertake ADR is critical (as explained below, the situation is quite
different with respect to outcome prediction ADR).
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GAO may raise the possibility of negotiation assistance ADR with the parties on its own
initiative; alternatively, a party may raise it in writing or on a conference call. However
raised, the possibility will generally be explored through discussions between the GAO
attorney and the parties. In any ADR, the GAO attorney always works with her/his
supervisor, the Assistant General Counsel, so that the parties can be sure that, if GAO is
moving forward with ADR, it has been approved by the Assistant General Counsel as
well. If GAO decides to proceed with the ADR (and that decision rests ultimately with
GAO), the GAO attorney will set out the ground rules and ensure that the parties agree to
them before moving forward. Those ground rules are that the GAO attorney handling the
case will act as a facilitator, that any settlement will be voluntary, that GAO will not "sign
off' or otherwise review any settlement, and that, if the ADR fails, the same attorney will
draft the decision.
The last point--the same attorney handling the ADR and drafting a decision if the ADR
fails--may surprise some practitioners, who would view the GAO attorney handling the
ADR as a third-party neutral that would not be involved in the writing of an eventual
decision. GAO does view the matter that way. In ADR at GAO, it is not GAO's
expectation (or its experience) that information would be provided during settlement
negotiations that should not be considered in the writing of a decision, if one needs to be
written. Moreover, if the ADR fails, the original 100-day CICA deadline remains in place-
-it is not "tolled" during the ADR attempt. In that context, the inefficiency of having a
second GAO attorney take over the case and draft a decision, if the ADR fails, weighs
heavily in favor of keeping the case with the first attorney.
The particulars of how the negotiation assistance ADR is conducted will vary from case
to case. Generally, though, GAO would expect face-to-face negotiations to be more
fruitful than telephone discussions, and the presence of clients, in addition to their
counsel, might also be helpful. The GAO attorney might point out the strengths or
weaknesses of particular positions of either party. For example, in a cost claim, if the
protester is seeking lost profits, GAO might point out that its case law clearly states that
lost profits should not be paid in a cost claim. Whatever the details of the ADR session,
whether it succeeds depends largely on the parties and, to that end, the GAO attorney may
leave the room at some point to let the parties talk among themselves. If the parties are
able to reach agreement, the process has been a success. Even if no agreement is reached,
however, the parties and GAO may find that the process offered the benefit of clarifying
or narrowing the remaining disputes.
In contrast to negotiation assistance, outcome prediction as a formal type of ADR is new
to GAO and should be seen as somewhat experimental. In this kind of ADR, the GAO
attorney tells the parties what she or he believes is the likely outcome of the case: these
are not win/win situations; the loser is simply being told earlier of the expected outcome.
Outcome prediction ADR cannot be said to be completely new at ADR, since agency and
private-party counsel have long sought guidance about the likely outcome of the case,
even if that sometimes meant reading the "tea leaves" of their conversations with GAO
attorneys. As with negotiation assistance ADR, the attorney's view will have been
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discussed with her or his Assistant General Counsel as well. Nonetheless, the opinion
voiced is not that of the Comptroller General and, if the case goes to a written decision,
that decision might be dramatically different from the outcome predicted in the ADR.
Also as with negotiation assistance, the ADR will not be binding: if, for example, the
protester, after learning in the ADR that its protest would probably be denied, nonetheless
refuses to withdraw and instead insists on a written decision, that is its prerogative;
similarly, if an agency refuses to take corrective action after being told that the protest
looks likely to be sustained, that is its choice to make. The hope, however, is that the
likely loser will voluntarily take the action that will end the case.
A key element in GAO's decision to engage in outcome prediction is the GAO attorney's
confidence in the likely outcome. The best basis for confidence, of course, would be the
existence of GAO decisions that are squarely on point and that uniformly point to the
same conclusion, but there could be other reasons that cause the GAO attorney to feel
confident about the likely outcome. The more certain the outcome, the better a candidate
for outcome prediction ADR the case is. There are, however, some categories of cases
that are poor candidates for ADR, regardless of this confidence factor. Examples might be
cases of first impression and cases where, for whatever reason, having a published
decision could help the procurement community. GAO would thus be unlikely to use
ADR for the first case challenging a provision in the Federal Acquisition Regulation Part
15 rewrite, regardless of the GAO attorney's level of confidence in the outcome.
A high degree of confidence may exist as to one issue in a multi-issue case, and GAO
may therefore engage in outcome prediction as to that issue. To illustrate: a protest could
raise five difficult cost evaluation challenges about which the GAO attorney has not yet
formed an opinion, but also a technical evaluation issue that the GAO attorney believes is
a nonstarter. An outcome prediction session as to the latter issue could help focus the
parties (and GAO) on the issues that really matter.
Because the GAO attorney's opinion about the likely outcome is central to outcome
prediction, this form of ADR is unlikely to be invoked before receipt of the agency
report. If a protest on its face raises what looks like a sure "winner," however, the agency
might be asked to address that issue on an expedited basis: for example, if the protest
raises 36 issues, one of which is that the protester is a small business and the agency
rejected its proposal on the basis that the firm did not have the capacity to do the work,
the GAO attorney might ask for an agency report (or an oral explanation in a conference
call) just on that issue, with the possibility in mind of engaging in outcome prediction
ADR if the agency does not have a good reason for not having referred the matter to the
Small Business Administration.
In general, though, outcome prediction ADR will occur only after the agency report and
the protester's comments have been received. Once the GAO attorney is confident about
the likely outcome and the appropriateness of the case for ADR, however, outcome
prediction will be held as soon as practical. The point of the exercise, after all, is to
resolve the case as early as possible.
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The parties' attitudes play a somewhat different role in deciding the appropriateness of
outcome prediction ADR than they do in negotiation assistance. Outcome prediction does
not require the likely loser to engage in negotiations with anyone; instead, the only
question is whether the party, upon learning that it will probably lose the protest, is likely
to take the action necessary to resolve the case. Reality dictates that a protester for whom
the stay of performance is beneficial (typically the incumbent who has lost the follow-on
procurement) is unlikely to withdraw its protest, no matter how certain it is that the
protest will be denied. It is GAO's experience, however, that agencies will generally take
corrective action when they learn that a protest is likely to be sustained. Because the
intervenor (at least formally) cannot cause the case either to close or to continue, the
intervenor's consent is not needed before GAO engages in outcome prediction. In sum,
GAO may initiate this kind of ADR without polling the parties to obtain their consent.
The details of the outcome prediction session will vary from case to case. Because the
parties' role is less active than in negotiation assistance, outcome prediction may work just
as well in a telephone conference call as face-to-face. Nonetheless, counsel for all parties
should feel free to question the GAO attorney about the basis of her/his opinion and to
advocate their client's position. As with negotiation assistance, the GAO attorney may
suggest that it would be useful to have the clients present, along with their counsel, during
the ADR session. In any event, the GAO attorney will try to ensure that the following is
understood and accepted by all parties: the GAO attorney's prediction binds neither the
parties (which may insist on a written decision from GAO) or GAO (which could
ultimately issue a written decision different from the predicted outcome). While the GAO
attorney may ask that the parties agree that the losing party will withdraw or take
corrective action, and that this be done within a certain number of days of the ADR
session, such requests do not create binding commitments, but are rather simply informal
agreements with the parties. Also, the same GAO attorney will draft the decision, if the
ADR fails and one needs to be written. In that case, the review process within GAO
provides a check on the view expressed by the individual attorney in the outcome
prediction session.
In the months since the spring 1998 workshops, GAO has engaged in both kinds of ADR,
with substantial success. Feedback from both the public and the private sectors has been
uniformly positive. The success of negotiation assistance in resolving cost claims and
solicitation challenges is consistent with GAO's experience from before the introduction
of the "negotiation assistance" label (GAO has engaged in something similar to ADR in
those kinds of cases for years). Outcome prediction, the more novel of the two kinds of
ADR used at GAO, has also been uniformly heralded as a success. In case after case, the
parties have expressed appreciation for being told a month or more before the 100-day
statutory due date which way the case is likely to come out. Although there have been a
handful of cases where the outcome prediction did not lead the predicted losing party to
take action to resolve the case, GAO's experience for the most part is that the parties
predicted to lose--protesters as well as agencies--have taken the action that resolved the
case.
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ADR at GAO remains a "work in progress," and the agency remains open to suggestions
for modifying its process. As in other contexts, ADR at GAO holds continuing promise
for providing a way to resolve bid protests and cost claims more quickly and less
expensively than GAO's ordinary process.
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United States Court of Federal Claims Amended General Order No. 13
The United States Court of Federal Claims is sensitive to rising litigation costs and the
delay often inherent in the traditional judicial resolution of complex legal claims. While
the mandates of due process inevitably place limits on how expeditious a trial of a
complex issue can be, there are no such limits when parties voluntarily seek
noncompulsory settlements. Since justice delayed is justice denied, it is an obligation of
this court to further the settlement process in all ways consistent with the ultimate
guarantee of a fair and complete hearing to those disputes that cannot be resolved by
mutual consent. Courts are institutions of last resort and while preserving that "last resort"
as a sacred trust, they should insure their use only when other methods of dispute
resolution have failed. In response to these concerns, the court is implementing three
methods of Alternative Dispute Resolution: Settlement Judges, Mini-Trials, and Third-
Party Neutrals. The methods to be used in the Court of Federal Claims are described in
the "Notice to Counsel" attached to this Order.
IT IS ORDERED, effective this date, that the Notice to Counsel shall be distributed as
follows:
(1) to counsel for all parties in cases currently pending before the Court of Federal
Claims, and
(2) to counsel for all parties in cases filed after the date of this Order.
November 8, 1996
BY THE COURT
/S/
LOREN A. SMITH
Chief Judge
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NOTICE TO COUNSEL
Alternative Dispute Resolution Techniques
In response to rising litigation costs and the delay often inherent in the traditional judicial
resolution of complex legal claims, the United States Court of Federal Claims is
implementing three methods of alternative dispute resolution (ADR) for use in
appropriate cases. The Court of Federal Claims encourages all reasonable avenues toward
settlement of disputes, including the usual dialogue between the trial judge and counsel.
Implementation by the court of these ADR methods does not preclude use by the parties
of other ADR techniques which do not require court involvement.
The ADR methods outlined below are both voluntary and flexible, and should be
employed early in the litigation process in order to minimize discovery. Both parties must
agree to use the procedures. Because these procedures are designed to promote settlement
and involve the application of judicial resources, however, the court views their use as
most appropriate where the parties anticipate a lengthy discovery period followed by a
protracted trial. These requirements typically will be met where the amount in controversy
is greater than $100,000 and trial is expected to last more than one week.
When both counsel agree and wish to employ one of the ADR methods offered, they
should notify the presiding judge of their intent as early as possible in the proceedings, or
concurrently with submission of the Joint Preliminary Status Report required by
Appendix G. The presiding judge will consider counsels' request and make the final
decision whether to refer the case to ADR. If ADR is considered appropriate, the
presiding judge will refer the case to the ADR Administrator 1) for assignment to a Court
of Federal Claims judge who will act as a settlement judge or preside over a minitrial, or
2) for the appointment of a third-party neutral. If the case is referred to an ADR judge,
that judge will exercise ultimate authority over the form and function of each method
within the general guidelines adopted by the court. Accordingly, the parties will promptly
meet with the assigned ADR judge to establish a schedule and procedures for the
technique chosen. Should none of these techniques produce a satisfactory settlement, the
case will be returned to the presiding judge's docket. Except as allowed by Federal Rule
of Evidence 408, all representations made in the course of the selected ADR proceeding
are confidential and may not be used for any reason in subsequent litigation.
I. General Provisions
A. Administrator. There will be an ADR Administrator who will assign cases as well as
facilitate the program. The Administrator will also keep statistics for each judge who
volunteers to participate in the program on the number of pending ADR cases and the
disposition of ADR cases.
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B. Training. All judges, as well as third-party neutrals shall be properly trained in the
handling of ADR matters.
C. Consent. Consent of all parties is required in order for a case to be referred to ADR.
D. Judicial Involvement. The Administrator will assign ADR cases only to judges who
have agreed to participate in the program.
II. Settlement Judge
In many circumstances, settlement can be fostered by a frank, in-depth discussion of the
strengths and weaknesses of each party's case before a neutral advisor. Although this
alternative can be used successfully at any stage of the litigation, it is suggested that it be
adopted as early in the process as feasible to eliminate unnecessary cost and delay.
Moreover, the agenda for these meetings with the settlement judge should remain flexible
to accommodate the requirements of the individual cases. Through this ADR method, the
parties will gain the benefit of a judicial assessment of their settlement positions, without
jeopardizing their ability to obtain an "impartial" resolution of their case by the presiding
judge should settlement not be reached.
III. Mini-Trial
The mini-trial is a highly flexible, expedited procedure where each party presents an
abbreviated version of its case to a neutral advisor (a judge other than the presiding
judge), who then assists the parties in negotiating a settlement. Because the mini-trial
similarly is designed to eliminate unnecessary cost and delay, it should be adopted before
extensive discovery commences. This ADR technique, however, should be employed
only in those cases which involve factual disputes and are governed by well-established
principles of law. Cases which present novel issues of law or where witness credibility is
a major factor are handled more effectively by traditional judicial methods.
Although the procedures for each mini-trial should be designed to meet the needs of the
individual case, the following guidelines are appropriate in most circumstances:
(a) Time Frame - The mini-trial should be governed by strict time limitations. The
entire process, including discovery and trial, should conclude within one to three
months.
(b) Participants - Each party should be represented by an individual with authority to
make a final recommendation as to settlement and may be represented by counsel. The
participation of senior management/agency officials (principals) with first-hand
knowledge of the underlying dispute is highly recommended.
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(c) Discovery - Any discovery conducted should be expedited, limited in scope where
feasible, and scheduled to conclude at least two weeks prior to the mini-trial. Counsel
bear a special responsibility to conduct discovery expeditiously and voluntarily in a
mini-trial situation. Any discovery disputes which the parties cannot resolve will be
handled by the mini-trial judge. Discovery taken for the purpose of the mini-trial may
be used in further judicial proceedings if settlement is not achieved.
(d) Pre-Hearing Matters - At the close of discovery, the parties should meet with the
mini-trial judge for a pre-hearing conference. The parties normally should provide for
exchange of brief written submittals summarizing the parties' positions and narrowing
the issues in advance of the hearing. The submittal should include a discussion of both
entitlement and damages. Contemporaneously with the exchange of the written
submittals, the parties should finalize any stipulations needed for the hearing and,
where applicable, exchange witness lists and exhibits. The parties also should establish
final procedures for the hearing.
(e) Hearing - The hearing itself is informal and should generally not exceed one day.
The parties may structure their case to include examination of witnesses, the use of
demonstrative evidence, and oral argument by counsel. Because the rules of evidence
and procedure will not apply, witnesses will be permitted to relate their testimony in
the narrative, objections will not be permitted, and a transcript of the hearing will not
be made. The role of the mini-trial judge similarly is flexible and may provide for
active questioning of witnesses. Each party should present a closing statement to
facilitate the post-hearing settlement discussions.
(f) Post-Hearing Settlement Discussions - At the conclusion of the informal hearing,
the principals and/or counsel meet to discuss resolution of the dispute. The mini-trial
judge may play an active role in the discussions, or be available to render an advisory
opinion concerning the merits of the claim.
IV. Third-party Neutrals (eighteen-month pilot program)
After entry of an order referring a case to ADR, the parties may request the ADR
Administrator to appoint a third-party neutral from a limited panel of experienced
attorneys trained to handle ADR. The third-party neutral shall have no conflict of interest
and shall either have experience in alternative dispute resolution or shall have expertise in
the subject matter of the lawsuit. The third-party neutral will meet with the parties and
attempt to resolve the dispute.
At the conclusion of an eighteen-month trial period, this program will be reviewed and
modified accordingly.