The Contract Disputes Act establishes the formal process for resolving nearly all claims and disputes that arise under federal government contracts. It is the source of the requirement that contractors certify claims in excess of $100,000, the contracting officer’s final decision, and the deadlines for bringing a dispute to the Court of Federal Claims or an agency board of contract appeals.

It is also the source of the federal government’s authority to use mediation and other forms of alternative dispute resolution. Today we review six key things contractors should know about mediating contract claims and disputes at the Armed Services Board of Contract Appeals.

  1. The parties control the parameters of ADR proceedings.

Many commercial contracts and court rules require mediation of every dispute. There is no settlement meeting, mediation, or any other type of mandatory ADR proceedings in cases brought to the ASBCA. The parties control the process, and they may adopt any approach to ADR that they believe will be effective. Mediation is nevertheless voluntary. Without the agreement of both parties, it won’t happen.

The specific parameters of the mediation or other ADR proceedings selected for a particular case will be specified in a separate agreement. This agreement will address a variety of issues about the ADR proceedings themselves, such as who will participate, when briefs and other information will be exchanged with the parties, whether the parties will be permitted to make presentations, and whether the proceedings will result in a binding decision or not.

The Board’s ADR procedures include template agreements that the parties can adapt to their specific situations.

  1. Mediation may allow the parties valuable insight on the merits.

In ADR proceedings at the ASBCA, a sitting Administrative Judge will typically serve as the neutral. The parties may request that a particular judge serve as the neutral or may request that the Board assign a neutral. If an ADR proceeding does not result in a settlement, the judge that serves as the neutral would not be involved in the disposition of the case on the merits.

While parties often benefit from the neutral’s services in facilitating their negotiations, parties often find value in hearing the neutral’s impressions of the claims and defenses asserted in the case. The neutral’s impressions would be strictly confidential and could not be offered in evidence in support of a particular claim or defense. But the insight that a sitting Board judge may have on the validity of a particular claim often allows parties to look at their case more objectively or from a different perspective. Sometimes an evaluative assessment from a sitting judge can persuade senior decision-makers on both sides of a dispute that a proposed settlement is the most cost-effective means of resolving it.

  1. Formal ADR is the exception, not the rule.

Most of the cases brought to the ASBCA are resolved by settlement or other informal resolution and not on the merits. Even when there is a settlement, most agreements are resolved without Board involvement in a mediation or other formal ADR proceeding.

Here is the data. According to its October 2020 Annual Report, the ASBCA disposed of 363 cases in Fiscal Year 2020. Of those, 123 were sustained or denied and 240 were dismissed. According to the Board, a dismissal indicates that a settlement was reached in “the majority of cases.” The Board conducted only 32 formal ADR proceedings in FY 2020.

  1. Mediation is the most popular form of ADR proceeding at the ASBCA.

Alternative dispute resolution is an umbrella term that encompasses all forms of proceedings other than formal disposition of the case on the merits. The most popular form of ADR is a non-binding mediation in which a mediator is engaged to facilitate negotiations between the parties and often to provide insight into the strengths and weaknesses of the parties’ positions. ADR also includes summary trials in which the parties agree to give the decision-maker authority to issue a binding decision.

According to recently-published ASBCA statistics, non-binding proceedings such as mediation comprise the vast majority of the ADR proceedings in cases at the Board. For the five-year period from FY 2016 to FY 2020, the Board conducted 362 ADR proceedings. The parties authorized a binding decision in only 14 of those cases.

  1. The ASBCA supports ADR even before a matter is filed.

Most of the ADR proceedings administered at the ASBCA involve pending cases, which arrive at the Board after the administrative disputes process has been completed and only after a claim has been the subject of a contracting officer’s final decision. But there is no requirement that the parties wait for the final decision to be issued or for the case to be docketed at the Board. The Armed Services Board has authority to administer ADR proceedings in cases that are not before the Board. In Fiscal Year 2020, the ASBCA administered ADR proceedings in three off-docket cases.

The main limitation of the Board’s authority to mediate “off-docket” cases is that settlements of cases that are not pending at the ASBCA cannot be paid from the Treasury Department’s Judgment Fund. But this limitation can typically be addressed as an element of the negotiation through the use of a consent judgment that would be docketed at the Board.

  1. Mediation is often successful.

The goal of any mediation is a negotiated settlement acceptable to both parties that resolves the pending disputes without the need for formal adjudication. The available data indicate that mediations are often successful. According to the ASBCA’s annual report, the Board reported that 32 cases were designated for the Board’s ADR program in Fiscal Year 2020. Of those cases, four settled without the assistance of a mediator and without any formal mediation sessions. Of the 28 remaining cases, 21 were resolved by a successful settlement and 5 were “unsuccessful.” By the close of the year, only two of the cases designated for ADR remained pending.