ADR Roundtable American Bar Association Annual Meeting August 9, 2014 Comments by the Alternative Dispute Resolution Committee of the Public Contract Law Section Alternative Dispute Resolution (ADR) techniques have been used extensively by parties involved in federal government contract controversies pursuant to the Administrative Dispute Resolution Act of 1995, Pub.L. No. 104-32 (codified at 5 U.S.C. 571, et seq., and various sections of the Contract Disputes Act 41 U.S.C. 7101, et seq.). Procedures have been established in the Federal Acquisition Regulation (FAR) at 48 C.F.R. 33.204 and by various agencies and forums, encouraging federal agencies to use ADR procedures to the maximum extent practicable. Id. In recent years, the use of ADR has increased significantly, with success rates typically in excess of 90 percent. ADR is available for use by parties at any stage of the procurement process, as well as in connection with such activities as grants, cooperative agreements, and so-called other transactions. This paper focuses on certain recent developments in federal government contracting ADR, including ADR in bid protests and ADR in contract disputes. Anyone interested in government contracting ADR may wish to consult the recently revised monograph on this topic. Alternative Dispute Resolution: A Practical Guide for Resolving Government Contract Controversies, 3 rd Edition, American Bar Association, Section of Public Contract Law, Committee on Alternative Dispute Resolution, 2014. ADR in Bid Protests The Air Force Extended Debriefing Program Agency-level protest procedures adopted pursuant to FAR 15.507(a) and 33.103 exist to allow contracting officers or other designated agency officials to decide both preaward and postaward protests without recourse to any outside forum and on an expedited basis. Non-specialized outside forums for bid protests include the Government Accountability Office (GAO) and the U.S. Court of Federal Claims (COFC). By far the most used outside forum for bid protests is GAO, which offers ADR in the form of outcome prediction, litigation risk assessment, and negotiation assistance. For FY 2013 the ADR success rate for bid protests at GAO was 86%. B-158766, January 2, 2014, GAO Bid Protest Annual Report to Congress for Fiscal Year 2013. 1
While a number of agencies have initiated their own bid protest ADR procedures to ameliorate the delay and disruption which formal protests may create, this paper focuses on a program recently launched by the Air Force. United States Department of the Air Force Extended Debriefing Program, October 1, 2013. The Air Force Extended Debriefing Program is aimed at reducing the number of speculative bid protests filed in Air Force procurements. Normally, when a disappointed offeror is given a debriefing by an agency, the offeror s ability to determine whether good grounds for protest exist may be hampered by the non-disclosure in the debriefing of source selection information and other information which is confidential to its competitors. An unsuccessful offeror may elect to file a protest, either at GAO or in the COFC, in an effort to obtain otherwise protected source selection information. After filing a protest, the protester is then able to have its outside counsel fully assess the merits of any protest, once the forum has issued a protective order. The Extended Debriefing Program is a possible solution to the problem of speculative bid protests. An extended debriefing is a transparent debriefing process during which the government will provide access to otherwise protected source selection documents to an unsuccessful offeror s counsel, pursuant to an Extended Debriefing Agreement (EDA). By utilizing this type of debriefing, the government can better explain the government s procurement decision and demonstrate that its decision was appropriate and rational. The EDA is the Air Force s version of the GAO protective order, and it is executed only with the consent of and participation by the awardee s outside counsel, who is also a party to the EDA. Following disclosure of the documents to outside counsel under the EDA, the next step is to invite the unsuccessful offeror s counsel to a question and answer session with Air Force source selection personnel for a robust discussion of the issues. The awardee may elect to participate in the question and answer session as well. The program has the potential benefit for the Air Force of eliminating unnecessary disruption and cost for the procurement activity, as well as enhancing confidence in the procurement process. Successful offerors may also benefit, by the avoidance of delays and protest defense costs. Potential protesters may avoid unnecessary protest costs without losing their rights to pursue a timely protest (including suspension of the award) should they decide to do so. The use of extended debriefings has demonstrated success. This success has the potential to be replicated. The Air Force conducted five extended debriefings prior to formalization of the Extended Debriefing Program. In four of those cases, the protesters elected either to refrain from filing a GAO protest, or to withdraw the existing protest. There was only one case in which an extended debriefing was performed in which the unsuccessful offeror continued on with a protest, and the facts of that case are peculiar. The protester initially filed a GAO protest, which it withdrew pursuant to an extended debriefing agreement. During the course of the extended debriefing, the Air Force discovered procurement errors. As a result, the unsuccessful offeror submitted an agency-level protest, which was sustained. In the end, the Air Force took partial corrective action with regard to some of the issues and negotiated a settlement agreement for the remaining issues. The protester did not re-file its protest at GAO. 2
In the first official test case since the launch of the Extended Debriefing Program, the source selection documents clearly demonstrated to outside counsel that the protester in a $28 million procurement was not an interested party and that the Air Force s source selection decision was reasonable and documented. The counsel declined the oral debriefing and the protest was not further pursued. ADR in Government Contract Disputes The Mega ADR The Armed Services Board of Contract Appeals (ASBCA) has by far the largest docket of the various dispute resolution forums for postaward claims and disputes. The ASBCA offers flexible ADR procedures for the consensual and voluntary use of the parties before or after the filing of formal claims, and encourages their use. However, if a matter is not pending before the Board under its Contract Disputes Act jurisdiction, any settlement may not be paid out of the Judgment Fund, the permanent, indefinite appropriation created to pay judgments against the United States. 31 U.S.C. 1304. Although the Board may allow the parties to select any ADR method or combination of methods, examples described in its notice to parties focus on two: Nonbinding mediation and summary proceeding with binding decision. In mediation at the Board, an administrative judge without decision-making authority in the case is appointed to facilitate settlement. Summary proceeding with binding decision is akin to arbitration. An informal trial is conducted by an administrative judge, who then issues a binding bench decision or a written decision, usually within ten days. Such decision is final, conclusive, not appealable, and will not serve as precedent. Armed Services Board of Contract Appeals, Notice Regarding Alternative Methods of Dispute Resolution, September 20, 2013. The ASBCA s record in ADR, similar to that at the Civilian Board of Contract Appeals and others, is very good. The success rate has averaged over 96% during the last five years. For FY 2013, the success rate for 78 non-binding ADR cases was 100%. Armed Services Board of Contract Appeals, A Guide to ADR Activity at the ASBCA, April 21, 2014. Lest there be any assumption that ADR is suitable mainly for less complex or low dollar contract disputes, the ASBCA within the last several years successfully concluded ADR of a case based on a 1999 Army contract which began with litigation in 2007 and involved claims and Requests for Equitable Adjustment (REAs) amounting to over $2.0 billion, which is believed to be the most arising out of one contract in ASBCA history. A contract awarded under the Wholesale Logistics Modernization Program called for the overhaul of systems supporting over 23,000 users in the Army s supply chain activities. These activities have responsibility for acquiring and positioning strategic stock and war reserves, and for performing other related functions using modern and sustainable technology. The contract contained requirements and indefinite quantity provisions, as well as provisions involving data rights and software development. Many difficulties were encountered during contract performance of this high visibility project. The contractor filed 14 requests for equitable adjustment, all of which the Army denied, 3
and which resulted in 14 denied claims which were appealed to the ASBCA. The amount of the contractor s claims grew over time; meanwhile, the Army determined to change contractors and submitted a counterclaim. Complex discovery issues arose involving electronically stored information (ESI). Competing motions for summary judgment and for partial dismissal were filed. With over $2.0 billion in dispute and a trial scheduled for 2011 to address entitlement only, potential interest on the contractor s claims was running as high as $60,000 per day. The contractor noticed an intention to seek in excess of $1.4 billion for breach of contract, including REAs for breach of intellectual property rights in the new system, and for unrecovered investment in software development. The parties decided to pursue ADR to address all 14 appeals, the Army counterclaim and the contractor s requests for equitable adjustment for intellectual property rights and unrecovered investment in software development. Both docketed appeals and undocketed matters were included in the ADR by agreement of the parties. The ADR method agreed to by the parties included an initial evaluative mediation following certain additional discovery, failing which certain components of the dispute would be escalated to a minitrial with binding decision. In recognition of the size and complexity of the case, the parties agreed to have coneutrals, consisting of the administrative judge already assigned to the appeals and the chairman of the ASBCA. Expressing confidence in these neutrals, the parties also agreed that neither would need to recuse herself or himself from further involvement in the appeals in the event that all matters were not resolved by ADR. Also indicative of the size and complexity of the case, the ADR position papers ran to 700 pages per party, instead of the 25 page limitation frequently adopted in ADR at the Board. However, all of the docketed matters and undocketed matters were broken into three groups, each of which contained related issues for purposes of position papers, joint sessions, presentations, and evaluative caucuses. These sessions together lasted nearly a month. The neutrals assigned homework to the parties during the process. At the neutrals request, the parties maintained a mediation decision matrix to identify agreements reached, open issues, party positions, and other information during the course of the ADR. This case benefitted from the fact that the parties agreed in advance to commit the highest required level of authority to settle the matter, and to provide the appropriate delegation of authority when needed. Following enormous effort, a definitive settlement agreement was reached in 2012. The contractor received a substantial payment and a five year contract extension, while the Government received unlimited rights to the contractor s intellectual property which was developed to support the services delivered under the contract. All claims and counterclaims were dismissed. This experience demonstrated the ASBCA s ability to adapt its ADR and appeal procedures to deal with a highly complex dispute. For additional information, see Donald M. Yenovkian, Logistics Modernization Program, Alternative Dispute Resolution: Using ADR to Effectively Resolve Large and Complex Government Contract Issues in Controversy, presented to the American Bar Association Section 4
of Public Contract Law Annual Meeting (August 6, 2012) and Reba Ann Page and Paul Williams, The ASBCA s Path to the Mega ADR in Computer Sciences Corporation, The Procurement Lawyer, American Bar Association Section of Public Contract Law, Fall 2013. 5