FAR-Based Contracting

The Federal Acquisition Regulation (FAR) governs the procurement of goods and services for nearly all federal agencies.  Notable exceptions include the U.S. Postal Service, the U.S. Mint, and the Federal Aviation Administration (FAA).  Part 33, and the contract terms it requires, governs both protests and disputes relating to FAR-based contracts.

Understanding FAR Citations

Because the FAR is codified in Title 48 of the Code of Federal Regulations, it is appropriate to reference particular FAR regulations by their full, formal citation.  An example would be 48 CFR 33.210 (2013).  It is equally acceptable, however, to use a shorter citation format, like FAR 33.210.

Most agencies have supplements to the FAR that are also codified in Title 48 of the CFR.  The Department of Defense, for example, has the Defense Federal Acquisition Regulation Supplement, or DFARS, which starts at 48 CFR Part 201.  The numbering for most supplements track corresponding provisions in the FAR.  For example, the DFARS guidance regarding FAR 33.210 is published at DFARS 233.210.

FAR Definitions Relating to ADR:  

ADR is defined in FAR 33.201 as “any type of procedure or combination of procedures voluntarily used to resolve issues in controversy,” and “may include, but are not limited to, conciliation, facilitation, mediation, fact-finding, mini-trials, arbitration, and the use of ombudsman.”  48 CFR 33.201.  Issue in controversy means “a material disagreement between the Government and the contractor that (1) may result in a claim or (2) is all or part of an existing claim.”  Id.

FAR Provisions Addressing ADR in Protests:

FAR 33.103(b) provides that “prior to submission of an agency protest, all parties shall use their best efforts to resolve concerns . . . at the contracting officer level through open and frank discussions.”  48 CFR 33.103(b).  The regulation goes on to instruct that “the agency should provide for inexpensive, informal, procedurally simple, and expeditious resolution of protests.  Where appropriate, the use of alternative dispute resolution techniques, third party neutrals, and another agency’s personnel are acceptable protest resolution methods.”  Id. at 33.103(c).  Based on this FAR provision, agencies have instituted a wide range of policies, procedures, and programs geared at maximizing pre-award ADR.  See Ch. 09, Agency-level Protests.

The FAR provides that when using ADR to resolve a protest, the neutral must be a third party or an official from another agency.  48 CFR 33.103(c).  Also, a solicitation cannot require an agreement to arbitrate as a condition of the contract award.  48 CFR 33.214(f)(1).

FAR Provisions Addressing ADR in Contract Administration and Disputes:

The basic ADR Policy for disputes under the FAR is simple:

Agencies are encouraged to use ADR procedures to the maximum extent practicable.

See FAR 33.204.  In addition, FAR 33.214 addresses the use of ADR in contract administration and disputes.

To use ADR to resolve contract controversies under the FAR, there must be an issue in controversy, the voluntary submission of that issue by both parties for ADR, an agreement by both parties as to what specific procedures will be used, and the participation of officials from both parties who have the authority to resolve the issue.  If either party -– the contractor or the contracting officer –- rejects a request for the use of ADR, he or she must submit to the other party in writing his or her reasons for doing so.  48 CFR 33.214(b).  If the contracting officer rejects the request for ADR, his or her written explanation must cite one or more of the conditions in the ADRA of 1996, or “such other reasons” that makes the use of ADR inappropriate.  48 CFR 33.214(b).

So long as the contracting officer retains authority to settle the issue in controversy, the FAR allows ADR to be used any time: pre-dispute, pre-final decision, pre-appeal, post-appeal, pre-hearing, and pre-decision.  48 CFR 33.214(c).  Pursuant to the FAR, if a claim has been submitted, “ADR procedures may be applied to all or a portion of the claim.”  Id.  The use of ADR procedures does not affect the time limitations and procedures for submitting an appeal of a contracting officer’s final decision.  Id.

The FAR provides that the confidentiality of ADR proceedings shall be protected consistent with section 574 of the ADRA of 1996.  See Ch. 29, Confidentiality.

The Administrative Dispute Resolution Act (ADRA) of 1996 specifically provides that agencies may use binding arbitration only after they issue agency guidance, in consultation with the Attorney General.  5 U.S.C. 575(c).  However, pursuant to the Contract Disputes Act, an argument has been made that agency boards of contract appeal have the authority outside the ADRA of 1996 to fashion binding ADR proceedings.  Thus, with claims properly on appeal before a board of contract appeals, parties may agree to engage in a summary proceeding with binding decision.  In these types of proceedings, parties try their appeal informally before an administrative judge with the judge issuing a binding “bench” or summary written decision.  The parties must agree on the details for the binding procedure ADR agreement.  To use this type of ADR, the parties must also agree that all decisions, rulings, and orders by the board shall be final, conclusive, not appealable, and may not be set aside except for fraud.  Pre-hearing, hearing, and post-hearing procedures and rules applicable to appeals generally will be modified or eliminated to expedite resolution of the appeal using this type of ADR, which is similar in most respects to binding arbitration.  For the Armed Services Board of Contract Appeals’ discussion of this procedure, see Addendum II, Alternative Dispute Resolution, at ¶ 7 (b).  For the Civilian Board of Contract Appeals’ discussion of this procedure, see Rule 54(c)(5), 48 CFR 6101.54(c)(5)See also Ch. 21, Arbitration.

FAR Provisions Addressing ADR for Contract Administration in Disputes for Commercial Items Contracts:

ADR use in commercial items contracts is addressed at FAR 52.233-1(g) and follows the same general guidelines for the use of ADR set forth in FAR 33.214. Contracting officers are instructed to include the following clause, found at FAR 52.233-1(g) in commercial item contracts:

If the claim by the contractor is submitted to the contracting officer or a claim by the government is presented to the contractor, the parties, by mutual consent, may agree to use ADR.  If the contractor refuses an offer for ADR, the contractor shall inform the contracting officer, in writing, of the contractor’s specific reasons for rejecting the offer.

48 CFR 52.233-1(g).

ADR in appeals to the ASBCA, the CBCA, other BCAs and the COFC