Solicitations, contracts, cooperative agreements, and grants typically have some kind of clause or provision that encourages the use of ADR. Aside from the one characteristic that no clause unilaterally imposes ADR procedures in lieu of administrative or judicial adjudication, there is a wide variety of clauses that take different approaches to encouraging the use of ADR.
Both the FAR and the FAA’s AMS require certain clauses to be in contracts or solicitations. Some of these clauses typically encourage the use of ADR. The standard FAR Disputes clause, for example, states:
(g) 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 alternative dispute resolution (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.
FAR 52.233-1, Disputes (May 2014).
Some agencies have their own standard clause, usually stated in their supplement to the FAR. The Defense Logistics Agency is one such agency.
The Defense Logistics Acquisition Directive (DLAD) provides, in subpart 33.214, the insertion of the following ADR clause (52.233-9001) in all solicitations and contracts in which the clause at FAR 52.233-1 is used, unless the conditions described in FAR 33.203(b) apply or unless a different ADR clause is used that is specifically tailored to the acquisition:
52.233-9001 Disputes Agreement to Use Alternative Dispute Resolution (ADR).
As prescribed in 33.214, insert the following provision:
DISPUTES – AGREEMENT TO USE ALTERNATIVE DISPUTE RESOLUTION (NOV 2011)
(a) The parties agree to negotiate with each other to try to resolve any disputes that may arise. If unassisted negotiations are unsuccessful, the parties will use alternative dispute resolution (ADR) techniques to try to resolve the dispute. Litigation will only be considered as a last resort when ADR is unsuccessful or has been documented by the party rejecting ADR to be inappropriate for resolving the dispute.
(b) Before either party determines ADR inappropriate, that party must discuss the use of ADR with the other party. The documentation rejecting ADR must be signed by an official authorized to bind the Contractor (see Federal Acquisition Regulation (FAR) clause 52.233-1), or, for the Agency, by the Contracting Officer, and approved at a level above the Contracting Officer after consultation with the ADR Specialist and with legal. Contractor personnel are also encouraged to include the ADR Specialist in their discussions with the Contracting Officer before determining ADR to be inappropriate.
(c) The offeror should check here to opt out of this clause:
[ ] Alternate wording may be negotiated with the Contracting Officer.
The typical government contract uses section H for special clauses that are unique to the contract in question. Sometimes this portion of the contract includes an ADR clause that encourages the use of ADR, and sometimes, with very detailed procedures. See, e.g., NAVSEA ADR clause.
Grants, cooperative agreements, and other transactions also can include special clauses that encourage ADR or establish procedures for informal resolution. The Department of the Navy has included in the terms and conditions of their grants the following language:
Alternative Dispute Resolution (ADR).
The Parties shall endeavor to agree upon an ADR technique (such as discussions, mediation, or mini-trial) appropriate to resolve any dispute, and they shall use ADR to the maximum extent practicable.
Office of Naval Research, For-Profit Organizations Research Grant Terms and Conditions, art. 30 (Feb. 2013). The National Institutes of Health offers another example that invokes a “tiered-discussion” procedure:
Article 11. Disputes
11.1 Settlement. Any dispute arising under this CRADA [cooperative research and development agreement] which is not disposed of by agreement of the NIH CRADA Extramural Investigator/Officer(s) and CRADA Collaborator PI(s) will be submitted jointly to the signatories of this CRADA. If the signatories, or their designees, are unable to jointly resolve the dispute within thirty (30) days after notification thereof, the Assistant Secretary for Health (or his/her designee or successor) will propose a resolution. Nothing in this Paragraph will prevent any Party from pursuing any additional administrative remedies that may be available and, after exhaustion of such administrative remedies, pursuing all available judicial remedies.
The idea behind ADR clauses is that as a controversy escalates to higher levels in the respective organizations, it becomes less important to the individual participants and their organizations. This improves the likelihood that it will be resolved. It also gives the first-tier administrators an incentive to work out their differences before they require the assistance of their superiors.
Prohibited Clauses – Mandatory Arbitration.
As shown above, most clauses used in the federal context describe voluntary ADR procedures that preserve the parties’ rights to adjudication if necessary. While binding arbitration can be offered in certain circumstances, “an agency may not require any person to consent to arbitration as a condition of entering into a contract or obtaining a benefit.” 5 USC 575(a)(3).