Contract Disputes Overview - Part I

A dispute between the Government and contractor may arise in a variety of situations. These include, but are not limited to:

• Inability to agree upon an equitable adjustment
• Inability to agree upon the amount due following a contract termination
• Disallowance of costs
• Noncompliance with Cost Accounting Standards (CAS)

There are three principal means of disputes resolution between contractors and the contracting officer. These are

• Unassisted negotiation
• Alternative Dispute Resolution (ADR), and
• Appeal of a contracting officer final decision to the 
• ASBCA (Armed Services Board of Contract Appeals) or
• United States Court of Federal Claims (COFC)

The Government's policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer's level (see FAR 33.204). Both parties are encouraged to make reasonable efforts to resolve controversies prior to the contractor submitting a claim. Agencies are encouraged to use ADR procedures to the maximum extent practicable. Certain factors, however, may make the use of ADR inappropriate. For example agencies are encouraged to avoid ADR when

• 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
• the matter involves or may bear upon significant questions of Government policy that require additional procedures before a final resolution may be and, and such a proceeding would not likely serve to develop a recommended policy for the agency
• 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
• the matter significantly affects persons or organizations who are not parties to the proceeding
• a full public record of the proceeding is important, and a dispute resolution proceeding cannot provide such a record
• 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.

When resolution cannot be accomplished by negotiation or by ADR proceedings, contractors may file a formal claim. The claim must be in writing (see FAR 33.206(a)). It must request a "sum certain" or a decision concerning contract terms. In addition, contractors must certify claims over $100 thousand (see FAR 33.207). Uncertified claims will be rejected and returned to contractors.

To be continued...