Wednesday, October 19, 2011

Contract Disputes Overview - Part II

There are several ways of handling contract disputes ranging from the informal and inexpensive (negotiations) to the formal and very expensive (going to court). Naturally, both contractors and the Government want to and generally seek to resolve disputes at the lowest cost possible. However, sometimes the stakes are so great or one side or the other becomes so entrenched that resolution by negotiation or by ADR is not possible. The decision to elevate disputes to the ASBCA or the COFC is largely a business case judgment where one or both of the parties calculate that the potential benefits outweigh the risk (i.e. cost). Yesterday we introduced the subject of contract disputes - today we will focus on the event that occurs when resolution is not possible through negotiations or ADR (Alternative Disputes Resolution) procedures. The first thing that must happen when a dispute is not resolved at the contracting officer level is the preparation of the contracting officer's "final decision".

When a claim cannot be satisfied or settled by mutual agreement and a decision upon the claim is necessary, the Contracting Officer must prepare a final decision (see FAR 33.211). A final decision represents the independent decision and determination of the ACO (or TCO). This decision may be based on information and assistance of auditors and technical specialists but the ultimate decision is that of the contracting officer after thoroughly reviewing all facts and recommendations (see FAR 33.211). The actual final decision document may contain copious information and legal jargon but must, at a minimum,
  • Contain a describe the claim or dispute
  • Refer to the pertinent contract terms
  • State the factual areas of agreement and disagreement
  • Set forth the contracting officer’s decision (along with supporting rationale).
  • Notify the contractor of its right to appeal to the ASBCA within 90 days or the Court of Federal Claims within 12 months.
For claims of $100 or less, the contracting officer must issue a final decision within a reasonable time (see FAR 33.211(c)(1)). For claims greater than $100 thousand, contracting officers must issue a final decision within 60 days or provide written notification within 60 days or provide written notification with 60 days as to when such a decision will be issued. Even if the 60 day target cannot be met, contracting officers are still required to issue a final decision in a "reasonable time". Reasonable time is not defined and we have seen situations where final decisions can take a year or longer to issue.

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