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The following article was included as a feature comment in the September 22, 1997 issue of the CONSTRUCTION CONTRACTOR and is reproduced by permission of the publisher, Federal Publications Inc.
In the private sector, arbitration, mediation, and other alternative dispute resolution (ADR) procedures are often used to resolve construction disputes. ADR procedures are also employed to resolve construction disputes arising from federal construction contracts. In October 1996, in keeping with the movement in the private sector to expand the use of ADR to resolve construction disputes, the rules of the General Services Administration Board of Contract Appeals (GSBCA) were amended to allow the Board to provide ADR services in a wider variety of matters than previously available.
This FEATURE COMMENT discusses the availability and types of ADR services provided by the GSBCA, and contains examples of situations in which ADR might prove the most effective. It was prepared by Board Judge Allan H. Goodman.
Introduction. While ADR procedures are used extensively by GSBCA judges to resolve many cases, very limited information concerning these cases is available to the public. ADR proceedings are confidential. There are no official records or reported decisions. The Board's dismissal order may state that a case has been resolved by ADR, but this is usually the only public indication that ADR procedures have been used.
ADR in Appeals. ADR is an option for resolving all appeals from contracting officer final decisions which are docketed before the Board. In addition to appeals from GSA contracting officer decisions, many other civilian agencies have their Contract Disputes Act disputes resolved at the GSBCA. Among these are the Departments of Treasury, Commerce, and Education, Securities and Exchange Commission, the Social Security Administration, and the Small Business Administration. Board Rule 204 sets forth the scope of ADR proceedings at the Board. The rule emphasizes the availability of ADR, and encourages parties to consider the feasibility of using ADR as soon as the appeal is docketed and at any time during the course of a Board proceeding. If the parties agree to ADR, standard proceedings may be suspended for a reasonable period so that a Board Neutral may be appointed and ADR procedures utilized.
Disputes from Other Agencies. The GSBCA has significantly expanded the availability of its ADR services. In addition to providing ADR in appeals docketed before the Board, Rule 204 provides that the Board will make its services available for ADR proceedings in contract and procurement matters involving any agency, regardless of whether the agency uses the Board to resolve its Contract Disputes Act appeals. As the result of this expanded availability, the GSBCA may now provide ADR services for all agencies whose Contract Disputes Act appeals are resolved at another board of contract appeals.
In a further expansion of the availability of the GSBCA's ADR services, Rule 204 also allows parties to seek ADR services from the Board to resolve disputes at any stage of a procurement, even if no contracting officer decision has been issued or is contemplated. Thus, parties may request ADR services from the GSBCA, even if the dispute is not ripe to be docketed as an appeal at a board of contract appeals or the United States Court of Federal Claims. Such disputes include bid protests as well as disputes arising from contract performance.
Initiation of ADR. The Board cannot compel ADR in appeals docketed before the Board. For disputes over which the Board has Contract Disputes Act jurisdiction, a three-judge panel is assigned immediately after the case is filed. The judge with primary responsibility to hear the case, the "panel chairman," may explain the available ADR procedures with counsel and the parties. All parties must agree to use ADR before the process can be initiated.
To initiate an ADR proceeding for a contract or procurement matter from another agency, or for a matter in which a contracting officer final decision has not been issued or is not contemplated, Rule 204 requires that the parties jointly request the ADR in writing and direct the request to the Office of the Clerk of the Board. Therefore, the parties must agree to ADR before making the request to the Board. Such requests are usually transmitted to the Board by letter on behalf of the parties to the dispute.
There have been instances in which proceedings have been initiated at other boards of contract appeals or at the U.S. Court of Federal Claims for which the parties have subsequently requested the GSBCA to provide ADR services. In those instances, the parties have requested suspension of proceedings in the initial forum to allow the opportunity to resolve the matter by using ADR procedures.
Appointing the Board Neutral. The judge who is to conduct the ADR proceeding is referred to as the "Board Neutral." For appeals, the Board Neutral may be the panel chairman or another Board judge. For ADR proceedings which are not docketed as appeals, the parties may request a particular Board judge or judges to serve as Board Neutral. This option was included in the GSBCA procedures because parties would be able to request the services of a specific individual if they pursued ADR in the private sector, and therefore might similarly wish to request a specific Board judge.
Advantages of ADR. The experience at the GSBCA has been that ADR can be employed very successfully to resolve construction disputes. Parties have elected and used ADR at the GSBCA to resolve disputes before the project has been completed. The advantage to using ADR to resolve a dispute during contract performance is that this will help to preserve the working relationship of the contracting parties during the completion of the project.
The obvious advantage of successful ADR is a swifter resolution of the dispute. An ADR session can be commenced as soon as the parties are prepared to proceed. The parties usually request limited discovery prior to the ADR session. Parties who engage in ADR before extensive discovery or prehearing motions come to the ADR with a greater commitment to resolve the matter and more flexibility in their negotiating positions.
There are also intangible advantages. ADR, by its very nature, tends to be less adversarial than litigation. Counsel and party representatives appreciate the opportunity to speak candidly and "off-the-record" with the Board Neutral and to the opposing side with the neutral present. Clients who have participated in ADR have felt that they have had their "day in court" even though they did not participate in formal proceedings. The cathartic effect of having the opportunity to speak directly with the judge who is acting as a Board Neutral is often conducive to a settlement of the dispute.
The nature of ADR is that parties are required to communicate with and listen to each other during the process. This is not necessarily true in litigation -- by the time the case is presented to the trier of fact, the parties may have ceased altogether to communicate with or listen to each other. The fact that lines of communication are kept open in ADR often achieves a resolution which is fashioned by the parties and the Board Neutral in a manner that could not be achieved if the case proceeded in litigation. In this sense, the parties retain control of the process and the resolution, rather than relinquishing all control to a third party. Ultimately, the parties determine the success or failure of the ADR process.
Cases Amenable to ADR. There are many reasons why a party may believe that ADR is not appropriate -- the case is fact intensive and the record has not been sufficiently developed; the level of emotion is too high; one party is convinced that it will prevail. On the other hand, these same reasons are very good reasons to use ADR. If the case is fact intensive and will require extensive discovery before a hearing on the merits, why not have some limited discovery and attempt to resolve it by ADR before spending additional resources? If the case is highly emotional, why not defuse the emotion by a non-adversarial process? If one party is convinced it will prevail, why not seek a non-binding opinion early in the proceedings and save additional costs? Any case is amenable to ADR if the parties are committed to the process and have made a good faith decision to resolve their differences without resorting to litigation.
ADR Procedures - Once the Board Neutral is appointed, the Neutral will discuss the particulars of the dispute with the parties and help them determine the ADR procedure to be used. It is not unusual for the parties to decide to use more than one ADR procedure in combination. There have been instances in which the parties, after deciding upon a procedure to be used, request that a different procedure be used before the ADR session commences or while it is proceeding. Board Rule 204 describes the various ADR procedures which may be used.
Neutral Case Evaluation - Neutral case evaluation is described in Rule 204 as a process in which the parties agree to present information upon which the Board Neutral bases a non-binding, oral, advisory opinion. The manner in which the information is presented depends upon the parties' agreement. Presentations may be an informal proffer of information (not necessarily in the form of evidence which would be admissible at a hearing) together with limited argument from counsel. However, the parties may wish to make a more formal presentation of oral and documentary evidence and argument from counsel. During the presentation of information to the Board Neutral, the party representatives and attorneys may ask questions to each other, and the Board Neutral may also ask questions.
Depending on the nature of the issues involved, an advisory opinion may be rendered at the conclusion of the presentation, or the Board neutral may schedule a time to reconvene in order to render the opinion.
Neutral case evaluation is particularly useful to resolve disputes which involve contract interpretation, such as claims for defective specifications, constructive changes, and additional work. Each party presents the basis of its interpretation of the contract, by witness narration and attorney argument. The Board Neutral renders a non-binding opinion as to the reasonableness of each party's interpretation and the party who would prevail.
Mediation - Board Rule 204 defines mediation as a process in which the Board Neutral aids the parties in settling their case. The distinguishing feature of mediation is that the mediator is allowed to have ex parte contact with the parties. During these ex parte meetings, the parties may reveal confidential information which they believe might be helpful for the mediator to know, but which they do not wish to reveal to the other party.
There are two approaches to mediation. In facilitative mediation, the mediator is not asked to offer an opinion, but aids in discussion, points out strengths and weaknesses, and guides the parties in settlement negotiations. In evaluative mediation, the parties request a non-binding decision from the mediator similar to that rendered during neutral case evaluation. The Board Neutral will discuss these procedures with the parties.
Mediation has been used effectively at the GSBCA to resolve cases involving termination for default, liquidated damages, constructive changes, and differing site conditions.
Mini-trial. The term "mini-trial" is a procedure conducted by a Board Neutral presiding over a panel consisting of representatives of the parties who have authority to settle the dispute - usually one representative from each party. Ideally, the party representatives should be individuals in upper management who have not been directly involved in the project from which the dispute arises, so they are "emotionally divorced" from the dispute.
The panel hears the evidence and/or information presented by attorneys and witnesses in summary fashion. Once the presentation phase is concluded, the Board Neutral aids the other panel members in reaching a settlement by employing facilitative or evaluative mediation.
Mini-trials are very effective in disputes involving compensable time extensions, acceleration claims, and other delay-related disputes. Scheduling information and expert testimony, relying upon critical path method (CPM) or other scheduling methods, may be presented effectively in a mini-trial. The mini-trial is also an effective procedure for disputes which involve expert testimony on other subjects, such as design deficiencies or differing site conditions.
Binding Decision. Board Rule 204 provides for the issuance of a "binding decision" in much the same manner as non-binding neutral case evaluation. In this process, one or more Board judges render a decision which, by prior agreement of the parties, is to be binding and non-appealable. As in the non-binding evaluation of a case by a Board Neutral, the manner in which information is presented for a binding decision may vary depending on the circumstances of the particular case.
A binding decision has been used in bid protests of construction contracts at the GSBCA, because the parties desire to resolve the protest and proceed with the award of the contract. A binding decision is also an economical ADR procedure in matters that involve small dollar amounts, allowing a quick resolution without committing resources which might possibly exceed the monetary recovery.
Combined ADR Procedures. ADR procedures may be used in combination. The non-binding procedures of neutral case evaluation and mediation work well in combination. Once the Board Neutral has rendered a non-binding opinion, this opinion can be used as the basis of settlement discussions. The Board Neutral then assumes the role of mediator and facilitates the settlement discussions, meeting ex parte with the parties, if necessary.
This combination is particularly useful in disputes that involve several disputed change orders. In such disputes, the parties often elect to proceed by presenting information on each individual change order, receiving a non-binding opinion as to entitlement, and then resolving quantum by mediation with the help of the Board Neutral.
Conclusion. ADR procedures are used successfully to resolve construction disputes at the GSBCA. The procedures to be used in a particular case are determined by discussion between the Board Neutral and the parties. The parties may decide to use one or more procedures in combination in any given case.