1. Resolving Contractual Disputes  

    1.1. The three principal means of disputes resolution between the contractor and the Contracting Officer are unassisted negotiation, Alternate Dispute Resolution ("ADR"), and appeal of a Contracting Officer's Final Decision to the Armed Services Board of Contract Appeals ("ASBCA") or the United States Court of Federal Claims ("COFC") under the Contract Disputes Act of 1978 ("CDA"). 

        1.1.1. A dispute between the Government and contractor may arise in a variety of situations.  These include, but are not limited to: (1) Inability to agree upon an equitable adjustment; (2) Inability to agree upon the amount due following a termination for convenience; (3) Disallowance of costs; (4) Cost Accounting Standards ("CAS") noncompliance, etc. 
        1.1.2. Products of the disputes process are negotiated settlements (which may include use of ADR), Final Decisions issued by Administrative Contracting Officers (“ACO”) or Termination Contracting Officers (“TCO”), and judgments arising from appeals of Final Decisions to the ASBCA or the COFC. 

    1.2. Contracting Officers should attempt to resolve all contractual issues in controversy by mutual agreement at the lowest possible appropriate Contracting Officer’s level (See Federal Acquisition Regulation ("FAR") 33.204).  DCMA ACOs and TCOs have the responsibility and the authority to resolve disputes, including through the use of ADR methods (See FAR 33.210; FAR 33.214).  The Procuring Contracting Officer ("PCO") shall be notified if the issue is outside the scope of the DCMA Contracting Officer’s authority or delegation.  If necessary, a Contracting Officer may seek a further delegation of authority from the PCO when appropriate.  DCMA Contracting Officers shall also notify the PCO if the issue may impact a contract’s cost, schedule, or performance.
    1.3. For claims made by a contractor, the contractor shall submit a claim in writing (FAR 33.206(a)).  A claim must ordinarily request a sum certain or a decision concerning contract terms.  In addition, the contractor shall certify the claim if it seeks in excess of $100,000 (See FAR 33.207).  The ACO or TCO should ensure that contractors properly certify all such claims.

2.  Final Decisions

    2.1.  When a claim by a contractor or a Government claim cannot be satisfied or settled by mutual agreement and a decision upon the claim is necessary, the Contracting Officer shall prepare a Final Decision pursuant to FAR 33.211.  Contracting Officers shall issue Final Decisions upon matters in which they have authority to take definitive action.
    2.2.  A Final Decision must represent the independent decision and determination of the ACO or TCO issuing the decision.  While it may be necessary to obtain assistance from legal and other advisors  (e.g., Defense Contract Audit Agency auditors, technical specialists, etc.), ACOs or TCOs are responsible for the ultimate decision and must make that decision after thoroughly reviewing all facts and recommendations.  (FAR 33.211)
    2.3.  Final Decisions shall:  describe the claim or dispute; refer to the pertinent contract terms; state the factual areas of agreement and disagreement; and set forth the Contracting Officer’s decision, with its supporting rationale (FAR 33.211(a)(4)).  Final Decisions shall also include notification that the contractor may appeal the decision to the ASBCA within 90 days or the COFC within 12 months of receipt of the final decision.  FAR 33.211(a)(4)(v) provides wording for the notification of the contractor’s appeal rights.  Contracting Officers shall send Final Decisions to the contractor in a manner that provides evidence of receipt (such as certified mail, return receipt requested) (FAR 33.211(b)). 
    2.4.  In preparing the Final Decision, the Contracting Officer shall secure advice from assigned legal counsel, the Contract Disputes Resolution Center (“CDRC”), and other advisors (FAR 33.211(a)(2)).  In addition to making their own independent review of the facts of any claim, Contracting Officers shall provide assigned legal counsel all the facts necessary to support the Contracting Officer's proposed Final Decision during the counsel’s review.  Assigned legal counsel is responsible for providing information to the CDRC and the Contract Law Group ("CLG") steering committee for their review of the proposed Final Decision.  The CDRC and the CLG steering committee should review every Final Decision before it is issued.  Comments and recommendations shall be provided to the Contracting Officer for consideration in his/her Final Decision.  After seeking advice, the Contracting Officer should issue an independent decision in his/her fiduciary responsibility to the United States.  [Note: The CDRC recommends that Contracting Officers not cite legal precedents or make arguments in Final Decisions.] 
    2.5.  In claims of $100,000 or less, the ACO or TCO shall issue a Final Decision within a reasonable time (FAR 33.211(c)(1)).  Where a contractor has requested in writing that a decision be rendered within 60 days, any failure of the Contracting Officer to issue a Final Decision upon a contractor claim within that period may be deemed a decision denying the claim, and will authorize the contractor to file an appeal upon the claim (FAR 33.211(g)).  In claims exceeding $100,000, Contracting Officers shall issue a Final Decision within 60 days or provide a written notification within 60 days as to when such a decision will be issued (after consultation with assigned legal counsel) (FAR 33.211(c)(2)).  The Contracting Officer shall issue a Final Decision within a reasonable time (FAR 33.211(d)).
    2.6.  Contracting Officers shall immediately coordinate all contractor's requests for Final Decisions and Government claims with assigned legal counsel to ensure a timely decision is issued.
    2.7.  Affirmative Government Claims: For a claim by the Government, the Contracting Officer shall state an amount certain, make a demand for payment, provide an address for payment, and notify the contractor of the deferment process.   Procedures for issuing a demand and Final Decision are governed by FAR 32.604, FAR 32.605, and 33.211.  The same requirements for functional area coordination exist as in paragraph 1.2 above.  Contracting Officers shall seek involvement and review of the proposed Final Decision by assigned legal counsel as described in paragraph 2.4 above.  After seeking advice and coordination, the Contracting Officer should issue an independent decision in his/her fiduciary responsibility to the United States.     

        2.7.1.  Government claims shall be made as soon as the Contracting Officer has determined that an actual debt is due the Government and the amount of refund or payment due the Government (see FAR 32..603(c) and FAR 604(a)(1)).
        2.7.2.  Where a dispute concerning a refund to the Government cannot be mutually resolved within a reasonable period, the Contracting Officer should issue a Final Decision after first consulting both assigned legal counsel and, through assigned legal counsel, the CDRC.  If a refund is due to the Government, the Contracting Officer shall make a demand for payment as part of the Final Decision, if required (see FAR 32.604, FAR 32.605).  Detailed procedures for issuing and processing demands for payment are provided in the DCMA Guidebook/Instruction entitled Contract Debt.
        2.7.3.  Contracting Officers, when making a demand for payment shall notify the contractor that it may submit a proposal for deferment of collection (FAR 32.604(b)(8)).  Upon the receipt of any request for debt deferment, Contracting Officers shall ensure it is forwarded to DCMA-OCB, with a recommendation as to whether to grant the request (FAR 32.607-2(c)).  Detailed procedures for issuing and processing deferment requests are provided in the DCMA Guidebook/Instruction entitled Contract Debt.
        2.7.4.  The agency does not have the authority to defer the collection of debts or authorize installment payment agreements.  As noted above in paragraph 2.7.3, the Contracting Officer shall forward contractor requests for deferral in accordance with the DCMA Guidebook/Instruction entitled Contract Debt.  The Contracting Officer will advise the contractor to contact the cognizant payment office  directly to request an installment payment agreement.

    2.8.  Statute of Limitations.  There is a six-year statute of limitations upon claims by either party for contracts awarded after October 1, 1995 that may not be waived.  ACOs must pay special attention to the date when CAS non-compliance issues develop or accrue, so they can comply with FAR notice requirements to contractors before issuing a Final Decision.  Determination of when a claim “accrues” can be a complicated issue of law.  Therefore, Contracting Officers should promptly seek assistance of assigned legal counsel when they learn of a potential Government claim.
    2.9.  As stated in FAR 33.210, the ACO or TCO is not authorized to decide or resolve claims or disputes that: 1) involve fraud or 2) involve penalties or forfeitures proscribed by statute or regulation that another Federal agency is specifically authorized to administer, settle, or determine (FAR 33.210).  In addition, ACOs may not settle disputes that can negatively affect existing disputes or appeals under the cognizance of any other service, DOD Agency, or Department of Justice (“DOJ”) without first consulting with assigned legal counsel.  Consultation with assigned legal counsel is necessary to ensure that any adverse effects are mitigated.  (Assigned legal counsel are responsible for consulting with the CDRC upon these matters.)  Disagreements between the ACO and assigned legal counsel concerning a settlement shall be elevated for resolution. 

        2.9.1.  The ACO or TCO shall report any suspected fraudulent claim or misrepresentation to the Contract Integrity Center ("CIC") (FAR 33.209).
        2.9.2.  For those penalties that an ACO or TCO are authorized to resolve, the Contracting Officer should refer to FAR 42.709 through 42.709-6 for further guidance.

3. Using Alternate Dispute Resolution ("ADR")

    3.1.  ADR is any procedure or combination of procedures used to resolve issues in controversy with the assistance of a third party neutral.  ADR procedures and methods are outlined in a separate DCMA instruction by that same title.
    3.2.  Contracting Officers must attempt to resolve issues in controversy, e.g., upon the failure of unassisted negotiations, etc.  ADR should be considered and, if appropriate, attempted even before issuing a Final Decision upon claims by contractors. 

        3.2.1.  In using ADR, Contracting Officers (in conjunction with assigned legal and CDRC counsel) add value to the resolution process by minimizing disruptions in contract performance; maintaining ongoing business relationships with contractors; avoiding delays in settlement of terminated contracts; and avoiding and reducing costs of litigation.
        3.2.2.  Contracting Officers should not delay issuing a mandatory demand for payment of contract debt and Final Decision because of ADR (See FAR 32.604).  Accordingly, it is not advisable to attempt ADR upon Government demands for repayment until after a demand for payment has been issued and the interest has started to accumulate for situations contemplated under04FAR 32.610.  

    3.3.  Either party (the Government or the contractor) may request ADR methods be used to resolve the dispute at any step of the claim/appeal process.  In order for ADR to be used, the parties must mutually agree to the ADR method.  Contracting Officers shall coordinate with assigned legal counsel in selecting the most beneficial method if the Contracting Officer elects to utilize ADR.  Binding Arbitration is not currently permitted.  Only the DOJ can approve ADR for Federal litigation.  If the Contracting Officer, after consultation with assigned legal counsel, makes an initial determination not to utilize ADR, follow the procedures in paragraph 3.4 below.
    3.4.  Normally, decisions not to use ADR should be approved by an official at least one level above the Contracting Officer, unless the contractor refuses to participate in meaningful ADR.  Once the Contracting Officer makes an initial determination not to utilize ADR, that determination shall be submitted in writing to an approving official at least one level above the Contracting Officer.  In documenting a decision not to use ADR after a contractor has made a legitimate request, the approving official shall consult with assigned legal counsel and coordinate with the Director, CDRC, as the designee of the DCMA Deputy General Counsel, and explain, in writing, specifically why ADR is inappropriate or not practicable in the case.  Once it is determined that ADR is not appropriate in accordance with these procedures, the Contracting Officer shall comply with FAR 33.214(b) in notifying the contractor.  Detailed procedures upon DCMA’s ADR program are provided in the DCMA Instruction entitled Alternate Disputes Resolution.
    3.5.  ADR procedures do not substitute for a Contracting Officer's Final Decision for purposes of entitling a contractor to file an appeal, nor does the use of ADR alter any of the time limitations or procedural requirements for filing an appeal of a Final Decision.  A Contracting Officer may elect to withdraw or reconsider a Final Decision pending the outcome of ADR (FAR 33.214(c)).  However, Contracting Officers are not obligated to do so, and should consult with assigned legal counsel before taking such an action.  Assigned legal counsel, in turn, should consult with the CDRC.  Contracting Officers are reminded that ADR does not toll any statute of limitation imposed by law.
    3.6.  The key to ADR is to achieve justifiable and fair settlements for all of DCMA’s customers.  Justifiable and fair ADR settlements achieve cost savings and avoid unnecessary expense, disruption, and delay.  Feeder metrics for this process include price negotiation sustention rate, negotiation cycle time, and Undefinitized Contract Actions.  Contracting Officers should also pay attention to the long term consequences of their actions, since DCMA leads for the entire DOD in matters involving CAS, Contract Administration, and terminations for convenience.  Justifiable and fair settlements also take into account the role of DCMA Contracting Officers as “honest brokers” among the Armed Services for matters within their core competencies, e.g., CAS, Contract Administration and termination settlements.  Other significant considerations are consistency of policy, regulatory interpretation, and precedent. 

4.  Defense of the Government's Position in Litigation

    4.1.  The DCMA Chief Trial Attorney and trial attorneys assigned to his/her office (the CDRC) shall represent the Agency and defend the appeals of Contracting Officer's Final Decisions before the ASBCA.  The CDRC shall coordinate with and assist the DOJ in representing the DCMA in Federal Courts.  Attorneys litigating the appeal will continue to explore possible resolution through ADR.  Contracting Officers, along with assigned legal counsel, shall assist assigned CDRC trial attorneys.

        4.1.1.  Legal Evaluation of Likelihood of Success in Litigation.  Assigned legal counsel to a Contracting Officer shall evaluate all proposed Final Decisions for litigation risk and will inform the client of their findings.  Assigned legal counsel is responsible for obtaining CDRC and CLG steering committee review of the proposed Final Decision as noted in paragraph 2.4 above.
        4.1.2.  Following the appeal of the Final Decision to the ASBCA or Federal Courts, CDRC trial attorneys will prepare Litigation Risk Assessments in accordance with the CDRC's internal Standard Operating Procedure.  The CDRC trial attorneys prepare these assessments upon a periodic basis during litigation to enable DCMA Contracting Officers to be knowledgeable of the risk(s) inherent with litigation, which, in turn, should enable them to make informed decisions.

    4.2.  ASBCA Rule 4 requires a submission of an appeal file by the Contracting Officer within 30 days of an appeal.  To permit timely review of this submission, the Contracting Officer shall provide the CDRC trial attorney with the information required by ASBCA Rule 4 (DFARS Appendix A) within 15 days after receiving an appeal or notice of an appeal.  [Contracting Officers should keep this in mind as they prepare Final Decisions – in other words, they should keep an orderly file of all matters they considered.  Contracting Officers should also consult with assigned legal counsel and CDRC trial attorneys for advice on what to put in their Rule 4 submission.]  The Contracting Officer, as well as other knowledgeable DCMA personnel, shall assist the trial attorney in assembling all facts and documents (manual or electronic) and in all other aspects of case preparation (FAR 33.212).  Coordination by the Contracting Officer with the applicable buying offices is also essential.
    4.3.  Once litigation at the ASBCA has commenced, the ACO or TCO shall consult with the assigned CDRC trial attorney and other appropriate advisors (e.g., audit, technical, etc.) before attempting any settlement.  In the event of any material disagreement between the Contracting Officer and the trial attorney concerning the best course of action for the agency, the ACO or TCO shall elevate the matter for resolution.

        4.3.1.  Only DOJ attorneys are authorized to settle appeals filed in Federal courts.  In addition, only DOJ attorneys are authorized to settle any subsequent appeals of Federal court trial level or ASBCA decisions filed at the U.S. Court of Appeals for the Federal Circuit or any other Federal level appellate court.

    4.4.  All assigned trial attorneys involved in resolving a dispute through either ADR or formal litigation shall input the relevant data in the appropriate modules of the CDRC Docket Control Database System.  This input will facilitate analysis of the case and allow a coordinated selection of the most beneficial dispute resolution strategy.

• FAR 32.6, Contract Debts
• FAR 33.2, Disputes and Appeals
• FAR 42.709 – 709-6, Assessment of Penalties against contractors for including unallowable indirect costs
• DFARS Appendix A, Armed Services Board of Contract Appeals

• Process Indicator/s:
  • TBD
• Workload Indicator/s:
  • TBD
• Resource Indicator/s:
  • TBD
• Supplier Indicator/s:
  • N/A

• PLAS Process code:  156

• Alternate Dispute Resolution (ADR) - Considerations and procedures
• Contract Debt - Procedures for issuing demands for payment and Final Decisions, as well as processing contractor requests for deferment of debt

Fireproofing Memo:  Contracting Officer Final Decisions

PURPOSE:  This is another in a series of Office of General Counsel Fireproofing Memos.  Improper action or inaction by Contracting Officers in response to a contractor’s claim often results in appeals being unnecessarily docketed at the Armed Services Board of Contract Appeals (“ASBCA”) or the United States Court of Federal Claims (“COFC”).  Significant portions of these appeals can be prevented or even settled by performing several, simple, housekeeping checks prior to issuing a Final Decision.  This Fireproofing Memo is designed to provide you with information upon steps that contracting officers can take to help prevent contract disputes litigation in the first place, and, if it cannot be prevented, place the Government in the best position possible at the onset of litigation.

1.         What is a contracting officer’s final decision?  Under the Contact Disputes Act (41 U.S.C. 601 et seq.) and FAR 33.211, a contracting officer who receives a claim of $100,000 or less must issue a contracting officer’s Final Decision within 60 days after receiving a written request that a decision be rendered, or within a reasonable time if the contractor does not make such a request.  If the claim is for more than $100,000, the contracting officer is required to issue a Final Decision within 60 days after receiving a certified claim or notify the contractor within that period of a date certain when a final decision will be issued provided that the date is within a reasonable time period.  

2.         What happens if I fail to issue a Final Decision?   If a contracting officer fails to issue a Final Decision within the required time period specified above, the contractor may file an appeal with the ASBCA or the COFC.  The contracting officer’s failure to act is considered a “deemed denial” of the claim.  From a litigation perspective, a “deemed denial” appeal places the Government behind the eight ball and puts the ASBCA or COFC, rather than the contracting officer, in control of the claims review process.  Since this is not a desirable outcome for the Government, if a contracting officer needs more time to respond to a claim, he or she should notify the contractor of a date certain when they will issue the decision rather then risk a “deemed denial”.

3.         What is a claim?   The FAR defines a claim as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to a contract.”  FAR 2.101(b) and FAR 52.233-1(c).  Whether a contractor’s submission is a claim is not always obvious.  It is crucial you contact the Office of General Counsel whenever you receive a contractor’s submission that you think might be a claim.

4.         What is the requirement for a proper claim certification?  A contractor claim exceeding $100,000 must be certified and must contain the certification language substantially the same as that found in FAR 33.207.  An incomplete certification can be corrected but if no certification at all is provided, the claim is jurisdictionally deficient.  If the claim does not include the requisite language, the contracting officer shall promptly notify the contractor and request full compliance with the certification requirement.

5.         What if the claim does not contain sufficient information in order for the contracting officer to properly respond?   A contracting officer may request the contractor provide additional information and supporting documentation if he or she determines that there is insufficient or inadequate information upon which to render a Final Decision.  Such a request must be made within the 60 day period and must be reasonable under the circumstances (i.e. based upon the size and complexity of the claim and the alleged basis for entitlement).  If the contractor fails to respond to the request for additional information or asserts that it has already provided sufficient information, then the contracting officer should prepare a written chronology of events for the contract file documenting the good faith attempts to obtain the necessary information. The contracting officer is still required to issue a Final Decision based upon the available information.  There should never be a situation where the Government does not issue a Final Decision.  At a minimum, issue a timely Final Decision denying the unsupported claim and indicate that the contractor’s failure to provide sufficient information was the sole reason for denying the claim if that is the case.      

6.         What should a contracting officer’s Final Decision include?  A contracting officer’s Final Decision should contain the following six elements:

1. It must describe the claim or dispute;
2. It must refer to the pertinent or disputed contract terms;
3. It must state the disputed and undisputed facts;
4. It must state the contracting officer’s decision and explain the underlying rationale;
5. It must advise the contractor of its appeal rights; and, if applicable,
6. It must include a demand for the repayment of any indebtedness to the Government.

Every contracting officer’s Final Decision is different.  They are always based upon different facts and circumstances.  As such, in order to place the Government in the best possible position, every Final Decision must be reviewed by the Office of General Counsel before it is issued.

7.         What is the appeal rights language a contracting officer must include in a Final Decision?   The required appellate rights language is found in FAR 33.211(a)(4):

              “This is the final decision of the Contracting Officer.  You may appeal this decision to the agency board of contract appeals.  If you decide to appeal, you must, within 90 days from the date you receive this decision, mail or otherwise furnish written notice to the agency board of contract appeals and provide a copy to the Contracting Officer from whose decision this appeal is taken.  The notice shall indicate that an appeal is intended, reference this decision, and identify the contract by number.  With regard to appeals to the agency board of contract appeals, you may, solely at your election, proceed under the board’s small claims procedure for claims of $50,000 or less or its accelerated procedure for claims of $100,000 or less.  Instead of appealing to the agency board of contract appeals, you may bring an action directly in the United States Court of Federal Claims (except as provided in the Contract Disputes Act of 1978, 41 U.S.C. 603, regarding Maritime Contracts) within 12 months of the date you receive this decision.”

If a contracting officer fails to include this language in a Final Decision, the contractor escapes from having a time limit placed upon the amount of time they have to litigate the decision.   Including the proper language in the decision is the only way to place an outer limit upon when the contractor can properly engage the Government in litigation over the issues in the Final Decision.  This is not the time to be creative.  Failure to include this language verbatim runs the risk of creating unnecessary litigation procedural issues.

8.         What if my Final Decision results in a finding that the contractor is indebted to the Government?  In cases where the Final Decision results in a finding that the contractor is indebted to the Government, the contracting officer must include a demand for payment in the Final Decision.  That demand for payment should be prepared in accordance with FAR 32.610(b).

9.         Can a contracting officer get assistance in preparing a Final Decision?   A Final Decision should always be a contracting officer’s personal and independent decision.  However, the FAR states that you should seek assistance from engineers, attorneys, auditors, and other advisors as necessary.  FAR 1.602-2; FAR 33.211(a)(2).  Moreover, all Final Decisions must be coordinated with the Office of Counsel before they are issued.  The initial contact should be with you local CMO counsel.  CMO counsel shall also arrange for review of the Final Decision by the Contract Disputes Resolution Center (“CDRC”) and, if necessary, by the Contract Law Group within the Office of General Counsel.

10.       What type of evidence is necessary to support a Final Decision?  Litigation can be intense.  It is crucial that a Final Decision be supported by available evidence.  Do not rely strictly upon oral communications to form the basis of your decision.  Our experience has shown that contracting officers who assemble all relevant documents and review them in detail issue higher quality Final Decisions.  As an added benefit, assembling all the documents prior to issuing the Final Decision collects in one place the documents needed to prepare a formal Rule 4 File for submission to the ASBCA in the event that the decision is appealed.

11.       What happens if a contractor appeals a Final Decision?  If a contractor appeals your decision to the ASBCA, a CDRC attorney will be appointed to represent the agency throughout the appeals process.  The CDRC attorney, in coordination with your local CMO Counsel, will handle all stages of the litigation.  If a contractor appeals your decision to the COFC, a U.S. Department of Justice (“DOJ”) attorney will be appointed to represent the agency in the case.  A CDRC attorney will be appointed to assist the DOJ attorney.

None