chapter 1 introduction i. introduction/course …
TRANSCRIPT
Major John Siemietkowski Disputes and Remedies
January 2001
CHAPTER 1
INTRODUCTION
I. INTRODUCTION/COURSE ORGANIZATION.
A. Introductions.
B. Schedule.
C. Time and Location.
D. Materials.
1. Deskbook – you assemble it!
2. Class Outlines and Handouts.
3. Rule 4 (R4) File and Trial Attorney’s Litigation File (TALF).
4. Cibinic and Nash, Administration of Government Contracts
5. CAD CD.
6. 1st Semester Outlines.
7. Dan Lavering.
II. GRADES AND SIGNIFICANT DATES.
A. Assignments – 3 Graded Events.
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1. Answer/Motion – 25% (Due on 20 February 2001) (10-15 pages).
2. Discovery Request – 25% (Due on 13 March 2001) (10-15 pages).
3. Brief – 50% (Due on 1 May 2001) (15-25 pages).
4. All student work must be original. Students may discuss the issues in the assignments. Students may not, however, collaborate on the actual writing of an assignment nor review each other’s written work.
B. Grading.
1. 90% Median.
2. Grading Philosophy.
III. LITIGATION OVERVIEW.
A. Clients.
1. Material (Buying) Commands.
2. Major Activities (e.g., Forces Command, Training and Doctrine Command, National Guard Bureau, Health Services Command, Information Systems Command, etc.).
3. Defense Agencies (e.g., AAFES, Defense Commissary Agency, etc.).
4. Post, Camp, and Station.
B. Forums (fora?).
1. Armed Services Board of Contract Appeals.
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2. U.S. Court of Federal Claims.
3. U.S. Court of Appeals for the Federal Circuit.
C. Opponents.
1. Large and “Boutique” Law Firms.
2. Slip and Fall Attorneys.
3. Pro Se appellant.
D. Issues.
1. Default Terminations.
2. Changes and Differing Site Conditions.
3. Other Issues (e.g., Defective Pricing, Cost Allowability, Convenience Terminations, Delay, Inspections, Government Furnished Property, etc.).
E. Witnesses.
1. Contracting Officers and Supporting Cast.
2. Inspectors.
3. Experts and Other Strange Breeds.
F. Why Contract Litigation is Fun.
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IV. LITIGATION PHILOSOPHY.
A. Truth, Justice, and the American Way.
B. Client Relations.
C. Elements of a Winning Case.
1. Facts are King.
2. Law.
a. Straightforward.
b. Constant.
3. Organization.
a. Backward Planning.
b. Making the Judge’s Job Easier.
4. Eat the elephant one bite at a time.
5. Settlement.
V. COMING EVENTS.
A. Advanced Contract Law Course (26-30 March 2001).
B. Contract Attorney’s Course (30 April – 11 May 2001
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VI. APPEAL OF CENTRAL INDUSTRIAL ELECTRIC CO., ASBCA NO. 33761.
A. Background.
B. Key Documents.
VII. HOMEWORK FOR NEXT CLASS. READ RULE 4 FILE AND TALF.
VIII. CONCLUSION.
CHAPTER 2
PREPARING TO LITIGATE
I. INTRODUCTION.................................................................................................................... 1
II. CLAIMS PREVENTION......................................................................................................... 1
A. Prevention is the Best Defense ............................................................................................. 1
B. Prevention During Contract Formation ................................................................................ 1
C. Prevention During Contract Administration......................................................................... 1
III. PREPARING TO DEFEND ................................................................................................. 3
A. Read the Contract.................................................................................................................. 3
B. Review the Claim.................................................................................................................. 3
C. Review the Final Decision .................................................................................................... 4
D. Identify and Interview Knowledgeable Persons ................................................................... 4
E. Identify and Preserve Records .............................................................................................. 6
IV. THE RULE 4 (R4) FILE....................................................................................................... 7
A. What is a Rule 4 File?........................................................................................................... 7
B. Why Prepare a Rule 4 File? .................................................................................................. 7
C. What Should the Rule 4 File Include? .................................................................................. 7
D. Assembling a Good Rule 4 File ............................................................................................ 8
E. Submitting the Rule 4 File .................................................................................................... 9
F. Objecting to Documents in the Rule 4 File......................................................................... 10
G. Supplementing the Rule 4 File. ASBCA Rule 4(b). .......................................................... 10
V. THE TRIAL ATTORNEY’S LITIGATION FILE (TALF) .................................................. 11
VI. CONCLUSION................................................................................................................... 12
MAJ John Siemietkowski Disputes & Remedies
January 2001
CHAPTER 2
PREPARING TO LITIGATE
I. INTRODUCTION.
II. CLAIMS PREVENTION.
A. Prevention is the Best Defense.
B. Prevention During Contract Formation.
1. Review the procurement history of the same or similar items.
a. Find out whether previous contractors filed claims and why.
b. Fix past problems before awarding new contracts.
2. Use negotiated procedures whenever possible. Can look at things other than price. Can’t gig a contractor just because they’ve filed lots of claims.
C. Prevention During Contract Administration.
1. Monitor the contractor’s performance.
a. Government personnel should verify a contractor’s work performance periodically and document significant observations.
b. Periodic monitoring permits the early identification of potential claims and the preservation of potential evidence.
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2. Develop good documentation procedures. See FAR 4.803 and FAR 4.805.
a. Include the documents specified in FAR 4.803 in the contract file.
(1) Record every substantive conversation with the contractor.
(2) Make record copies of all correspondence.
(3) Record coordination on the back of record copies.
(4) Note the mailing date on letters.
b. Do not dispose of documents during the retention periods specified in FAR 4.805.
3. Answer the mail.
a. Avoid or minimize claims by investigating issues and responding to contractor complaints or requests for guidance/direction in a timely fashion. Especially important for the contracting officer.
b. Do not expect problems to disappear if ignored.
4. Bad facts make bad law.
a. Strive to develop a favorable factual record by treating contractors with courtesy and professionalism.
b. Avoid conduct that may appear petty (or not founded upon sound business judgment or practices) to an outside or impartial observer. See, e.g., Libertatia v. United States, 46 Fed. Cl. 702 (2000); Apex Int’l Mgt. Servs., ASBCA No. 38087, 94-2 BCA & 26,842 (imposing breach damages against the government).
5. Ask contractors to record actual cost data to support requests for equitable adjustment.
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III. PREPARING TO DEFEND.
A. Read the Contract.
1. Obtain a copy of the contract, including:
a. Any modifications; and
b. Any plans, drawings, or specifications.
2. Review the entire document.
3. Ask knowledgeable persons to explain vague or technical portions.
B. Review the Claim.
1. Jurisdictional Issues.
a. Is the submission a claim?
(1) Is the submission a routine request for payment?
(2) Did the claimant submit its request in writing?
(3) Did the claimant request a sum certain, the adjustment or interpretation of a contract term, or other relief arising under or related to the contract?
(4) Did the claimant submit enough supporting data to allow the contracting officer to render an informed decision?
(5) Did the claimant certify its request if it exceeds $100,000?
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(6) Did the claimant implicitly or explicitly request a contracting officer’s final decision?
b. Is the claimant a proper party? If the claimant is a sub, is the prime properly sponsoring the claim?
c. Is the claim timely?
2. Substantive Issues.
a. Identify the legal theories the contractor is relying on to show entitlement and the elements of proof for each.
b. Identify any legal theories supporting entitlement that the contractor has not yet raised and the elements of proof for each.
c. Identify possible defenses to each theory of entitlement and the elements of proof for each.
C. Review the Final Decision.
1. Did the contracting officer issue a written final decision?
2. Did the contracting officer issue the final decision in a timely manner?
3. Did the contracting officer properly advise the contractor of its appeal rights?
4. Did the contracting officer furnish the final decision to the contractor?
D. Identify and Interview Knowledgeable Persons.
1. Government Employees.
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a. Contract Personnel. Identify and interview the procuring contracting officer (PCO), the administrative contracting officer (ACO), the contract specialist, the contracting officer’s representative (COR), and the contracting officer’s technical representative (COTR).
b. Technical Personnel. Identify and interview the project engineer, the test engineer, the item manager, the quality assurance representative (QAR), the quality assurance specialist (QAS), and the industrial specialist (IS) (especially if these people work inside the contractor’s facility).
c. Financial Personnel. Identify and interview the financial specialist, the cost analyst, and the auditor.
2. Contractor Employees. Identify and interview knowledgeable contractor employees.
a. Former contractor employees are often more candid than current employees. See, e.g., J.C. Equip. Corp., ASBCA No. 42879, 97-2 BCA ¶ 29,197 (finding the testimony of the appellant’s president unpersuasive based, in part, on contradictory testimony provided by two of his former employees).
b. May have to go through contractor’s attorney!
c. Ask government employees to assess the knowledge and honesty of contractor employees.
3. Protect your interviews as attorney work product.
a. Federal Rule of Civil Procedure (FRCP) 26(b)(3) protects documents prepared in anticipation of litigation or trial by a party or its attorney.
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b. Based on this rule, the government may be able to protect records of interviews prepared by field attorneys from later discovery. See generally B.D. Click Co., Inc., ASBCA Nos. 25609, 25972, 83-1 BCA ¶ 16,328; Ingalls Shipbldg. Div., Litton Sys., Inc., ASBCA No. 17717, 73-2 BCA ¶ 10,205.
E. Identify and Preserve Records.
1. Ask every knowledgeable person for relevant records. Look for personal diaries and logs.
2. Mark all records that may be relevant to the claim/dispute to prevent their routine destruction.
3. Protect the status of business records.
a. Federal Rule of Evidence (FRE) 803(6) permits the government to introduce records of regularly recorded activity as an exception to the hearsay rule if:
(1) The record was made at or near the time of the event;
(2) The record was made by persons with knowledge (or from information transmitted by a person with knowledge) of the recorded facts;
(3) The record was made in the regular course of business activity; and
(4) The regular practice of the business was to make the record.
See Rault Center Hotel, ASBCA No. 31232, 91-3 BCA ¶ 24,247 (admitting quality control questionnaires under FRE 803(6)); cf. USD Tech., Inc., ASBCA No. 31305, 87-2 BCA 19,680 (overruling the government’s objection to the admission of a document in the Rule 4 file).
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b. Do not endanger the status of documents as business records by interfering with the way the government regularly maintains them.
IV. THE RULE 4 (R4) FILE.
A. What is a Rule 4 File? ASBCA Rule 4(a).
B. Why Prepare a Rule 4 File?
1. The Board will rely on the documents in the Rule 4 file to decide the appeal. But cf. Thomas & Sons Bldg. Contractor, Inc., ASBCA No. 43527, 96-1 BCA ¶ 28,101 (stating that “[a]dmission of a document . . . under ASBCA Rule 4 does not establish as true everything that is said therein”).
2. A well-prepared Rule 4 file:
a. Facilitates discovery;
b. Facilitates meaningful preliminary procedures;
c. Simplifies hearing procedures; and
d. May bolster the credibility of the contracting officer and other government witnesses.
See X-Tyal Int’l Corp., ASBCA Nos. 24353, 26495, 84-2 BCA ¶ 17,251 (stating that “[e]fficient use of the Rule 4 file cuts the costs of litigation to the parties and can significantly reduce the time needed to hear appeals”).
C. What Should the Rule 4 File Include? ASBCA Rule 4(a).
1. The Rule 4 file should include all documents pertinent to the appeal, including:
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a. The contracting officer’s final decision;
b. The contract, including pertinent plans, drawings specifications, and amendments;
c. All relevant correspondence between the parties;
d. Transcripts of testimony, affidavits, and witness statements made prior to the filing of the notice of appeal; and
e. Other relevant information (e.g., audit reports, Department of Defense Inspector General (DODIG) reports, trip reports, production progress reports, inspection logs, quality deficiency reports (QDR), photographs, critical path charts, memoranda of phone conversations, evidence of the date the contractor received the final decision, etc.).
2. The Rule 4 file should not include:
a. Privileged documents (e.g., attorney-client privileged documents, attorney work product, etc.);
b. Rank hearsay prepared in anticipation of litigation; and
c. Irrelevant documents.
D. Assembling a Good Rule 4 File. ASBCA Rule 4(c).
1. Requirements. See McDonnell Aircraft Co., ASBCA No. 37346, 96-1 BCA ¶ 28,164 (stating that Board orders “are not to be taken lightly or blatantly ignored” and discussing the Board’s threat to preclude the government from introducing any oral or written evidence in further proceedings if the government continued to ignore the Board’s order to retab the Rule 4 file).
a. Use originals, legible facsimiles, or authenticated copies.
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b. Place the contract first.
c. Arrange the other documents in chronological order.
d. Tab and number each document sequentially.
e. Prepare a comprehensive index.
2. Practical Considerations.
a. Copy head-to-head.
b. Punch holes on the sides.
c. Ensure that all documents are complete.
d. Assemble the file into manageable volumes.
E. Submitting the Rule 4 File. ASBCA Rules 4(a) and 4(d).
1. The contracting officer is responsible for preparing the Rule 4 file; however, the field attorney should review it before the contracting officer submits it.
2. Each Chief Trial Attorney (CTA) has established procedures for distributing the Rule 4 file.
a. The contracting officer (or contract specialist) must normally make at least six copies of the Rule 4 file—one for the ASBCA, one for the head of the contracting activity (HCA), one for the appellant, one for the field attorney, and two for the trial attorney.
b. The contracting officer (or contract specialist) should use an overnight delivery service or first class mail to send the Rule 4 file.
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3. Authorized Omissions.
a. The contracting officer may omit the contract, including plans, drawings, specifications, and amendments, from the file it provides to the contractor. ASBCA Rule 4(a).
b. Upon request, the Board may waive the requirement to furnish copies of bulky, lengthy, or out-of-size documents; however, the party requesting the waiver must make a copy of the document available for inspection.
F. Objecting to Documents in the Rule 4 File. ASBCA Rule 4(e).
1. A party may object to the Board’s consideration of one or more documents in the Rule 4 file. See USD Tech., Inc., supra (noting that “[t]he Government is not deemed to have sponsored every document contained in its initial Rule 4(a) submission and is not precluded from objecting to the admissibility of particular writings therein”).
a. If a party objects, the Board will remove the challenged document from the Rule 4 file.
b. The other party may then move to admit the document under ASBCA Rules 13 and 20.
2. A party will waive its right to object if its fails to assert its right in a timely manner.1 See X-Tyal Int’l Corp., supra (overruling the appellant’s objection to certain Rule 4 documents because the appellant did not raise its objections until after the hearing had started, even though the appellant had been in possession of the disputed documents for approximately two years).
G. Supplementing the Rule 4 File. ASBCA Rule 4(b).
1 A party must object to documents in the Rule 4 file “reasonably in advance of:” (1) the hearing; or (2) the settling of the record if there is no hearing. ASBCA Rule 4(e).
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1. The appellant may supplement the Rule 4 file within 30 days of the date it receives its copy. See Trinity Universal Insurance Co., ASBCA No. 41846, 96-1 BCA ¶ 27,976 (refusing to allow the appellant to supplement the Rule 4 file because it failed to adhere to the Board’s Scheduling Order); see also International Crane Co., ASBCA No. 49604, 00-1 BCA ¶ 30,624.
2. The Board normally permits the parties to submit supplemental Rule 4 matters even after the 30-day submission period expires; however, the Board may refuse to accept additional documents at some point in time. See Hill Constr. Corp., ASBCA No. 43615, 92-2 BCA ¶ 24,832 (ordering the parties to supplement the Rule 4 file with documents that address issues raised by the appellant’s notice of appeal and complaint regarding the imposition of liquidated damages).
V. THE TRIAL ATTORNEY’S LITIGATION FILE (TALF).
A. The contracting officer sends a TALF to the CTA at the same time the contracting officer sends the Rule 4 file to the Board.
B. The TALF should include:
1. A list of potential witnesses;
2. A signed statement from each government witness;
3. The contracting officer’s analysis of the dispute;
4. A legal memorandum discussing the relevant legal issues;
5. Privileged documents not included in the Rule 4 file (e.g., communications with an attorney, attorney work product, trade secrets of other contractors, classified documents, etc.); and
6. Other potentially relevant documents not included in the Rule 4 file.
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VI. CONCLUSION.
CHAPTER 3
ASBCA JURISDICTION
I. INTRODUCTION. ................................................................................................................1
II. REFERENCES. .....................................................................................................................1
III. OVERVIEW. .........................................................................................................................2
IV. THE ASBCA. ........................................................................................................................3
A. Composition.......................................................................................................................3
B. Jurisdiction.........................................................................................................................3
C. Board Guidance. ................................................................................................................4
D. Standard of Review............................................................................................................5
V. CDA CLAIMS AND JURISDICTIONAL CONSIDERATIONS. .......................................5
VI. FAILURE TO SUBMIT A PROPER CLAIM. .....................................................................7
A. Definition of a Claim. ........................................................................................................7
B. Elements of a Claim.........................................................................................................10
C. Government Claims. ........................................................................................................17
VII. LACK OF STANDING. ..................................................................................................19
A. Parties to the Contract......................................................................................................19
B. Others...............................................................................................................................19
VIII. LACK OF A CONTRACTING OFFICER’S FINAL DECISION..................................20
A. Elements of a Valid Final Decision.. ...............................................................................20
B. Timeliness. .......................................................................................................................21
C. Reconsideration of a Final Decision. ...............................................................................23
D. Delivery of the Final Decision.........................................................................................23
E. Independent Act of a Contracting Officer. ......................................................................24
IX. FAILURE TO APPEAL IN A TIMELY MANNER...........................................................25
A. Filing Methods. ................................................................................................................25
B. Contents ...........................................................................................................................26
C. The Board liberally construes appeal notices ..................................................................25
X. FRAUDULENT CLAIMS...................................................................................................26
A. CDA Provisions Regarding Fraudulent Claims...............................................................26
B. Fraudulent Claims and the BCAs. ...................................................................................27
XI. CONCLUSION....................................................................................................................27
MAJ Jon Guden 49th Graduate Course Disputes & Remedies
January 2001
CHAPTER 3
ASBCA JURISDICTION
I. INTRODUCTION. As a result of this instruction, the student will understand:
A. The jurisdiction of the Armed Services Board of Contract Appeals (ASBCA) to decide appeals from contracting officer final decisions.
B. The dispute resolution process provided by the Contract Disputes Act.
II. REFERENCES.
A. The Contract Disputes Act of 1978 (41 U.S.C. §§601-613).
B. Charter of the Armed Services Board of Contract Appeals. The charter can be accessed at www.law.gwu.edu/asbca/charter.htm.
C. Rules of the Armed Services Board of Contract Appeals. The rules can be accessed at www.law.gwu.edu/asbca/rule.htm.
D. Department of Defense Directive (DODD) 5515.6, Processing Tort, Contract and Compensation Claims Arising out of Operations of Nonappropriated Fund Activities (3 Nov. 1956).
E. Department of Defense Instruction (DODI) 4105.67, Nonappropriated Fund Procurement Policy (2 Oct. 1981).
F. AR 215-4, Nonappropriated Fund Contracting (10 Sep. 1990).
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III. OVERVIEW.
A. Boards of Contract Appeals (BCAs). During World War I (WWI), the War and Navy Departments established full-time BCAs to hear claims involving wartime contracts. The War Department abolished its board in 1922, but the Navy board continued in name (if not fact) until World War II (WWII). Between the wars, an interagency group developed a standard disputes clause. This clause made contracting officers’ decisions final as to all questions of fact. WWII again showed that boards of contract appeals were needed to resolve the massive number of wartime contract disputes. See Penker Constr. Co. v. United States, 96 Ct. Cl. 1 (1942). Thus, the War Department created a board of contract appeals, and the Navy revived its board. In 1949, the Department of Defense (DOD) merged the two boards to form the current ASBCA.
B. Post-WWII Developments. In a series of cases culminating in Wunderlich v. United States, 342 U.S. 98 (1951), the Supreme Court upheld the finality (absent fraud) of factual and legal decisions issued under the disputes clauses by agency BCAs. It further held that the Court of Claims could not review board decisions de novo. Congress reacted by passing the Wunderlich Act, 41 U.S.C. §§ 321-322, which reaffirmed that the Court of Claims could review factual and legal decisions by agency BCAs. At about the same time, Congress changed the Court of Claims from an Article I (legislative) to an Article III (judicial) court. Pub. L. No. 83-158, 67 Stat. 226 (1953). Later, the Supreme Court clarified the relationship between the Court of Claims and the agency BCAs by limiting the jurisdiction of the boards to cases “arising under” remedy granting clauses in the contract. See Utah Mining and Constr. Co. v. United States, 384 U.S. 394 (1966).
C. The Contract Disputes Act (CDA) of 1978, 41 U.S.C. §§ 601-613. Congress replaced the previous disputes resolution system with a comprehensive statutory scheme. Congress intended that the CDA:
1. Help induce resolution of more disputes by negotiation prior to litigation;
2. Equalize the bargaining power of the parties when a dispute exists;
3. Provide alternate forums suitable to handle the different types of disputes; and
4. Insure fair and equitable treatment to contractors and Government agencies. S. REP. NO. 95-1118, at 1 (1978), reprinted in 1978 U.S.C.C.A.N. 5235.
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D. Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25. Congress overhauled the Court of Claims and created a new Article I court (i.e., the Claims Court) from the old Trial Division of the Court of Claims. Congress also merged the Court of Claims and the Court of Customs and Patent Appeals to create the Court of Appeals for the Federal Circuit (CAFC).
E. Federal Courts Administration Act of 1992, Pub. L. No. 102-572, 106 Stat. 4506. Congress changed the name of the Claims Court to the United States Court of Federal Claims (COFC), and expanded the jurisdiction of the court to include the adjudication of nonmonetary claims, such as termination of a contract, rights in tangible or intangible property, compliance with cost accounting standards, and other nonmonetary disputes on which a decision of the contracting officer has been issued.
F. Federal Acquisition Streamlining Act (FASA) of 1994, Pub. L. No. 103-355, 108 Stat. 3243. Congress increased the monetary thresholds for requiring CDA certifications and requesting expedited and accelerated appeals.
IV. THE ASBCA.
A. Composition.
1. The ASBCA consists of 25-30 administrative judges.1
2. ASBCA judges specialize in contract disputes and come from both the government and private sectors. Each judge has at least five years of experience working in the field of government contract law.
B. Jurisdiction. 41 U.S.C. § 607(d).
1. The ASBCA has jurisdiction to decide appeals regarding contracts made by:
a. The Department of Defense; or
1 The four judges of the Corps of Engineer Board of Contract Appeals merged with the ASBCA on 12 July 2000. All pending ENGBCA cases received new ASBCA docket numbers. The ASBCA disposed of 857 appeals during fiscal year 2000, dismissing 509, denying 81, and sustaining 186. 42 GOV’T CONTRACTOR, NO. 42, AT 4 (NOV. 8, 2000).
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b. An agency that has designated the ASBCA to decide the appeal.
2. The ASBCA may grant any relief that would be available to a litigant asserting a contract claim before the United States Court of Federal Claims. The board does not have authority to grant injunctive relief or order specific performance. See Applied Ordnance Technology, Inc., ASBCA Nos. 51297, 51543, 98-2 BCA ¶ 30,023.
C. Board Guidance.
1. ASBCA Charter. The ASBCA will invoke its Charter as authority to hear certain appeals. See Atlantis Construction Corp., ASBCA Nos. 44044, 44860, 96-1 BCA ¶ 28,045 (rejecting Navy’s contention that Charter did not give board jurisdiction over NAFI disputes).
2. Paragraph 1 of the Charter provides that appeals to the board may be taken pursuant to:
a. The Contract Disputes Act of 1978.
b. Provisions of contracts requiring the decision by the Secretary of Defense or by a Secretary of a Military Department or their duly authorized representative or board. See e.g. Disputes clause, DA Form 4074-R, I-25 (SEP 1984) (NAF contracts); see also D’Tel Communications, ASBCA No. 50093, 97-2 BCA ¶ 29,251 (holding that the Board’s jurisdiction stemmed from the disputes resolution provision in the contract); COVCO Hawaii Corp., ASBCA No. 26901, 83-2 BCA ¶ 16,554 (NAFI contract’s Disputes clause afforded ASBCA jurisdiction).
c. Pursuant to the provisions of any directive whereby the Secretary of Defense or the Secretary of a Military Department has granted a right of appeal not contained in the contract on any matter consistent with the contract appeals procedure. See Recreational Enterprises, ASBCA No. 32176, 87-1 BCA ¶ 19,675 (citing to DODD 5515.6 to accept jurisdiction of NAFI contract with no Disputes clause).
3. ASBCA Rules.
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a. The Rules of the Armed Services Board of Contract Appeals appear in Appendix A of the DFARS.
b. Preface, para. I.
(1) The ASBCA shall consider appeals pursuant to the CDA relating to contracts made by the Departments of Defense, Army, Navy, and Air Force or
(2) Any other executive agency when such agency or the Administrator for Federal Procurement Policy has designated the Board to decide the appeal.
c. Rules 1-3 describe how appeals are taken, the contents of a notice of appeal, and the docketing of an appeal.
D. Standard of Review. The ASBCA will review the appeal de novo. See 41 U.S.C. § 605(a) (contracting officer’s specific findings of fact are not binding in any subsequent proceeding); see also Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994) (en banc); Precision Specialties, Inc., ASBCA No. 48717, 96-1 BCA ¶ 28,054 (final decision retains no presumptive evidentiary weight nor is it binding on the Board).
V. CDA CLAIMS AND JURISDICTIONAL CONSIDERATIONS.
A. CDA Applicability.
1. The CDA applies to most express and implied-in-fact2 contracts entered into by an executive agency.3 41 U.S.C. § 602; FAR 33.203.
2 An “implied-in-fact” contract is similar to an “express” contract. It requires: (1) “a meeting of the minds” between the parties; (2) consideration; (3) an absence of ambiguity surrounding the offer and the acceptance; and (4) an agency official with actual authority to bind the government. James L. Lewis v. United States, 70 F.3d 597 (Fed. Cir. 1995). 3 The CDA normally applies to contracts for: (1) the procurement of property; (2) the procurement of services; (3) the procurement of construction, maintenance, and repair work; and (4) the disposal of personal property. 41 U.S.C. § 602. See G.E. Boggs & Assocs., Inc., ASBCA Nos. 34841, 34842, 91-1 BCA ¶ 23,515 (holding that the CDA did not apply because the parties did not enter into a contract for the procurement of property, but retaining jurisdiction pursuant to the disputes clause in the contract).
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2. Exchange Service contracts. The CDA applies to contracts with the Army and Air Force, Navy, Marine Corps, Coast Guard, and NASA Exchanges. See 41 U.S.C. § 602(a), 28 U.S.C. §§ 1346, 1491.
B. Federal Acquisition Regulation (FAR) implementation.4 FAR 33.215.
1. FAR 52.233-1, Disputes, requires the contractor to continue to perform pending resolution of disputes “arising under” the contract.5 See Appendix B.
2. FAR 52.233-1, Alternate I, Disputes, requires the contractor to continue to perform pending resolution of disputes “arising under or relating to” the contract.6 See Appendix B.
C. Jurisdictional Prerequisites for Contractor Appeals.
1. Written Submission of Claim.
a. The contractor must show that it submitted a written claim to the contracting officer for a decision. 41 U.S.C. § 605(a); FAR 33.201; FAR 33.206(a). See W.M. Schlosser Co. v. United States, 705 F.2d 1336, 1338-39 (Fed. Cir. 1983); Service Eng’g Co., ASBCA No. 40274, 93-1 BCA ¶ 25,520.
b. Statute of Limitations. If the claim is based on a contract awarded after 1 October 1995, the contractor must show that it submitted the claim to the contracting officer within 6 years of the date the claim accrued. 41 U.S.C. § 605(a); FAR 33.206(a).
4 The CDA—and hence the Disputes clause—does not apply to: (1) tort claims that do not arise under or relate to an express or an implied-in-fact contract; (2) claims for penalties or forfeitures prescribed by statute or regulation that another federal agency is specifically authorized to administer, settle or determine; (3) claims involving fraud; and (4) bid protests. 41 U.S.C. §§ 602, 604, 605(a); FAR 33.203; FAR 33.209; FAR 33.210. 5 “Arising under the contract ” is defined as falling within the scope of a contract clause and therefore providing a remedy for some event occurring during contract performance. RALPH C. NASH ET AL., THE GOVERNMENT CONTRACTS REFERENCE BOOK, at 8 (2d ed. 1998). 6 “Relating to the contract” means having a connection to the contract. The term encompasses claims that cannot be resolved through a contract clause, such as for breach of contract or correction of mistakes. Prior to passage of the CDA, contractors pursued relief for mutual mistake (rescission or reformation) under the terms of Pub. L. No. 85-804 (see FAR 33.205; FAR Part 50, Extraordinary Contractual Actions). RALPH C. NASH ET AL., THE GOVERNMENT CONTRACTS REFERENCE BOOK, at 438 (2d ed. 1998).
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2. Final Decision. The contractor must normally show that the claim was the subject of a contracting officer’s final decision. 41 U.S.C. § 605(a); FAR 33.211
3. Timely Appeal. The contractor must show that it appealed the contracting officer’s final decision in a timely manner. 41 U.S.C. § 606.
D. Jurisdictional Motions.
1. The parties may raise jurisdictional issues at any time; however, the Armed Services Board of Contract Appeals (ASBCA) prefers that a party file jurisdictional motions “promptly.” ASBCA Rule 5(a).
2. The ASBCA may raise jurisdictional issues, sua sponte, at any time. ASBCA Rule 5(a).
3. Jurisdictional motions include motions to dismiss for lack of:
a. subject matter jurisdiction;
b. a proper claim;
c. standing;
d. a contracting officer’s final decision;
e. a timely appeal; or
f. Fraud.
VI. FAILURE TO SUBMIT A PROPER CLAIM.
A. Definition of a Claim.
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1. Contract Disputes Act. The CDA does not define the term “claim.” As a result, courts and boards look to the FAR for a definition. See Essex Electro Eng’rs, Inc. v. United States, 960 F.2d 1576 (Fed. Cir. 1992) (holding that the executive branch has authority to issue regulations implementing the CDA, to include defining the term “claim,” and that the FAR definition is consistent with the CDA).
2. FAR. 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 33.201; FAR 52.233-1.
a. Claims arising under or relating to the contract include those supported by remedy granting clauses, breach of contract claims, and mistakes alleged after award.
b. A written demand (or written assertion) seeking the payment of money in excess of $100,000 is not a valid CDA claim until the contractor properly certifies it. FAR 33.201.
c. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a valid CDA claim. FAR 33.201; 52.233-1. See Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995) (reversing four years of case law requiring a pre-existing dispute for both routine and nonroutine demands for payment). A contractor may convert such a submission into a valid CDA claim, however, if:
(1) The contractor complies with the submission and certification requirements of the Disputes clause; and
(2) The contracting officer:
(a) Disputes the submission as to either liability or amount; or
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(b) Fails to act in a reasonable time. FAR 33.201; FAR 52.233-1. See S-TRON, ASBCA No. 45890, 94-3 BCA ¶ 26,957 (contracting officer’s failure to respond for 6 months to contractor’s “relatively simple” engineering change proposal (ECP) and REA was unreasonable).
d. Termination for Convenience (T4C) Settlement Proposals. FAR 49.206.
(1) A contractor may submit a settlement proposal for costs associated with the termination of a contract for the convenience of the government. FAR 49.206-1; FAR 49.602-1.
(2) Courts and boards consider T4C settlement proposals to be “nonroutine” submissions under the CDA. See Ellett, 93 F.3d at 1542 (stating that “it is difficult to conceive of a less routine demand for payment than one which is submitted when the government terminates a contract for its convenience”).
(3) Courts and boards, however, do not consider T4C settlement proposals to be CDA claims when submitted because contractors normally do not submit them for a contracting officer’s final decision—they submit them to facilitate negotiations. See Ellett, 93 F.3d at 1543-44 (holding that the contractor’s T4C settlement proposal was not a claim because the contractor did not submit it to the contracting officer for a final decision); see also Walsky Constr. Co. v. United States, 173 F.3d 1312 (Fed. Cir. 1999) (T4C settlement proposal was not a claim because it had not yet been the subject of negotiations with the government).
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(4) A T4C settlement proposal may “ripen” into a CDA claim once settlement negotiations reach an impasse. See Ellett, 93 F.3d at 1544 (holding that the contractor’s request for a final decision following ten months of “fruitless negotiations” converted its T4C settlement proposal into a claim); Metric Constructors, Inc., ASBCA No. 50843, 98-2 BCA ¶ 30,088 (holding that a contractor’s T4C settlement proposal ripened into a claim when the contracting officer issued a unilateral contract modification following the parties’ unsuccessful negotiations).
(5) The passage of time is not itself an indication that the parties have reached an impasse such that the settlement proposal has been converted to a claim. See Rex Sys., Inc. v. Cohen, 224 F.3d 1367 (Fed. Cir. 2000) (parties took 2 ½ years to settle T4C).
B. Elements of a Claim.
1. Submitted in Writing. The CDA requires contractors to submit their claims in writing. 41 U.S.C. § 605(a); FAR 33.206(a). See Honig Indus. Diamond Wheel, Inc., ASBCA No. 46711, 94-2 BCA ¶ 26,955 (granting the government’s motion to strike monetary claims that the contractor had not previously submitted to the contracting officer for a decision). The CDA does not require contractors to submit their claims in any particular form. Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987).
2. Seeking as a matter of right,7 one of the following:
a. Payment of money in a sum certain;
(1) Where the essence of a dispute is the increased cost of performance, the contractor must demand a sum certain as a matter of right.
(2) A claim states a sum certain if:
7 Some submissions, such as cost proposals for work the government later decides it would like performed, would not be considered submissions seeking payment “as a matter of right.” Reflectone v. Dalton, 60 F.3d 1572, n.7 (Fed. Cir. 1995)
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(a) The government can determine the amount of the claim using a simple mathematical formula. Metric Constr. Co. v. United States, 1 Cl. Ct. 383 (1983); Mulunesh Berhe, ASBCA No. 49681, 96-2 BCA ¶ 28,339 (simple multiplication of requested monthly rate for lease); Jepco Petroleum, ASBCA No. 40480, 91-2 BCA ¶ 24,038 (claim requesting additional $3 per linear foot of excavation, when multiplied by total of 10,000 feet, produced sum certain).
(b) Enlarged claim doctrine. Under this doctrine, a BCA or the COFC may exercise jurisdiction over a dispute that involves a sum in excess of that presented to the contracting officer for a final decision if:
(i) The increase in the amount of the claim is based on the same set of operative facts previously presented to the contracting officer; and
(ii) The contractor neither knew nor reasonably should have known, at the time when the claim was presented to the contracting officer, of the factors justifying an increase in the amount of the claim. Johnson Controls World Services, Inc. v. United States, 43 Fed. Cl. 589 (1999). See also Stencel Aero Engineering Corp., ASBCA No. 28654, 84-1 BCA ¶ 16,951 (finding essential character or elements of the certified claim had not been changed).
b. Adjustment or interpretation of contract terms. TRW, Inc., ASBCA Nos. 51172 and 51530, 99-2 BCA ¶ 30,047 (seeking decision on allowability and allocability of certain costs). Compare William D. Euille & Assocs., Inc. v. General Services Administration, GSBCA No. 15,261, 00-1 BCA ¶ 30,910 (dispute concerning directive to remove and replace building materials proper contract interpretation claim), with Rockhill Industries, Inc., ASBCA No. 51541, 00-1 BCA ¶ 30,693 (money claim “masquerading” as claim for contract interpretation); or
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c. Other relief arising under or relating to the contract. See General Electric Co.; Bayport Constr. Co., ASBCA Nos. 36005, 38152, 39696, 91-2 BCA ¶ 23,958 (demand for contractor to replace or correct latent defects under Inspection clause).
(1) Reformation or Rescission. See McClure Electrical Constructors, Inc. v. United States, 132 F.3d 709 (Fed. Cir. 1997); LaBarge Products, Inc. v. West, 46 F.3d 1547 (Fed. Cir. 1995) (ASBCA had jurisdiction to entertain reformation claim).
(2) Specific performance is not an available remedy. Western Aviation Maintenance, Inc. v. General Services Administration, GSBCA No. 14165, 98-2 BCA ¶ 29,816.
3. Submitted to the contracting officer for a decision. 41 U.S.C. § 605(a).
a. The Federal Circuit has interpreted the CDA’s submission language as requiring the contractor to “commit” the claim to the contracting officer and “yield” to his authority to make a final decision. Dawco Constr., Inc. v. United States, 930 F.2d 872 (Fed. Cir. 1991).
b. The claim need not be sent only to the contracting officer or directly to the contracting officer. If the contractor submits the claim to its primary government contact with a request for a contracting officer final decision, and the primary contact delivers the claim to the contracting officer, the submission requirement can be met. Neal & Co. v. United States, 945 F.2d 385 (Fed. Cir. 1991). See also D.L. Braughler Co., Inc. v. West, 127 F.3d 1476 (Fed. Cir. 1997) (letter to resident engineer did not satisfy submission requirement); Hamza v. United States, 31 Fed. Cl. 315, 321 (1994) (permitting the contractor to submit its claim through a U.S. Army Corps of Engineers attorney). But see J&E Salvage Co., 37 Fed. 256 (1997) (concluding that a demand letter submitted to the Department of Justice was not a claim, even though the appropriate contracting officer eventually received it).
c. Only receipt by the contracting officer triggers the time limits and interest provisions set forth in the CDA. See 41 U.S.C. § 605(c)(1), § 611.
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d. A claim should implicitly or explicitly request a contracting officer’s final decision. See Ellett Constr. Co., Inc. v. United States, 93 F.3d 1537, 1543, 1546 (Fed. Cir. 1996) (holding that submission to the contracting officer is required, but the request for a final decision may be implied); Heyl & Patterson, Inc. v. O’Keefe, 986 F.23 480, 483 (Fed. Cir. 1993) (stating that “a request for a final decision can be implied from the context of the submission”); Transamerica Ins. Corp. v. United States, 973 F.2d 1572, 1576 (Fed. Cir. 1992) (stating that no “magic words” are required “as long as what the contractor desires by its submissions is a final decision”).
e. A contracting officer can’t issue a valid final decision if the contractor explicitly states that it is not seeking a final decision. Fisherman’s Boat Shop, Inc. ASBCA No. 50324, 97-2 BCA ¶ 29,257 (holding that the contracting officer’s final decision was a nullity because the contractor did not intend for its letter submission to be treated as a claim).
4. Certification. CDA certification serves to create the deterrent of potential liability for fraud and thereby discourage contractors from submitting unwarranted or inflated claims. See Fischbach & Moore Int’l Corp. v. Christopher, 987 F.2d 759 (Fed. Cir. 1993).
a. A contractor must certify any claim that exceeds $100,000. 41 U.S.C. § 605(c)(1); FAR 33.207.
b. Determining the claim amount.
(1) A contractor must consider the aggregate effect of increased and decreased costs to determine whether the claim exceeds the dollar threshold for certification.8 FAR 33.207(d).
(2) Claims that are based on a “common or related set of operative facts” constitute one claim. Placeway Constr. Corp. , 920 F.2d 903 (Fed. Cir. 1990); American Consulting Services, Inc., ASBCA No. 52923, 2000 BCA ¶ 31,084.
8 The contractor need not include the amount of any government claims in its calculations. J. Slotnik Co., VABCA No. 3468, 92-1 BCA ¶ 24,645.
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(3) A contractor may not split a single claim that exceeds $100,000 into multiple claims to avoid the certification requirement. See, e.g., Columbia Constr. Co., ASBCA No. 48536, 96-1 BCA ¶ 27,970; Jay Dee Militarywear, Inc., ASBCA No. 46539, 94-2 BCA ¶ 26,720.
(4) Separate claims that total less than $100,000 each require no certification, even if their combined total exceeds $100,000. See Phillips Constr. Co., ASBCA No. 27055, 83-2 BCA ¶ 16,618; B. D. Click Co., ASBCA No. 25609, 81-2 BCA ¶ 15,394.
(5) The contracting officer cannot consolidate separate claims to create a single claim that exceeds $100,000. See B. D. Click Co., Inc., ASBCA No. 25609, 81-2 BCA ¶ 15,395. Courts and boards, however, can consolidate separate claims for hearing to promote judicial economy.
(6) A contractor need not certify a claim that grows to exceed $100,000 after the contractor submits it to the contracting officer if:
(a) The increase was based on information that was not reasonably available at the time of the initial submission; or
(b) The claim grew as the result of a regularly accruing charge and the passage of time. See Tecom, Inc. v. United States, 732 F.2d 935 (Fed. Cir. 1984); Mulunesh Berhe, ASBCA No. 49681, 96-2 BCA ¶ 28,339.
c. Requirement. FAR 33.207(c). When required to do so, a contractor must certify that:
(1) The claim is made in good faith;
(2) The supporting data are accurate and complete to the best of the contractor’s knowledge and belief;
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(3) The amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable; and
(4) The person submitting the claim is duly authorized to certify the claim on the contractor’s behalf.9
d. Proper Certifying Official. A contractor may certify its claim through “any person duly authorized to bind the contractor with respect to the claim.” 41 U.S.C. § 605(c)(7); FAR 33.207(e). See Northeast Air Group, Inc., ASBCA No. 46350, 95-2 BCA ¶ 27,679 (concluding that company president at time of claim submission was a proper certifying official).
e. No claim vs. Defective Certification. Tribunals treat differently those cases where an attempted certification is “substantially” compliant from those where the certification is either entirely absent or the language is intentionally or negligently defective.
(1) No claim.
(a) Absence of Certification. No valid claim exists. See FAR 33.201 (“Failure to certify shall not be deemed to be a defective certification.”); Eurostyle Inc., ASBCA No. 45934, 94-1 BCA ¶ 26,458 (“complete absence of any certification is not a mere defect which may be corrected”).
(b) Certifications made with intentional, reckless, or negligent disregard of CDA certification requirements are not correctable. See Walashek Industrial & Marine, Inc., ASBCA No. 52166, 00-1 BCA ¶ 30,728 (two prongs of certificate omitted or not fairly compliant).
9 Absent extraordinary circumstances, courts and boards will not question the accuracy of the statements in a contractor’s certification. D.E.W., Inc., ASBCA No. 37332, 94-3 BCA ¶ 27,004. A prime contractor need not agree with all aspects or elements of a subcontractor’s claim. In addition, a prime contractor need not be certain of the government’s liability, or the amount recoverable. The prime contractor need only believe that the subcontractor has good grounds to support its claim. See Oconto Elec., Inc., ASBCA No. 45856, 94-3 BCA ¶ 26,958 (holding that the prime contractor properly certified its subcontractor’s claim, even though the official certifying the claim lacked personal knowledge of the amount claimed); see also Arnold M. Diamond, Inc. v. Dalton, 25 F.3d 1006 (Fed. Cir. 1994) (upholding the contractor’s submission of a subcontractor’s claim pursuant to a court order).
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(2) Claim with “defective”, or correctable, certification. 41 U.S.C.A.§ 605 (c)(6). FAR 33.201 defines a defective certification as one which alters or otherwise deviates from the language in 33.207(c) or which is not executed by a person duly authorized to bind the contractor.
(a) Exact recitation of the language of CDA section 605(c) is not required—“substantial compliance” suffices. See Fischbach & Moore Int’l Corp. v. Christopher, 987 F.2d 759 (Fed. Cir. 1993) (substituting the word “understanding” for “knowledge” did not render certificate defective).
(b) Technical defects are correctable. Examples include missing certifications when two or more claims are deemed to be a larger claim requiring certification, and certification by the wrong representative of the contractor. See H.R. Rep. No. 102-1006, 102d Cong., 2d Sess. 28, reprinted in 1992 U.S.C.C.A. at 3921, 3937.
(c) Certifications used for other purposes may be acceptable even though they do not include the language required by the CDA. See James M. Ellett Const. Co., Inc. v. United States, 93 F.3d 1537 (Fed. Cir. 1996) (SF 1436 termination proposal not substantially deficient as a CDA certificate); Metric Constructors, Inc., ASBCA No. 50843, 98-2 BCA ¶ 30,088. Compare SAE/Americon - Mid-Atlantic, Inc., GSBCA No. 12294, 94-2 BCA ¶ 26,890 (holding that the contractor’s “certificate of current cost or pricing data” on SF 1411 was susceptible of correction, even though it did not include the first and third statements required for a proper CDA certification), with Scan-Tech Security, L.P. v. United States, 46 Fed. Cl. 326 (2000) (suit dismissed after court equated use of SF 1411 with no certification).
(d) The CO need not render a final decision if he notifies the contractor in writing of the defect within 60 days after receipt of the claim. 41 U.S.C. § 605 (c)(6).
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(e) Interest on a claim with a defective certification shall be paid from the date the contracting officer initially received the claim. FAR 33.208(c).
(f) A defect will not deprive a court or board of jurisdiction, but it must be corrected before entry of a court’s final judgment or a board’s decision. 41 U.S.C. § 605 (c)(6).
5. Supporting Data. Invoices, detailed cost breakdowns, and other supporting financial documentation need not accompany a CDA claim as a jurisdictional prerequisite. H.L. Smith v. Dalton, 49 F.3d 1563 (Fed. Cir. 1995) (contractor’s failure to provide CO with additional information “simply delayed action on its claims”); John T. Jones Constr. Co., ASBCA No. 48303, 96-1 BCA ¶ 27,997 (stating that the contracting officer’s desire for more information did not invalidate the contractor’s claim submission).
C. Government Claims.
1. General Requirements. The requirements set forth in the preceding sections also apply to government claims.
2. Requirement for Final Decision. 41 U.S.C. § 605(a); FAR 52.233-1(d)(1).
a. The government may assert a claim against a contractor; however, the claim must be the subject of a contracting officer’s final decision.
b. Some government actions are immediately appealable.
(1) Termination for Default. A contracting officer’s decision to terminate a contract for default is an immediately appealable government claim. See Malone v. United States, 849 F.2d 1441, 1443 (Fed. Cir. 1988); Independent Mfg. & Serv. Cos. of Am., Inc., ASBCA No. 47636, 94-3 BCA ¶ 27,223.
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(2) Withholding Monies. A contracting officer’s decision to withhold monies otherwise due the contractor is an immediately appealable government claim. Placeway Constr. Corp. United States, 920 F.2d 903, 906 (Fed. Cir. 1990).
(3) Cost Accounting Standards (CAS) Determination. A contracting officer’s decision regarding the allowability of costs under the CAS is often an immediately appealable government claim. See Litton Sys., Inc., ASBCA No. 45400, 94-2 BCA ¶ 26,895 (holding that the government’s determination was an appealable government claim because the government was “seeking, as a matter of right, the adjustment or interpretation of contract terms”).
(4) Miscellaneous Demands. See Outdoor Venture Corp., ASBCA No. 49756, 96-2 BCA ¶ 28,490 (holding that the government’s demand for warranty work was a claim that the contractor could immediately appeal).
3. As a general rule, the government may not assert a counterclaim that was not the subject of a contracting officer’s final decision. See, e.g., Teledyne MEC, ASBCA Nos. 35680, 35681, 89-1 BCA ¶ 21,334 (granting the appellant’s motion to dismiss a government counterclaim that had not been the subject of a contracting officer’s final decision). But cf. ORC, Inc., ASBCA No. 49693, 96-2 BCA ¶ 28,371 (denying the appellant’s motion to dismiss the government’s allegation of fraud in the inducement because it put the existence of an enforceable contract between the parties in issue and was relevant to both the merits of the appellant’s claims and the Board’s jurisdiction).
4. Opportunity to Comment. The contracting officer should give the contractor notice and an opportunity to comment before issuing a final decision on a government claim. FAR 33.211(a); 52.233-1(d). See Martin J. Simko Constr., Inc. v. United States, 852 F.2d 540 (Fed. Cir. 1988); B.L.I. Constr. Co., ASBCA No. 40857, 92-2 BCA ¶ 24,963 (stating that “[w]hen the Government is considering action, the contractor should be given an opportunity to state its position, express its views, or explain, argue against, or contest the proposed action.
5. Certification. Neither party is required to certify a government claim. 41 U.S.C. §§ 605(a); 605(c)(1). See Placeway Constr. Corp., 920 F.2d at 906.
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VII. LACK OF STANDING.
A. Parties to the Contract.
1. Only the parties to the contract (i.e., the prime contractor and the government) may normally submit a claim. 41 U.S.C. § 605(a); United States v. Johnson Controls, 713 F.2d 1541 (Fed. Cir. 1983) (dismissing subcontractor claim); see also Detroit Broach Cutting Tools, Inc., ASBCA No. 49277, 96-2 BCA ¶ 28,493 (holding that the subcontractor’s direct communication with the government did not establish privity); Southwest Marine, Inc., ASBCA No. 49617, 96-2 BCA ¶ 28,347 (rejecting the subcontractor’s assertion that the Suits in Admiralty Act gave it the right to appeal directly).
2. Dissolved/Suspended Corporations. A corporate contractor must possess valid corporate status, as determined by applicable state law, to assert a CDA appeal. See Micro Tool Eng’g, Inc., ASBCA No. 31136, 86-1 BCA ¶ 18,680 (holding that a dissolved corporation could not sue under New York law). A corporation filing for dissolution under Chapter 7 of the U.S. Bankruptcy Code cannot prosecute claims. Microscience, Inc., ASBCA No. 46452, 98-1 BCA ¶ 29,481 (granting motion to dismiss). But cf. Fre’nce Mfg. Co., ASBCA No. 46233, 95-2 BCA ¶ 27,802 (allowing a “resurrected” contractor to prosecute the appeal); Certified Abatement Technologies, Inc., ASBCA No. 39852, 99-1 BCA ¶ 30,398 (allowing substitution of appellants following Chapter 11 sale and transfer of assets).
B. Others.
1. Subcontractors. A prime contractor can sponsor claims (also called “pass-through claims) on behalf of its subcontractors. Erickson Air Crane Co. of Washington, Inc. v. United States, 731 F.2d 810 (Fed. Cir. 1984); McPherson Contractors, Inc., ASBCA No. 50830, 98-1 BCA ¶ 29,349 (appeal dismissed where prime stated it did not wish to pursue the appeal); cf. Department of the Army v. Blue Fox, 119 S. Ct. 687 (1999) (holding that a subcontractor may not sue the government directly by asserting an equitable lien on funds held by the government).
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2. Sureties. Absent privity of contract, sureties may not file claims. Admiralty Constr., Inc. v. Dalton, 156 F.3d 1217 (Fed. Cir. 1998) (surety must finance contract completion or take over performance to invoke doctrine of equitable subrogation); William A. Ransom and Robert D. Nesen v. United States, 900 F.2d 242 (Fed. Cir. 1990) (discussing doctrine of equitable subrogation); Brent M. Davies, ASBCA No. 51938, 00-1 BCA ¶ 30,678.
VIII. LACK OF A CONTRACTING OFFICER’S FINAL DECISION.
A. Elements of a Valid Final Decision. 41 U.S.C. § 605(a); FAR 33.211.
1. The contracting officer must issue a written final decision on all claims. 41 U.S.C. § 605(a); FAR 33.211(a). See Tyger Constr. Co., ASBCA No. 36100, 88-3 BCA ¶ 21,149. But cf. McDonnell Douglas Corp., ASBCA No. 44637, 93-2 BCA ¶ 25,700 (dismissing the contractor’s appeal from a government claim for noncompliance with CAS because the procuring contracting officer issued the final decision instead of the cognizant administrative contracting officer).
2. Format. 41 U.S.C. § 605(a); FAR 33.211(a)(4). The final decision must:
a. Describe the claim or dispute;
b. Refer to the pertinent or disputed contract terms;
c. State the disputed and undisputed facts;
d. State the decision and explain the contracting officer’s rationale;
e. Advise the contractor of its appeal rights; and
f. Demand the repayment of any indebtedness to the government.
3. Every final decision must inform the contractor of its appeal rights under the CDA. 41 U.S.C. § 605(a); FAR 33.211(a)(4)(v).
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a. The FAR specifies that the rights advisement should state:
This is a 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 the 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 claim 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.
b. Failure to properly advise the contractor of its appeal rights may prevent the “appeals clock” from starting. If the contracting officer’s rights advisory is deficient, the contractor must demonstrate that, but for its detrimental reliance upon the faulty advice, its appeal would have been timely. 10 U.S.C. § 605(a). See Decker & Co. v. West, 76 F.3d 1573 (Fed. Cir. 1996).
4. Specific findings of fact are not required and, if made, are not binding on the government in any subsequent proceedings. 41 U.S.C. § 605(a); FAR 33.211. See Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994) (concluding that admissions favorable to the contractor do not constitute evidence of government liability).
B. Timeliness. A contracting officer must issue a final decision on a claim within certain statutory time limits. 41 U.S.C. § 605(c); FAR 33.211(c).
1. Claims of $100,000 or less. The contracting officer must issue a final decision within 60 days.
2. Certified Claims that Exceed $100,000. The contracting officer must take one of the following actions within 60 days:
a. Issue a final decision; or
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b. Notify the contractor of a firm date when the decision will be issued.10 See Eaton Contract Services, Inc., ASBCA Nos. 52686, 52796, 00-2 BCA ¶ 31,039 (4 and 8 months to issue final decisions reasonable periods of time); Northrop Grumman Corp., ASBCA No. 52263, 00-1 BCA ¶ 30,676 (intent to render final decision 90 days after completion of ADR not sufficient) Aerojet Gen. Corp., ASBCA No. 48136, 95-1 BCA ¶ 27,470 (concluding that the contracting officer failed to provide a firm date where the contracting officer made the timely issuance of a final decision contingent upon the contractor’s cooperation in providing additional information).
3. Uncertified and Defectively Certified Claims Exceeding $100,000.
a. The contracting officer has no obligation to issue a final decision on a claim that exceeds $100,000 if the claim is:
(1) Uncertified; or
(2) Defectively certified.
b. If the claim is defectively certified, the contracting officer must notify the contractor, in writing, within 60 days of the date the contracting officer received the claim of the reason(s) why any attempted certification was defective.
4. If the contracting officer fails to issue a final decision within a reasonable period of time, the contractor may:
a. Request the ASBCA direct the contracting officer to issue a final decision.11 41 U.S.C. § 606(c)(4); FAR 33.211(f).12 See American Indus., ASBCA No. 26930-15, 82-1 BCA ¶ 15,753.
10 The contracting officer must issue the final decision within a reasonable period. What constitutes a “reasonable” period depends on the size and complexity of the claim, the adequacy of the contractor’s supporting data, and other relevant factors. 41 U.S.C. § 605c(3); FAR 33.211(d). See Defense Sys. Co., ASBCA No. 50534, 97-2 BCA ¶ 28,981 (holding that nine months to review a $72 million claim was reasonable). 11 The Board may not direct the contracting officer to issue a more detailed final decision than the final decision the contracting officer already issued. See A.D. Roe Co., ASBCA No. 26078, 81-2 BCA ¶ 15,231. 12 A NAFI contractor whose contract is not subject to the CDA cannot seek this remedy. Charitable Bingo Assocs., Inc., d/b/a Mr. Bingo, ASBCA Nos. 52999-883, 2000 ASBCA LEXIS 185 (Nov. 17, 2000).
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b. Treat the contracting officer’s failure to issue a final decision as an appealable final decision (i.e., a “deemed denial”). 41 U.S.C. § 605(c)(5); FAR 33.211(g). See Aerojet Gen. Corp., ASBCA No. 48136, 95-1 BCA ¶ 27,470.
C. Reconsideration of a Final Decision.
1. A contracting officer may reconsider, withdraw, or rescind a final decision before the expiration of the appeals period. See General Dynamics Corp., ASBCA No. 39866, 91-2 BCA ¶ 24,017; cf. Daniels & Shanklin Constr. Co., ASBCA No. 37102, 89-3 BCA ¶ 22,060 (rejecting the contractor’s assertion that the contracting officer could not withdraw a final decision granting its claim and indicating that the contracting officer has an obligation to do so if the final decision is erroneous).
2. The contracting officer’s rescission of a final decision, however, will not necessarily deprive a BCA of jurisdiction because jurisdiction vests as soon as the contractor files its appeal. See Security Servs., Inc., GSBCA No. 11052, 92-1 BCA ¶ 24,704; cf. McDonnell Douglas Astronautics Co., ASBCA No. 36770, 89-3 BCA ¶ 22,253 (indicating that the Board would sustain a contractor’s appeal if the contracting officer withdrew the final decision after the contractor filed its appeal).
3. A contracting officer may vacate his or her final decision unintentionally by agreeing to meet with the contractor to discuss the matters in dispute. See Sach Sinha and Assocs., ASBCA No. 46916, 95-1 BCA ¶ 27,499 (finding that the contracting officer “reconsidered” her final decision after she met with the contractor as a matter of “business courtesy” and requested the contractor to submit its proposed settlement alternatives in writing); Royal Int’l Builders Co., ASBCA No. 42637, 92-1 BCA ¶ 24,684 (holding that the contracting officer “destroyed the finality of his initial decision” by agreeing to meet with the contractor, even though the meeting was cancelled and the contracting officer subsequently sent the contractor a letter stating his intent to stand by his original decision).
D. Delivery of the Final Decision.
1. The contracting officer should use certified mail, return receipt requested; however, hand delivery and facsimile (FAX) transmission are also acceptable means of delivery.
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2. The contracting officer should preserve all evidence of the date the contractor received the contracting officer’s final decision. See Omni Abstract, Inc., ENG BCA No. 6254, 96-2 BCA ¶ 28,367 (relying on a government attorney’s affidavit to determine when the 90-day appeals period started).
a. When hand delivering the final decision, the contracting officer should require the contractor to sign for the document.
b. When using a FAX transmission, the contracting officer should confirm receipt and memorialize the confirmation in a written memorandum. See Mid-Eastern Indus., Inc., ASBCA No. 51287, 98-2 BCA ¶ 29,907 (concluding that the government established a prima facie case by presenting evidence to show that it successfully transmitted the final decision to the contractor’s FAX number); see also Public Service Cellular, Inc., ASBCA No. 52489, 00-1 BCA ¶ 30,832 (transmission report not sufficient evidence of receipt).
E. Independent Act of a Contracting Officer.
1. The final decision must be that of the contracting officer. Compare PLB Grain Storage Corp. v. Glickman, 113 F.3d 1257 (Fed. Cir. 1997) (unpub.) (holding that a termination was proper, even though a committee of officials directed it); with Climatic Rainwear Co. v. United States, 88 F. Supp. 415 (Ct. Cl. 1950) (holding that a termination was improper because the contracting officer’s attorney prepared the termination findings without the contracting officer’s participation).
2. The contracting officer shall seek assistance from engineers, attorneys, auditors, and other advisors, as appropriate. See FAR 1.602-2 (requiring the contracting officer to request and consider the advice of “specialists,” as appropriate); FAR 33.211(a)(2) (requiring the contracting officer to seek assistance from “legal and other advisors”); Prism Constr. Co., ASBCA No. 44682, 97-1 BCA ¶ 28,909 (indicating that the contracting officer is not required to independently investigate the facts of a claim before issuing final decision.
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IX. FAILURE TO APPEAL IN A TIMELY MANNER.
A. Filing Methods. ASBCA Rule 1(a). A contractor’s notice of appeal shall be mailed or otherwise furnished to the Board and contracting officer within 90 days from date of receipt of the final decision. Cosmic Constr. Co. v. United States, 697 F.2d 1389 (Fed. Cir. 1982) (90 day filing requirement is statutory and cannot be waived by the Board); Rex Sys, Inc., ASBCA No. 50456, 98-2 BCA ¶ 29,956 (refusing to dismiss a contractor’s appeal simply because the contractor failed to send a copy of the NOA to the contracting officer); Duane A. Carlson, ASBCA No. 48462, 95-2 BCA ¶ 27,880.
1. Physically delivering a written notice of appeal (NOA) to the ASBCA or the contracting officer.
2. Mailing a written NOA via the U.S. Postal Service. See Thompson Aerospace, Inc., ASBCA Nos. 51548, 51904, 99-1 BCA ¶ 30,232 (NOA mailed to KO timely filed); North Coast Remfg., Inc., ASBCA No. 38599, 89-3 BCA ¶ 22,232 ( NOA delivered by Federal Express courier service not accorded same status as U.S. mail service and was therefore untimely).
B. Contents. An adequate notice of appeal (NOA) must:
1. Be in writing. See Lows Enter., ASBCA No. 51585, 00-1 BCA ¶ 30,622 (holding that verbal notice is insufficient).
2. Express dissatisfaction with the contracting officer’s decision;
3. Manifest an intent to appeal the decision to a higher authority, see e.g., McNamara-Lunz Vans & Warehouse, Inc., ASBCA No. 38057, 89-2 BCA ¶ 21,636 (concluding that a letter stating that “we will appeal your decision through the various avenues open to us” adequately expressed the contractor’s intent to appeal); and
4. Be timely. Thompson Aerospace, Inc., ASBCA Nos. 51548, 51904, 99-1 BCA ¶ 30,232.
a. A contractor must file an appeal with a BCA within 90 days of the date it received the contracting officer’s final decision. 41 U.S.C. § 606.
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b. In computing the time taken to appeal (See ASBCA Rule 33(b)):
(1) Exclude the day the contractor received the contracting officer’s final decision; and
(2) Count the day the contractor mailed (evidenced by postmark by U.S. Postal Service) the NOA or that the Board received the NOA.
(3) If the 90th day is a Saturday, Sunday, or legal holiday, the appeals period shall run to the end of the next business day.
C. The Board liberally construes appeal notices. See Thompson Aerospace, Inc., ASBCA Nos. 51548, 51904, 99-1 BCA ¶ 30,232 (Board jurisdiction where timely mailing of NOA to KO, despite Board rejecting its NOA mailing).
X. FRAUDULENT CLAIMS.
A. CDA Provisions Regarding Fraudulent Claims.
1. Jurisdiction. 41 U.S.C. § 605(a); 4 C.F.R. § 101.3(a). The CDA does not apply to any “claim or dispute for penalties or forfeitures prescribed by statute or regulation which another Federal agency is specifically authorized to administer, settle, or determine,” and the Department of Justice is specifically authorized to settle fraud claims. See FAR 33.210(a) (limiting a contracting officer’s authority to settle such claims).
2. Settlement Authority. 41 U.S.C. § 605(a); FAR 33.210(b). The CDA specifically prohibits agency heads from settling, compromising, paying, or otherwise adjusting any claim involving fraud.
3. Penalties. 41 U.S.C. § 604. If a contractor is unable to support any part of its claim because of misrepresentation or fraud, the contractor must pay the government:
a. An amount equal to the unsupported part of its claim; and
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b. All costs to the government attributable to the cost of reviewing the unsupported part of its claim. See UMC Elecs. Co. v. United States, 45 Fed. Cl. 507 (1999) (contracting officer, DCAA, and DOJ costs of reviewing the fraudulent part of the contractor’s claim awarded to the government).
B. Fraudulent Claims and the BCAs.
1. The government may assert a fraud conviction as either an affirmative defense, or a justification for a default termination. See Michael C. Avino, Inc., ASBCA No. 31752, 89-3 BCA ¶ 22,156.
2. BCAs, however, will not suspend or dismiss appeals based on a mere allegation of fraud. See Meisel Rohrbau, ASBCA No. 35566, 90-1 BCA ¶ 22,424 (concluding that a CID report alleging fraud was insufficient to deprive the Board of jurisdiction).
3. BCAs will retain jurisdiction over appeals involving allegations of fraud when the dispute may be resolved without a finding of fraud. See Systems Eng’g Assocs., ASBCA No. 37536, 90-2 BCA ¶ 22,900 (characterizing the appeal as a “negligent estimate” case rather than a fraud case); General Constr. and Dev. Co., ASBCA No. 36138, 88-3 BCA ¶ 20,874 (questioning only whether certain costs were properly incurred).
XI. CONCLUSION.
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APPENDIX A
The Disputes Process
Contractor or Government Claim
Contracting Officer’s Final Decision
Choose One
BCA
60 Days 120 Days
12 Months 90 Days No Appeal
CAFC
Writ of Certiorari
U.S. Supreme Court
COFC
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APPENDIX B
DISPUTES CLAUSES 52.233-1 Disputes. As prescribed in 33.215, insert the following clause:
Disputes (Dec 1998) (a) This contract is subject to the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). (b) Except as provided in the Act, all disputes arising under or relating to this contract shall be resolved under this clause. (c) “Claim,” as used in this clause, means 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 this contract. A claim arising under a contract, unlike a claim relating to that contract, is a claim that can be resolved under a contract clause that provides for the relief sought by the claimant. However, a written demand or written assertion by the Contractor seeking the payment of money exceeding $100,000 is not a claim under the Act until certified as required by subparagraph (d)(2) of this clause. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim under the Act. The submission may be converted to a claim under the Act, by complying with the submission and certification requirements of this clause, if it is disputed either as to liability or amount or is not acted upon in a reasonable time. (d)(1) A claim by the Contractor shall be made in writing and, unless otherwise stated in this contract, submitted within 6 years after accrual of the claim to the Contracting Officer for a written decision. A claim by the Government against the Contractor shall be subject to a written decision by the Contracting Officer. (2)(i) Contractors shall provide the certification specified in subparagraph (d)(2)(iii) of this clause when submitting any claim exceeding $100,000. (ii) The certification requirement does not apply to issues in controversy that have not been submitted as all or part of a claim. (iii) The certification shall state as follows: “I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the Contractor.” (3) The certification may be executed by any person duly authorized to bind the Contractor with respect to the claim. (e) For Contractor claims of $100,000 or less, the Contracting Officer must, if requested in writing by
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the Contractor, render a decision within 60 days of the request. For Contractor-certified claims over $100,000, the Contracting Officer must, within 60 days, decide the claim or notify the Contractor of the date by which the decision will be made. (f) The Contracting Officer's decision shall be final unless the Contractor appeals or files a suit as provided in the Act. (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. (h) The Government shall pay interest on the amount found due and unpaid from (1) the date that the Contracting Officer receives the claim (certified, if required); or (2) the date that payment otherwise would be due, if that date is later, until the date of payment. With regard to claims having defective certifications, as defined in (FAR) 48 CFR 33.201, interest shall be paid from the date that the Contracting Officer initially receives the claim. Simple interest on claims shall be paid at the rate, fixed by the Secretary of the Treasury as provided in the Act, which is applicable to the period during which the Contracting Officer receives the claim and then at the rate applicable for each 6-month period as fixed by the Treasury Secretary during the pendency of the claim. (i) The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the Contracting Officer.
(End of clause) Alternate I (DEC 1991). If it is determined under agency procedures, that continued performance is necessary pending resolution of any claim arising under or relating to the contract, substitute the following paragraph (i) for the paragraph (i) of the basic clause: (i) The Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under or relating to the contract, and comply with any decision of the Contracting Officer.
(End of clause)
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MAJ Jon Guden 49th Graduate Course Disputes & Remedies
January 2001
CHAPTER 4
PLEADINGS & MOTIONS
I. INTRODUCTION.
II. NOTICE OF APPEAL.
A. How to Appeal to the ASBCA. ASBCA Rules 1 and 2.
1. A notice of appeal must be in writing.
2. An appellant must mail or otherwise furnish its notice of appeal to the Board within 90 days following receipt of a contracting officer’s final decision.
3. Appellant should furnish a copy of the notice of appeal to the contracting officer.
4. Contents of the Notice of Appeal. ASBCA Rule 2.
a. Contract number.
b. Agency involved in the dispute.
c. The decision from which the appeal is taken.
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d. The amount in dispute, if known.
e. Signed personally by appellant, or appellant's duly authorized representative or attorney.
5. Complaint. The complaint referred to in Rule 6 may be filed with the notice of appeal, or the appellant may designate the notice of appeal as the complaint. ASBCA Rule 2.
B. Docketing of the Appeal.
1. The ASBCA Recorder dockets the appeal and assigns a docket number.
2. The Recorder furnishes a copy of the appeal to the agency’s designated Chief Trial Attorney (CTA), who informs the contracting officer and the local attorney. The Recorder also requests information regarding the appeal. The CTA's docket section handles these tasks.
3. Time limits commence from the date the agency receives notice of the appeal.
C. Assignment of the Government's Trial Attorney.
D. Representation of the parties. ASBCA Rules 26 and 27.
1. Appellant.
a. Individual. May appear before the board in person, or be represented by an attorney at law duly licensed in any state, commonwealth, territory, the District of Columbia, or in a foreign country (hereafter “attorney”).
b. Corporation. May be represented by one of its officers or an attorney.
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c. Partnership or joint venture. May be represented by one of its members or an attorney. See Marine Instrument Company, ASBCA Nos. 41370, 46295, 97-2 BCA ¶ 29,082 (son’s proof of partnership under Arizona law supported jurisdiction).
2. The Government. Attorneys represent the Government before the ASBCA.
3. Notice of appearance. Counsel representing either side must file a written notice of appearance with the Board. See Dalton v. Gaffny Corp., 1997 U.S. App. LEXIS 2387 (Fed. Cir. 1997)(CAFC reverses ASBCA award of attorney's fees to licensed attorney who represented Gaffny as officer/attorney pro se).
4. Format.
a. Use the letter format of AR 25-50 (see CAD Toolbox), modified to include a reference to the ASBCA number, appeal name, and contract number.
b. The trial attorney should ask the board to communicate directly with him.
c. The trial attorney should provide phone numbers and an alternate point of contract, such as the team chief.
III. PLEADINGS.
A. Generally.
1. “The main purpose of pleadings under our rules is to frame and join the issues.” RCA, ASBCA No. 33866, 87-2 BCA ¶ 19,797.
2. “In our practice, pleadings are not straightjackets, irrevocably binding the parties to matters alleged therein.” RCA, ASBCA No. 33866, 87-2 BCA ¶ 19,797 (stating that pleading at the ASBCA is not as formal as that observed in District Courts).
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3. Matters extraneous to the scope of the appeal, which is circumscribed by the claim, the contracting officer’s decision thereon, and the appeal therefrom, are outside the purview of the appeal. Honeywell, Inc., ASBCA No. 47103, 95-2 BCA ¶ 27,835.
4. Counterclaims are not authorized. Phoenix Petroleum Co., ASBCA Nos. 42763, et. seq., 94-1 BCA ¶ 26,461.
5. A party intending to raise an issue concerning the law of a foreign country shall give notice in the pleadings or provide other reasonable notice. ASBCA Rule 6(c).
B. Complaint. ASBCA Rule 6(a).
1. The appellant must file a complaint within 30 days of notice of the docketing of the appeal. ASBCA Rule 6(a). This time frame may be shortened for the small claims ("expedited") procedure under Rule 12.2(b), or the accelerated procedure of Rule 12.3(a).
2. The Board may, in limited circumstances, require the Government to submit a complaint. See e.g. Worldwide Tankers, ASBCA No. 20903, 79-1 BCA ¶ 13,619.
3. Appellant’s complaint should set forth simple, concise, and direct statements of each of its claims. It should state the basis of the appeal, refer to relevant contract provisions, and state the dollar amount claimed. There is no set format.
4. The appeal letter, if sufficiently detailed, may substitute for the complaint. This is common in pro se appeals.
C. Government Answer. ASBCA Rule 6(b).
1. The answer shall set forth simple, concise, and direct statements of the government’s defenses to each claim asserted by the appellant, including affirmative defenses (e.g., accord and satisfaction, laches, estoppel, fraud, waiver, final payment, res judicata, collateral estoppel).
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2. Purpose of an answer.
a. Define areas in dispute.
b. Set forth version of facts.
c. State affirmative defenses, for which the government will have the burden of proof.
3. The government must answer the complaint within 30 days of receipt of the appellant’s complaint from the board. If the board designates the notice of appeal as the complaint, the government’s answer is due within 30 days of receipt of the designation. ASBCA Rule 6(b). This time frame may be shortened for the small claims ("expedited") procedure under Rule 12.2(b), or the accelerated procedure of Rule 12.3(a).
4. The answer is NOT limited to the rationale set forth and the positions taken in the contracting officer’s final decision. The ASBCA reviews a contracting officer’s final decision de novo. Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994).
D. Answer Format.
1. The typical Army answer is divided into two parts: the responsive pleadings (Part I) and the affirmative pleadings (Part II). A Part III is often used to assert affirmative defenses.
a. Part I. Plead responsively to each allegation, sentence by sentence, in numbered paragraphs corresponding to the numbered paragraphs of the complaint. For unnumbered complaints, attach an annotated complaint providing numbers for the allegations.
b. Part II. This is the Government's version of the facts.
(1) Part II is optional and may be omitted when Part I fully develops the issues in dispute or when affirmative allegations may disclose significant weaknesses in the government’s case.
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(2) Creation of a Part II forces the trial attorney to understand case early.
(3) The trial attorney's ability to draft a good Part II is dependent upon good field support (i.e. Rule 4 file, TALF, and draft answer).
(4) Part II serves as the basis for the brief's proposed findings of fact. You should have a document or testimony that supports Part II statements, and cite to it if possible. It is not necessary to attach or supplement the R4 file at this stage. However, make sure to introduce the evidence before the record is closed.
(5) Generally, assert the facts in chronological order and continue numbering the paragraphs in sequence from the end of Part I.
c. Part III. Affirmative Defenses.
(1) Federal Rule of Civil Procedure 8(c) lists many of the possible government affirmative defenses.
(2) Affirmative defenses must be timely pled or generally will be waived. See Varo, Inc., ASBCA Nos. 47945, 47946, 98-1 BCA ¶ 29,484 (waiver of untimely T4C settlement proposal defense).
(3) Failure to raise an affirmative defense in the pleadings may not be fatal if the party will not be surprised or unfairly prejudiced. Caldera v. Northrop Worldwide Aircraft Services, Inc., 192 F.3d 962 (Fed. Cir. 1999) (collateral estoppel not waived).
2. Stylistic conventions.
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a. Headings. Identify the contractor, the contract, and the docket number. The ASBCA has a standard format for correspondence and pleadings.
b. Parties. The contractor is the "appellant" and the government is the “respondent.” To create a more readable answer, you may instead use the contractor’s name, e.g. "Boeing", and “Government” or “Army”.
c. Openings. Answers generally open with an introductory paragraph explaining the style of the answer adopted.
d. Acronyms. Should be defined when used. Consider providing a separate list of acronyms to aid the judge. Parties often use acronyms for organizations, corporations, or government personnel.
e. Prayer for relief. Answers typically close with a request for a specific result, normally denial of the appeal in its entirety.
f. Signature.
(1) The Chief Trial Attorney and the Trial Attorney sign pleadings in Army cases.
(2) Although the ASBCA has no provision concerning the signing of pleadings, motions, or other papers, Fed. R. Civ. P. 11 states that a signature certifies that the signer has read and believes the document is well grounded in fact and warranted by existing law.
3. Standard responses.
a. Don't be afraid to use responses that are to the point, rather than longer, more recognized "legalistic" responses.
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b. Watch out for “specific writing is the best evidence of . . .” See RCA, ASBCA No. 33866, 87-2 BCA ¶ 19,797 (“[w]e share appellant’s misgivings about the suitability of [such] responses).
4. General Denials.
a. The board may enter a general denial if the government fails to file its answer within 30 days.
b. The preferred approach is for the government attorney to seek a time extension (enlargement of time) from the board.
E. Amendment of Pleadings. ASBCA Rule 7.
1. The Board may on its own or upon application of a party order a party to make a more definite statement of the complaint or answer.
a. ASBCA Rule 7 combines the features of Fed. R. Civ. P. 12(e) and 15.
b. A Motion for a more definite statement under Rule 12(e) is generally limited to such definiteness to allow for a responsive pleading.
c. A Rule 7 order for a more definite statement serves the broader purpose of defining and clarifying the issues and assuring effective joinder of the issues for the benefit of the parties and the Board. Honeywell, Inc., ASBCA No. 47103, 95-2 BCA ¶ 27,835.
2. The Board may, in its discretion, and within the proper scope of the appeal, permit either party to amend its pleading upon conditions fair to both parties.
3. Issues within the proper scope of the appeal that are tried by express or implied consent of the parties or by permission of the Board, but are not raised by the pleadings, shall be treated as if raised by the pleadings.
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4. Amendment is not necessary to conform the pleadings to the proof of the case.
5. If evidence is objected to at a hearing on grounds that it was not raised by the pleadings, the Board may grant the objecting party a continuance if necessary to meet the introduced evidence.
IV. MOTIONS.
A. ASBCA Rule 5 refers to jurisdiction motions and "other appropriate motions."
B. Format. There is no required ASBCA format. Generally, motions should include a heading that clearly identifies the motion, an introduction, proposed findings of fact, legal argument, and a conclusion.
C. Hearings. A hearing on the motion shall be afforded on application of either party.
D. Jurisdictional Motions. The Board may raise this issue on its own initiative.
1. Parties must file motions to dismiss for lack of jurisdiction promptly. ASBCA Rule 5(a).
a. Do not delay filing jurisdictional motions because delay wastes scarce judicial and agency resources.
b. If the motion is filed late, the Board may require the parties to brief the jurisdictional issue in their post-hearing briefs.
2. Bases for jurisdictional motions include:
a. Timeliness of the appeal. Cosmic Constr. Co. v. United States, 697 F.2d 1389 (Fed. Cir. 1982) (90 day filing requirement is statutory and cannot be waived by the Board).
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b. Failure to submit a proper claim. See Chapter 3 of the Deskbook, ASBCA Jurisdiction.
c. Lack of a final decision. However, an appeal is properly before the Board if the government has failed to timely render a final decision, i.e., there is a "deemed denial."
d. Subject Matter Jurisdiction.
(1) There must be an express or implied-in-fact contract. Henry P. Duncan, ASBCA No. 47,565, 95-1 BCA ¶ 27,588.
(2) Remedies of injunctive relief or specific performance are not available at the ASBCA. Dixon Pest Controls, ASBCA No. 41042, 91-1 BCA ¶ 23,640.
E. Motions to Strike. Parties have moved to strike:
1. Pleadings concerning improperly certified claims. Sarbo, Inc., ASBCA No. 34292, 87-3 BCA ¶ 20,176.
2. Portions of a brief concerning issues beyond the scope of the appeal. Talley Defense Systems, Inc., ASBCA No. 39878, 93-1 BCA ¶ 25,521.
3. Documents submitted with a filing, such as an affidavit. Rockwell International Corp., ASBCA No. 41095, 95-2 BCA ¶ 27,897; Stemaco Products, Inc., ASBCA No. 45469, 94-3 BCA ¶ 27,060.
F. Motions for Summary Judgment.
1. When a motion presents a non-jurisdictional, affirmative defense to a claim and relies on material other than the pleadings, it is treated as a motion for summary judgment. The Swanson Group, Inc., ASBCA No. 52109, 2000 ASBCA LEXIS 168.
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2. The ASBCA considers motions for summary judgment under ASBCA Rule 5(b). The Board applies the standards set forth in Federal Rule of Civil Procedure 56(e).
3. Timing of summary judgment motions. Parties must file summary judgment motions early in the proceedings, as soon as all of the facts supporting the motion are known. Summary judgment motions are intended to eliminate the need for intensive case preparation. Blake Constr. Co. Inc., ASBCA No. 36307, 90-2 BCA ¶ 22,889 (motion denied because facts relied on were known at time of COFD, and motion was not filed until after case was set for hearing and parties had begun preparation).
4. A board will grant a motion for summary judgment when the moving party can establish that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The Swanson Group, Inc., ASBCA No. 52109, 2000 ASBCA LEXIS 168.
a. A fact is "material" if it is one which will make a difference in the case. Cochrane Construction Co., ASBCA No. 39434, 90-2 BCA ¶ 22,684.
b. If any material facts are in dispute, the board will deny a motion for summary judgment. CBI Na-Con, Inc., ASBCA No. 37972, 90-1 BCA ¶ 22,447.
5. In deciding a motion for summary judgment, the board will construe all evidence and draw all inferences in favor on the non-moving party. TRW Inc., ASBCA Nos. 44068, 44473, 97-1 BCA ¶ 28,627 (motion denied because construction of record in favor of government showed material fact questions remained).
G. Motions to Dismiss for Failure to Prosecute.
1. Where a party shows a lack of “meaningful effort” to continue the prosecution of an appeal, the Board may dismiss an appeal for failure to prosecute. ASBCA Rule 31; Scorpio Piping Company, ASBCA No. 34073, 89-2 BCA ¶ 21,813.
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2. An order to show cause is a prerequisite to an order dismissing an appeal. RADALAB, Inc., ASBCA No. 44530, 95-1 BCA ¶ 27,566.
3. The board will dismiss an appeal when an appellant fails to respond to the Board’s Show Cause Order. See Intelligence Systems Service-I.S.S., Inc., ASBCA Nos. 51017, 51019, 1999 ASBCA LEXIS 29.
H. Motions to Suspend the Proceedings. ASBCA Rule 30
1. The board will suspend the proceedings for a limited time by agreement of the parties, i.e., when the parties wish to enter settlement discussions.
2. The board may suspend the proceedings for good cause at the request of one of the parties.
3. Fraud allegations are asserted frequently as a basis to suspend the proceedings. See T. Iida Contracting, Ltd., ASBCA No. 51865, 00-1 BCA ¶ 30,626; Triax Co. Inc., ASBCA No. 33899, 88-1 BCA ¶ 20,830 (the government must show that there is a real possibility that fraud exists or that the fraud adversely affected the board's ability to ascertain the facts.)
I. Discovery Motions.
1. Motion to Compel. Use when opposition fails to timely respond to discovery.
2. Motion for Sanctions. The Board has inherent power to impose sanctions for discovery abuses and has barred introduction of evidence in extreme circumstances where the circumstances warrant. See ASBCA Rule 35; Hughes Aircraft Co., ASBCA No. 46321, 97-1 BCA ¶ 28,972. Parties have requested the following sanctions:
a. Issue and evidence preclusion. Hughes Aircraft Co., supra.
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b. Attorney's fees. Turbomach, ASBCA No. 30799, 87-2 BCA ¶ 19,756 (ASBCA has no jurisdiction to award attorney's fees as a sanction against the government). Attorney's fees under the Equal Access to Justice Act are not "sanctions." Industrial Steel, Inc., ASBCA Nos. 49632, 49633, 97-2 BCA ¶ 29,177.
V. GRADED EXERCISE.
A. Answers and jurisdictional motions are due at 0800 on 20 February 2001.
B. The answer and motion should be prepared as separate documents. Though there is no page requirement for this assignment, a sufficient submission should total 10-15 pages.
1. The answer must include a Part I and Part II.
2. The motion should address all jurisdictional issues for which you believe the government can obtain relief.
C. Use formats provided on your Contract Appeals Division CD.
D. All student work must be original. Students may discuss the issues in the assignments. Students may not collaborate on the actual writing of an assignment or review each other’s written work.
E. Pose any questions concerning this exercise to either MAJ Guden or MAJ Siemietkowski.
VI. CONCLUSION.
LTC Richard B. O’Keeffe, Jr. 2000 Government Contract Law Symposium
4-8 December 2000
PROFESSIONAL RESPONSIBILITY IN CONTRACT LITIGATION: SELECTED ISSUES AND PRACTICAL PROBLEMS
TABLE OF CONTENTS ....................................... 19-1 TABLE OF AUTHORITIES .................................... 19-2 I. INTRODUCTION ....................................... 19-6 A. Contract Litigation Focus ..................... 19-6 B. The Alternative Dispute Resolution Angle ...... 19-6 C. Applicable Rules and Caveat ................... 19-7 II. PROFESSIONAL RESPONSIBILITY ISSUES ................. 19-9 A. Who is the Client? ............................ 19-9 B. Advice ........................................ 19-9 C. Meritorious Claims and Contentions ............ 19-10 D. Candor Towards the Tribunal ................... 19-10 E. Statements to Others .......................... 19-14 F. Fairness to Opposing Party and Counsel ........ 19-15 G. Impartiality and Decorum of the Tribunal ...... 19-17 H. Lawyer as a Witness ........................... 19-20
I. Dealings with Represented Persons ............. 19-22
III. SUMMARY AND CONCLUSION .............................. 19-23 PRACTICAL PROBLEMS ....................................... ANN
19-2
TABLE OF AUTHORITIES
UNITED STATES COURTS OF APPEALS Amstar Corp. v. Envirotech Corp., 730 F.2d 1476, 1486 (Fed. Cir. 1984) ................... 19-12 Barnhill v. United States, 11 F.3d 1360 (7th. Cir. 1993) ........................ 19-14, 17 Genentech v. United States Int’l Trade Commission, 122 F.3d 1409 (Fed. Cir. 1997) ......................... 19-14 McCandless v. Great Atlantic and Pacific Tea Company, 697 F.2d 198, (7th Cir. 1983) .......................... 19-9 Westmoreland v. CBS, Inc., 770 F.2d 1168, (D.C. Cir. 1985) ........................ 19-10
UNITED STATES COURT OF FEDERAL CLAIMS AND PREDECESSOR COURTS Estrada v. Sec’y of Health and Human Services, 29 Fed. Cl. 78, 1993 U.S. Claims LEXIS 123 (1993) ...... 19-14 Gulf & Western Industries, Inc. v. United States, 230 Ct. Cl. 1, 671 F.2d 1322; 1982 U.S. Ct. Cl. LEXIS 70, 29 Cont. Cas. Fed. (CCH) ¶82,274 ........... 19-12, 20 In the Matter of Judith Ward Mattox, 35 Fed. Cl. 425, 429, 1996 U.S. Claims LEXIS 70 ........ 19-8 Syscon Corp. v. United States, 10 Cl. Ct. 200, 1986 U.S. Cl. Ct. LEXIS 851, (1986) .... 19-21
STATE COURTS Colorado v. Holmes, 921 P.2d 44; 1996 Colo. LEXIS 252; 20 BTR 113 (1996) ... 19-16
BOARDS OF CONTRACT APPEALS Application Under the Equal Access to Justice Act, Decker & Company, GmbH, ASBCA No. 41089, Apr. 23, 1998, 98-2 BCA ¶29,740 ................................. 19-12
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Application under the Equal Access to Justice Act of Gaffny Corp., ASBCA Nos. 39740, 46025, 46027, 46028, 46029, Oct. 25, 1995, 96-1 BCA ¶28,060 ......... 19-7, 21 B.G.W. Limited Partnership, GSBCA No. 10501, Aug. 28, 1991, 91-3 BCA ¶24,336, 1991 GSBCA LEXIS 401 .................................. 19-8, 21 Charles G. Williams Construction, Inc., ASBCA No. 33766, Feb. 27, 1989, 89-2 BCA ¶21,733, 1989 ASBCA LEXIS 86 .................................... 19-15 Cleveland Telecommunications Corp., GSBCA Nos. 12586-P, 12599-P, 12629-P, Oct. 18, 1993, 94-1 BCA ¶26,494, 1993 GSBCA 514 ....................... 19-8 Ford Aerospace & Communications Corp., DOTBCA Nos. 1559, 1606, Feb. 5, 1986, 86-1 BCA ¶18,718, 1986 DOT BCA LEXIS 105 ................................. 19-22 Gary Aircraft Corp., ASBCA No. 21731, Dec. 5, 1989, 91-3 BCA ¶24,122, 1989 ASBCA LEXIS 541 ................................... 19-17 Giuliani Associates, Inc., ASBCA No. 51672, Feb. 14, 2000 ......................... 19-7 Hospital Healthcare Systems, Inc. v. Department of the Treasury, GSBCA No. 14442-TD, Jun. 29, 1998, 1998 GSBCA LEXIS 231 ................................... 19-8 Inslaw, Inc., Docket Nos. 1609, 1673, 1775, 1828, Oct. 8, 1992, 1992 DOT BCA LEXIS 21; 93-1 BCA ¶25,554 ................ 19-10 Integrated Systems Analysts, Inc., GSBCA Nos. 10750-P, 10757-P, Sep. 12, 1990, 91-1 BCA ¶ 23,330, 1990 GSBCA LEXIS 448 ..................... 19-22 Int’l Technology Corp., 1989 GSBCA LEXIS 476; Oct. 16, 1989, 90-1 BCA ¶22,341 .. 19-10 Kaiser Aerospace & Electronics Corp., ASBCA No. 32098, Feb. 12, 1990, 90-2 BCA ¶22,695 ....... 19-10
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Louis Gordon (Ariana), ASBCA Nos. 26652 and 26724, Jun. 6, 1983, 83-2 BCA P16,616, 1983 ASBCA LEXIS 360 ................. 19-18 McDaniel Brothers Construction Co., GSBCA Nos. 6973-R, 7283-R, Sep. 21, 1984, 84-3 BCA ¶17,683, 1984 GSBCA LEXIS 208 ................. 19-6 Melville Energy Systems, Inc., ASBCA No. 33890, Jul. 1, 1987, 87-3 BCA ¶19,992, 1987 ASBCA LEXIS 739 ................................... 19-16 Neal R. Gross and Company, Inc., ASBCA Nos. 28776 and 29982, Aug. 23, 1985, 84-3 BCA ¶17,596, 1984 ASBCA LEXIS 455 .......................... 19-8 Systems Management American Corp., GSBCA No. 9733-P, Jun. 2, 1989, 1989 GSBCA LEXIS 227 ... 19-9 TDC Management Corp., DOTBCA No. 1802, Jul. 11, 1990, 90-3 BCA ¶ 23,099, 1990 DOT BCA 26 ........................................ 19-22 The Swanson Group, Inc., ASBCA No. 47675, Oct. 11, 1995, 96-1 BCA ¶27,972, 1995 ASBCA LEXIS 282 ................................... 19-22 United Technologies Corp., ASBCA No. 25501, Jun. 26, 1986, 86-3 BCA ¶19,171, 1986 ASBCA LEXIS 675 ................................... 19-18 W.B. & A., Inc., ASBCA No. 32524, Feb. 27, 1989, 89-2 BCA ¶21,736, 1989 ASBCA LEXIS 89 .................................... 19-14
DECISIONS OF THE COMPTROLLER GENERAL
Information Processing Services, Inc., B-282220, Jun. 10, 1999, 99-1 CPD ¶109 ................. 19-12 Memorex Corp., B-213430.2, Oct. 23, 1984, 84-2 CPD ¶432, 1984 U.S. Comp. Gen. LEXIS 350 ................................... 19-19
REGULATIONS, ARTICLES, MISCELLANEOUS MATERIALS
41 U.S.C. §607(b)(1) ................................... 19-11
19-5
ABA Formal Opinion 91-359, CONTACT WITH FORMER EMPLOYEE OF ADVERSE CORPORATE PARTY, March 22, 1991 ............. 19-22 Alexis De Tocqueville, Democracy in America, The Henry Reeves Text, Part II, First Book at 275-6, (Phillips Bradley ed., A.A. Knopf, 1945) (1840) ....... 19-6 Bid Protests at GAO: A Descriptive Guide, GAO/OGC-96-24 (6th ed. 1996) .......................... 19-19 Black’s Law Dictionary (5th ed. 1979) ................. 19-11 Carrie Menkel-Meadow, Ethics in ADR Representation: A Road Map of Critical Issues, Dispute Resolution Magazine, Winter 1997 ................................. 19-21 JAGINST 5803.1A, July 13, 1992, Subject: Professional Conduct of Attorneys Practicing Under the Supervision of The Judge Advocate General; republished at 32 C.F.R. Part 776 ..................... 19-7 Professional Responsibility Note, Disclosing Adverse Case Law From Noncontrolling Jurisdictions, 1996 Army Law. 56 (1996) ........................................ 19-13 Rule 204(c)(1)Rules of procedure of the General Services Board of Contract Appeals .................... 19-19 Rule 34, Rules of the Armed Services Board of Contract Appeals, July 1, 1997 ........................ 19-18
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PROFESSIONAL RESPONSIBILITY IN CONTRACT LITIGATION: SELECTED ISSUES AND PRACTICAL PROBLEMS
[P]eople in democratic states do not mistrust the members of the legal profession, because it is known that they are interested to serve the popular cause; and the people listen to them
without irritation, because they do not attribute to them any sinister designs.
Alexis De Tocqueville, Democracy in America
The Henry Reeve Text, Part II, First Book at 275-6 (Phillips Bradley ed., Alfred A. Knopf, 1945)(1840)
* * * * *
We admire appellant's counsel for his candor. This is the sort of conduct that is required,
... and it is all the more remarkable because it is so seldom displayed.
McDaniel Brothers Construction Co.
GSBCA Nos. 6973-R, 7283-R 1984 GSBCA LEXIS 208, *5
Sep. 21, 1984, 84-3 BCA ¶17,683 I. INTRODUCTION A. Contract Litigation Focus
(1) Contract cases are employed to the maximum extent possible so as the enhance their “fit” in arguments and briefs involving Government contract issues.
(2) Only those rules having the most specific
application to litigation are discussed. B. The Alternative Dispute Resolution (ADR) Angle
As ADR becomes ever more popular, more professional responsibility issues will arise. Yet ADR is different in ways that affect the applicability of
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ethical rules and considerations. Although this area of professional responsibility is not well developed, obvious differences between traditional litigation and ADR will be highlighted.
C. Applicable Rules and Caveat
(1) The Army’s professional responsibility regulation, AR 27-26, The Rules of Professional Conduct for Lawyers, 1 May 1992 is the primary source for the ethical norms discussed. These rules are applicable to:
• Army judge advocates;
• All other military personnel who are attorneys and who deliver legal services to an Army activity as part of their duties;
• Civilian attorneys employed by the Army to provide legal services; and
• Non-Government attorneys practicing in Army proceedings under the Manual for Courts-Martial.
(2) Lawyers from other services and agencies will be
subject to different rules, for example: (A) U.S. Navy: JAGINST 5803.1A, July 13, 1992,
Subject: Professional Conduct of Attorneys Practicing Under the Supervision of The Judge Advocate General; republished at 32 C.F.R. Part 776.
(B) U.S. Air Force: See Web FLITE, Air Force Rules of Professional Responsibility. http://aflsa.jag.af.mil/GROUPS/AIR_FORCE/ TJAG/AFRulePC.htm.
(3) Do the boards of contract appeals have the
authority to enforce ethics codes? (A) The ASBCA has shied away from enforcement,
citing a lack of precedent for such action. Application under the Equal Access to Justice Act of Gaffny Corp., ASBCA Nos. 39740, 46025, 46027, 46028, 46029, Oct. 25, 1995, 96-1 BCA ¶28,060. Giuliani Associates, Inc., ASBCA No. 51672, Feb. 14,
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2000. But see Cleveland Telecommunications Corp., GSBCA Nos. 12586-P, 12599-P, 12629-P, Oct. 18, 1993, 94-1 BCA ¶26,494, 1993 GSBCA 514 (boards of contract appeals have inherent authority to control the attorneys appearing before them).
(B) ASBCA judges are themselves governed by the
Code of Judicial Conduct of the American Bar Association. Neal R. Gross and Company, Inc., ASBCA Nos. 28776 and 29982, Aug. 23, 1985, 84-3 BCA ¶17,596, 1984 ASBCA LEXIS 455, *3.
(C) GSBCA members are required by 41 CFR 105-735.705(b)(3)1 to “criticize and correct unprofessional conduct of lawyers” in board practice. B.G.W. Limited Partnership, GSBCA No. 10501, Aug. 28, 1991, 91-3 BCA ¶24,336, 1991 GSBCA LEXIS 401. Board not required to adopt and enforce any particular code, but elected to enforce the code of the lawyers involved in the ethical dispute. 1991 GSBCA LEXIS 401, *15.
(D) Is there a greater need for enforcement of
professional responsibility standards in Government contract cases? Court of Federal Claims wants to be "particularly acute" in enforcing ethical rules for the lawyers before it because of: (1) the pressures of the unique and demanding practice of procurement law; (2) the high volume of documents involved in a typical contracts case: and (3) judgments, often very large in amount, are satisfied out of the public treasury. In the Matter of Judith Ward
1 This section was removed in favor of the Joint Ethics Regulation, which does not contain similar language. See 61 FR 56399, 56403, Nov. 1, 1996. The GSBCA, however, stills applies the professional standards of the state bars of the lawyers involved. Hospital Healthcare Systems, Inc. v. Department of the Treasury, GSBCA No. 14442-TD, Jun. 29, 1998, 1998 GSBCA LEXIS 231.
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Mattox, 35 Fed. Cl. 425, 429, 1996 U.S. Claims LEXIS 70, ** 14-15.
II. PROFESSIONAL RESPONSIBILITY ISSUES A. Who is the Client?
RULE 1.13 Army as Client
(a) Except when representing an individual client pursuant to (g) below, an Army lawyer represents the Department of the Army acting through its authorized officials. These officials include the heads of organizational elements within the Army, such as the commanders of armies, corps and divisions, and the heads of other Army agencies or activities. When an Army lawyer is assigned to such an organizational element and designated to provide legal services to the head of the organization, the lawyer-client relationship exists between the lawyer and the Army as represented by the head of the organization as to matters within the scope of the official business of the organization.
B. Advice
RULE 2.1 Advisor
In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social, and political factors, that may be relevant to the client's situation, but not in conflict with the law. (1) Candor to the client means telling him the bad
news along with the good. "[A]bout half of the practice of a decent lawyer is telling would-be clients that they are damned fools and should stop." See McCandless v. Great Atlantic and Pacific Tea Company, 697 F.2d 198, 201 (7th Cir. 1983) (quoting Elihu Root).
(2) Attorney obliged to provide the best advice
possible, even if he or she is relying on
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privileged information that cannot be revealed to the client. Systems Management American Corp., GSBCA No. 9733-P, Jun. 2, 1989, 1989 GSBCA LEXIS 227, *12.
C. Meritorious Claims and Contentions
RULE 3.1 Meritorious Claims and Contentions
A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification, or reversal of existing law. See also Fed. R. Civ. P. 11. (1) More than subjective good faith is required. A
lawyer must undertake a reasonable inquiry into the validity of the facts and arguments advanced before a tribunal. Westmoreland v. CBS, Inc., 770 F.2d 1168, 1174 & n.8 (D.C. Cir. 1985), cited in Int’l Technology Corp., 1989 GSBCA LEXIS 476; Oct. 16, 1989, 90-1 BCA ¶22,341.
(1) A reconsideration request that does not present
arguments or contentions distinct from those advanced prior to the initial decision of the board may violate Rule 3.1; however, the ASBCA has declined to impose sanctions, such as the costs of responding to such a reconsideration request. Kaiser Aerospace & Electronics Corp., ASBCA No. 32098, Feb. 12, 1990, 90-2 BCA ¶22,695.
(2) The filing of groundless motions, though not
relevant to the ultimate issues in an appeal, can be considered by the board in ruling on motions to dismiss and for discovery. Inslaw, Inc., Docket Nos. 1609, 1673, 1775, 1828, Oct. 8, 1992, 1992 DOT BCA LEXIS 21; 93-1 BCA ¶25,554.
D. Candor Towards the Tribunal RULE 3.3 Candor Toward the Tribunal
(a) A lawyer shall not knowingly:
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(1) make a false statement of material fact or law to a tribunal;
(2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client;
(3) fail to disclose to the tribunal legal authority
in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel;
(4) offer evidence that the lawyer knows to be false.
If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall take reasonable remedial measures; or
(5) knowingly disobey an obligation or order imposed
by a superior or tribunal, unless done openly before the tribunal in a good faith assertion that no valid obligation or order should exist.
(b) The duties stated in paragraph (a) continue to
the conclusion of the proceeding, and apply even if compliance requires disclosure of information otherwise protected by Rule 1.6.
(c) A lawyer may refuse to offer evidence that the lawyer reasonably believes is false. (d) In an ex parte proceeding, a lawyer shall inform
the tribunal of all material facts known to the lawyer which are necessary to enable the tribunal to make an informed decision, whether or not the facts are adverse.
(1) Who/what is a “tribunal?”
(A) The dictionary definition is restrictive.
Tribunal. The seat of a judge; the place where he[she] administers justice. The whole body of judges who compose a jurisdiction; a judicial court; the jurisdiction which judges exercise. Black’s Law Dictionary 1350 (5th ed. 1979).
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(B) Boards of Contract Appeals. “Members” rather than judges preside over the Board’s of Contract Appeals. 41 U.S.C. §607(b)(1). However, the CDA states that board members “shall be selected and appointed to serve in the same manner as administrative law judges pursuant to section 3105 of title 5 ... .” Id. The boards see themselves as tribunals. See Application Under the Equal Access to Justice Act, Decker & Company, GmbH, ASBCA No. 41089, Apr. 23, 1998, 98-2 BCA ¶29,740 (“pursuant to long-standing precedent of this Board and other tribunals... .”) 1998 ASBCA LEXIS 126, *4 (emphasis added). But see Gulf & Western Industries, Inc. v. United States, 230 Ct. Cl. 1, 671 F.2d 1322; 1982 U.S. Ct. Cl. LEXIS 70, 29 Cont. Cas. Fed. (CCH) ¶82,274 (noting that the Canons of Judicial Conduct might not apply to BCA judges).
(C) Comptroller General. It is clear that the
General Accounting Office sees itself as a bid protest Tribunal. See Information Processing Services, Inc., B-282220, Jun. 10, 1999, 99-1 CPD ¶109 (“Our Office is not the proper tribunal ... .”) 1999 U.S. Comp. Gen. LEXIS 92, *9 (emphasis added).
(2) Creative Editing in Briefs.
(A) Selective and out-of-context quotation of evidence, “reflects a lack of the candor required by [Model Rule 3.3], wastes the time of the court and of opposing counsel, and imposes unnecessary costs on the parties and on fellow citizens whose taxes support [the Court of Appeals for the Federal Circuit] and its staff.” Amstar Corp. v. Envirotech Corp., 730 F.2d 1476, 1486 (Fed. Cir. 1984).
(B) REMEDY: Doubled costs assessment.
Because Envirotech's brief relies on a reverse statement of the law of infringement, ignores the numerous and
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unanimous contrary authorities called to its attention by Amstar's main brief, distorts a quotation, and presents an estoppel argument based on that distortion, Envirotech shall pay to Amstar an amount equating to double Amstar's costs on this appeal.
Id.
(3) Adverse Case Law From Noncontrolling
Jurisdiction. Where the controlling jurisdiction has not decided an issue, counsel may have to disclose precedent from another jurisdiction where:
(A) the lawyer knows of the adverse precedent; (B) the precedent has not been disclosed by
opposing counsel;
(C) the tribunal would reasonably consider it important to resolve the issue.
AR 3.3 cmt. See, Professional Responsibility Note, Disclosing Adverse Case Law From Noncontrolling Jurisdictions, 1996 Army Law. 56 (1996).
(4) The Limits of Advocacy: Armed Services Board's
View.
It is the professional responsibility of counsel to set forth all of the material and relevant facts adduced at the hearing and found in the documentary evidence, not just those facts which support an advocate's position. After all of the facts have been set forth counsel may argue the weight to be accorded or any other matters in support of his/her position. Counsel may not, however, fail to mention established facts simply because they do not support the position he/she advocates.
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... [P]rofessional responsibility mandates that counsel assures that the statements he/she makes are accurate .... W.B. & A., Inc., ASBCA No. 32524, Feb. 27, 1989, 89-2 BCA ¶21,736, 1989 ASBCA LEXIS 89, *183.
(5) The COFC admonished counsel for failing to
advise the court of controlling authority even when the court was actually aware of the precedent. Estrada v. Sec’y of Health and Human Services, 29 Fed. Cl. 78, 1993 U.S. Claims LEXIS 123 (1993). Duty to provide zealous representation does not excuse failure to follow Rule 3.3(a)(3); counsel presumed to have actual knowledge of controlling authority in case in which he appeared as counsel. 1993 U.S. Claims LEXIS 123, *10. Issue: would a different trial attorney in the same Government legal office be presumed to have actual knowledge of adverse precedent in a case involving his or her office?
(6) Evasiveness Puts IRS Lawyers in Big Jam: A
Cautionary Tale for the Ethically Daring. Improvident hardball tactics involving lack of candor by Government counsel in tax trial results in dismissal by trial judge. Rescue of case by circuit court small comfort to lawyer tainted with lack of candor. Barnhill v. United States, 11 F.3d 1360 (7th. Cir. 1993) accord Genentech v. United States Int’l Trade Commission, 122 F.3d 1409 (Fed. Cir. 1997).
E. Statements to Others Truthfulness in Statements to Others
In the course of representing a client a lawyer shall not knowingly:
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(a) make a false statement of material fact or law to
a third person; or
(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6 [Confidentiality of Information].
(1) Discovery Misrepresentation Leads to Board
Sanctions Against the Air Force.
(A) Appellant made repeated requests for documents, the existence of which was denied by the Government, because of a belief that the documents were privileged.
(B) The documents were then used by the
Government at trial. Appellant filed a motion for sanctions. The Government asserted a claim of privilege in response to the motion.
(C) HELD:
(1) The Board decides whether a privilege applies, not the parties. In any event, it was wrong to lie to Appellant.
(2) Sanctions granted –- the Government was
precluded from using the documents at the hearing or in its brief, and the testimony of an important Government witness was given no weight by the Board. Charles G. Williams Construction, Inc., ASBCA No. 33766, Feb. 27, 1989, 89-2 BCA ¶21,733, 1989 ASBCA LEXIS 86.
(2) What Are the Limits of Puffery in
Court/ADR/Negotiations? F. Fairness to Opposing Party and Counsel
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RULE 3.4 Fairness to Opposing Party and Counsel
A lawyer shall not:
(a) unlawfully obstruct another party's access to evidence or unlawfully alter, destroy, or conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act;
(b) falsify evidence, counsel or assist a witness to
testify falsely, or offer an inducement to a witness that is prohibited by law;
(c) knowingly disobey an obligation to an opposing
party and counsel under the rules of a tribunal, except for an open refusal based on an assertion that no valid obligation exists;
(d) in pretrial procedure, make a frivolous discovery
request or fail to make reasonably diligent effort to comply with a legally proper discovery request by an opposing party;
(e) in trial, allude to any matter that the lawyer
does not reasonably believe is relevant or that will not be supported by admissible evidence, assert personal knowledge of facts in issue except when testifying as a witness, or state a personal opinion as to the justness of a cause, the credibility of a witness, the culpability of a civil litigant, or the guilt or innocence of an accused; ... .
(1) Violation of Rule 3.4(b) Has Bearing on Board’s
Evaluation of Witness Credibility. Melville Energy Systems, Inc., ASBCA No. 33890, Jul. 1, 1987, 87-3 BCA ¶19,992, 1987 ASBCA LEXIS 739 (“Our view of [a contingent fee witness’s] credibility is influenced too by the ethical considerations which guide our profession since they demonstrate to us that a contingent fee arrangement with an expert witness is a factor to be considered in evaluating the expert’s credibility.”) 1987 ASBCA LEXIS 739, *14.
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(2) Reasonably Diligent Efforts to Comply with Discovery Requests. Colorado v. Holmes, 921 P.2d 44; 1996 Colo. LEXIS 252; 20 BTR 113 (1996) (violation of Rule 3.4(d) to fail properly to prepare a witness for deposition, and to show up 45 minutes late).
(3) Not Unlawful Foulplay Does Not Violate Rule
3.4(a). Barnhill v. United States, 11 F.3d 1360 (7th Cir. 1993) (where party improperly served a subpoena but witness showed up anyway, 7th Circuit reverses trial court ruling that Rule 3.4(a) was violated when opposing counsel told witness to go home).
(4) Use of Extra-Record Evidence Draws Stinging
Rebuke and Harsh Sanction. Gary Aircraft Corp., ASBCA No. 21731, Dec. 5, 1989, 91-3 BCA ¶24,122, 1989 ASBCA LEXIS 541. The Government and Appellant agreed to the contents of the record and the Government then made numerous references to evidence outside the stipulated record. The Board said of this circumstance:
The parties to a dispute must have the responsibility of providing a record which is clear, readable, of a size consistent with the complexity of the issues, and limited to the issues. In briefing we expect the parties to make specific reference to each remaining document which they contend supports their position. In the absence of such specific reference, parties risk documents not being considered in reaching our decision. The Government's brief totally violates the rules by which we agreed to proceed. We disregard the Government's brief in its entirety and proceed as though the Government filed no brief herein.
1989 ASBCA LEXIS 541, *18-19 (emphasis added). G. Impartiality and Decorum of the Tribunal
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RULE 3.5 Impartiality and Decorum of the Tribunal
A lawyer shall not:
(a) seek to influence a judge, court member, member
of a tribunal, prospective court member or member of a tribunal, or other official by means prohibited by law;
(b) communicate ex parte with such a person except as
permitted by law; or
(c) engage in conduct intended to disrupt a tribunal. (1) ASBCA.
(A) ASBCA Rule 34. Ex parte Communications
No member of the Board or of the Board's staff shall entertain, nor shall any person directly or indirectly involved in an appeal, submit to the Board or the Board's staff, off the record, any evidence, explanation, analysis, or advice, whether written or oral, regarding any matter at issue in an appeal. The provision does not apply to consultation among Board members or the ex parte communications concerning the Board's administrative functions or procedures.
(B) Ex parte communication not limited to
verbal media. Louis Gordon (Ariana), ASBCA Nos. 26652 and 26724, Jun. 6, 1983, 83-2 BCA P16,616, 1983 ASBCA LEXIS 360, *27 (Board refused to consider extra-record submission of a textile sample as an ex parte “communication.”
(B) Late Submission of Evidence Tantamount
to ex parte Communication. United Technologies Corp., ASBCA No. 25501, Jun. 26, 1986, 86-3 BCA ¶19,171, 1986 ASBCA LEXIS 675 (Appellant submitted
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computer spreadsheets generated after the record was closed, and supplemented or explained them with off the record comments to the board).
(3) GAO.
(A) Guidance.
Parties should not attempt to engage in ex parte communications with the GAO attorney assigned to the protest, or with any other GAO employee. An ex parte communication refers to any oral or written communication with a GAO official, which excludes one or more parties to a protest, about the merits of the protest, or about significant issues which might affect the outcome of the protest. Although it may be necessary during the proceedings to clarify a fact in the record or to explain in greater detail a party's position in the case, GAO will not entertain, and no one may submit to GAO, off the record, any evidence, explanation, analysis, or advice, whether written or oral, regarding any substantive matter affecting the disposition of the protest. Where it is necessary to discuss any substantive issue with GAO, a telephone conference should be requested. A copy of all written submissions to GAO, redacted where necessary, should be provided to all parties to the protest.
Bid Protests at GAO: A Descriptive Guide 32-33, GAO/OGC-96-24 (6th ed. 1996). (B) Late Delivery of Communication Not ex parte. Memorex Corp., B-213430.2, Oct. 23, 1984,
84-2 CPD ¶432, 1984 U.S. Comp. Gen. LEXIS 350 (no ex parte violation where protester eventually received communication to GAO).
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(4) Mediator often explicitly authorized to conduct ex parte communications with parties. See Rule 204(c)(1), Rules of procedure of the General Services Board of Contract Appeals (“(1) Mediation. The Board Neutral, as mediator, aids the parties in settling their case. The mediator engages in ex parte discussions with the parties and facilitates the transmission of settlement offers. Although not authorized to render a decision in the dispute, the mediator may discuss with the parties, on a confidential basis, the strengths and weaknesses of their positions. No judge who has participated in discussions about the mediation will participate in a Board decision of the case if the ADR is unsuccessful.”)
(5) Board Judge Chastised for ex Parte
Communication. Gulf & Western Industries, Inc. v. United States, 230 Ct. Cl. 1, 671 F.2d 1322; 1982 U.S. Ct. Cl. LEXIS 70, 29 Cont. Cas. Fed. (CCH) ¶82,274 (Board judge improperly attempts to influence handling of appeal of a board decision appealed to the Court of Claims.
H. Lawyer as a Witness
RULE 3.7 Lawyer as Witness
(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where:
(1) the testimony relates to an uncontested
issue;
(2) the testimony relates to the nature and quality of legal services rendered in the case; or
(3) disqualification of the lawyer would work
substantial hardship on the client.
(b) A lawyer may act as advocate in a trial in which
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Another lawyer in the lawyer’s office is likely to be called as a witness unless precluded by [the general conflict of interest rule] Rule 1.7 or [the conflict of interest: former client rule] Rule 1.9.
(1) ASBCA Expresses Doubt as to Whether the Rule
Applies to Non-Jury Trials Such as Board Hearings. In EAJA application, Appellant sought reimbursement for fees paid to a lawyer who testified at trial and performed normal litigation functions outside of the hearing. Facts that: issue not raised at hearing; no precedent cited for enforcement; board unsure of its authority, were among reasons for not denying EAJA reimbursement for fees of attorney-witness. Application under the Equal Access to Justice Act of Gaffny Corp., ASBCA Nos. 39740, 46025, 46027, 46028, 46029, Oct. 25, 1995, 96-1 BCA ¶28,060, 1995 ASBCA LEXIS 314.
(2) Issue: Is an ADR proceeding a “trial?” See
Carrie Menkel-Meadow, Ethics in ADR Representation: A Road Map of Critical Issues, Dispute Resolution Magazine, Winter 1997.
(3) The COFC applied ABA Model Rule 3.7 (identical to
AR 3.7), holding that if the conflict of interest rules, would disqualify a lawyer because the testimony of the lawyer as witness would be adverse to the client, then no other lawyer in the firm could serve as advocate in the case. Thus, where the lawyer shows that his testimony would not be adverse to the client, Rule 3.7 will not disqualify the witness/lawyer. Syscon Corp. v. United States, 10 Cl. Ct. 200, 1986 U.S. Cl. Ct. LEXIS 851, *6 (1986).
(4) GSBCA: Rule 3.7(b) is not a rule of general
imputed disqualification. B.G.W. Limited Partnership, GSBCA No. 10501, Aug. 28 1991, 91-3 BCA ¶24,336, 1991 GSBCA LEXIS 401, *18 (rule is intended to provide protection to the client, not disqualification rights to the opposing party).2
2 N.B. Rule 3.4(b) of the DC Rules of Professional Responsibility provide that the imputed disqualification does not apply at all “if the lawyer who is
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(5) Rule against lawyer/witnesses not applied by
DOTBCA to disqualify Government counsel where disqualification motion filed on eve of trial, the lawyer’s testimony would address discovery issues (waiver of a privilege), and disqualification would create undue hardship for the client. Ford Aerospace & Communications Corp., DOTBCA Nos. 1559, 1606, Feb. 5, 1986, 86-1 BCA ¶18,718, 1986 DOT BCA LEXIS 105.
(6) Disqualification Does Not Preclude Further
Participation. Integrated Systems Analysts, Inc., GSBCA Nos. 10750-P, 10757-P, Sep. 12, 1990, 91-1 BCA ¶ 23,330, 1990 GSBCA LEXIS 448 (disqualified lawyer could still have access to protected material and participate as the agency’s “client representative.”) 1990 GSBCA LEXIS 448, *5-6.
I. Dealings with Represented Persons.
RULE 4.2 Communication with Person Represented by Counsel
In representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.
(1) Party represented by more than one lawyer. It is
not improper to communicate with a person represented by more than one lawyer as long as at least one lawyer is present and consents. TDC Management Corp., DOTBCA No. 1802, Jul. 11, 1990, 90-3 BCA ¶ 23,099, 1990 DOT BCA 26.
(2) Issue: Are former employees of a party
represented by counsel?
(A) Former security guard employees: NO. The Swanson Group, Inc., ASBCA No. 47675, Oct.
appearing as an advocate is employed by, and appears on behalf of, a Government agency.”
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11, 1995, 96-1 BCA ¶27,972, 1995 ASBCA LEXIS 282, *4.
(B) Not necessarily. ABA Formal Opinion
91-359, CONTACT WITH FORMER EMPLOYEE OF ADVERSE CORPORATE PARTY, March 22, 1991.
III. SUMMARY AND CONCLUSION
PROFESSIONAL RESPONSIBILITY IN
CIVIL LITIGATION
NOTES FACTS
Last year's defense appropriations act included funding for an Air Force Reserve B-2 Bomber maintenance facility at Sugar Grove Naval Communications Station. The maintenance facility is a nuclear-hardened, reinforced concrete, underground hanger. The specifications for the facility required the contractor to smooth finish all cast concrete that is exposed to public view. The National Guard Bureau (NGB), assisted by an Army contracting officer and legal advisor, administers the construction contract. The legal advisor is new to the agency and she does not have any experience in government contracts. The prime contractor, Fluor-Daniels, was the successful low offeror in the limited competition. Several months into the project, Fluor's concrete subcontractor finished pouring the first walls in the facility. When the forms were removed, the Air Force's on-site representative, Lieutenant Stephen Dooley, noticed that the interior walls had a very rough finish, which he brought to the attention of the NGB's inspector. Lieutenant Dooley, the contracting officer, the government inspector, and the legal advisor, met to review the specifications. After considerable argument over whether the interior walls were "exposed to the public," they concluded that the concrete work did not conform to the specifications. Lieutenant Dooley prepared a detailed memorandum for record (MFR) of the meeting. The NGB inspector rejected the work the following week. Fluor's project manager was livid. He screamed that smooth finish was not required because the public would never see any part of these walls. In any event, he could have smooth-finished the walls by hand if the government had told him about the problem earlier. After sending the
contracting officer appropriate notice of the fact that it would incur additional costs to comply with the government's direction to change the surface of the concrete, Fluor ordered the concrete subcontractor to begin the very expensive process of chipping off the old surface and hand resurfacing the walls to a smooth finish, while maintaining very tight dimensional tolerances. The contracting officer received Fluor's claim for this work shortly thereafter, and in due course, denied it. The dispute is now at the Armed Services Board of Contract Appeals (ASBCA). While preparing the Rule 4 file, the legal advisor interviewed the inspector and Lieutenant Dooley. She obtained copies of all the inspection records and asked the two to prepare written statements. The inspector did so, while Lieutenant Dooley, the Air Force representative, forwarded a copy of his earlier MFR to the lawyer. Lieutenant Dooley, anxious to assist in the litigation, decided to get more information for "his" lawyer. At the next opportunity on the job site, he questioned the foreman for the concrete subcontractor. The subcontractor's foreman said that he thought the whole dispute was the fault of Fluor's chief cost estimator because job site rumor indicated that the chief cost estimator had been fired shortly after his promotion to vice president. Lieutenant Dooley passed this on to the legal advisor. The legal advisor was pleased with this information and asked Stephen for the former employee's name and address. Stephen obtained this information on his next trip to the job site where, while waiting to speak with the Project Manager about the selection of a plumbing fixture, he thumbed through a Fluor phone listing which he found by the phone in the project manager's office trailer. As a reward for his hard work, the legal advisor asked the handsome Lieutenant out to dinner, which led to a brief but intimate relationship. After completing the answer and submitting the Rule 4 file, the legal advisor decided to interview Fluor's former Chief Cost Estimator personally. The estimator, rather upset by the callous way he was fired, stated that he had prepared two estimates for the B-2 hanger concrete work - one for rough finish interior concrete and one for smooth finish interior concrete. At the final meeting to set the bid price, Fluor went with the lower, rough finish estimate after its general counsel opined that the specifications were, at best, ambiguous. The "vice president for a week" also showed the legal advisor the entries in his daily calendar summarizing the bid meeting. When questioned about his dismissal, the cost estimator described an interview he had with Fluor's outside counsel and general counsel who
were preparing Fluor's claim. He said that after he talked to the two, he was on the street the next day. The legal advisor, writing furiously, asked for and received copies of the pertinent entries from the estimator's diary. In its initial wave of discovery, Fluor's attorney requested production of all documents relating to, and the identity of all persons with personal knowledge of, the concrete surfacing claim. The legal advisor responded by noticing the deposition of Fluor's outside counsel and corporate counsel. The legal advisor asked the special agent in charge of the local Criminal Investigation Command (CID) field office if he would like to send an agent to attend the depositions with her. Discuss all of the potential professional responsibility issues involved in this scenario. 1. What ethical rules apply to the agency’s legal advisor? 2. Who is the client? Lieutenant Dooley? The contracting officer? The Air Force? The Army? The United States? 3. What is the scope of the legal advisor’s representation? 4. Does the legal advisor’s role change once the dispute becomes an appeal? 5. Is there an ethical problem because the attorney has not had any experience in this matter? 6. Is there any other reason why this legal advisor should not defend the agency in this matter? 7. Is it proper for the legal advisor to defend the agency’s position that the walls must have a smooth finish? 8. What if the contracting officer agrees that smooth walls were not required by the original specifications, but wants to make the contractor incur legal fees and other administrative costs before he agrees to the change? What if the contracting officer agrees that the specifications were defective and that the contractor is entitled to extra money, but denies the claim because he does not have the funding to pay for the claim?
9. Was it permissible for the legal advisor to use the information obtained by Lieutenant Dooley? What about his interview of the Chief Cost Estimator? 10. What about getting the phone number and address from the Project Manager’s trailer? 11. Does it make any difference that the inquiry was performed by Lieutenant Dooley, not the legal advisor? 12. Was it permissible for the legal advisor to date Lieutenant Dooley? 13. What about the legal advisor’s discovery response? 14. Was it proper to notice Fluor’s attorneys for depositions? To ask CID to accompany her to the depositions?
CHAPTER 6
WRITTEN AND DOCUMENT DISCOVERY
I. INTRODUCTION.................................................................................................................................. 1
A. Goal .................................................................................................................................................... 1
B. Learning Objectives............................................................................................................................ 1
II. General Considerations........................................................................................................................... 1
A. Obtaining information other than through discovery.......................................................................... 1
B. Timing of Discovery........................................................................................................................... 3
C. Rules................................................................................................................................................... 3
III. Discovery Plans. ................................................................................................................................. 5
A. Goal of a Plan ..................................................................................................................................... 5
B. Factors. ............................................................................................................................................... 5
C. Timing. ............................................................................................................................................... 6
IV. Interrogatories..................................................................................................................................... 6
A. Purpose.. ............................................................................................................................................. 6
B. Drafting and Responding.................................................................................................................... 6
C. Wave Concept. ................................................................................................................................. 11
D. Use of Interrogatories. ...................................................................................................................... 11
V. Production of Documents or Objects.................................................................................................... 11
A. Scope. ............................................................................................................................................... 11
B. Drafting Pointers. ............................................................................................................................. 12
C. Production vs. Access....................................................................................................................... 13
D. Screening Documents. ...................................................................................................................... 13
E. Reviewing Appellant's Documents................................................................................................... 15
VI. Requests for Admissions. ................................................................................................................. 17
A. Purpose. ............................................................................................................................................ 17
B. Scope. ............................................................................................................................................... 17
C. Examples. ......................................................................................................................................... 17
D. Time for Response............................................................................................................................ 17
VII. Remedies. ......................................................................................................................................... 18
A. Motions and Board Orders. .............................................................................................................. 18
B. Sanctions. ......................................................................................................................................... 19
VIII. Graded Exercise................................................................................................................................ 20
IX. Conclusion........................................................................................................................................ 20
MAJ Jon Guden Disputes & Remedies
February 2001
CHAPTER 6
WRITTEN AND DOCUMENT DISCOVERY
I. INTRODUCTION.
A. Goal. To obtain what you need to resolve a case as quickly as possible with minimal investment of time and money.
B. Learning Objectives.
1. The student will understand how FOIA and discovery standards compare.
2. The student will understand the importance of a Discovery Plan.
3. The student will understand the basic written discovery tools used in litigation.
II. GENERAL CONSIDERATIONS.
A. Obtaining information other than through discovery.
1. Freedom of Information Act (FOIA) (5 U.S.C. § 552).
a. Contractors can obtain information through a FOIA request. ABA Electromechanical Systems, Inc., NASA BCA No. 1081-13, 83-1 BCA ¶ 16,440 (Appellant may use both FOIA and discovery procedures to obtain information); B.D. Click Co., Inc., ASBCA Nos. 25,609 and 25,972, 83-1 BCA ¶ 16,328.
b. The FOIA is not intended to supplement or displace the rules of discovery. John Doe Agency v. John Doe Corp., 493 U.S. 146 (1989).
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c. As a general notion, information available under the FOIA is likely available through discovery. Culinary Foods, Inc. v. Raychem Corp., 150 F.R.D. 122 (N.D. Ill. 1993).
d. Information unavailable under the FOIA is not necessarily unavailable through discovery. Culinary Foods, Inc. v. Raychem Corp., supra.
(1) Under FOIA, the requesting party's need for the information is irrelevant.
(2) When a privilege is asserted under discovery, the litigant's need for the information is an important factor.
(3) Where discovery privileges are paralleled by certain FOIA exemptions, the balancing test weighing the litigant's need for information against the government's interest in confidentiality should be combined with the policies underlying the FOIA exemption. ACLU v. Brown, 609 F. 2d 277 (7th Cir. 1979).
e. Courts and Boards exercising jurisdiction under the Contract Disputes Act do not have authority to resolve FOIA disputes. Bay Area Crane - Hoist Company, Inc., NASA BCA No. 387-7, 87-2 BCA ¶ 19,828 (Despite allegation that a FOIA request violated the Board's discovery order, the Board declined to issue a protective order or impose sanctions because FOIA is not a discovery procedure within the Board's jurisdiction).
f. The Government must process FOIA requests, even during litigation. Rights under the FOIA are neither increased nor diminished because the requester is a party to litigation. National Presto Industries, Inc. v. U.S., 218 Ct. Cl. 696 (1978).
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g. Local attorneys and trial attorneys must be cognizant of the FOIA requests and responses. To the extent appellant has already received documents under FOIA, it should not seek them again in discovery. Bay Area Crane - Hoist Company, Inc., supra, (Board directed appellant to avoid requesting documents under Rule 15 that it possessed from its FOIA request).
2. The Government requests and obtains information prior to the contracting officer's final decision.
a. DCAA audits.
b. Additional evidence supporting the contractor's claim.
B. Timing of Discovery.
1. The complaint must be filed before discovery may start. ASBCA Rules 14, 15.
2. Methods of discovery may be used in any sequence. However, this is the typical framework for contract litigation:
a. Written interrogatories.
b. Document production.
c. Depositions.
d. Requests for admissions.
C. Rules.
1. Armed Services Board of Contract Appeals (ASBCA).
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a. Rules 14 (Discovery -Depositions), 15 (Interrogatories to Parties, Admission of Facts, and Production and Inspection of Documents), 21 (Subpoenas), and 35 (Sanctions).
b. The ASBCA applies the Federal Rules of Civil Procedure (Fed. R. Civ. P.) when the Board rules are silent on a procedural issue.
c. The rules encourage voluntary discovery. Rule 14(a).
(1) Once the pleadings are filed, discovery is typically left to the parties to control.
(2) A judge, once assigned to a case, typically holds a conference at which the parties discuss discovery needs. The judge will issue an order establishing deadlines.
d. Protective orders.
(1) The Board may make an order to protect a party or person from annoyance, embarrassment, or undue burden or expense.
(2) The order may include limits on scope, method, time, and place for discovery, and provisions for protecting the secrecy of confidential information or documents.
e. Board rulings on discovery issues.
(1) Most discovery rulings are non-binding, unpublished, interlocutory decisions of an individual judge.
(2) The Boards follows the Federal Rules of Civil Procedure. If you can't find a Board case concerning a discovery issue, cite Federal court cases interpreting the Federal Rules.
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2. Court of Federal Claims (COFC).
a. Rules (RCFC) 26-37 (Depositions and Discovery).
b. The rules provide for Discovery conferences. RCFC 26(f). The judge may direct the parties to appear at a conference any time after commencement of the action, and may hold a conference on proper motion by the attorney for any party.
c. The COFC may issue protective orders. RCFC 26(c).
III. DISCOVERY PLANS.
A. Goal of a Plan. Identify what you need to resolve the case. The Discovery Plan is a significant piece of a trial attorney's overall "Business Plan" for litigating the case.
1. See what you have before asking for it from the other side. Inspection of government documents and discussions with key employees is an essential first step.
2. The effort expended in producing a quality contracting officer's final decision can minimize the need for formal discovery.
a. What documents were compiled to address the claim? These documents should be in the Rule 4.
b. Has a DCAA audit been completed?
c. Did the contracting officer discuss issues with key government employees? This information should be in the Trial Attorney's Litigation File (TALF).
B. Factors. The plan varies in each case and is dependent upon the following factors:
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1. Dollar value of the case;
2. Information already in the Government's possession;
3. Number of issues;
4. Government or contractor claim.
C. Timing.
1. Optimally you will develop your plan while answering the complaint. You can amend as required during the course of litigation.
2. The trial attorney should coordinate with the field attorney and contracting officer.
a. Identify Government employees who can fill in information gaps, or identify contractor sources for the information.
b. Discuss the projected time to be invested in discovery.
c. Discuss the projected costs of discovery.
3. The Government should attempt to serve its first set of written discovery on or about the date the answer is filed. At a minimum, the request should include interrogatories and requests for document production.
IV. INTERROGATORIES.
A. Purpose. To identify deponents and location of documents.
B. Drafting and Responding.
1. Drafting Tips.
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a. There is no limit on the number of interrogatories a party may serve on its opponent.1 However, only ask for what you need.
b. Seek factual information. Avoid questions that seek opinions or legal conclusions.
c. Don't use legal terms such as "relevant," as in "provide all relevant documents."
d. Seek only one item of information per interrogatory.
e. Use words and phrases such as "identify," "state the location of," and "list."
f. Instructions and definitions.
(1) If you use, make sure the terms used in the interrogatories are consistent with those in the instructions and definitions.
(2) You may wish to make the instructions available on request. Some parties will answer your interrogatories without requiring instructions.
g. Use subheadings to organize your Interrogatories. For example, "The Complaint" and "The Claim." Reference statements made in the claim and the complaint when asking questions.
h. When seeking the identity of individuals, request current addresses and phone numbers.
i. Request production of documents at the same time you serve interrogatories.
1 The Fed. R. Civ. P 33(a) limits parties to twenty-five (25) interrogatories, to include discrete subparts.
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2. Responding.
a. ASBCA Rule 15. Written interrogatories are to be answered separately in writing, signed under oath and answered or objected to within 45 days after service. The ASBCA may allow a shorter or longer time.
(1) Separately in writing. You can use one of two formats.
(a) Response only.
(b) Interrogatory and response.
(2) Objections.
(a) The burden is on the objecting party to establish a basis for withholding discovery.
(b) Objections should be specific and supported by detailed explanations.
(c) Examples of common objections:
(i) Privileged or otherwise protected material requiring a protective order.
(ii) Relevance.
(iii) Unduly burdensome (i.e., the burden is disproportionate to the need).
(3) Answers.
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(a) Option to produce business records. If the answer may be derived from a business record, and the burden of deriving the answer is substantially the same for both parties, it is sufficient to identify the records from which the answer may be derived. Fed. R. Civ. P. 33(c).
(b) The signature of the attorney constitutes a certification that to the best of the signer's knowledge, information and belief, formed after a reasonable inquiry, the disclosure is complete and correct as of the time it is made. Fed. R. Civ. P. 26(g)(1).
(c) Duty to supplement. Fed. R. Civ. P. 26(e) requires supplementation of responses in the following instances:
(i) When the discovery requested the identity and location of persons having knowledge of discoverable matters;
(ii) When the discovery requested the identity of each person expected to be called as an expert witness at trial, the subject matter on which the expert witness is expected to testify, and the substance of the expert witness' testimony;
(iii) When the party learns that the response is in some material respect incomplete or incorrect and the additional or corrective information has not been made known through the discovery process or in writing;
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(iv) When the court (Board) imposes an order, the parties have an agreement, or at any time prior to trial through new requests for supplementation of prior responses. See W.M. Schlosser Company, Inc., ASBCA No. 44778, 96-2 BCA ¶28,587 (Government timely notified Appellant of identity of expert witness on Board ordered deadline).
(4) Enlargement of time to respond.
(a) Parties typically work out extensions between themselves.
(b) If the opponent does not agree to an extension of time, the requesting party should seek an extension from the Board.
(5) The responses must be signed under oath. Northern Pacific Contractors, Inc., ASBCA No. 49350, 97-1 BCA ¶ 28,769 (Board threatened to dismiss appeal with prejudice for failure to prosecute if appellant failed to submit its answers signed under oath.);
(6) It is not necessary to submit interrogatories or answers to the Board, unless a party wishes to introduce into evidence or have the Board rule on adequacy of a response.
b. COFC. RCFC 33(a).
(1) The COFC requires responses to interrogatories within 30 days after service. It also may allow a shorter or longer time.
(2) The answers are to be answered separately and fully in writing under oath.
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(3) The answers are to be signed by the person making them, and the objections signed by the attorney making them.
C. Wave Concept.
1. Review the responses to the first set of interrogatories.
2. Quickly send a letter to the opponent concerning questions that were not answered satisfactorily.
3. Submit successive rounds of interrogatories as necessary.
4. Keep the interrogatories in numerical order. If your first set of interrogatories ended with number 30, start the second set with number 31.
D. Use of Interrogatories.
1. Introduce interrogatory responses as part of the record upon which the Board will decide the case. Rule 13(a). They are especially useful in record submissions (without a hearing) under Rule 11.
2. A response to an interrogatory can be dispositive. See Polote Corporation, ASBCA No. 31115, 86-1 BCA ¶ 18,640 (Government bound by initial admission to interrogatory despite supplementing response three days before hearing).
3. Responses to interrogatories can be considered in deciding a motion for summary judgment. Adamation, Inc., ASBCA No. 22495, 80-1 BCA ¶ 14,385 (Board granted motion after finding that Appellant's responses established that it had provided no notice to the government of its asserted claims prior to final payment).
V. PRODUCTION OF DOCUMENTS OR OBJECTS.
A. Scope.
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1. Serve only on a party. Use a subpoena duces tecum for non-parties. Rule 21(a)(iii).
2. Third-party documents within the Government.
a. The contracting officer may have to obtain relevant documents from other agencies.
b. Request for the documents should be specific.
3. Equally accessible documents. Generally not required to be disclosed or produced.
B. Drafting Pointers.
1. Documents that may be relevant:
a. Financial records;
b. Bid or proposal documents;
c. Daily logs or notebooks;
d. Purchase orders and invoices.
2. Use an expansive definition of document, e.g. include drafts, nonidentical copies, attachments, annexes, appendices, enclosures, facsimile documents, software, databases, tape recordings, photographs.
3. Request that appellant provide a privileged document log that describes all documents withheld.
4. Don't forget to ask for electronic media. You may need the help of a consultant to find and review this data.
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C. Production vs. Access.
1. Production.
a. Used mostly in small document and pro se cases.
b. Possessor of documents makes copies of the requested documents and sends to requesting party.
2. Access.
a. This is the likely route when dealing with many documents.
b. If you are prepared, this is preferable to having the other side produce documents.
c. The parties should prepare an agreement in advance, addressing the following points:
(1) Where the documents will be made available;
(2) The period of time the documents will be available;
(3) Who will be reviewing the documents;
(4) How the documents will be reproduced;
(5) Who will pay the costs of reproduction;
(6) What to do in case of inadvertent disclosure of privileged or protected documents.
D. Screening Documents.
1. Government Documents.
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a. Before granting access to the appellant, the documents must be screened by counsel. Disclosure of privileged documents, even inadvertently, may result in waiver of the privilege. See Carter v. Gibbs, 909 F.2d 1452 (Fed. Cir. 1990). But see National Helium Corp. v. U.S., 219 Ct. Cl. 612 (1979)(no per se waiver rule for inadvertent disclosure).
(a) An inadvertent disclosure agreement can avoid waiver of a privilege.
(b) Best to get a bilateral agreement, but can put it in a letter to give notice to the other party.
b. Withhold all privileged documents.
(1) Look for documents marked with a protective legend. However, not all documents requiring protection will be so marked, nor will all documents so labeled be entitled to protection.
(2) Look for documents involving attorneys. However, not all correspondence, such as correspondence concerning routine business matters, will receive protection.
(3) For purposes of work product, the ASBCA does "not view the contracting officer's final decision as the automatic line of demarcation between routine contract administration and preparation for litigation." B.D. Click Co., Inc., ASBCA Nos. 25,609 and 25,972, 83-1 BCA ¶ 16,328.
(4) Opinion work product receives greater protection than fact work product. AT&T v. General Services Administration, GSBCA No. 14732, 99-2 BCA ¶ 30,580.
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(5) Some documents may have to be produced after redaction. Sierra Rock v. Regents of Univ. of California, EBCA No. C-9705223, 98-2 BCA ¶ 30,083 (ordering disclosure of certain documents after redacting portions subject to the attorney-client privilege).
c. Withhold third-party proprietary documents until the parties obtain a protective order.
d. Prepare a privileged document log that includes:
(1) Identity of individuals party to the communication;
(2) Date of the document;
(3) Enough information to allow for independent evaluation of the claimed privilege (attorney-client, work product, etc.).
e. Disputed documents may require the Board's in camera review.
E. Reviewing Appellant's Documents.
1. Develop a plan.
a. Identify the quantity of documents.
b. Identify who will review the documents (e.g., contracting officer or specialist, engineers, auditors, experts).
c. Provide guidance on what to look for.
d. Identify the most efficient way to review and tag documents for copying.
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2. Methods of Conducting Document Discovery.
a. Manual.
(1) Method most often used.
(2) Parties look at documents and tag with tape flags, BATE stamp, or similar method.
(3) Ensure you have a list describing the documents marked, to compare to the documents actually received.
b. Automated.
(1) Useful when trying a large document case.
(2) Requires special equipment and/or personnel.
(3) Consider hiring a commercial firm to do this.
(4) Can scan full text of documents, or code a document (by issue, witness name, etc.)
3. Receipt of Documents.
a. Compare documents received with documents marked.
b. Decide whether to pursue withheld documents after reviewing appellant's rationale for withholding.
c. Decide which documents you will use to conduct depositions, supplement the Rule 4 file, introduce at the hearing, or archive.
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VI. REQUESTS FOR ADMISSIONS.
A. Purpose. To expedite trial by narrowing the issues to be litigated. Rust Mfctg., Inc., ASBCA No. 27511, 84-3 BCA ¶ 17,518.
B. Scope.
1. Requests for Admissions should be matters of fact.
2. A proper request can also seek admission of the authenticity of a document.
3. Facts that are in dispute are not proper subjects for a Request for Admission. Rust Mfctg., Inc., ASBCA No. 27511, 84-3 BCA ¶ 17,518.
4. Require the answering party to state reasons for its denial of a Request for Admission, and to produce any documents relied upon in making the denial.
C. Examples.
1. Admit or deny that Contract DABA60-99-C-0001 required XYZ Corporation to deliver 50 widgets to Fort Swampy on 1 July 2000.
2. Admit or deny that XYZ Corporation failed to deliver 50 widgets under Contract DABA60-99-C-0001 to Fort Swampy on 1 July 2000.
D. Time for Response.
1. ASBCA.
a. Responses or objections are due within 45 days of service, or a shorter or longer time as decided by the Board.
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b. Failure to timely respond could result in the admission of the factual statements in the requests. The party seeking the sanction must show prejudice due to the late response. Rust Mfctg., Inc., ASBCA No. 27511, 84-3 BCA ¶ 17,518 (Board refused to deem facts admitted where government was one month late in responding and the appellant showed no prejudice).
2. COFC. Responses or objections are due within 30 days of service, or a shorter or longer time as decided by the Court.
VII. REMEDIES.
A. Motions and Board Orders.
1. Motions to Compel.
a. Requests Board to order the party to answer discovery or produce documents.
b. Requesting party should articulate the time elapsed since serving discovery on the nonresponsive party, and the efforts made to obtain discovery responses.
2. Motion to Dismiss for Failure to Prosecute. ASBCA Rule 31.
a. A party is required under ASBCA Rule 31 to take steps showing its intention to prosecute or defend the appeal.
b. Failure of appellant to respond to notices or comply with orders from the Board should lead to a motion to dismiss.
c. The Board will generally allow the party an opportunity to cure the defect or show cause before dismissing the case with prejudice. Failure to respond at this stage can lead to dismissal. Ellis Constr. Co., Inc., ASBCA No. 50091, 98-1 BCA ¶ 29,552.
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B. Sanctions.
1. ASBCA Rule 35. "If any party fails or refuses to obey an order issued by the Board, the Board may then make such order as it considers necessary to the just and expeditious conduct of the appeal."
2. A board order is not a prerequisite for the application of sanctions. Charles G. Williams Constr., Inc., ASBCA No. 33766, 89-2 BCA ¶ 21,733 (sanctions appropriate where Air Force falsely denied that it conducted a technical evaluation of appellant's claims).
3. Types of sanctions.
a. Dismiss case with prejudice. This sanction is a drastic step which is employed only in the most extreme cases. Ellis Constr. Co., Inc, supra; Tech-Tron Constructors, ASBCA No. 46367, 97-1 BCA ¶ 28,746 (Appellant failed to submit affidavit with response to motion).
b. Bar offending party from using withheld evidence. Charles G. Williams Constr., Inc., supra.
c. Preclude party from presenting evidence that was subject of interrogatory. American Ballistics Co., Inc., ASBCA No. 38578, 92-3 BCA ¶ 25,056.
d. If the evidence sought through an interrogatory is first disclosed at hearing, the party seeking the evidence should move to strike. Grumman Aerospace Corp., ASBCA Nos. 46834, 48006, 51526, 1999 ASBCA LEXIS 174 (Board declined to strike hearing testimony).
e. Treat unanswered requests for admissions as admitted. American Ballistics Co., Inc, supra.
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f. Adverse inferences due to lost or destroyed documents. Nation-Wide Check v. Forest Hills Distributors, 692 F.2d 214 (1st Cir. 1982); Hughes Aircraft Company, ASBCA No. 46321, 97-1 BCA ¶ 28,972; Dalmo Victor Division of General Instrument Corporation, ASBCA No. 39718, 92-3 BCA ¶ 25,176.
g. Costs. The Board does not have the authority to impose monetary sanctions. E-Systems, Inc., ASBCA No. 46111, 97-1 BCA ¶ 28,975.
VIII. GRADED EXERCISE.
A. Written discovery is due at 0800 on 13 March 2001.
B. Your discovery request shall include interrogatories, requests for production, and requests for admissions.
C. There is no minimum page requirement for this assignment. Fifteen pages is the maximum.
1. A submission of between five and ten pages likely will be sufficient, assuming the requests are specific and not simply boilerplate.
2. You need not include instructions with your request. If you choose to include instructions, they will not count toward your 15-page limit.
3. While the ASBCA does not place a limit on the number of interrogatories that may be posed, you want to be sure each interrogatory and request has a purpose. Quality, not quantity, is the key to good written discovery.
D. This appeal will be decided on the record pursuant to Rule 11. Bear that in mind when crafting your discovery.
IX. CONCLUSION.
CHAPTER 7
DEPOSITIONS
I. INTRODUCTION .................................................................................................................. 1
A. What Is a Deposition?...............................................................................................................1
B. Reasons for Taking Depositions...............................................................................................1
C. Additional Considerations ........................................................................................................3
II. RULES FOR CONDUCTING DEPOSITIONS IN CASES BEFORE THE U.S. COURT OF FEDERAL CLAIMS........................................................................ 3
A. General Provisions Governing Discovery................................................................................3
B. Persons Before Whom Depositions May Be Taken ................................................................5
C. Stipulations Regarding Discovery Procedures.........................................................................5
D. Depositions upon Oral Examination ........................................................................................6
E. Use of Depositions in Court Proceedings ..............................................................................10
F. Failure to Cooperate in Discovery..........................................................................................11
G. Expert Witnesses.....................................................................................................................14
III. RULES FOR CONDUCTING DEPOSITIONS IN CASES BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS.................................... 15
A. General Policy and Protective Orders ....................................................................................15
B. Timing .....................................................................................................................................15
C. Use as Evidence ......................................................................................................................16
D. Expenses..................................................................................................................................16
E. Subpoenas ...............................................................................................................................17
F. Motions ...................................................................................................................................19
IV. CONDUCTING DEPOSITIONS......................................................................................... 20
A. The Ground Rules...................................................................................................................20
B. Taking Depositions .................................................................................................................21
C. Defending Depositions ...........................................................................................................25
V. LIMITS ON DISCOVERY.................................................................................................. 28
A. Relevance ................................................................................................................................28
B. Undue Burden .........................................................................................................................28
C. Attorney Work Product Rule..................................................................................................29
D. Attorney-Client Privilege .......................................................................................................29
VI. DISCOVERY EXPENSES .................................................................................................. 29
A. Funding Issues ........................................................................................................................29
B. Contracting Issues...................................................................................................................29
VII. EXPERT WITNESSES ........................................................................................................ 30
A. The Government’s Expert Witness(es) ..................................................................................30
B. The Appellant’s Expert Witness(es).......................................................................................30
VIII. CONCLUSION..................................................................................................................... 32
MAJ John Siemietkowski Disputes & Remedies
February 20, 2001
CHAPTER 12
DEPOSITIONS
I. INTRODUCTION.
A. What Is a Deposition?
1. A deposition is “[t]he testimony of a witness taken upon oral questions or written interrogatories . . . reduced to writing . . . and intended to be used in preparation and upon the trial of a civil action or criminal prosecution.” BLACK’S LAW DICTIONARY 440 (6th ed. 1990).
2. A deposition is a flexible, spontaneous, and dynamic discovery tool.
B. Reasons for Taking Depositions.
1. Trial/Hearing Preparation.
a. Depositions force you to start preparing your case.
b. Depositions give you direct, unfiltered access to the other party’s witnesses.
c. Depositions allow you to probe the other party’s position on key issues.
d. Depositions allow you to seek out additional evidence.
e. Depositions allow you to minimize the possibility of surprise testimony at the trial/hearing by exhausting the knowledge of the other party’s witnesses.
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f. Depositions allow you to gauge the skills, traits, and demeanor of the other party’s witnesses.
g. Depositions allow you to secure admissions and “lock in” testimony.
2. Motion Practice. Depositions provide a factual record for motions.
3. Settlement.
a. Depositions force both sides to analyze the strengths and weaknesses of their case.
b. Depositions may narrow the issues in dispute.
c. Depositions may influence the other party by:
(1) Highlighting damaging or unflattering evidence; or
(2) Demonstrating the expense and emotional rigor of protracted litigation. See Time Contractors, J.V., DOT CBA Nos. 1669, 1691, 86-1 BCA ¶ 18,559 (refusing to allow the appellant to shift deposition costs to the government based on a “naked allegation of financial hardship).
4. Trial/Hearing.
a. Depositions preserve the testimony of witnesses who may not be able to appear at the trial/hearing because of age, illness, or distance.
b. Depositions provide a basis for contradicting or impeaching witnesses at the trial/hearing.
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C. Additional Considerations.
1. Depositions are expensive and time consuming.
2. Friendly Witnesses. You should avoid deposing a friendly witness unless you need to preserve the witness’s testimony.
3. Hostile Witnesses. If a hostile witness has already given you a detailed statement in the presence of a third party, you may not want to depose the witness.
II. RULES FOR CONDUCTING DEPOSITIONS IN CASES BEFORE THE U.S. COURT OF FEDERAL CLAIMS.
A. General Provisions Governing Discovery. FED. R. CIV. P. 26. COFC Rule 32.
1. Methods of Discovery. FED. R. CIV. P. 26(a)(5). The parties may obtain discovery by oral or written depositions.
2. Discovery Scope and Limits. FED. R. CIV. P. 26(b).
a. The parties may discover any matter that is:
(1) Not privileged; and
(2) Relevant to the subject matter of the pending action.1
1 The information sought does not have to admissible at the trial. It only has to be “reasonably calculated to lead to the discovery of admissible evidence.” FED. R. CIV. P. 26(b)(1).
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b. The court may limit discovery if:
(1) The discovery sought is unreasonably cumulative or duplicative;
(2) The party seeking the discovery can obtain it from a more convenient, less burdensome, or less expensive source;
(3) The party seeking the discovery has had ample opportunity to obtain the information sought; or
(4) The burden or expense of the proposed discovery outweighs its likely benefit.
3. Protective Orders. FED. R. CIV. P. 26(c). The court in the district where a party plans to take a deposition may issue an order “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”
a. The party or a person from whom the discovery is sought must request the protective order.
b. The moving party must certify that he/she has attempted to resolve the dispute without court action.
c. The moving party must show “good cause.”
4. Timing and Sequence of Discovery. FED. R. CIV. P. 26(d).
a. The parties may not seek discovery from any source until they have met and conferred pursuant to Federal Rule of Civil Procedure (FRCP) 26(f).2
2 A person may take a deposition before bringing an action in court under certain circumstances. See FED. R. CIV. P. 27(a).
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b. After the parties have met and conferred pursuant to FRCP 26(b), the parties may:
(1) Conduct discovery simultaneously; and
(2) Use any of the discovery methods available to them in any sequence.3
5. Supplementation of Responses. FED. R. CIV. P. 26(e). See W.M. Schlosser Co., Inc., ASBCA No. 44778, 96-2 BCA ¶ 28,587 (refusing to impose sanctions after finding no evidence that the government purposefully waited to the last permissible moment to inform the appellant that it intended to retain an expert witness).
B. Persons Before Whom Depositions May Be Taken. FED. R. CIV. P. 28. See FED. R. CIV. P. 29 and FED. R. CIV. P. 30(b)(4).
1. A party within the United States must take a deposition “before an officer authorized to administer oaths by the laws of the United States or of the place where the examination is held . . . .”
2. A person who has a personal, professional, or financial interest in the action may not take a deposition.
C. Stipulations Regarding Discovery Procedures. FED. R. CIV. P. 29. The parties may stipulate regarding:
1. The person(s) before whom the parties will take depositions;
2. The time and place where the parties may take depositions;
3. Any required notice;
3 Upon motion, the court may dictate the sequence or order of the discovery. FED. R. CIV. P. 26(d).
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4. The manner in which the parties may take depositions; and
5. The manner in which the parties may use depositions.
D. Depositions upon Oral Examination.4 FED. R. CIV. P. 30.
1. Who May a Party Depose? FED. R. CIV. P. 30(a).
a. As a general rule, a party may depose “any person.”
b. A party must obtain leave of the court, however, if:
(1) The party wants to depose a prisoner;
(2) The party wants to take more than 10 depositions;
(3) The party wants to depose a person who has already been deposed in the case; or
(4) The party wants to depose a person before the parties have met and conferred regarding a proposed discovery schedule.
2. Notice of Examination. FED. R. CIV. P. 30(b).
a. The party seeking the deposition must give reasonable notice, in writing, to every other party to the action.
4 A party can also take depositions upon written questions; however, this rarely occurs. FED. R. CIV. P. 31. See FED. R. CIV. P. 30(C).
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b. The notice must state:
(1) The time and place where the party will take the deposition;
(2) The name and address of each person the party plans to depose;5 and
(3) The method the party plans to use to record the deponent’s testimony (e.g., sound, sound-and-visual, stenographic means, etc.).6
c. The notice may include a request for the production of documents. FED. R. CIV. P. 30(b)(5).
3. Expenses. FED. R. CIV. P. 30(b)(2) and (g).
a. The party taking the deposition must pay the cost of recording the deposition.
b. If the party that noticed the deposition fails to appear (or fails to subpoena the witness and the witness fails to appear), the court may order that party to pay the other party’s reasonable expenses, including reasonable attorney’s fees. See FED. R. CIV. P. 37(d).
4. Telephonic Depositions. FED. R. CIV. P. 30(b)(7). The parties may agree to take a deposition by telephone or other remote electronic means. See Time Contractors, J.V., supra (urging the parties to consider using telephonic depositions).
5 If the party does not know a deponent’s name and address, the party must provide a general description that identifies the deponent or the class/group to which the deponent belongs. FED. R. CIV. P. 30(b)(1). 6 Another party may designate an additional method of recording the deponent’s testimony, provided the party is willing to pay for it. FED. R. CIV. P. 30(b)(3).
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5. Examination and Cross-Examination. FED. R. CIV. P. 30(c).
a. The witness must testify under oath.
b. Objections. See FED. R. CIV. P. 30(d)(1); FED. R. CIV. P. 32(d).
(1) The officer taking the deposition will note any objections on the record.
(2) A party must state its objections in a concise, non-argumentative, and non-suggestive manner.
(3) A party may only instruct a deponent not to answer to:
(a) Preserve a privilege;
(b) Enforce a court-ordered limitation; or
(c) Present a motion showing that the examination is being conducted:
(i) In bad faith; or
(ii) A manner calculated to unreasonably annoy, embarrass, or oppress the deponent.
(4) Subject to FRCP 28(b) and FRCP 32(d)(3), a party may object to the use of deposition testimony at a trial/hearing for the same reasons that the party could object if the witness was present and testifying.
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(a) A party will waive the following errors, irregularities, and objections unless the party raises them promptly:
(i) Errors and irregularities in the deposition notice;
(ii) Objections based on the qualifications of the officer before whom the party is taking the deposition; and
(iii) Errors or irregularities in the manner in which the testimony was transcribed, or the deposition prepared, signed, certified, sealed, indorsed, transmitted, or filed.
(b) A party will waive the following errors, irregularities, and objections if a timely objection would have obviated, removed, or cured the error, irregularity, or grounds for objection:
(i) Objections based on the manner in which the deposition was taken;
(ii) Objections based on the form of the questions or answers;
(iii) Errors or irregularities in the oath or affirmation; and
(iv) Objections based on the conduct of the parties.
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(c) A party will not waive the following objections unless a timely objection would have obviated or removed the grounds for objection:
(i) Objections based on the competency of the witness; or
(ii) Objections based on the competency, relevancy, or materiality of the testimony.
6. Review of Transcript by Witness. FED. R. CIV. P. 30(e).
a. If the deponent or a party requests the deponent to review the transcript, the deponent will have 30 days to do so.
b. The deponent may make changes; however, the deponent must sign a statement that details the deponent’s reasons for making them.
E. Use of Depositions in Court Proceedings. FED. R. CIV. P. 32.
1. Any party may use a witness’s deposition testimony to contradict or impeach the witness’s in-court testimony.
2. An adverse party may use a party’s deposition testimony for any purpose. See Ryan-Walsh, Inc. v. United States, 39 Fed. Cl. 305 (1997) (permitting the plaintiff to offer the depositions of the administrative contracting officer and the assistant contracting officer as substantive testimony at trial because they were party-opponent admissions); Weaver-Bailey Contractors, Inc. v. United States, 19 Cl. Ct. 474 (1990) (admitting the deposition testimony of two government employees over the government’s “strenuous objections”).
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3. Any party may use a witness’s deposition testimony for any purpose if the court finds that:
a. The witness is dead. See Ryan-Walsh, Inc. v. United States, 39 Fed. Cl. 305 (1997) (permitting the plaintiff to offer a deceased witness’s deposition as substantive testimony at trial).
b. The witness is more than 100 miles from the place of the trial/hearing.
c. The witness is unable to attend or testify because of age, illness, infirmity, or imprisonment. See International Gunnery Range Servs, Inc., ASBCA No. 34152, 90-1 BCA ¶ 22,601 (permitting the government to introduce the deposition testimony of a witness who had suffered a heart attack and was advised by his doctor not to testify at the hearing).
d. The party offering the deposition testimony could not procure the witness’s attendance by subpoena.
e. Exceptional circumstances justify the use of the deposition testimony in the interest of justice. But see Ryan-Walsh, Inc. v. United States, 39 Fed. Cl. 305 (1997) (refusing to permit the plaintiff to offer depositions as substantive testimony based solely on cost, trial efficiency, or speculation that the government may not call the witness as planned).
F. Failure to Cooperate in Discovery. FED. R. CIV. P. 37.
1. Motions to Compel. FED. R. CIV. P. 37(a)(2).
a. If a deponent fails to answer a question during a deposition, the party asking the question may move for an order compelling an answer.
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(1) The moving party must certify that it has made a good faith effort to confer with the deponent—or the person responsible for the deponent’s failure to answer the question—in an attempt to resolve the situation without court action.
(2) The party asking the question may either complete or adjourn the deposition.
b. A party may treat an evasive or incomplete response as a failure to answer.
2. Expenses. FED. R. CIV. P. 37(a)(4).
a. If the motion to compel is granted, the court may require the deponent—or the party responsible for the deponent’s failure to answer the question—to pay the moving party’s reasonable expenses, including attorney’s fees.
b. If the motion to compel is denied, the court may:
(1) Issue a protective order; and
(2) Require the moving party to pay the deponent’s—or the opposing party’s—reasonable expenses, including attorney’s fees.
c. If the motion to compel is granted in part and denied in part, the court may:
(1) Issue a protective order; and
(2) Apportion the parties’ reasonable expenses in a just manner.
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3. Sanctions. FED. R. CIV. P. 37(b).
a. Sanctions by Court in District Where Deposition Taken. FED. R. CIV. P. 37(b)(1). If a deponent fails to answer a question after being directed to do so by the court, the court may hold the deponent in contempt of court.
b. Sanctions by Court in Which Action Pending. FED. R. CIV. P. 37(b)(2). If a party fails to provide or permit discovery after being directed to do so, the court may take one or more of the following actions:
(1) Order that designated facts be taken as established for purposes of the action.
(2) Refuse to allow the disobedient party to support or oppose designated claims or defenses.
(3) Refuse to allow the disobedient party to introduce designated facts into evidence. See Thomas S. Rhoades and Steven L. Schluneger, ENG BCA Nos. 6025, 6062, 6097, 95-1 BCA ¶ 28,215 (refusing to permit Mr. Schluneger to testify at the hearing because of his failure to comply with a Board order to make himself available for an oral deposition).
(4) Strike pleadings in whole or in part.
(5) Stay further proceedings until the order is obeyed.
(6) Dismiss the action in whole or in part. But see Thomas S. Rhoades and Steven L. Schluneger, ENG BCA Nos. 6025, 6062, 6097, 95-1 BCA ¶ 28,215 (refusing to dismiss the appellants’ appeal despite its failure to comply with various discovery requests because two of the three appeals were principally subcontractor claims, and the third appeal was a government claim).
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(7) Enter a default judgment against the disobedient party.
(8) Hold the disobedient party in contempt of court.
(9) Order the disobedient party—or the attorney advising that party—to pay the other party’s reasonable expenses, including attorney’s fees.
G. Expert Witnesses. FED. R. CIV. P. 26(b)(4).
1. A party may depose any person the other party has identified as an expert whose opinions that party may present at the trial.7
2. The party seeking the deposition is entitled to a copy of any written report the expert prepared pursuant to FRCP 26(a)(2) before the deposition begins.8
3. The party seeking the deposition must pay the expert a reasonable fee for the time the expert spent preparing for and attending the deposition unless a manifest injustice would result. See Copy Data Sys, Inc., ASBCA No. 44058, 98-1 BCA ¶ 29,390 (requiring the government to pay the appellant’s expert a reasonable expert witness fee as a “matter of basic fairness” because the government noticed the deposition to prepare for its own cross-examination of the witness)
7 A party may also depose experts that the other party does not intend to call as witnesses under certain “exceptional circumstances” (e.g., where the party seeking to depose the experts cannot obtain the facts known or the opinions held by the experts by other means). FED. R. CIV. P. 26(a)(4)(B). See FED. R. CIV. P. 35(b); cf. Donald C. Hubbs, Inc., DOT CBA Nos. 2012, 2013, 2014, 2015, 89-2 BCA ¶ 21,740 (requiring the appellant to give the government access to test results conducted by a non-testifying expert upon which a testifying expert relied, but declining to permit the government to actually depose the non-testifying expert). 8 FRCP 26(a)(2)(B) requires witnesses retained or employed to provide expert testimony to prepare and sign a written report that contains: (1) a complete statement of all of the witness’s opinions; (2) the basis and reasons for those opinions; (3) the data or other information the witness considered in forming those opinions; (4) any exhibits the witness plans to use to summarize or support those opinions; (5) the witness’s qualifications, including a list of all of the publications authored by the witness during the preceding 10 years; (6) the compensation the witness is receiving for the witness’s study and testimony; and (7) a list of any other cases in which the witnesses has testified during the preceding 4 years. FED. R. CIV. P. 26(a)(2)(B).
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III. RULES FOR CONDUCTING DEPOSITIONS IN CASES BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS
A. General Policy and Protective Orders. ASBCA Rule 14(a).
1. The Board encourages the parties to engage in voluntary discovery procedures.
2. The Board may issue an order “to protect a party or person from annoyance, embarrassment, or undue burden or expense.”
a. The order may limit the scope, method, time, and place for discovery. See Meredith Relocation Corp., GSBCA Nos. 8956, 9124, 9295, 9844, 10077, 90-2 BCA ¶ 22,747 (refusing to grant the appellant’s motion for a blanket order permitting it to take depositions via videotape over the objection of the deponent).
b. The order may also include provisions for protecting the secrecy of confidential information or documents.
B. Timing. ASBCA Rules 14(b) and (c).
1. The parties may start taking depositions as soon as:
a. The Board dockets the appeal; and
b. One of the parties (normally the Appellant) files the complaint.
2. The parties will generally agree to a voluntary deposition schedule; however, either party may request the Board to order depositions and impose a schedule.9
9 The application for an order must specify whether the deposition is a discovery deposition or an evidentiary deposition. ASBCA Rule 14(b).
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a. The Board may order the deposition of “any person.”
b. The Board may order oral or written depositions.
C. Use as Evidence. ASBCA Rule 14(d).
1. The Board will not consider deposition testimony as evidence in a hearing until the testimony is offered and received.
a. As a general rule, the Board will not receive deposition testimony in a hearing if the witness is present and available to testify. See International Gunnery Range Services, Inc., ASBCA No. 34152, 90-1 BCA ¶ 22,601 (permitting the government to introduce the deposition testimony of a witness who had suffered a heart attack and was advised by his doctor not to testify at the hearing).
b. A party, however, may use a witness’s deposition testimony to contradict or impeach the witness’s hearing testimony.
2. The Board may receive deposition testimony to supplement the record if the parties agree to submit the case on the written record pursuant to ASBCA Rule 11.
D. Expenses. ASBCA Rule 14(e). Each party must bear its own expenses. See Duckels Constr. Co., AGBCA No. 89-1-218-1, 90-1 BCA ¶ 22,955 (requiring the government to pay all of the costs of a deposition it initiated, even though the appellant’s cross-examination allegedly consumed 61% of the total deposition time); Time Contractors, J.V., supra (refusing to allow the appellant to shift deposition costs to the government based on a “naked allegation of financial hardship); cf. Copy Data Sys, Inc., supra (requiring the government to pay the appellant’s expert a reasonable expert witness fee as a “matter of basic fairness” because the government noticed the deposition to prepare for its own cross-examination of the witness).
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E. Subpoenas. ASBCA Rule 14(f) and ASBCA Rule 21.
1. The Board expects the parties to cooperate by:
a. Making witnesses and evidence under their control available without the issuance of a subpoena; and
b. Securing the voluntary attendance of third-party witnesses.
2. Either party may request the Board to issue a subpoena pursuant to ASBCA Rule 21 if a subpoena is necessary to ensure the attendance of a witness at a deposition.
a. Administrative Requirements. ASBCA Rule 21(a) and (c).
(1) The party requesting the subpoena must do so in writing.
(2) The party requesting the subpoena must normally submit the request 15 days before the scheduled deposition date.10
(3) The party requesting the subpoena must state the reasonable scope and general relevance of the testimony or evidence sought.
b. Service. ASBCA Rule 21(f).
(1) The party requesting the subpoena must arrange for service.
(2) The subpoena may be served by:
(a) A U.S. marshal or deputy marshal; or
10 The Board may honor a “late” request for a subpoena. ASBCA Rule 21(c)(ii).
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(b) Any person who is:
(i) Not a party; and
(ii) More than 18 years of age.
(3) The person serving the subpoena must:
(a) Personally deliver a copy of the subpoena to the witness; and
(b) Tender the allowance and travel fees specified in 18 U.S.C. § 1821.11
c. Refusal to Obey a Subpoena. ASBCA Rule 21(g).
(1) The Board does not have any direct contempt power over a witness who fails to obey a subpoena.
(2) If a person refuses to comply with a subpoena, the Board may apply for an order requiring the person to appear and give testimony or produce evidence.12
(3) If the person refuses to comply with the order, the court that issued the order may punish the person for contempt.
d. Requests to Quash or Modify a Subpoena. ASBCA Rule 21(d).
(1) A party may move to quash a subpoena within 10 days of service, but no later than the time specified in the subpoena for compliance.
11 The government does not have to tender the allowance and travel fees in advance. ASBCA Rule 21(f)(2). 12 The Board applies through the Attorney General to the United States District Court for the district where the person resides, is found, or transacts business. ASBCA Rule 21(g).
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(2) The Board may quash a subpoena for good cause (e.g., where the subpoena is unreasonable and/or oppressive). See W.G. Yates & Sons Constr. Co., ASBCA Nos. 49398, 49399, 98-1 BCA ¶ 29,655 (finding “no compelling argument” to grant a motion to quash a subpoena compelling the presence of the appellant’s “professional claims preparer” for a deposition); see also Truswal Sys. Corp. v. Hydro-Air Eng’g, Inc., 813 F.2d 1207 (Fed. Cir. 1987 (concluding that the district court abused its discretion when it quashed the plaintiff’s motion based solely on the plaintiff’s failure to cite case authority to support its discovery of sales information from a nonparty witness).
F. Motions. ASBCA Rule 5(b). The Board may entertain and rule upon “appropriate motions.”
1. Motions to Compel. If you cannot resolve your dispute without judicial intervention, ask the Board to issue an order requiring the opposing party to respond by a specified date. See American Telephone & Telegraph Co., Federal Sys. Advanced Tech., DOT CBA No. 2479, 94-1 BCA ¶ 26,305 (granting the government’s motion to compel the testimony of a witness after the witness’s attorney inappropriately directed the witness not to answer the government’s questions); Tera Advanced Servs. Corp., GSBCA No. 6713-NRC, 84-1 BCA ¶ 16,936 (granting the government’s motion to compel the testimony of three witnesses despite the appellant’s claim of attorney-client privilege); cf. Nero & Assocs., Inc., GSBCA No. 6484-ED, 83-1 BCA ¶ 16,174 (noting that the government cannot refuse to permit the appellant to depose government witnesses based on its unilateral perception that the appellant provided evasive or incomplete answers to its interrogatories).
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2. Motions for Sanctions. ASBCA Rule 35. Seek sanctions if the opposing party fails to comply with a discovery order. See Space Craft, Inc., ASBCA No. 47997, 96-2 BCA ¶ 28,485 (refusing to permit the appellant to present testimonial or documentary evidence during the hearing because the appellant refused to make its president available for a deposition); But cf. Taisei Rotec Corp., ASBCA No. 50669, 98-2 BCA ¶ 30,070 (refusing to grant the appellant’s motion to dismiss absent a Board order requiring the government to produce documents, answer interrogatories, or make witnesses available); W.M. Schlosser Co., Inc., ASBCA No. 44778, 96-2 BCA ¶ 28,587 (stating that “[e]xclusion of evidence, such as expert witness testimony is a drastic action which generally should only occur when bad faith or willfulness in failing to comply with a court order is shown); Praught Constr. Corp., ASBCA No. 46135, 96-1 BCA ¶ 28,058 (refusing to grant the appellant’s motion for a default judgment absent a Board order requiring the government to produce documents or otherwise furnish discovery).
IV. CONDUCTING DEPOSITIONS.
A. The Ground Rules.
1. There are no generally accepted ground rules for conducting depositions.
2. Therefore, you should:
a. Review the ground rules on the record at the beginning of every deposition;
b. Make sure you know and understand the ground rules before the deposition begins; and
c. Make sure the appellant (and the appellant’s attorney) knows and understands the ground rules before the deposition begins.
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B. Taking Depositions.
1. Your goal is to expose biases and obtain admissions.
2. Prepare for a deposition like you would prepare for a hearing.
a. Decide the purpose of the deposition.
b. Do background research.
c. Decide who to depose and when to depose them.
d. Decide where to conduct the deposition.
e. Decide how to conduct the deposition (e.g., oral vs. written depositions; personal vs. telephonic depositions; etc.).
f. Decide whether to negotiate any stipulations.
(1) Negotiating stipulations in advance may avert conflicts and avoid delays during the deposition.
(2) The parties may agree to take a deposition before any person, at any time, at any place, upon any notice, and in any manner. See FED. R. CIV. P. 29.
(3) Other common stipulations include:
(a) Reserving all objections except as to form;
(b) Waiving the requirement to sign the transcript; and
(c) Permitting the deponent to sign the transcript before any notary.
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g. Prepare a loose outline and “witness sheet.”
h. Organize your documents.
(1) The use of documents can make or break a deposition.
(2) Mark documents in advance, if possible.
(3) Ensure that you have an adequate number of clean, identical, and legible copies of each document you plan to use during the deposition.
i. Organize your deposition notebook.
(1) Your deposition notebook should contain a scripted opening, your outline, and copies of the documents/exhibits you plan to use during the deposition.
(2) Update your deposition notebook after each deposition.
j. If you anticipate problems, provide the Board with written notice of the deposition schedule and arrange to have a judge available to resolve any conflicts.
3. Examining the Witness.
a. Create a relaxed atmosphere.
(1) Be friendly and try to establish a rapport with the witness.
(a) Maintain eye contact.
(b) Demonstrate your interest in what the witness is saying.
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(c) Ask the witness to help you understand difficult concepts/terms.
(2) Do not fight with opposing counsel.
b. General Strategies/Techniques.
(1) Work from a loose outline.
(a) You should have a list of the topics you want to cover, but do not insist on covering them in any particular order.
(b) Let the witness dictate the order.
(2) Let the witness ramble.
(3) Allow a moment of silence after each answer. Some witnesses cannot stand silence and will fill the void by expanding their answers.
(4) Listen!!
c. Suggested Order/Pattern of Questioning.
(1) Begin by asking the witness broad, open-ended questions that permit the witness to tell a story (e.g., who, what, where, when, how).
(2) Follow-up with specific questions that commit the witness to a particular position or force an admission.
(3) Wrap up with questions that pin the witness down.
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d. Avoiding Late Recollections by the Witness.
(1) Ask the witness about any documents the witness reviewed to prepare for the deposition.
(2) Ask the witness about other things that might refresh the witness’s memory.
e. Dealing with Obstreperous Opponents.
(1) If your opposing counsel engages in objectionable behavior (e.g., angry outbursts, threatening gestures, continuous objections calculated to disrupt your examination, etc.):
(a) Describe what is your opposing counsel is doing on the record.
(b) Repeat the description as many times as necessary to compel your opposing counsel to discontinue the objectionable behavior.
(c) Consider taking a break to clear the air.
(2) If your opposing counsel persists, make a motion to compel and/or a motion for sanctions.
f. Miscellaneous Tips.
(1) Maintain control.
(a) Do not permit your opposing counsel to bully you out of a legitimate question.
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(b) Do not permit your opposing counsel’s objections to distract you from gathering discoverable information. Note the objections for the record and continue.
(c) Do not explain your rationale for asking a particular question if you can avoid it.
(d) Do not forfeit legitimate areas of inquiry to be agreeable or accommodate the witness’s or your opposing counsel’s schedule. Postpone the deposition and finish it later, if necessary.
(2) Stay on the record as much as possible.
(3) Remember that you are making a written record.
(a) Be careful with documents and gestures.
(b) Avoid showmanship and theatrics.
C. Defending Depositions.
1. You must fully defend the government’s position at every deposition.
2. Your goal is should be to:
a. Protect the witness from your opponent’s clever tricks; and
b. End the deposition as quickly as possible with as little useful information on the record as possible.
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3. Prepare your witness in advance.
a. Make sure the witness is thoroughly familiar with the parties’ claims and defenses.
b. Discuss the deposition process.
c. Teach the witness the “golden rules.”
(1) Tell the truth.
(2) Think before you speak.
(3) Answer the question, but do not volunteer information.
(4) Listen carefully.
(5) Do not answer questions that you do not understand.
(6) Beware of tricky questions.
(7) Do not advocate the government’s case.
(8) Do not guess or speculate.
(9) Examine documents and exhibits carefully and completely before you answer questions about them.
(10) Do not argue with the appellant’s attorney.
(11) Correct mistakes as soon as possible.
d. Do a “dry run.”
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4. Protect your witness during the deposition.
a. Take regular breaks.
b. Make appropriate objections . . . BUT
(1) Do not coach the witness; and
(2) Do not end the deposition (or direct the witness not to answer a question) unless you have no choice.
c. Move to limit or end the deposition pursuant to FRCP 30(d) if your opposing counsel is conducting the deposition:
(1) In bad faith; or
(2) In a manner intended to annoy, embarrass, or oppress the deponent.
5. Do not cross-examine your own witness unless:
a. You know the witness will not be available at the hearing;
b. There are matters on the record that require correction or clarification; or
c. A brief examination will resolve an important point in the government’s favor.
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V. LIMITS ON DISCOVERY.
A. Relevance. See FED. R. CIV. P. 26(b)(1).
1. For discovery purposes, information is “relevant” if it:
a. Concerns the subject matter of the appeal; or
b. Is reasonably likely to lead to the discovery of admissible evidence.
2. This is a very LOW standard.
B. Undue Burden. See FED. R. CIV. P. 26(b)(1).
1. The Board will weigh the requesting party’s need against the burden on the other party.
2. In so doing, the Board may consider:
a. The size and complexity of the appeal;
b. The amount in controversy;
c. The likelihood that the length of the hearing will be reduced, trial presentations simplified, or substantive settlement negotiations advanced; and
d. Any limitations on the parties’ resources.
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C. Attorney Work Product Rule. See FED. R. CIV. P. 26(b)(3). This privilege protects work done for a party in anticipation of litigation. See generally B.D. Click Co., Inc., ASBCA Nos. 25609, 25972, 83-1 BCA ¶ 16,328; Ingalls Shipbldg. Div., Litton Sys., Inc., ASBCA No. 17717, 73-2 BCA ¶ 10,205. But see W.G. Yates & Sons Constr. Co., supra (finding no evidence to support the appellant’s claim that the opinions of the appellant’s “professional claims preparer” were covered by either the attorney-client privilege or the work product privilege).
D. Attorney-Client Privilege. This privilege protects attorney-client communications undertaken for the purpose of seeking or giving legal advice. See generally B.D. Click Co., Inc., ASBCA Nos. 25609, 25972, 83-1 BCA ¶ 16,328; Ingalls Shipbldg. Div., Litton Sys., Inc., ASBCA No. 17717, 73-2 BCA ¶ 10,205. But see Tera Advanced Servs. Corp., GSBCA No. 6713-NRC, 84-1 BCA ¶ 16,936 (granting the government’s motion to compel the testimony of three witnesses despite the appellant’s claim of attorney-client privilege).
VI. DISCOVERY EXPENSES.
A. Funding Issues.
1. Discovery expenses are generally the responsibility of the contracting activity.
2. Avoid making an unauthorized commitment of funds to purchase a deposition transcript.
3. Plan for the travel expenses of non-government employees.
B. Contracting Issues.
1. The contracting activity must contract for the services of a court reporter.
2. Consider procurement lead-time and competition requirements when setting the deposition schedule.
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3. Recognize the contractual implications of changing the deposition schedule—particularly at the last minute.
VII. EXPERT WITNESSES.
A. The Government’s Expert Witness(es).
1. Involve the government’s expert witness(es) in the deposition process.
2. Have the government’s expert witness(es) prepare deposition questions.
3. Consider having a government expert present during depositions.
B. The Appellant’s Expert Witness(es).
1. Discovering the Appellant’s Expert Witness(es).
a. Use interrogatories to identify the appellant’s expert witness(es) early in the discovery process. See FED. R. CIV. P. 26(b)(4)(B).
b. Ask the government’s expert witness(es) what they know about the appellant’s expert witness(es).
2. Deposing the Appellant’s Expert Witness(es).
a. Your goal is to discover:
(1) The witness’s credentials;
(2) How familiar the witness is with the case; and
(3) Potential bases for impeachment.
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b. Possible Scenarios.
(1) The Worst Case Scenario—The Hired Gun.
(a) Lock the witness into as many extreme positions as possible.
(b) Attempt to lay a foundation for conflicts.
(2) The Best Case Scenario—The Painfully Honest Expert Witness.
(a) Not all opposing witnesses are the enemy.
(b) Nothing is more effective than proving your case with the appellant’s expert witness(es).
(i) Determine whether the appellant’s expert witness(es) bolsters the conclusions drawn by the government’s expert witness(es).
(ii) Consider calling the appellant’s expert witness(es) at the hearing if the appellant chooses not to base on the deposition testimony.
(3) The Generalist. Watch out for expert witnesses that have outstanding credentials, but no hands-on experience or familiarity with the critical facts of the case.
(a) Challenge the foundations upon which the witness’s conclusions are based.
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(b) Seek to establish that:
(i) The appellant (or the appellant’s attorney) exerted undue influence over the witness.
(ii) The witness lacks personal knowledge.
(iii) The witness’s source information is unreliable.
(iv) The witness had inadequate time to prepare.
(v) The witness’s assumptions, methodology, or calculations are erroneous or flawed.
c. Challenge expert witnesses who seek to testify about the ultimate legal issue in the appeal. See, e.g., Litton Sys, Inc., Applied Tech. Div., ASBCA No. 36976, 93-2 BCA ¶ 25,705; Lockheed Corp., ASBCA Nos. 36420, 37495, 39195, 91-2 BCA ¶ 23,903.
d. Ask expert witnesses about their fees. See Cosmic Constr. Co., ASBCA Nos. 24014, 24036, 88-2 BCA ¶ 20,623 (indicating that the Board would “carefully scrutinize and evaluate” an expert’s testimony where the expert was receiving a contingent fee for his testimony); Melville Energy Sys, Inc., ASBCA No. 33890, 87-3 BCA ¶ 19,992 (indicating that the Board would consider a contingent fee arrangement in evaluating an expert’s credibility).
e. Do not spend all of your time taking notes!!
VIII. CONCLUSION.
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January 2001
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Foreword The Air Force has a superb and well-trained acquisition workforce. So do our industry partners. However, no acquisition or resulting contract is perfect. When disagreements occur we cannot afford to conduct business in an adversarial and litigious manner. As a result, the Air Force is taking the “A” out of ADR by making ADR forums, the primary and preferred method for resolving contract issues that have not been resolved through the normal negotiation process. This effort to strengthen our ADR program constitutes a major policy shift and will have a significant—and hopefully beneficial impact—both to the warfighter and to contractors of all sizes doing business with the Air Force. The Air Force ADR program has already successfully accomplished the following:
• Resolved contract issues valued at approximately $1 billion and increased the number of ADR cases four-fold—with a 97% success rate.
• Created an ADR Division of 10 attorneys at Wright-Patterson AFB and expanded the Directorate of
Contract Dispute Resolution’s mission to fully implement the new “ADR First” policy.
• Converted 52% of appeals being litigated before the Armed Services Board of Contract Appeals (ASBCA) to ADR.
• Engaged with industry and signed 17 Corporate-level ADR agreements that commit the parties to
using “ADR First,” before resorting to litigation. (See Section 1.3.2.1)
• Executed 88 program-level agreements, covering all Acquisition Category I & II programs, committing senior program leadership to using ADR. (See Section 1.3.2.2)
• Expanded the ADR infrastructure, by placing ADR Champions in every Major Command and at
each Center within Air Force Materiel Command. The Air Force developed this reference book to further assist the acquisition, sustainment and operational contracting communities in understanding ADR and the myriad of ways in which it can be used to resolve issues. This reference book: (1) defines ADR; (2) explains Air Force policy on ADR; (3) summarizes various methods of ADR available along with the characteristics of some cases that might call for ADR; (4) recommends methods for deciding when to select an ADR option, as well as the process of selecting a third-party Neutral; and (5) summarizes practical issues to consider in using ADR. This handbook is not intended to be an exhaustive list of ADR methods or situations appropriate for ADR. Rather it is intended to provide the issue resolution team (program manager, requiring activity, contracting officer, and attorney) with a basic understanding of what ADR offers as a tool for resolving contract issues in controversy. Any attempt to use ADR should begin with contacting the appropriate experts to help facilitate your efforts. Points of contact are provided in this handbook. The warfighter—and the entire acquisition community wish you good luck and successful issue resolution! DARLEEN A. DRUYUN
Principal Deputy Assistant Secretary, (Acquisition & Management)
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Table of Contents
Foreword........................................................................................................................................................ i
1 The Air Force Alternative Dispute Resolution (ADR) Program ............................................................... 1 1.1 What is ADR?.................................................................................................................................... 1 1.2 Why Use ADR?................................................................................................................................. 1
1.2.1 Business Reasons for Using ADR .............................................................................................. 1 1.2.2 Legal and Policy Mandates to Use ADR.................................................................................... 2 1.2.3 Air Force Implementation of National ADR Policy................................................................... 2
1.3 Who are the Players in the Air Force ADR Program?....................................................................... 4 1.3.1 Air Force..................................................................................................................................... 4
1.3.1.1 SAF/GC Responsibilities..................................................................................................... 5 1.3.1.2 SAF/AQ Responsibilities .................................................................................................... 5 1.3.1.3 ADR Advisory Team........................................................................................................... 5 1.3.1.4 ADR Champions.................................................................................................................. 6
1.3.1.4.1 Air Force Materiel Command (AFMC) ADR Champions ........................................... 6 1.3.1.4.2 Operational MAJCOM ADR Champions..................................................................... 6 1.3.1.4.3 ADR Champion Roles and Responsibilities................................................................. 7
1.3.1.5 ADR Legal Experts ............................................................................................................. 7 1.3.1.5.1 Directorate of Contract Dispute Resolution ( AFMC LO/JAB) ................................... 7 1.3.1.5.2 Commercial Litigation Division (AFLSA/JACN) ....................................................... 8
1.3.1.6 Contract Issues Resolution Team ........................................................................................ 8 1.3.2 The Contractor.......................................................................................................................... 10
1.3.2.1 Corporate-Level ADR Agreements ............................................................................... 10 1.3.2.2 Program-level ADR Agreements (Lightning Bolt 99-4) ............................................... 11
1.3.3 ADR Resources in the Private-Sector....................................................................................... 13
2 Factors to Consider in Assessing Whether ADR is Appropriate............................................................. 14 2.1 Air Force ADR Criteria ................................................................................................................... 14
2.1.1 What Are Our Business Objectives With Regard to this Issue?............................................... 14 2.1.2 Why Did Negotiations Reach Impasse? ................................................................................... 14 2.1.3 Are There Pragmatic Concerns about Whether ADR Will Work?........................................... 15
2.1.3.1 Factors Favoring Use of ADR ........................................................................................... 15 2.1.3.2 Factors that Weigh Against the Selection of ADR............................................................ 15
3 How to Engage in ADR........................................................................................................................... 16 3.1 The Importance of Decision Quality Information ........................................................................... 16 3.2 Subcontractor Claims ...................................................................................................................... 16 3.3 GAO Bid Protests ............................................................................................................................ 16 3.4 How to Engage in ADR:.................................................................................................................. 17
3.4.1 Notifying the ADR Advisory Team ......................................................................................... 17 3.5 Preparation for ADR:....................................................................................................................... 19
3.5.1 Information Exchange. ............................................................................................................. 19 3.5.2 The Participants ........................................................................................................................ 19
3.5.2.1 The Principal(s) ................................................................................................................. 19 3.5.2.2 The Attorney(s) ................................................................................................................. 20 3.5.2.3 Other Members of the Business Team............................................................................... 20
3.6 Advice on Preparing the Air Force for an ADR Proceeding ........................................................... 20
4 Fitting the “Form to the Fuss:” Choosing Appropriate ADR Techniques............................................. 22 4.1 ADR Techniques Designed to Assist Negotiations ......................................................................... 22
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4.1.1 Mediation.................................................................................................................................. 23 4.1.2 Early Neutral Evaluation .......................................................................................................... 24 4.1.3 Mini-trials ................................................................................................................................. 25
4.2 Sample Plan for a Non-Binding ADR Process ................................................................................ 25 4.3 ADR Techniques that Result in a Binding Decision ....................................................................... 26
4.3.1 Arbitration ................................................................................................................................ 26 4.3.2 Summary Trial With Binding Decision.................................................................................... 27
4.3.2.1 Air Force Use of Binding Arbitration In a Pre-Appeal ADR ............................................ 27 4.4 ADR Process Selection Matrix........................................................................................................ 28
5 Neutrals................................................................................................................................................... 29 5.1 Definition of a Neutral..................................................................................................................... 29 5.2 Tenure of Neutrals ........................................................................................................................... 29 5.3 Qualifications of Neutrals................................................................................................................ 29 5.4 Choosing a Neutral .......................................................................................................................... 30 5.5 Using Senior-level Officials to Resolve the Issue ........................................................................... 31 5.6 Paying For the Services of A Neutral .............................................................................................. 32
6 Putting It All Together: Elements of an Issue-Specific ADR Agreement ............................................. 33 6.1 Issues Defined, Methods of Presentations,Resolution, and Schedule ............................................. 33 6.2 Appointment of a Neutral ................................................................................................................ 33 6.3 Stay or Suspension of Litigation ..................................................................................................... 33 6.4 Audit ................................................................................................................................................ 33 6.5 Exchange of Information ................................................................................................................. 33 6.6 Confidentiality Concerns................................................................................................................. 34 6.7 Other Considerations ....................................................................................................................... 35 6.8 Closure............................................................................................................................................. 35
7 Fiscal/Monetary Considerations ............................................................................................................. 36 7.1 Who Pays for the Cost of an ADR Procedure?................................................................................ 36 7.2 Funding Judgments.......................................................................................................................... 36 7.3 Funding Settlements ........................................................................................................................ 37
7.3.1 General Principals and Anti-Deficiency Act (ADA) Concerns................................................ 37 7.3.2 Source of Settlement Funds...................................................................................................... 38
7.4 Other Issues Associated with the Cost of ADR............................................................................... 39 7.4.1 Interest ...................................................................................................................................... 39 7.4.2 Payment of Attorney’s Fees ..................................................................................................... 39 7.4.3 Allowability of Claim Preparation Costs.................................................................................. 39
8 Best Practices.......................................................................................................................................... 40 8.1 Assembling the ADR Team............................................................................................................. 40
8.1.1 Identifying A Principal ............................................................................................................. 40 8.1.2 Identifying Team Members Who Should Participate And When............................................. 40 8.1.3 Obtaining Neutrals/Mediators .................................................................................................. 40
8.2 Other Issues and Concerns .............................................................................................................. 41 8.2.1 Be Sure to Consult Your Air Force Attorney ........................................................................... 41 8.2.2 Need for Well-Drafted Procedures Regarding Information Exchanges ................................... 41 8.2.3 Need for Well-Drafted Settlement Agreements........................................................................ 41
8.3 Conducting Successful ADR ........................................................................................................... 41 8.4 Avoiding and Managing Contract Issues in Controversy................................................................ 42
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List of Tables Table 1 Air Force Acquisition ADR Plan.................................................................................................... 4 Table 2 Type of Issue or ADR Assistance................................................................................................... 9 Table 3 ACAT I & II Program Level ADR agreements............................................................................ 12 Table 4 ADR Timing and Settlement Alternatives.................................................................................... 18 Table 5 Issue Resolution Continuum......................................................................................................... 22 Table 6 Business Goals.............................................................................................................................. 28 Table 7 Department of Justice - Guidelines for Selecting Neutrals........................................................... 30 Table 8 Limitations on Neutral’s Authority .............................................................................................. 31 List of Figures Figure 1 Mediation Process ....................................................................................................................... 23 Figure 2 Early Neutral Evaluation Process................................................................................................ 24 Figure 3 Mini-Trial Process....................................................................................................................... 25 Figure 4 Summary Trial Process ............................................................................................................... 27
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1 The Air Force Alternative Dispute Resolution (ADR) Program
1.1 What is ADR? Alternative Dispute Resolution (ADR) refers to a variety of streamlined resolution techniques designed to resolve issues in controversy more efficiently when the normal negotiation process fails. FAR 33.201 defines ADR as “…any type of procedure or combination of procedures voluntarily used to resolve issues in controversy. These procedures may include, but are not limited to, conciliation, facilitation, mediation, fact-finding, mini-trials, arbitration and the use of ombudsmen.” FAR 33.201defines an “issue in controversy” as a material disagreement between the Government and the contractor which: (1) may result in a claim; or (2) is all or part of an existing claim. It is not “giving away the farm,” “paying a premium”, or an “easy way out.” It is a disciplined approach to resolving contract issues. It is important to note that ADR is not the first step to litigation, rather it is an extremely effective business tool available to the Contracting Officer and Program Manager to resolve contract issues in controversy long before litigation is contemplated.
1.2 Why Use ADR? Effective use of ADR makes good business sense. It is national policy and the policy of the Department of the Air Force to use ADR to the maximum extent practicable and appropriate to resolve issues in controversy at the earliest stage feasible, by the most efficient and least expensive method possible, and at the lowest possible organizational level.1
1.2.1 Business Reasons for Using ADR There are a number of common-sense business reasons to consider using ADR.
Fitting the Form to the Fuss: ADR permits the parties to fashion a process that is custom-tailored to resolving their issue. Keeping Control: ADR permits the parties to fashion agreements that address the time and effort they need to resolve their issue. It also ensures the parties mutually resolve the issue rather than relinquish control to a disinterested (and probably less knowledgeable) third party. Flexibility: ADR processes permit business and requirements personnel to help design a resolution process that can adapt, as necessary, to changing circumstances in order to remain effective. Facilitating Open Communication and Information Exchange: ADR processes can significantly reduce the adversarial nature of resolving an issue, improve the productivity of face-to-face discussions between stakeholders, and typically permit expedited information exchanges. Tangible Benefits: ADR processes significantly reduce resolution cycle times and transaction costs associated with protracted litigation. Intangible Benefits: The impact of protracted litigation can lead to inefficiencies and distractions that can materially impact the quality of performance on existing and future contracts. In addition, many ADR processes directly involve stakeholders. This direct involvement which can increase buy-in for the results, and enhance the long-term relationships of the parties.
1 See Air Force Policy Directive 51-12 (April 1999), Para. 3
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ADR Works: Armed Services Board of Contract Appeals (ASBCA) judges serving as third-party Neutrals in hundreds of ADR proceedings confirm that ADR works. Over the last five years, the ASBCA has been asked to resolve more than 400 Department of Defense appeals using ADR. They have successfully resolved over 95% of these appeals.
1.2.2 Legal and Policy Mandates to Use ADR By statute, contracting officers are authorized to use any “alternative means of dispute resolution….”2 In addition, the Contracts Dispute Act (CDA) requires contracting officers to explain in writing why they have declined a contractor’s request to use ADR.3 FAR Part 33 was amended to implement the foregoing statutory authorization/requirement4 and provides that it is Government policy to:
[R]esolve all contractual issues in controversy by mutual agreement at the contracting officer's level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim. Agencies are encouraged to use ADR procedures to the maximum extent practicable.5
1.2.3 Air Force Implementation of National ADR Policy Air Force Five Year-Plan: Air Force Policy Directive (AFPD) 51-12 requires the development of an Air Force Five-Year ADR plan to ensure that various functional offices determine the goals, shape and size of the ADR effort for their functional area. In July of 1999, the Assistant Secretary of the Air Force for Acquisition (SAF/AQ) approved the acquisition community’s Five-Year ADR plan6 Its goals are:
• To use ADR to the maximum extent practicable and appropriate to resolve contractual issues in controversy at the lowest level possible using the least expensive means appropriate.
• To develop coordinated strategies for the management of contract controversies to include mission
need, legal, and fiscal issues.
• To promote creative, efficient and sensible outcomes to contractual disagreements.
• To track and measure the efficiency, effectiveness and overall usage of ADR, and to continuously seek process improvements. This last goal recognizes the need to track our results in order to realize the Air Force’s overarching goal of reducing “tangible and intangible costs, in time and resources, associated with dispute resolution.” 7
Corporate and Program ADR Agreements: The Air Force has entered into Corporate-level agreements with 17 of its largest suppliers to use ADR before resorting to litigation. (See section 1.3.2.1). While there is some variation in the wording used in these Corporate Agreements, each of them essentially establishes the following commitment by senior-level decision-makers:
2 See 41 U.S.C. 605(d) 3 See 41 U.S.C. 605(e) 4 A copy of the FAR provisions that were amended can be found on the web at: http://www.adr.af.mil/iadrwg/far.html 5 Certain factors, however, may make the use of ADR inappropriate (See 5 U.S.C. 572(b)). 6 A complete copy of the Five-Year Plan can be found on the ADR Program web site at http://www.safaq.hq.af.mil/contracting/toolkit/adr/AQ5yr_plan_Final.htm 7 See AFPD 51-12, Para. 2.3
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In the event an issue cannot be resolved through negotiation, the parties shall, in lieu of litigation, endeavor to use ADR to facilitate resolution. Air Force and Corporate management will be kept advised of the progress in resolving the issue whether through negotiation or through ADR techniques.
Both the Air Force and the contractors take these agreements seriously and intend to use these agreements to promote conflict resolution. Pursuant to Lightning Bolt 99-4, the Air Force entered into program-level ADR Agreements covering most of its major weapon system contracts. These agreements commit senior program management to using ADR before resorting to litigation. (See section 1.3.2.2) A complete listing of programs having ADR program-level ADR Agreement, along sample program-level ADR agreements, is available on the Air Force ADR Program web site: http://www.safaq.hq.af.mil/contracting/toolkit/adr/lightning.html Creation of an Air Force Infrastructure: Pursuant to the AQ ADR Plan, the Air Force has created a multi-disciplinary and multi-agency ADR Advisory Team and placed ADR Champions at each Center within the Air Force Materiel Command (AFMC) and each Major Command Headquarters. Additionally, the legal community created an ADR Division within the Air Force Directorate of Contract Dispute Resolution (previously known as the Air Force Trial Team) to emphasize the importance of using ADR techniques. The AQ ADR plan is ambitious in its size and scope. While there is significant ongoing effort required by this plan, much of the preliminary structure is in place as indicated in Table 1 below:
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Table 1 Air Force Acquisition ADR Plan
Plan Element Summary Engagement with Industry • Executed 17 Corporate and 88 Program-level Agreements
• HQ AFMC/JA Hosted Corporate Counsel (Jun 00) • On-going Interchange with industry associations (Aug 00 –
present) • On-going Joint Air Force-Industry ADR Integrated Product Team
(IPT) (Aug 00-present) ADR Infrastructure • Established the ADR Advisory Team & ADR Division.
• Appointed ADR Champions and Facilitators. • Created ADR Program web Site at http://www.adr.af.mil
AF/JA ADR Support Services • HQ AFMC/JA initiated major new initiative to use ADR in all pending contract litigation and to provide Trial Team support ADR use pre-contracting officer final decision.
• Completed 29 ADRs (Jan-Sep 00) Integrating Fiscal Concerns into ADR
Included SAF/FMB and SAF/AQX representatives as members of ADR Advisory Team.
ADR Case Screening • Established pre-appeal criteria-- See Section 2. • Established post-appeal criteria-- See section 1.3.1.5.1
Data Collection & Infrastructure Funding
Approved funding for infrastructure FY00 – FY07
Air Force ADR Program Marketing & Training
• Extensive Air Force ADR training effort underway • ADR website http://www.adr.af.mil -- over 200,000 hits • Industry briefings and ADR Program marketing effort underway • Continuing efforts with industry to address joint training
In short, ADR use is national policy and the Air Force has engaged with industry to secure its commitment to using ADR. Equally important, the Air Force has created an infrastructure to support this program that includes a network of offices and personnel who can assist Air Force personnel in using ADR techniques.
1.3 Who are the Players in the Air Force ADR Program?
1.3.1 Air Force The basic decisions concerning whether to use ADR in a particular case, the type of ADR to use, and the selection of an ADR Neutral generally are made by the parties. These decisions may also be made by an “Integrated Product Team” -- a team comprised of, but not limited to, agency contracting officials, program managers/user communities, and agency procurement attorneys. The Air Force has created a network of personnel and offices that are designed to ensure Air Force personnel capitalize on prior experiences each time they consider the use of ADR. As discussed more completely below, the ADR Advisory Team, ADR Champions, and the ADR Division of the AF Contract Dispute Resolution team are tasked to ensure Air Force ADR needs are matched with appropriate resources. The text that follows provides more information about the ADR Program players and their roles in helping Air Force business
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teams employ the use of ADR. For more information of the Air Force ADR Program, resources and specific points of contact see the Air Force ADR website (http: //www.adr.af.mil).
1.3.1.1 SAF/GC Responsibilities The Secretary of the Air Force appointed the Principal Deputy General Counsel (SAF/GC) the Air Force Dispute Resolution Specialist (AFDRS) in 51-12 AFPD 51-12. The AFDRS has overall responsibility for developing and implementing Air Force ADR policy and initiatives. The AFPD deals with a wide range of ADR activities, the major ones being in the areas of acquisition, personnel and environmental disputes. The AFDRS is tasked with coordinating the efforts of SAF/GC with representatives from, SAF/AQ, SAF/MI, AF/DP and AF/JA, among others, (collectively known as the “Air Force ADR Steering Committee”). Together the AFDRS and the ADR Steering Committee are responsible for implementing ADR initiatives throughout the Air Force. A senior attorney in the Air Force Office of the General Counsel was appointed the Deputy Dispute Resolution Specialist (AFDDRS) responsible for ADR Program management, implementation, and legal advice. The ADR Program Office is located in SAF/GCQ and can be contacted by phone at (937) 693-7286 (DSN 223) or via email at [email protected]
1.3.1.2 SAF/AQ Responsibilities SAF/AQ is responsible for the development and implementation of effective execution of ADR within the Acquisition community. SAF/AQ:
• Is responsible for developing and executing the Air Force Five Year Plan for acquisition ADRs. • Provides the vision, guidance and leadership to implement the acquisition and business processes
ADR initiatives. • Funds the infrastructure associated with acquisition ADR efforts
1.3.1.3 ADR Advisory Team The ADR Advisory Team is a key part of SAF/AQ’s effort to establish a support structure to facilitate the use of ADR. The Advisory Team is a multi-disciplinary team of senior Government officials who can help in designing and implementing efforts to use ADR. The ADR Advisory Team helps ensure that each time the Air Force engages in ADR, that it benefits from “lessons learned” and helps acquisition professionals match existing Air Force resources with their unique ADR needs. The SAF/AQ Five-Year ADR Plan provides that the ADR Advisory Team will:
• Develop and maintain an ADR practical application guide • Coordinate and monitor corporate agreements and program-level agreements • Facilitate and provide assistance on ADR process design • Maintain a centralized register of third-party Neutrals, their preferred ADR techniques and
experience, and an evaluation of their performance • Communicate lessons learned throughout the Air Force via web site • Manage the ADR training program, developing and providing training as needed • Coordinate responses to media and/or congressional inquires • Establish metrics and identify continuous improvement opportunities • Maintain on-going assessment of Air Force ADR environment
The Chief of Contracting Policy (SAF/AQCP) currently chairs the ADR advisory team. This individual works closely with SAF/GCQ, HQ AFMC/JABA, DCAA, DMCA, financial experts, and other members of the Advisory Team to help identify resources and overcome obstacles for parties interested in using ADR to resolve issues in controversy. The membership of the ADR Advisory Team and phone numbers
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for its members are posted on the Air Force ADR Program web site at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/.
1.3.1.4 ADR Champions ADR Champions are the key to ensuring Air Force ADR needs are matched with appropriate resources. Because Air Force contracting organizations focus on acquisition and sustainment programs, and operational contracting, the ADR Champions reflect the different organizations and chains of command for each area. Accordingly, the Air Force placed ADR Champions at each Center in Air Force Materiel Command and at the headquarters of each operational command. A list of the ADR Champions/Facilitators and their phone numbers are posted on the Air Force ADR program web site at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/
1.3.1.4.1 Air Force Materiel Command (AFMC) ADR Champions SAF/AQ and AFMC/CC have designated the Director of the Centralized Acquisition Support Team (CAST) to be the OPR for implementing ADR policy within the Air Force Materiel Command’s Acquisition Community. Center AR Champions are intended to be the first source of advice for Program Offices in all ADR procedures and the key to matching individual Air Force ADR needs with corporate Air Force resources. Each Center has an Acquisition Support Team (AST). The ASTs are “multi-functional” and provide “life-cycle” support to Air Force acquisition professionals. The CAST is charged with training, organizing and equipping the ASTs in implementation of the Air Force ADR program. Specifically, the CAST will:
• Provide a link to field ASTs and facilitate prioritization and allocation of resources. • Prioritize and allocate CAST resources to support AST implementation of the Air Force ADR
Plan. • Train ADR Champions/Facilitators and key members of ADR team. • Coordinate efforts of ADR Champions across the command. • Develop and maintain ADR training modules. • Augment local ASTs in assisting Special Program Offices (SPO) match individual Air Force
ADR needs with appropriate Air Force Resources, e.g., the ADR Advisory Team, ADR Division and Contract Issue Resolution Team (CIRT).
• Collect ADR lessons learned and transmit them to the ADR Advisory Team for dissemination across the Air Force.
• Assist the ADR Advisory Team in creating and maintaining the ADR Reference Book. • Function as liaison between ASTs and SAF/AQC, SAF/GCQ, HQ AFMC/JAB, CIRT and the
ADR Advisory Team. In accordance with AFMC/CC letter dated 26 September, 2000, the Chief or Deputy of each AST is designated as the Center ADR Champion. The Center ADR Champion has received ADR training in order to match individual ADR needs with the available resources. In addition, each Center will also have one ADR Facilitator -- a more knowledgeable “expert” on the mechanics of ADR. The facilitator would normally be assigned within the AST. However, an AST can appoint facilitators outside the AST by mutual agreement. The ADR Facilitator will assist programs in resolving contract issues in controversy at the lowest possible level, as early as possible, through the use of ADR techniques using appropriate Air Force resources, e.g., the ADR Advisory Team, the ADR Division and the CIRT. A list of the ADR Champions/Facilitators and their phone numbers are posted on the Air Force ADR Program web site at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/.
1.3.1.4.2 Operational MAJCOM ADR Champions
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SAF/AQC directed that senior-level contracting personnel in the headquarters of every Air Force Major Command (except AFMC) be appointed as the ADR Champion in that command. Operational ADR Champions are intended to be the first source of advice for operational contracting officers within their respective commands and are the key to matching individual Air Force ADR needs with Air Force resources. The Operational MAJCOM ADR Champions have received intensive ADR training to match individual ADR needs with the available resources. These Operational MAJCOM ADR Champions will be supported by the ADR Division of the Air Force Directorate of Contract Dispute Resolution. Each ADR Champion will be paired with one or more members of the ADR Division’s experts to provide ADR assistance as needed. Operational contracting ADR Champions and their phone numbers, as well as the membership of the ADR Division, are posted on the Air Force ADR Program web site at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/.
1.3.1.4.3 ADR Champion Roles and Responsibilities These ADR Champions, working with their Facilitators within AFMC or their ADR Division experts within the operational commands, must be able to:
• Understand what alternative dispute resolution is and the benefits it can provide • Understand when ADR is appropriate and the importance of designing an ADR process that “fits
the form to the fuss” • Understand the resources the Air Force can bring to bear in an ADR effort and who to call to help
match your ADR needs with appropriate Air Force resources. In addition, ADR Champions will be expected to:
• Collect and interject Lessons-Learned into future acquisition strategies • Arrange for or provide ADR training to contracting officers and/or offices on an as needed basis • Collect and maintain metrics on the implementation of ADR.
In short, ADR Champions are intended to be the first source of advice for contracting officers and program managers within their respective commands and the key to matching individual Air Force ADR needs with Corporate Air Force ADR resources. ADR Champions and their phone numbers, as well as Facilitators and the membership of the ADR Division, are posted on the Air Force ADR Program web site at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/.
1.3.1.5 ADR Legal Experts Legal counsel can provide advice on applicable law, Neutrals, range of appropriate ADR forums and techniques, and litigation risk. They can assist in fact-finding, document review, analysis and strategy. Your local legal office should be the first legal office consulted for such assistance and then, if needed the contract dispute resolution experts at the Directorate of Contract Dispute Resolution (AFMC LO/JAB “Air Force Trial Team”) and the Office of General Counsel (SAF/GCQ).
1.3.1.5.1 Directorate of Contract Dispute Resolution (AFMC LO/JAB) The Air Force Directorate of Contract Dispute Resolution, located at Wright Patterson Air Force Base, serves as the Air Force representative for all Air Force contract claims appealed to the Armed Services Board of Contract Appeals (ASBCA). They are dispute resolution specialists and now experts in ADR forums and techniques. Traditionally, the Air Force Trial Team has been involved with program managers and contracting officers only at the final decision stage and then again if the contractor appeals the Contracting Officer Final Decision (COFD). The Air Force Trial Team’s mission has expanded to include pre-final decision and pre-appeal assistance. To better support program management and the contracting officer, the Air Force Trial Team has been reorganized and is now divided into two geographic divisions (East and West, divided by the Mississippi River) and an ADR Division. The ADR
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Division handles all PEO and DAC cases and is the point of contact for ADR. Overseas cases are assigned across divisions. Attorneys in all the divisions are doing ADR, with over half of the disputes presently before the ASBCA on an ADR track. The Air Force Trial Team can be reached at (937) 255-6111 (DSN 785), Ext 252. The trial team can support program management and the contracting officer by providing:
• Legal analysis and litigation risk assessment • Fact-finding, document review and witness interviews • Advice on resolution strategies and forums • ADR agreement preparation/negotiation • Assistance in conducting a mediation, mini-trial or summary trial • Assistance in securing a Neutral and/or coordinating with the ASBCA • Assistance in drafting settlement agreements and releases • Interface with experts, technical consultants and resources.
1.3.1.5.2 Commercial Litigation Division (AFLSA/JACN) 8 The Department of Justice (DOJ) takes control of the litigation on behalf of the Government when a contractor appeals a contracting officer’s final decision at the United States Court of Federal Claims (Court of Federal Claims). DOJ has the responsibility for litigating the case and is vested with settlement authority. Stated differently, Air Force contracting officers do not exercise settlement authority in cases filed before this Court. The Air Force cooperates closely with DOJ in cases pending before the Court of Federal Claims. In order to support DOJ in cases appealed to this Court, and to provide a single point of contact for interfacing with DOJ, the Air Force has a division of attorneys within the Commercial Litigation Division of the Air Force Legal Services Agency (AFLSA/JACN). Use of ADR in the Court of Federal Claims requires agreement with DOJ, the Air Force and the contractor. All communication with DOJ in cases pending before the Court of Federal Claims must be coordinated with JACN, (703) 696-9063 (DSN 426).
1.3.1.6 Contract Issues Resolution Team The Contract Issue Resolution Team (CIRT) is an Air Force organization located at Wright-Patterson AFB, Ohio, with state-of-the-art document collection and analysis capability. The Air Force has made funding available to ensure that the CIRT’s capabilities are used to support its ADR efforts. Requests for CIRT support for an ADR effort are currently made through the ADR Division or the ADR Advisory Team. The technological and analytical capabilities of the CIRT can play a key role in helping the parties collect, analyze and communicate the information needed to facilitate resolution. 1.3.1.7 Summary of Air Force Sources of ADR Assistance The basic thrust of the Air Force ADR Program is to help Air Force personnel match their ADR needs with Air Force resources. To illustrate this point, Table 2 summarizes the types of ADR assistance that can be provided by various organizations. “P” denotes primary sources(s) of assistance and “c” denotes secondary sources of assistance.
8 An ADR division was created within AFLSA/JAC to implement the ADR program within the Department. However, ADR related to contract disputes have been worked through the Directorate of Contract Disputes Resolution, AFMC LO/JAB, or AFLSA/JACN.
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Table 2 Type of Issue or ADR Assistance Type of Issue or ADR Assistance Needed
ADR Champion (Section 1.3.1.4)
ADR Advisory Team (Section 1.3.1.3)
ADR Division (AFMC/ JABA) (Section 1.3.1.5.1)
ADR Program (SAF/GC) (Section 1.3.1.1)
ADR Web Site (Section 1.3.1)
The Issue in controversy involves a PEO or DAC Program and is: (1) likely to result in litigation; or (2) more than 12 months old then the concerned organization or ADR Champion should contact the ADR Advisory Team
P P C C C
The Issue in controversy involves an operational contract issue and is: (1) likely to result in litigation; or (2) more than 12 months old then the concerned organization or ADR Champion should contact the ADR Division
P C P C C
The Issue in Controversy is neither likely to result in litigation nor more than 12 months old and ADR assistance is needed
P C
To obtain joint ADR training contractor(s) in preparation for an upcoming ADR
P C
To obtain the latest ADR guidance material P C C C P
Need help selecting a third-party Neutral P C Need assistance in identifying funds to pay for a settlement (after consulting with appropriate local and MAJCOM points of contact)
P C
To obtain the latest ADR lessons learned C C P C C To respond to a congressional or media inquiry about using ADR P
To obtain the latest information about ADR metrics C P C
To view sample ADR agreements C C P To view Corporate or Program-level ADR Agreements C P
To identify sources for ADR Skills Training P C
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1.3.2 The Contractor Successful ADR requires all parties to make a good faith effort to help the process work. As a result the contractor is a key player. Like the Air Force, most of the major DoD contractors have adopted ADR as a preferred method of resolving issues in controversy. Many of these DoD contractors have committed to use ADR with the Air Force by executing Corporate and program specific ADR agreements.
1.3.2.1 Corporate-Level ADR Agreements Corporate-level Agreements are generally signed by a corporation’s CEO or COO and SAF/AQ. Seventeen companies have committed to the Air Force that they will use ADR techniques to resolve issues. Collectively these companies account for a majority of the total Air Force procurement budget in any one year. They are:
• AlliedSignal, Inc. • Northrop Grumman Corporation • Alliant Techsystems Inc. • Raytheon Company, Inc. • DynCorp • Science Application International
Corporation • GE Aircraft Engines • Sverdrup Corporation • GTE Government Systems • The Boeing Company • Harris Corporation • Tracor Aerospace, Inc. • ITT Industries, Defense & Electronics • TRW Inc. • Litton Industries Inc. • United Technologies Corporation • Lockheed Martin Corporation
A current list of these agreements may be viewed at the ADR Program web site at:http://www.safaq.hq.af.mil/contracting/toolkit/adr/corpagree/index.html Corporate-level ADR Agreements establish an overarching ADR process that generally requires the parties to:
1. Use a cooperative philosophy throughout the acquisition life cycle. In furtherance of this principle, all Air Force/corporate teams are encouraged to conduct joint reviews of the contract’s goals and objectives identify potential obstacles to timely and effective completion, and to periodically assess progress toward overcoming these obstacles.
2. Resolve all contract issues at the lowest possible level. This principle recognizes that the detailed
knowledge of the issues is generally at the program level and the resolution of problems at that level fosters teamwork in pursuing mutually satisfactory solutions.
3. In the event an issue cannot be resolved through negotiation, the parties shall, in lieu of litigation,
endeavor to use ADR to facilitate resolution. The parties’ management will be kept advised of the progress in resolving the issues whether through negotiation or through ADR techniques.
4. Consistent with FAR 33.214, the parties will, before initiation of the use of ADR for a particular
matter, agree in writing to specific ADR collaborative techniques, timelines and identification of Neutrals appropriate for the issues in controversy.
5. In the event either party believes a particular issue is not well-suited to ADR, or is dissatisfied
with progress being made in a particular ADR proceeding, that party may, after good faith efforts to resolve the issue, elect to opt out of the ADR processes and proceed as otherwise provided
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under contract, regulation or statute. Nothing in these agreements should be deemed to prevent either party from exercising their legal rights and remedies during the ADR process.
Air Force personnel who are working on contracts with a signatory to a Corporate-Level ADR Agreement must attempt to use ADR in lieu of litigation.
1.3.2.2 Program-level ADR Agreements (Lightning Bolt 99-4) Lightning Bolt 99-4 required each Acquisition Category (ACAT) I and II program to establish program level ADR implementation agreements with their prime contractor(s) by the end of FY99. Among other things, the stated purpose of this Lightning Bolt was to initiate the Air Force ACAT I and II program portion of an Air Force-wide initiative to expand the appropriate use of ADR, e.g., Corporate ADR Agreements and the Air Force Five-Year ADR Plan. Air Force personnel who are working on a contract with a Program-level ADR Agreement must attempt to use ADR. The ADR Program ADR Agreements are consistent with the Corporate-ADR Agreements but are tailored for the specific program. They generally require the parties to conduct a two-step process. In the first step the parties attempt to resolve all issues in controversy arising under or related to the contract by negotiation and mutual agreement at the contracting officer's level. If negotiations reach an impasse, the parties proceed to an ADR step. While the specific type of ADR is not specified, the parties have agreed upon certain parameters:
• The Parties further agree that any ADR process must be structured to allow sufficient time to exchange and analyze any information necessary to obtain and justify a settlement.
• The parties will prepare and agree to a specific, written ADR Agreement appropriate to the
controversy, before the ADR process begins.
• The agreement should normally address the following (as appropriate): authorized representatives for each party; ADR techniques and processes to be utilized and procedures to be followed; methods for the exchange of information; a schedule and procedures for any discovery proceedings, including how to limit discovery/factual exchange; appointment and payment of Neutrals; whether and to what extent to stay or suspend any pending litigation; possible audit requirements; confidentiality; at what point the parties will begin negotiations; and a provision for termination of the agreement.
• In the event either party believes a particular issue is not well-suited to ADR, or is dissatisfied
with progress being made in a particular ADR proceeding, that party may, after good faith efforts to resolve the issue, elect to opt out of the ADR process and proceed as otherwise provided under contract, regulation or statute. Nothing in these agreements should be deemed to prevent either party from preserving and exercising its legal rights and remedies during the ADR process.
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Table 3 ACAT I & II Program level ADR Agreements
AC-130U Gunship Evolved Expendable Launch Vehicle
MILSATCOM
Advanced Cruise Missile (AGM-126A)
F-15 Minuteman III GRP/ICBM PIC
AGM-130 F-16 NAVSTAR Air Force Mission Support System
F-22 Predator UAV
Airborne Laser Global Air Traffic Operations
Satellite and Launch Control
AMRAAM Global Transportation Network
SBIRS High Component
B1-B Ground Theater Air Control System
SBIRS Low PD
B-2 JASSM Sensor Fused Weapon C-17 JDAM T-1A Defense Meteorological Sat. Prog.
Joint Strike Fighter T-6 Airframe
Defense Support Program JSOW Theater Battle Management Core System
E-3 AWACS Joint STARS Training Systems Program 1.3.2.3 Establishing Additional ADR Agreements In general, the Air Force believes additional ADR agreements can be valuable tools but should be focused on program and operational level agreements. As additional agreements are executed they should be forwarded to the ADR website at http://www.safaq.hq.af.mil/contracting/toolkit/adr The following provides some guidance for establishing additional agreements. Corporate-level ADR Agreements: While generally not anticipated, if a CEO or COO of a corporation wishes to enter into a corporate-level ADR Agreement with the Air Force, his or her staff should contact the Chief of the ADR Advisory Team. The corporation initiating this request should be prepared to commit to all the material terms found in the Corporate ADR Agreement template located on the Air Force ADR Program web site at http://www.safaq.hq.af.mil/contracting/toolkit/adr/corpagree/index.html Corporate-level ADR Agreements are generally signed by the following officials:
For the Government – Principal Deputy Assistant Secretary for Acquisition and Management (SAF/AQ)
For the Contractor – The appropriate counterpart (e.g., CEO or COO) Program-level ADR Agreements: Any program managers for Acquisition Category I-III (ACAT) program may execute a Program-level ADR Agreement. That agreement should conform to the material terms of the agreement template found on the Air Force ADR Program web site. Program-level ADR Agreements require signatures from the following officials:
For the Government – Government’s System Program Director (SPD) and the chief of contracting For the Contractor – Their appropriate counterparts
Individual Contract Agreements for Operational Contracts: The Air Force encourages ADR agreements with contractors supporting operational installations and would expect these agreements to
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track the language of the ADR Program-level agreements. Individual Contract Agreement for Operational Contracts will require the following signatures:
For the Government - Contracting officer and head of the office that generated the contract requirements (the customer)
For the Contractor - Project manager and chief of the business unit
1.3.3 ADR Resources in the Private-Sector In addition to the Government ADR resources and organizations addressed in this section, there are numerous other resources available in the private sector. (See the Air Force ADR web Site www.adr.af.mil)). These private-sector ADR resources can provide innovative solutions and different ADR models. 1.3.3.1 General ADR Information for Small and Medium-Sized Businesses If you are approached by a small or medium-sized company regarding an issue, and they are not familiar with ADR, you can refer them to the Centralized Acquisition Support Team Legal Advisor at (937) 656-0816 (DSN 986) for more information.
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2 Factors to Consider in Assessing Whether ADR is Appropriate This section discusses characteristics of cases that may help to determine their suitability for ADR. These characteristics are necessarily broad, as ADR is useful in many types of issues in controversy. Air Force personnel can refer to these characteristics to make a preliminary assessment of the possibility of using ADR in a particular case, as well as in a discrete portion or issue in a case.
2.1 Air Force ADR Criteria Use ADR as early in the life cycle of an issue in controversy as possible. The following three-part test can help determine whether ADR is suitable for your issue.
• What are the business objectives with regard to this issue? • Why did negotiations reach impasse? • Are there pragmatic concerns about whether ADR will work?
2.1.1 What Are Our Business Objectives With Regard to this Issue? If the following list characterizes our business objectives, then use of ADR often makes sense:
• Continuing relationships between the parties need to be maintained. • Desire for early problem solving by use of creative alternatives. • Flexibility desired in shaping relief. (For example, the parties may want to achieve a more
comprehensive resolution involving other issues, which are not part of the contract controversy). • Need for swifter resolution than could be achieved by litigation. • Need to minimize disruption to other programs or mission areas by diversion of resources to
support litigation.
2.1.2 Why Did Negotiations Reach Impasse? We should not use ADR if our face-to-face negotiations with a contractor are producing results. However if our negotiations with the contractor have reached impasse, then we need to ask why that happened. For example, the American Bar Association developed the following list9 of some common causes of impasse and what a Neutral can do to help the parties overcome the problem: Communications Difficulties Between or Among Parties: Impasse has been reached or is likely to develop because of personality conflicts or a history of poor or non-existent communications among the participants (including attorneys). A skilled ADR Neutral can bridge the parties' communications gap. Communications Difficulties Between Lawyers and Their Clients: Clients may be resistant to settlement overtures, even if endorsed by their counsel, without first obtaining from an impartial Neutral a candid appraisal of the merits and the parties' respective legal positions. Factual or Technical Complexity/Uncertainty: The parties would benefit from reliance on the expertise of a third-party expert for technical assistance and/or fact-finding. Obtaining such expert Neutral assistance could facilitate more meaningful discussion and resolution of a complex matter. Ultimate Outcome Uncertain: The parties are confused about the likely outcome, should the matter proceed through litigation. Negotiations, to be productive, require a better grasp of litigation risks. A knowledgeable ADR Neutral can provide the parties with needed insights as to those risks.
9 This list was developed by the American Bar Association Public Contract Law Section’s Special Committee on ADR in a Monograph entitled, Alternative Dispute Resolution: A Practical Guide for Resolving Contract Controversies.
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This analysis will help us focus on designing an ADR process that matches the right ADR technique, or combination of techniques, to help us overcome the barriers to settlement.
2.1.3 Are There Pragmatic Concerns about Whether ADR Will Work? Even if the first two parts of our analysis indicate that ADR use makes sense, there are a number of pragmatic concerns that could hinder the ADR process.
2.1.3.1 Factors Favoring Use of ADR If any of the considerations listed below apply to your issue in controversy, use of ADR may be appropriate: • Need a factual interpretation or the parties are polarized into an “all or none” position and believe
that an evaluation by a third party Neutral could help resolve the matter. • Reasonably clear that some entitlement exists and the real task is negotiating or agreeing to a
reasonable amount. If lack of funds, or cancelled funds, preclude meaningful negotiations, the ADR Advisory Team may help identify potential sources of funds.
• One party’s view of the case is unrealistic, and a realistic appraisal of the situation by a Neutral third party may help.
• ADR could speed anticipated settlement by streamlining or limiting the exchange of information and time needed to resolve the matter.
• Bad facts, bad law or other factors make avoiding an adverse precedent desirable.
2.1.3.2 Factors that Weigh Against the Selection of ADR Under the Administrative Dispute Resolution Act of 1996, Congress requires agencies to consider the following factors in deciding if a case is appropriate for ADR.10 If any of the considerations listed below apply to your issue in controversy, use of ADR may not be appropriate:
• A definitive and authoritative decision is needed as a precedent. • The matter involves significant issues of Government policy and ADR will not assist policy
development. • Maintaining established policy and avoiding variations in implementation is of special
importance. • The matter significantly affects non-parties. • A full public record of the proceeding or resolution is important. • The agency must maintain continuing jurisdiction over the matter with the right to alter the
resolution as circumstance demands. In addition, allegations of fraud may prohibit the contracting officer from proceeding with an ADR.
10 See 5 U.S.C. § 572(b)
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3 How to Engage in ADR
3.1 The Importance of Decision-Quality Information An issue will not be ready for ADR unless decision-quality information is accessible using available resources within the time frame contemplated. This is because the parties must have sufficient knowledge of the facts to determine their business interests and make a credible ADR presentation. Accordingly, each party must be conscious of the other party’s need for reliable information sufficient to support a rational decision to conclude the matter and should cooperate in furnishing this information. Audit input on financial matters is often critical to establish facts needed to justify a settlement. Many contract controversies stem from audit exceptions. These issues are often complex and require in-depth knowledge of accounting and related regulations. To fully understand the financial consequences of decisions, government procurement professionals should include auditors as part of the ADR team in appropriate cases. Seek audit assistance whenever equitable adjustment proposals or claims are included in the ADR. The ADR agreement should address the type of information and documents to be provided to the auditor and whether there are any restrictions on the use of the information or documents provided. The Air Force Trial Team at Wright Patterson AFB has extensive ADR experience. If you are unsure of whether your process will produce decision-quality information, contact the Chief of the ADR Division (937) 255 –6111 (DSN 785), Ext 244 for assistance. The Air Force ADR Division can also assist Air Force personnel in accessing the services offered by the Contract Issue Resolution Team (CIRT). The CIRT has a tremendous range of technical, financial, and program experts to consult and state-of-the- art document collection and analysis capabilities that can provide many of the services needed to develop decision-quality information as quickly as possible.
3.2 Subcontractor Claims Except in very limited cases,11 subcontract claims cannot be considered by the Air Force unless the prime contractor sponsors the claim.12 This rule applies because the Air Force has no direct contractual relationship (privity of contract) with the subcontractor. As a result, the only contractual relationship is through the prime contractor. Therefore any negotiations or ADR procedures used to resolve a subcontractor issue in controversy must involve or be processed through the prime contractor.
3.3 GAO Bid Protests The General Accounting Office (GAO) will make its attorneys available to serve as third-party Neutrals before and after a bid protest is filed with the GAO. The two ADR methods used by GAO attorneys who act as ADR Neutrals are: (1) negotiation assistance (mediation); and (2) outcome prediction (Early Neutral Evaluation -- ENE). Virtually all of the Air Force’s ADRs before the GAO have been of the ENE variety. When using this technique, the GAO attorney assigned to the case will, in coordination with his or her supervisor, provide the parties with a candid assessment of the likely outcome of the protest. Because they will be the ones who will write the GAO’s opinion about the protest, their assessment of the case means they are essentially telling the parties who will prevail. (A more detailed description of the ADR process before the GAO can be found in an article by the GAO's Daniel I. Gordon, Esq. entitled “GAO's Use of ‘Negotiation Assistance’ and ‘Outcome Prediction’ as ADR Techniques” at 11 Although Small Business Administration 8(a) contracts are technically subcontracted through the SBA, contractors under SBA 8 (a) program may file claims directly with the Air Force. 12 See FAR 44.203
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http://www.adr.af.mil/iadrwg/gordon.html.) To date, the Air Force’s ADR practice before the GAO enjoys a 100% resolution rate and provides a resolution of the bid protest in 20-45 days versus the 100 days normally required to receive a written decision from the GAO.
If counsel represents a protestor, then the Air Force Office of the General Counsel (SAF/GCQ) takes the lead in representing the Air Force before the GAO. Accordingly, the use of ADR in such matters must be coordinated with SAF/GCQ. However, if an attorney does not represent a protestor, then the Chief of the Contract Support Division (SAF/AQCX), within the Office of the Deputy Assistant Secretary for Contracting has the lead in representing the Air Force before the GAO. Accordingly, the use of ADR in such cases must be coordinated with SAF/AQCX.
3.4 How to Engage in ADR: The procedural steps used on a particular ADR may depend on when you use ADR. The FAR provides that the parties may agree to use ADR when an issue first arises or a claim is submitted.13 Because only a few business personnel in the Air Force have participated in ADR processes, the Air Force ADR Program has a number of experienced and trained personnel to assist you in using ADR. (See “ADR Program Players” in Section 1.3. above and Table 2.) Your ADR Champion can assist you in understanding what ADR is and how it can be used. But for more assistance on designing an ADR process and drafting an ADR agreement, your ADR Champion will put you in contact with the ADR Advisory Team or the ADR Division. These organizations can provide expert advice so that you do not have to “re-invent the wheel” and will ensure your ADR process benefits from the lessons learned by the Air Force in other ADRs. In addition, these organizations can help you obtain resources necessary to help support your ADR effort.
3.4.1 Notifying the ADR Advisory Team If you intend to use ADR, your command ADR Champion must contact the ADR Advisory Team. This will ensure any new policies or lesson learned can be disseminated and incorporated into future business practices. Likewise, upon completion of the ADR, the lessons learned will be posted on the Air Force ADR Program web site. Table 4, below, is designed to give you an overview of how the posture of your issue in controversy determines who needs to be involved and what needs to be done to commence an ADR process. It assumes you have contacted your ADR Champion. Note that the FAR Disputes process may still impose procedural or timing requirements, regardless of whether ADR is being used. If you seek more detailed information or assistance, contact the ADR Advisory Team or the ADR Division, as appropriate.
13 FAR 33.214(a)(1); FAR 52.233-1 - Disputes.
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Table 4 ADR Timing and Settlement Alternatives
Status
If ADR is Appropriate: ADR Resolves the Issue: ADR Fails,
Pre-CO Final Decision (COFD)
Parties execute an ADR Agreement and proceed according to the terms of the ADR agreement. See FAR 33.214(a) Note: Often the best time to use ADR. If the issue in controversy is more than $10 million or has remained unresolved for more than 12 months, be sure to coordinate your effort with the ADR Advisory Team. http://www.safaq.hq.af.mil/contracting/toolkit/adr/newpocs/
Execute a settlement, bi-lateral modification and appropriate releases. If necessary, Air Force pays the contractor
Resume the normal Contract Disputes Act process, e.g., issue a COFD
Post-COFD, but Pre-Appeal
Same as above, but note that the contractor’s time limits for filing an appeal are not suspended. See FAR 33.214(c)
Execute a settlement, bi-lateral modification and appropriate releases. If necessary, Air Force pays the contractor
Resume the normal CDA process, e.g., contractor appeals the COFD
Post Appeal of a COFD to the Armed Services Board of Contract Appeals (ASBCA)
(1) Work with the Air Force attorney at HQ AFMC/JAB who is representing the Air Force at the ASBCA (2) The JAB attorney will coordinate the execution of an ADR agreement with the ASBCA and the other party (or parties) (3) The parties then suspend the proceeding and proceed to ADR according to the terms of the ADR agreement
(1) If negotiated settlement, execute a modification and appropriate releases and, if necessary, Air Force pays the contractor if contract funds or expired funds are available. If funds have cancelled or are not available within the Air Force, ASBCA incorporates the settlement into a Consent Judgment, paid by the Judgment fund. (2) If you get a binding decision on sum certain, the Judgment Fund normally pays the contractor. The CO may issue a modification. (3) When the Judgment Fund is used, the Air Force reimburses the Judgment Fund from “current year” funds
Resume litigation process at the ASBCA
Post Appeal of a COFD to the Court of Federal Claims (CFC)
(1) Work with the Air Force attorney at AFLSA/JACN assigned to handle the case (2) The JACN attorney will coordinate with the Department of Justice attorney assigned to the case to engage with the appropriate CFC judge and the other party (or parties) to execute an ADR agreement (3) The parties then proceed according to the terms of the ADR agreement
Execute a modification and appropriate releases and, if necessary, Air Force pays the contractor if contract funds or expired funds are available. Otherwise CFC incorporates the settlement in a Consent Judgment, paid by the Judgment fund. When the Judgment Fund is used, the Air Force reimburses the Judgment Fund from “current year” funds
Resume litigation process at the CFC
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3.5 Preparation for ADR: Non-binding ADR leads to agreement, not judgment. Always keep in mind that the process will not succeed unless the parties agree to the terms of a resolution. Therefore ensure you have a process that builds bridges necessary for resolution. Preparation for ADR will depend upon the type of ADR to be used.
3.5.1 Information Exchange. In order for the parties to prepare for any ADR proceeding, they must have a grasp of the facts and an understanding of the other party's positions on the issues in controversy. For the parties to achieve the comfort level needed to reach a negotiated settlement, they must first do an appropriate amount of fact-finding. The ADR Neutral can aid them in structuring a sensible schedule of ADR fact-finding in the form of document exchanges, informal meetings and formal depositions of critical personnel. Bottom line, most contractors are willing to give information in an information exchange if they know the Government is serious about seeking a resolution and that it is needed to help justify a settlement. Based on the Air Force’s experience to date, the following guidance may be helpful:
• Identify the issues in controversy.
• Identify the documents needed to intelligently discuss and value each issue, and to obtain decision quality information.
• Once the potential universe of information is identified, establish a timeline for the exchange of that information.
• Consider building joint binders with information relevant for each issue (“One Book”) concept to make it easier for the parties and the Neutral to access relevant documents. Note: The CIRT may be able to provide assistance in this effort.
• Identification of incurred costs is critical to the ability of the Government to reach a resolution and justify a settlement. Generally the Government must receive a contractor proposal adequate for the DCAA to do a meaningful audit to justify a settlement. Otherwise the Government may lack authority to settle the issue at the amounts proposed.
• In complex cases, you may need to develop a common statement of the legal theories to support/defend the position of each side and the elements needed to prove each theory. Next agree upon the information needed to support each elements. Finally, organize the information exchange to fill in the missing information.
3.5.2 The Participants At one level, a non-binding ADR process can be viewed as a series of trust building measures between the parties. When using a non-binding ADR process, it is essential to carefully consider the inter-personal as well as technical skills as you select the members of the team that will conduct the ADR process.
3.5.2.1 The Principal(s) Each side will normally appoint principal negotiating representatives (“principals”) for the proceeding. The principals should have sufficient authority to commit their organizations to a settlement of the controversy. Equally important, the principals must possess strong leadership and conflict management skills to help: (1) keep the ADR team together; (2) focus the ADR process on reaching a resolution; and (3) help maintain trust between the parties.
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3.5.2.2 The Attorney(s) The role of counsel is to support the principals and other members of the business team in the ADR process. This role normally includes providing the following:
• Drafting the ADR Agreement.
• Assisting the business team in the design of the ADR process.
• Ensuring that confidentiality protections sought by the Air Force business team are effective.
• Ensuring that privileged, or otherwise protected information, is not disclosed.
• Assisting the business team in the selection of a Neutral the business team agrees is both effective and unbiased.
• Assessing legal entitlement and litigation risk. One approach to assessing legal entitlement is to group the contractor’s theories into the following four groups:
- Accept the theory and note that most of the facts are present. - Accept the theory, but note that some facts are missing. - Accept the theory but no facts to support it. - Reject the theory.
• Based on the foregoing groupings, the attorney can then assign his or her litigation risk assessment to each issue by:
- Evaluating causation -- Who is responsible for what? - Assisting in the evaluation of damages – Were the costs incurred and are they allocable? - Putting forth affirmative Government defenses and assessing whether these defenses negate
any or all of the contractor’s theory (or theories) of entitlement. - Identifying the differences in the positions of the parties.
• Assisting in drafting and, if appropriate, presenting the positions.
• Helping to identify the underlying interests of the parties.
• Providing a reality check of the goals and approach to ADR..
• Ensuring that the settlement agreement is legally enforceable and defensible.
• Ensuring that payment is based on the contract at issue or another one that is linked to the issue. Although legal advice is essential for a successful ADR, the ultimate decision to settle and the amount of that settlement is not a legal decision, it is a business decision.
3.5.2.3 Other Members of the Business Team At a minimum, the Air Force should ensure that members of the business team include personnel with first-hand knowledge of the issue(s) in controversy. The Air Force should supplement its team, as necessary, with personnel from DCMA and DCAA. In addition, in many cases the input of a senior price analyst is absolutely critical. Technical experts may also be required to clarify issues.
3.6 Advice on Preparing the Air Force for an ADR Proceeding When using a non-binding ADR process, the principals should meet with the Neutral jointly or separately at the beginning and end of each day of the joint presentation phase to make adjustments as necessary to keep the ADR process on track.
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In addition to the ADR position statements, it is frequently helpful for both parties to develop and have available for ADR initial settlement offers and “fall back” negotiating positions. These, of course, will be subject to modification, based on the facts that emerge from the ADR proceeding. When preparing the Air Force presentation here are some helpful lessons learned.
• Power point presentations are very effective. • Demonstrative evidence (i.e., maps, charts, models, etc.) is very effective. • Direct exchanges between experts and program officials are very helpful.
Agency representatives should also identify in advance of any ADR proceeding the sources of funding that will be available should the parties be able to settle their differences through ADR. Familiarity with the types of funding that may be accessed as well as with the use of the Judgment Fund administered by the Treasury Department is advisable. See Section 7.
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4 Fitting the Form to “the Fuss”: Choosing Appropriate ADR Techniques This section describes the techniques most commonly used, how they work, some problems that may be encountered in their use and the relationship of each technique to negotiation and litigation. The table below provides a framework for organizing your thinking about ADR. From left to right is the issue resolution continuum, ranging from unassisted negotiation on the left to litigation on the right. In between these two extremes are a number of resolution forums, collectively referred to as ADR. As indicated in the shaded area near the top of the chart, ADR techniques fall into three broad categories based on the type of assistance the parties need: 1) assisted negotiation; 2) outcome prediction; and 3) a binding decision. Moving from left to right, the chart depicts increasingly adversarial, costly and time-consuming modes of issue resolution. Equally important, moving from left to right, the parties lose some, or all, control of the process and its outcome.
Table 5 Issue Resolution Continuum
NEGOTIATION ALTERNATIVE DISPTUE RESOLUTION LITIGATION
Unassisted Negotiations
Assisted Negotiations
Outcome Prediction Assistance
Binding ADR Litigation
Traditional negotiation methods
Mediation
Early Neutral Evaluation
Binding Arbitration
Court of Federal Claims
Mini-Trial
Dispute Review Boards14
Summary Trial with Binding Decision
Boards of Contract Appeals
Federal Appellate Courts
In many ways, effective ADR use depends on the tailoring of the procedures outlined above, alone or in combination, to provide the process and input needed to resolve the issue.
4.1 ADR Techniques Designed to Assist Negotiations All too frequently, parties reaching impasse on an issue in controversy can no longer effectively communicate and need a Neutral third person to act as a conduit. In such instances, mediation, facilitation, or a structured settlement procedure offers viable options.
14 A Dispute Review Board (DRB) is usually a three-member panel selected by agreement of the parties that evaluates controversies as they arise during the course of a contract and are rarely used in the Air Force. The DRB is often established soon after contract award. The members typically attend meetings between the parties and are privy to contract administration issues as they arise, giving them an understanding of the contract requirements and a familiarity with the parties. Obviously, a DRB comes with an associated, sometimes substantial, overhead cost to maintain the DRB. Therefore, establishment of a DRB may not be economically feasible unless the associated contract is large enough to justify the required expenditures in view of the anticipated benefits. The Joint Direct Attack Munition Program has a contract clause that contemplates the use of a Dispute Review Board and that clause can be viewed on the web at: http://www.safaq.hq.af.mil/contracting/toolkit/adr/adr_docs/CC.html
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4.1.1 Mediation Mediation is an ADR forum using the assistance of a neutral third party with no stake in the result and used when the parties have “room to settle”, but have been unsuccessful with traditional negotiations. The Neutral in this process is called a mediator. The mediator is not authorized to impose a settlement upon the parties, but rather assists the parties in fashioning a mutually satisfactory solution to resolve the issue in controversy. Parties may seek facilitative mediation, in which the mediator simply facilitates discussions between or among the parties and does not provide any form of evaluation of the merits of their respective positions. Alternatively, some parties may prefer evaluative mediation (outcome prediction), in which the mediator provides the parties with his/her views as to the strengths and weaknesses of their respective positions, in conjunction with the mediator's efforts to help the parties fashion a mutually acceptable resolution to the controversy. Mediation is one of the most widely used ADR techniques in the private sector. Mediation is favored because the flexibility and informality of the mediation process makes it useful in a wide variety of matters. In addition, the parties in a mediation are voluntary participants who do not surrender control of the ultimate resolution of an issue in controversy so that matters of authority and control do not become obstacles to resolution. The Mediation process can be designed in a manner that meets the needs of the parties. Typically it begins with all parties meeting in joint “session” where the respective interests and positions are shared. The process often includes a private “caucus” session with the mediator to allow further discussion of the case. At times, particularly when emotions run high, the mediator may choose to keep the parties separated and to conduct “shuttle diplomacy.” The mediator will work with the parties to identify common interests and to narrow the gap between the parties' respective positions. The dynamics of mediation process and its unique features are captured in Figure 1, below.
Figure 1 Mediation Process
I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Mediation
Process Dynamics:Third-party assistednegotiations
Unique Feature:Confidential caucuses
Decisionmakers:The parties
N
P1 P2
N
P1 P2
P1 P2
N
+
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The mediator serves to structure negotiations, acts as a catalyst between the parties, focuses the discussions, facilitates exchange between the parties, and serves as an assessor - not a judge - of the positions taken by the parties during the course of the negotiations. In some cases, the mediator may propose specific suggestions for settlement; in other cases the mediator helps the parties generate more creative settlement proposals. Nevertheless, as in traditional negotiation, the parties retain the power to resolve the issues through an informal, voluntary process in order to reach a mutually acceptable agreement. If settlement is possible, the mediator’s role is to bring the parties to closure. A sample mediation agreement can be reviewed on the ADR Program web site at: http://www.adr.af.mil/iadrwg/samples.html
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4.1.2 Early Neutral Evaluation Early Neutral Evaluation (also referred to as “outcome prediction” or the “settlement judge” approach) has many of the same features as mediation. It adds a Neutral's: (1) review of the parties' positions and the information they provide; and (2) evaluation of the relative strengths and weaknesses of each party's position. These evaluations can be given to the parties individually or jointly. In this non-binding process, the parties generally select a Neutral with subject matter expertise and whose opinion they respect. Often settlement is based in large part on the Neutral’s opinion. This is one of the reasons the parties involved in government procurement issue in controversy often use a sitting ASBCA judges to perform this function. The basic elements of an early neutral evaluation are captured in Figure 2, below:
Figure 2 Early Neutral Evaluation Process
As of: 18 Oct 00 I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Early Neutral Evaluation
Process Dynamics:Third-party assistancewith negotiations
Unique Feature:- evaluation of likely outcome- assessment of facts and/or methodology
Decisionmakers:The parties
P1 P2+
P1 P2
N
A sample settlement judge agreement can be reviewed on the ADR Program web site at: http://www.adr.af.mil/iadrwg/samples.html
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4.1.3 Mini-trials A Mini-trial is not a small trial. It is a more structured process that includes the use of senior principals. Mini-trials permit the parties to present their case or an agreed upon portion of the case to principals who have authority to settle the issue in controversy, often with the assistance of a third-party neutral advisor. The Neutral may thereafter meet with the principals to attempt to mediate a settlement. The mini-trial may also be a prelude to the Neutral's issuance of either a formal written non-binding advisory opinion or to the Neutral's rendering of a binding decision. Limited discovery (as outlined in the ADR agreement) ordinarily precedes the case presentation. The presentation itself may be a summary or abbreviated hearing with or without oral testimony as the parties agree. Often, following the presentation, the principals begin negotiations with the aid of the Neutral as mediator or facilitator. The role of the Neutral is defined in the written ADR Agreement. The Neutral generally presides at the presentation of the case, setting the ground rules and seeing that the proceeding is conducted according to the ADR Agreement. The Neutral often has expertise in evidence and the substantive law and may be called upon for advisory rulings on questions likely to arise if the matter proceeds to litigation. If the Neutral has subject matter expertise the Neutral may also question presenters and witnesses to focus the parties’ attention on specific matters. This ADR mechanism is useful in focusing factual issues or mixed questions of law and fact, and in highlighting the strengths and weaknesses of the case. Settlement authority in mini-trial is the same as in negotiated settlements. The basic elements of a mini-trial are captured in Figure 3, below:
Figure 3 Mini-Trial Process
As of: 18 Oct 00 I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Mini-Trial
Process Dynamics:Hybrid settlement negotiation process combining senior- decisionmakerswith mediation
Unique Feature:Involvement of senior-decisionmakers
Decisionmakers:The parties
SP1 SP2+
P1 P2
NSP1 SP2
Mini-Trial Panel
SP1 SP2
N
At the conclusion of the presentation the decision-makers may adjourn to negotiate the matter in controversy. The Neutral may be called upon to act as advisor, mediator or fact-finder in this subsequent session depending upon the terms of the ADR Agreement and the desires of the parties. A sample mini-trial agreement can be reviewed on the ADR Program web site at: http://www.adr.af.mil/iadrwg/samples.html
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4.2 Sample Plan for a Non-Binding ADR Process The following is a generalized plan that needs to be tailored to your circumstances. Meet and Discuss (Government Only) -- Air Force and, if appropriate, DCMA and DCAA, principal(s) meet and discuss roles and responsibilities, including funding and the Air Force’s position on (a)-(f) in paragraph 2, below. Meet and Discuss (Government and Contractor) -- Government and the contractor meet and discuss the use of ADR to determine:
a. The contractor’s willingness to engage in ADR process, b. The type of process to be used, c. Whether and what extent they will use a third-party Neutral, d. How to exchange information, e. To what extent proceedings should be stayed (if the matter is before a Board or Court), and f. The schedule for resolution.
Draft ADR Agreement & Selection of the Third-Party Neutral -- Based on guidance received from the principals and the third-party Neutral where relevant, counsel for the Government and the contractor draft the ADR Agreement. Assure the 3rd party Neutral can utilize the proposed agreement. There are sample ADR agreements on the Air Force ADR Program web site that can be accessed. http://www.adr.af.mil/iadrwg/samples.html Stay of Proceedings -- If applicable, Government and contractor counsel jointly ask board/court to stay proceedings to the extent and manner agreed. Statement of Issues -- Counsel for the parties jointly draft preliminary statement of issues. (Probably several issues, but this document is normally only two to three pages.) Exchange of Documents -- The parties exchange types of documents in accordance with schedule in ADR Agreement. Compilation of Facts and Documents -- The parties jointly compile facts and documents related to each issue. Presentation of Positions -- The parties present positions on the issues to the principals for each side and to the Neutral, including a rebuttal, if necessary. Identification of Unresolved Issues -- Parties meet and confer to see if issues have been narrowed through presentations. Jointly draft statement of unresolved issues. Employ Resolution Mechanisms -- This is a critical part of any ADR process. Use any one of a number of techniques that may be appropriate to the issue and the dynamics of the process at the time:
• Additional fact finding • Expert assistance • Neutral facilitation • Joint discussions or presentations • Advisory opinion or outcome prediction by the Neutral • Additional considerations
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Negotiate Agreement -- Get buy-in from all necessary Government personnel and agree with the contractor on resolution. Draft Settlement Document -- Reduce resolution to writing. Obtain Judgment (if necessary to fund the settlement) -- Counsel for the parties file a stipulation to with the Court or Board. The Court or Board enters judgment and issues written order of judgment.
4.3 ADR Techniques that Result in a Binding Decision When the parties need a binding decision to resolve the issues a Summary Trial with Binding Decision using the ASBCA is the appropriate forum. In this procedures, the ASBCA Judge acts as the Neutral. If the parties need a binding decision pre-appeal, the ASBCA will work with the parties to accommodate this need.
4.3.1 Arbitration Arbitration is an issue resolution process whereby a neutral third party is empowered by agreement of the parties to issue a binding decision on the controversy. In this process the Neutral is called an arbitrator. Arbitration is commonly used in the private sector. However, there are significant legal restrictions on its use within DoD. Until those restrictions are modified, the only binding ADR method available to the Air Force is the summary trial before an ASBCA judge (see para. 4.3.2 below). DoD personnel are not currently authorized to use a binding ADR proceeding that does not involve the ASBCA.
4.3.2 Summary Trial with Binding Decision15 This is a binding ADR arbitration-type procedure offered by Boards of Contract Appeals. The parties design the summary trial process (format, timing, rules, etc.), unlike in a traditional “trial” before the ASBCA, with the assistance of the judge (who is often selected by the parties). A summary trial with binding decision permits the parties to expedite the appeal schedule and to try their appeal informally before an administrative judge or panel of judges. Generally, the parties elect to have the one judge decide the case (instead of a three judge panel used in traditional hearings), submit pre-hearing position papers (instead of post hearing briefs) and opt for more streamlined evidentiary presentations. The Judge(s) will issue a “bench” decision upon conclusion of the proceeding or a summary written decision at an agreed-to time following the receipt of a trial transcript. For most, this is one of the greatest advantages of the ADR summary trial process. In a traditional ASBCA trial, a judgment is rendered only after the parties submit post trial briefs and two other judges review the trial record and briefs. It is difficult to determine how long this process will take but it can easily exceed a year – and then the decision can still be appealed. The decision by a judge in a summary trial cannot be appealed so expeditious finality is a certainty. The basic elements of a Summary Trial with Binding Decision are captured below in Figure 4. A sample Summary Trial with Binding Decision ADR agreement can be reviewed on the ADR Program web site at: http://www.adr.af.mil/iadrwg/samples.html
15 At least one respected former ASBCA judge questions the authority of the ASBCA to use this procedure and questions the government’s authority to waive an appeal prior to the final decision of the Board. This is a minority viewpoint. The Air Force has examined the matter and decided that the ASBCA does have the requisite authority and that the appeal may be waived.
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Figure 4 Summary Trial Process
As of: 18 Oct 00 I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Summary Trial with BindingDecision
Process Dynamics:Case presented to third-party in an expedited manner and third-party makes a decision
Unique Feature:Binding decision
Decisionmakers:The ASBCA Judge
P1 P2
N
N
Binding Decision
4.3.2.1 Air Force Use of Binding Arbitration in a Pre-Appeal ADR Since an ASBCA judge is the only Neutral who can enter a binding decision in an arbitration-like forum, use of arbitration pre-appeal is limited, 16 however not out of the question. There have been a number of occasions where the parties have agreed and the board has consented to resolve pre-appeal claims in a summary trial on other claims. Also, if the parties agree, the board will expedite the process to perfect an appeal in order to have the required jurisdiction to enter a binding judgment.
16 There is one exception that we are currently aware of -- disputes governed by the Randolph-Sheppard Act (RSA), 20 U.S.C. § 107 et. seq. The RSA establishes a cooperative federal/state vocational rehabilitation program designed to promote economic opportunity and self-sufficiency in blind persons through the operation of vending facilities on federal property. Under the RSA, qualified blind vendors are to receive “permits” to operate vending facilities and contracts to operate cafeterias on eligible federal properties. Dispute arising under the RSA may be submitted to binding arbitration. Under the RSA, Contracting Officers must submit to binding arbitration..
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4.4 ADR Process Selection Matrix The table below attempts to help organize your thinking about how to match your business objective with the appropriate ADR tool. Bear in mind that these ADR processes are not mutually exclusive, but rather, may be used in combination. This is why the Air Force believes it was necessary to create a network of Air Force personnel with extensive training and experience in this area to assist you in designing and implementing your ADR process. Table 6, below, is designed to help you fit the form to the fuss:
Table 6 Business Goals
Business Goals Mediation Mini-Trial
Early Neutral Evaluation
Summary Trial with Binding Decision
Litigation
Enhance/ Preserve Relationship X X X X
Want to Maintain Control X X X
Need to Deal with Strong Emotions X X X
Want a “Hearing on the Merits” and a non-binding Evaluation
X
Want to Keep the Process Simple X X X
Need or Want a Third party Neutral Decision Very Quickly
X
Need to Establish Precedent X
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5 Neutrals
5.1 Definition of a Neutral A Neutral is an impartial third party who serves as a mediator, fact finder, arbitrator, or otherwise assists the parties in resolving the issues in controversy. A Neutral may be a permanent or temporary officer or employee of the Federal Government or any other individual who is acceptable to the parties.17 Neutrals can be drawn from a number of sources, inside or outside the Government: sitting or retired judges; academics; retired in-house counsel of defense corporations; Air Force Reserve Officers; or well-respected Government contract professionals or attorneys in the private sector. The ADRA of 1996 authorizes agencies to enter into contracts for the services of Neutrals.18
5.2 Tenure of Neutrals Neutrals serving as conciliators, facilitators or mediators serve at the will of the parties.19 Early neutral evaluators, fact-finders, mini-trial Neutrals or arbitrators also serve at the will of the parties.
5.3 Qualifications of Neutrals A Neutral must have no official, financial, or personal conflict of interest with respect to the issues in controversy, unless such interest is fully disclosed in writing to all parties and all parties agree to use that Neutral. Subject to the limitations listed above, the market dictates the qualifications of a Neutral. This means that the admonition “buyer beware” applies to those entering the marketplace for Neutrals’ services. The Department of Justice (DOJ) has established general guideline questions for selecting Neutrals and published this guidance in the Federal Register and on DOJ’s ADR web site: http://www.usdoj.gov/crt/adr/notice.html . DOJ guidance on Neutral selection is summarized in Table 7, below.
17 See FAR 33.201 18 5 U.S.C. § 573(e) 19 5 U.S.C. § 573(b)
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Table 7 Department of Justice - Guidelines for Selecting Neutrals
Neutrality, and Related Ethics Standards • Is the ADR provider unbiased, acting in good faith, diligent, and not seeking to advance his
or her own interest at the expense of the parties? • Will the ADR provider deal fairly with the parties, be reasonably available to the parties,
show no personal interest in the content of the settlement? • Does the Neutral know counsel, and if so, what is the nature and context of that knowledge? • Is the Neutral subject to disqualification on grounds analogous to those found within 28
U.S.C. § 455? • Check Society of Professionals in Dispute Resolution's Ethical Standards. Training • What kind and extent of training for the particular ADR process has the Neutral received? • Has the Neutral been trained by a well-recognized program? Experience • ADR Experience: Number of cases the Neutral conducted, the dollar amount in controversy,
diversity of processes, complexity of the issues, years of experience in a particular process(es), breadth of experience in types of disputes, experience in multi-party and/or multi-issue disputes, affiliation with court-annexed programs.
• Litigation Experience: Is the Neutral an attorney? Type of legal practice, years of experience, complexity of cases and issues, experience in Government litigation.
Factors Favoring Subject-Matter Expertise: • Highly technical areas of law are central for understanding the dispute and/or issues and the
fashioning of the options for resolution of the dispute (e.g. patent, subspecialties of science or medicine).
• Issue is one of damages--when offers are far apart, expertise in typical damage awards and in standard components of damage calculation may bring parties’ offers closer (e.g. certain attorney fees, personal injury disputes).
• When the parties and attorneys are hesitant to use ADR for a particular case, and expertise will build credibility for them.
• There is an impasse over discrete factual and/or legal issues. • Expertise is central to a particular kind of ADR process -- e.g., case evaluation on factual
issues, mini-trial, arbitration.
5.4 Choosing a Neutral When seeking assistance of a third party neutral, always choose an individual with a reputation for unquestioned integrity, someone that can be trusted to be impartial and unbiased. The Neutral should have ample knowledge and experience in the resolution of federal contract-related controversies, preferably experience with the kinds of issues, contract type and subject matter that your controversy involves. To date the Air Force has used sitting Armed Services Board of Contract Appeals judges to serve as third-party Neutrals in appeals docketed before the ASBCA and for contract controversies that have not been appealed to the Board. The Air Force and contractors’ experience with using ASBCA judges has been excellent. Air Force personnel seeking to use an ASBCA judge as a Neutral should contact the ADR Division Chief of the Air Force Trial Team for assistance. If the ASBCA is unable to support a request to use one of its judges as a Neutral, there are procedures in place that permit us to request the services of a judge from one of the other Boards of Contract Appeals.
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Such requests should only be made after the chairman of the ASBCA has had an opportunity to consider and decline a request to make one of his judges available to serve as a Neutral. There are a large number of private-sector organizations and individuals that provide Neutrals services. Many of these organizations and individuals have excellent qualifications and track records in resolving commercial contract issues, especially commercial construction contract issues. The costs of hiring a private-sector Neutral can range from $1,000 a day to $9,000 a day. Air Force personnel interested in procuring the services of a private-sector Neutral should contact the ADR Program Office for assistance. Given the foregoing, it is Air Force preference to apply the following priorities in selecting an ADR Neutral:
• An ASBCA judge appointed by the Chairman (generally no added costs involved). • A judge from another Board of Contract Appeals, appointed by its Chairman (may have to pay
costs and salaries; but see, the Boards of Contract Appeals (BCA) ADR Sharing Arrangement.)20 • A third-party Neutral not affiliated with a Board of Contract Appeals (generally must pay for cost
and or fees). When using an ASBCA judge as a Neutral, you should get them involved early. Otherwise, if you are seeking the services of a Neutral, then you should agree to the use of a particular ADR procedure or combination of procedures before selecting the Neutral. The parties then typically agree to use one of the following processes:
• Exchange a list of names of Neutrals until they reach agreement on a particular Neutral; • Each party picks another individual. The selected individuals then meet and select a Neutral; or • Employ the services of an organization to provide a Neutral. See 10 U.S.C. § 2304(c)(3)(c).
Only ASBCA judges or CFC judges are authorized to access the Judgment Fund to pay for a settlement.
Table 8 Limitations on Neutral’s Authority
Type of Neutral Non-Binding ADR Binding ADR Authorized to Access the Judgment Fund Private-Sector Neutral X
No. However, once binding arbitration guidelines are issued by the Air Force, then this may change.
ASBCA Judge X X Yes, if the ASBCA has jurisdiction (has an appeal before it).
Court of Federal Claims Judge X Yes, if the CFC has jurisdiction (has an
appeal before it) Board (non-ASBCA) Judge X
No, if the Board does not have jurisdiction, then the Judge is not authorized to access the Judgment Fund
5.5 Using Senior-level Officials to Resolve the Issue In some instances, agencies have developed mechanisms for using high-level agency procurement officials as Neutrals to review the merits of controversies and assisting the parties in resolving their differences. High-level agency and contractor officials can also serve jointly in given cases, either as co-
20 The text of the BCA ADR agreement can viewed at: http://www.adr.af.mil/iadrwg/sharing.html
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mediators or as a mini-trial panel. Although mini-trials typically involve the assistance of a third-party Neutral, the parties, as a first step, will try to resolve their controversy with a structured settlement process that uses the mini-trial forum without the Neutral. Although these individuals are not technically “Neutrals” since they are employed by parties to the controversy, if they have not had direct involvement with the matters at issue, they can maintain a considerable degree of impartiality. Moreover, in some instances, their involvement is all that is required to settle a controversy.
5.6 Paying For the Services of A Neutral If the contracting officer determines, in consultation with an Air Force attorney, to use an ADR procedure then funds to payment for the Neutral's services must be considered. Opposing parties should bear a share of ADR costs equal to the Air Force except in unusual circumstances. At the very least, opposing parties should bear some of the costs of ADR. For smaller cases, SAF/GCQ may have funds sufficient to pay for the services. This policy will ensure that these parties have a stake in the process and a vested interest in its success. It is important that the exact financial terms with all parties be reduced to writing before the initiation of ADR procedures. If you decide to procure the services of a Neutral be advised that the services can be obtained “by name” using “Other than Full and Open Competition.”21
21 FAR 6.302-3 (a)(2)(iii)
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6 Putting It All Together: Elements of an Issue-Specific ADR Agreement The ADR agreement provides the framework and procedures for the parties to follow during and after the proceeding. A well-drafted agreement allows the parties to avoid or resolve many of the potential issues that can arise during the proceeding. You should consider some or all of the following issues for inclusion in the ADR agreement.
6.1 Issues Defined, Methods of Presentations, Resolution, and Schedule Include in the agreement identification of the details surrounding the issue, including the parties, contracts, definition of issues and amounts at issue, as well as the ground rules. Consider inclusion of the type of ADR process, order and procedures of the presentation (including number and sequence of both witnesses and issues), schedule (time limitations and location), and methods of resolution contemplated. Also, the agreement should address the allocation of fees and expenses.
6.2 Appointment of a Neutral If you use a third-party Neutral, provisions in the ADR agreement should address the appointment, role and payment of the party (including costs of facilities used and other similar expenses, if any). The agreement should spell out the role the third party is anticipated to fulfill (mediator, fact finder, arbitrator, etc.). In the case of a mediator the parties may specify whether they desire the mediator to be “evaluative” or “facilitative”. The Neutral should be disqualified as a witness in subsequent litigation. The agreement should also specify the nature, subject and permissibility of ex parte communications [communications between the Neutral and one party without the other party present]. If the Neutral has been selected in advance and has a set of preferred “ground rules”, these rules may also be included in the agreement.
6.3 Stay or Suspension of Litigation If applicable, suspension or stay of the litigation should be addressed in the agreement. It should spell out the duration of the stay (whether indefinite or linked to specific events or dates), the manner in which the Court or Board will be informed of the agreement and how the parties will obtain concurrence of the forum. If there is to be no stay, the agreement should also state that fact.
6.4 Audit If a request for equitable adjustment (REA) or claim needs to be audited, provide for the audit in the agreement. The agreement should address the types of information and documents are to be provided to the auditor and whether there are any restrictions on the use of the information or documents provided.
6.5 Exchange of Information The ADR agreement should set out provisions allowing for discovery and document exchange. What is to be allowed? What type of limits (schedule, time, relevance to issues/subjects, types and number of requests) are necessary? May witnesses previously deposed be deposed again? Also address records retention, future use and the effect on future access/discovery. How will discovery issues, if any, be resolved? Can matters disclosed be used in future litigation? Please remember that if litigation is filed, any alteration of discovery schedules must be coordinated with and approved by the Court or Board. Provisions for control of statements, briefs, opening offers or position papers can also be included in the agreement. Do the parties submit confidential position statements only to the Neutral? What are the
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length and format requirements for the position statements? May the Neutral respond with ex parte communications? The agreement should also mandate an exchange of information required to justify and support any settlement reached. This could include an audit of costs incurred and certified cost and pricing data.
6.6 Confidentiality Concerns The issue of confidentiality should be addressed in the ADR agreement, more particularly whether non-participants may gain access to any information exchanged during the ADR process. Confidentiality is addressed both in the ADRA of 1996 and in FAR 33.214(e). A related issue concerns whether any information developed or exchanged during the ADR process may be utilized during any adjudication that may occur if the ADR is not successful. Use of settlement discussions in litigation is governed by the Federal Rules of Evidence, Rule 408. All of these confidentiality issues should be spelled out clearly in the ADR agreement. The provision should be tailored to the circumstances of each individual case. Participants in ADR should understand that Government agencies may be required to make available ADR-related documents pursuant to a request under the Freedom of Information Act (FOIA). However, documents may qualify for FOIA Exemptions or may be covered by the limited confidentiality protections afforded for dispute resolution communications under the ADRA of 1996. FAR 33.214 provides that ADR proceedings will be protected pursuant to the confidentiality provisions of the ADRA.22 Air Force personnel should be cautious about relying on the ADRA’s confidentiality provisions. The wording of the section is very precise. For example, a mini-trial conducted without the appointment of a Neutral does not qualify as a “dispute resolution proceeding” under the ADRA.23 The ADRA generally provides for the non-disclosure of: (1) confidential communications to a Neutral; and (2) dispute resolution communications. 24 A “dispute resolution communication” is “any oral or written communication prepared for the purposes of a dispute resolution proceeding . . .” 25 Absent an exception or provision for disclosure, a Neutral may not disclose a confidential communication or a dispute resolution communication and a party may not disclose a dispute resolution communication.26 However, there are numerous exceptions to the foregoing non-disclosure requirements, i.e., court order, waiver, statute, public knowledge, matters otherwise discoverable, etc. The ADRA’s confidentiality provision, that is, its non-disclosure rule, does operate as a narrowly defined FOIA exemption.27 The parties are also authorized to agree to and impose confidentiality provisions on the Neutral different from those set out in the ADRA.28 However, those provisions cannot provide less disclosure than provided for by ADRA.29 This discussion is not intended to be exhaustive. It is intended to illustrate the complexity of confidentiality issues related to drafting an ADR agreement. You should engage the services of an Air Force lawyer to ensure that any confidentiality concerns are properly addressed. If you want more information about confidentiality see the Air Force ADR website at: http://www.adr.af..mil
22 5 U.S.C. § 574 23 5 U.S.C. § 571(b) and the confidentiality provisions of the act do not apply in such a proceeding. 24 5 U.S.C. § 574 25 5 U.S.C. § 571(5) 26 5 U.S.C. § 574(a) and (b) 27 5 U.S.C. § 574(j) 28 5 U.S.C. § 574(d) 29 5 U.S.C. § 574
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6.7 Other Considerations An ADR agreement may provide for the waiver of recovery of fees under Equal Access to Justice Act (EAJA). Also, a provision may be included addressing interest, waiver of attorney fees, and the use or the waiver of transcripts. In the alternative, the parties' agreement may specify that the parties and the Neutral at the close of the ADR proceeding will address any or all of these costs. Also see Section 7.4.
6.8 Closure Closing out a successful ADR is important, therefore it should be decided whether to address this topic in the agreement. If limitations exist affecting closure, such as funding limitations imposed by law or a particular time period, consider putting a provision in the agreement to cover this situation.
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7 Fiscal/Monetary Considerations
7.1 Who Pays for the Cost of an ADR Procedure? Each party to an issue in controversy bears the cost of their own internal ADR preparation (i.e., fact finding, document control, expert witnesses, etc.). The program office, on a systems contract, or the requiring activity, on an operational contract, would fund these preparation costs. JA generally funds attorney TDY costs. The parties usually share the cost of the private sector Neutral. The Air Force has a preference for using judges at the Armed Services Board of Contract Appeals (ASBCA) to serve as Neutrals in ADR proceedings, and there is no cost to either party when an ASBCA judge serves in this capacity. Some central funding to support ADR may be available on a case-by-case basis from SAF/GCQ.
7.2 Funding Judgments A judgment is an order from the ASBCA or U.S. Court of Federal Claims (or higher court following an appeal of the original decision) directing the Air Force to pay an amount of money because Appellant has prevailed in at least part of its case. The Contract Disputes Act,30 provides, “[a]ny monetary award to a contractor by an agency board of contract appeals shall be paid promptly in accordance with the procedures contained in [the Judgment Fund statute]....” Judgments can be funded from available contract funds, the Indefinite Judgment Fund (this is a special fund established for this purpose), 31 or other available, like-type, current funds. Expired account funds cannot be used to reimburse the Judgment Fund although, depending on the circumstances, they may be used to fund a settlement. If contract funds are exhausted, and there is no expired money a “consent judgment” and payment from the judgment fund may be the only option to avoid an Anti-Deficiency Act (ADA) violation (consult finance and your legal counsel). Also note that even in this situation, the Air Force will be required to reimburse the Judgment Fund with “current year” funds. Congress created the judgment fund as a source of funds to pay judgments against the United States Government.32 The Judgment Fund certification of payment function has been transferred from the General Accounting Office (GAO) to the Financial Management Service (FMS), Department of the U.S. Treasury. This change only affects the administrative procedures for tapping the Judgment Fund and does not impact the substantive guidance on the appropriate use of the Judgment Fund. The U.S. Treasury requires that, when the Armed Services Board of Contract Appeals renders a monetary award to a contractor, a certificate of finality be executed by the parties (certifying neither party contemplates an appeal or further action on the appeal) and three Treasury Department forms be completed by the contracting officer: Treasury FMS Form 195, Judgment Fund Payment Request; FMS Form 196, Judgment Fund Award Data Sheet; and FMS Form 197A, Voucher for Payment. The ASBCA will include copies of the FMS forms (195, 196, and 197A) and certificates of finality for completion by the parties when it forwards a decision making a monetary award to a contractor. The Air Force Trial Team docket clerk will forward these forms to the contracting officer upon receipt of the authenticated copy of the Board’s decision. The contracting office, using FMS Form 195 as a transmittal letter, should send the completed forms and certificates of finality along with a copy of the Board’s
30 41 U.S.C. § 612 31 31 U.S.C. § 1304 32 31 U.S.C. § 1304
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decision to the address listed on FMS Form 195 if the award is to be paid from the Judgment Fund (as opposed to other funds currently available to the contracting officer such as surplus contract funds). The Treasury Department will send payment to the contracting office, not to the contractor or the contractor’s attorney. Each Form 197A should contain the name, address, and telephone number of the person in the contracting office to whom payment should be sent. The contracting office will be responsible for delivering the payment to the contractor or the contractor’s representative. The Treasury Department also requires that all check or wire transfers have the payee’s Taxpayer Identification or Social Security Number on the payment. If the payee is the contractor’s attorney, include the attorney’s tax identification number. The Contract Disputes Act requires the contracting activity listed on the certificate of finality reimburses the Judgment Fund out of current appropriations or obtain additional appropriations from Congress for the judgment.33 Such reimbursement must be out of current year funds unless a specific appropriation is obtained. Reimbursements come from funds available for obligation when the judgment is entered.34 The rationale for Congress requiring agencies to reimburse the Judgment Fund is to foster responsible agency decision making during the claims resolution process. As mentioned above, the Judgment Fund cannot be reimbursed with expired account funds. The Air Force will normally seek the necessary funds from the local base or MAJCOM involved to reimburse the Judgment Fund after the Air Force has reimbursed the Treasury.
7.3 Funding Settlements
7.3.1 General Principals and Anti-Deficiency Act (ADA) Concerns Funds associated with a settlement fall into one of three categories: (1) current, (2) expired, or (3) cancelled. Current year funds are funds whose availability for new obligations has not expired under the terms of the applicable appropriation. For example, procurement funds are current for three years, R&D funds for two years and O&M funds for one year. Expired funds are those funds whose availability for new obligations has expired but they retain their fiscal year identity for five years after expiration and are available to adjust and liquidate obligations already incurred. The FY91 National Defense Authorization Act generally phased out the previous merged or “M” account funds. As partial replacement, the Act extended the life of “expired” accounts from 2 to 5 years. Funds move from current to expired status after a varying number of years depending on their type. For example, O&M funds “expire” and can no longer be obligated, after 1 year from the time the funds are first appropriated; RDT&E after 2 years; procurement after 3 years; and MILCON after 5 years. Both obligated and unobligated funds in the expired accounts are available for settlements and in-scope changes so long as the fiscal year identity of the funds and the fund types are respected. Canceled funds are funds that are no longer available for any purpose. Funds become canceled after their five-year period in an expired account. The Anti-Deficiency Act prohibits the use of canceled funds. Any payments beyond the expired phase must be taken from currently available appropriations and cannot exceed one percent of current Air Force appropriations without congressional approval.
33 41 U.S.C. § 612(c) 34 AFR 170-8, para. 28.b
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7.3.2 Source of Settlement Funds A contracting officer entering into settlement negotiations should determine the source of the settlement funds and have a fairly good estimate of how long it will take to actually make the payment after the parties agree to settle. In general, settlements can be paid from available contract funds, available expired accounts, or other available, like-type, current funds. Most of our cases that result in monetary relief to the contractor occur when settlement discussion among the parties results in an agreed-to compromise of the ASBCA appeal and underlying claim(s). In this instance, the settlement is normally effected by bilateral agreement between the parties and modification to the contract. The settlement amount is normally paid by the contracting officer from the appropriation available to fund the contract. In certain cases, this settlement payment may come from expired money on a “relation back” theory. However, in some settlements, the parties have may agree to a stipulated judgment (the parties agree to the facts and the amount of the judgment) or a consent judgment (one party consents to the facts and amount of judgment to which the other party raises no objection). These judgments are then adopted by the ASBCA in an order of award that is satisfied from the Judgment Fund. However, the Judgment Fund cannot be used to directly fund settlements. Use of stipulated or consent judgments to be paid from the Judgment Fund may be advantageous to the Government when: (1) the appropriation which funded the contract is no longer available or is exhausted; (2) the contracting officer must obtain funds from higher headquarters which may involve substantial delay and the unnecessary incurrence of interest charges on the CDA claim; (3) the delay in obtaining funds from higher headquarters may jeopardize an otherwise advantageous settlement for the Government; or (4) reimbursement of the award from subsequent annual appropriations would have a “cash flow” advantage to the contracting agency. There are disadvantages in the use of stipulated or consent judgments.. Reimbursement of the Judgment Fund, which is necessary when stipulated or consent judgments are used, must be from current year funds, whereas payment of settlements by the contracting officer may occur on a “relation back” theory from expired funds. Any decision to use a stipulated or consent judgments should be coordinated with the Air Force financial community prior to execution In summary: • If contract funds are still available, they are the preferred source to fund settlements. • If contract funds are exhausted, determine availability of obligated or unobligated funds in “expired”
accounts. • If expired accounts are not available (insufficient amount of the correct FY or type); current year
funds must be used. • If current or expired year funds are not available, but settlement is determined to be most
advantageous to the Government, consult with the assigned trial attorney to prepare a motion to the board. This motion should seek to have the board adopt the settlement as its decision in the case, and have the settlement, now a “judgment,” paid by the Judgment Fund. As discussed previously, the Judgment Fund will have to be repaid by the Air Force. In most instances the Air Force will look to the appropriate requiring activity to reimburse the fund.
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7.4 Other Issues Associated with the Cost of ADR Air Force personnel should be familiar with a number of cost allowability issues that may arise under certain types of contracts and in certain types of cases. The text below is designed to briefly address this area so that Air Force personnel can begin to make informed choices regarding how to proceed. None of these matters alone are likely to tip the scales on when to pursue ADR if it is appropriate. They are matters that should be considered in entering into ADR, writing the ADR Agreement and in preparing settlement documents.
7.4.1 Interest The Contract Disputes Act of 1978 (CDA) entitles contractors to interests on their claims. Accrual of CDA interest begins on the date the contracting officer receives a proper claim under the CDA.35 Interest prior to the submission of a contractor’s claim is generally unallowable.36 Generally, settlements should address the issue of interest and the settlement agreement should reflect the terms to which the parties have agreed i.e., define the exact terms of the agreement rather than relying upon general statements such as “ interest is due”.
7.4.2 Payment of Attorney’s Fees Although as a general rule of law parties to litigation are not entitled to attorney’s fees and costs, government contractors may be entitled to attorney’s fees and costs under certain circumstances. The Equal Access to Justice Act (EAJA) provides that government contractors who meet specified eligibility requirements relating to business size may be permitted to recover attorney fees and associated litigation costs.37 EAJA can apply to the ADR process as well. As a result, the issue of attorney’s fees and costs must be considered in any ADR and addressed within any ADR settlement agreement. The effects of the EAJA also play a role in the timing of ADR. EAJA fees are imposed upon the granting of a “final judgment”; however, an “order of settlement” is considered a final judgment for the purposes of the Act.38 As a result, ADR should be timed to avoid or minimize EAJA attorney fees when possible and any settlement should contain language waiving or satisfying any EAJA fee obligation. Resolution prior to a CO Final Decision is normally desirable if EAJA fees are a primary concern.
7.4.3 Allowability of Claim Preparation Costs The cost of preparation and presentation of claims against the government are not reimbursable (allowable) costs as part of an equitable adjustment or damage award.39 However, costs associated with contract administration, such as preparation of a request for equitable adjustment etc, are generally reimbursable expenses. Unfortunately, there is rarely a bright line between claims preparation and contract administration in practice. Consequently, every case is unique and requires a case-by-case determination. Additionally, application of legal precedent in this area can be very technical and complex. Therefore, if the parties have questions about the allowability of costs in their particular controversy, they should contact their legal counsel and ADR Champion for additional guidance.
35 41 U.S.C. § 611; FAR 33.208 36 FAR 31.205-20 37 5 U.S.C. § 504. EAJA has two effects: (1) it waives the immunity of the United States to claims for attorney fees in situations in which other civil litigants would be subject to such fees, and, (2) it applies fees to the United States when they would not ordinarily apply if the individual opposed to the United States meets certain income criteria defined by the Act. 38 23 U.S.C. § 2412(d)(2)(a) 39 FAR 31.205-47
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8 Best Practices
8.1 Assembling the ADR Team
8.1.1 Identifying A Principal Both the Air Force and the contractor should each designate a person to act as the principal negotiating representative. This person should have the authority to negotiate a settlement. It is also important that this person be able to approach the ADR proceeding objectively, with an open mind. It is preferable to resolve matters at the contracting officer’s level (see FAR 33.204). However, there may be occasions (due to the emotional nature of a particular controversy) when it may be helpful if the person selected has had little or no prior involvement in the day-to-day contract administration or with the matter in controversy. As a result, the person can view the facts with fresh eyes and without having to justify their own previous positions or actions. On the other hand, if the principals already know each other, their prior experiences may have been cordial and thus have a positive effect. If the prior relations have been “unfriendly,” it may be more productive not to involve them in either the presentation phase of the ADR proceeding or in direct face-to-face negotiations. A more effective approach in the “unfriendly situation” may be to keep the principals in separate rooms, and for the Neutral to mediate between them by means of “shuttle diplomacy.”
8.1.2 Identifying Team Members Who Should Participate And When Be prepared to have the people with direct, first-hand knowledge of the facts attend the ADR proceeding. Their participation is key in helping the principal understand the other side’s position. Similarly, these people can also assist the Neutral more accurately assess the strengths and weaknesses of the other side’s position. This is critical where credibility becomes an issue. Another reason to include the people who have been involved in the issue since its inception is that this can bring about some emotional closure. Keep in mind, a large number of people may hinder negotiations. Therefore, the number of participants should be kept to a necessary minimum. Again, only those people most knowledgeable about the issues to be presented should be involved. In addition, these people should be available to respond to questions throughout the course of any presentation phase of the ADR proceeding, and should remain available throughout the negotiation phase, unless released by their principals or the Neutral. Also, sometimes the people who have the most direct experience and knowledge of the issues are too emotionally involved with the issue to participate effectively (objectively) in the negotiations.
8.1.3 Obtaining Neutrals/Mediators The Air Force has made extensive use of judges from the Armed Services Board of Contract Appeals (ASBCA) as Neutrals. This has several advantages. First, ASBCA judges are experts in government contracts. Second, an ASBCA judge is viewed as impartial by both sides. Third, using ASBCA judges is far less expensive than using private-sector Neutrals. Fourth, having a sitting ASBCA judge adds credibility to the process, and can help justify any settlement that may emerge from the ADR process. Finally, ASBCA judge involvement enables them to determine if the final agreement falls within a zone of reasonableness and allows them to use a Consent Decree - thereby giving access to the Judgment Fund and potentially avoiding an ADA violation. There are, however, a number of potential sources of Neutrals from sitting Board or Court judges to hosts of distinguished private-sector Neutrals for hire. The key is to understand the role you want the Neutral to play and then to be sure you secure the highest quality Neutral possible.
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8.2 Other Issues and Concerns
8.2.1 Be Sure to Consult Your Air Force Attorney In two cases Air Force contracting personnel attempted to use ADR techniques that resulted in significant additional work to resolve the issue in controversy. In on case, senior program officials from the Air Force and the contractor sought to “keep the lawyers out of it” and negotiate a settlement of their issue in controversy. The result was several years of negotiations and subsequent litigation. In the second case, Air Force technical personnel sought to enter into a Partnering Agreement with a contractor. An agreement was executed. When an issue in controversy arose, the contractor’s attorneys argued that the language of the Partnering Agreement superseded the Disputes clause and provided the sole process for resolving the issue in controversy. The result was a dispute about the ADR agreement itself. The lesson learned in both cases is that consultation with Air Force attorneys can avoid needless delay and confusion surrounding the terms of the ADR Agreement.
8.2.2 Need for Well-Drafted Procedures Regarding Information Exchanges In a recent ADR proceeding, a Government ADR team was surprised by new evidence submitted by the contractor only hours before the two sides were to present their case in a Summary Trial with binding decision. The Judge allowed the evidence to be heard and its effect was significant. Lesson learned: Be sure your submission agreements have a cut-off date for the submission of evidence. In several other cases the parties agreed to limit the time allotted for discovery. Counsel for the contractor then attempted to turn time limited discovery to their advantage by overwhelming government counsel with discovery requests. Lesson learned: Ensure that your ADR Agreement does not allow the other side to overwhelm you. These examples explain why the Air Force has created an ADR Advisory Team and an ADR Division of the Air Force Trial Team. These organizations stay abreast of lessons learned and are prepared to help ensure that you reach clear agreement on information exchange provisions and avoid repeating past mistakes made by other Government personnel.
8.2.3 Need for Well-Drafted Settlement Agreements After working hard to reach a settlement, the parties too often consummate their settlement with a handshake. This can lead to significant problems in finalizing the details of the settlement agreement. In one large-dollar case, the Navy and a contractor did precisely this. It then took counsel for both parties several months to hammer out the details of the settlement. In several other cases, the parties hurriedly crafted the release language of their bilateral contract modification. The contractor, upon reflection, sought to get out of the agreement by challenging the release language as over-broad. The lessons learned in both types of cases are that if one of the parties has second thoughts about the merits of the settlement reached, they will seek to vitiate some or perhaps all of the terms of the settlement by challenging the release language in the bilateral contract modification. These challenges typically allege the release language was too broad or too narrow. In addition, parties may allege that someone has done something that is inconsistent with the terms of the release. Simply stated, if immediate execution of the contract modification is not possible, the parties should ensure their written settlement agreement is comprehensive.
8.3 Conducting Successful ADR The vast majority of ADRs result in resolution. However, ADR may not be quick and easy. If resolving the issue were quick and easy, normal negotiations would have been adequate. Therefore, make sure you
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are committed to providing the necessary resources, time and effort to make the ADR effort a success. The following “lessons learned” were gleaned from past successes and are helpful to keep in mind for future ADR efforts.
• Information exchange and realistic schedules are essential.
• Ensure the right business principals are involved.
• Be sure the Government members function as cohesive team.
• Begin with the end in mind Settlement mechanics and payment issues need to be addressed early in the process.
• Be Flexible. Change things that are not working and keep those that are.
• If either side is not prepared, the ADR may fail. Both sides need to justify a settlement to their management.
• Make sure you carefully evaluate potential Neutrals.
• Be sure the Neutral is familiar with the controversy and is prepared to engage with the parties.
• While the Rules of Evidence do not apply—legally admissible evidence (especially if it comes from the contractor’s documents) can be very effectively used in ADR.
• Demonstrative evidence (such as graphs, charts, diagrams, photographs, models, illustrations) is very effective in ADR.
• Ex Parte communications (one side speaking to the Neutral without other side being present) can be beneficial in certain types of ADR (like mediation).
• Neutrals will (depending on the type of ADR used) frequently provide candid assessments of a case. This assessment should not weaken a strong case or strengthen a weak one.
8.4 Avoiding and Managing Contract Issues in Controversy The ultimate goal of ADR is to avoid issues in the first place. Although issues are bound to arise, they can be minimized. Recent revisions to the DoD 5000 series place increased emphasis on life-cycle risk assessment and management on major weapon system programs (DoD 5000.1 Para 4.1.4). While not new, emphasizing risk management as a continual process appropriately applies the concept across the entire life cycle of an acquisition effort and makes it an integral part of the program approval and decision process. The AFMC Acquisition Support Teams (ASTs) routinely employ the risk assessment process to focus integrated product teams on program risks during the pre-award phase of a program. Here the risk assessment is used to shape both the request for proposal and the source selection criteria. Both proposal risk and performance risk are assessed and rated during source selection and are considered by the decision authority when the selection is made. This use of risk focused processes has proven effective and extremely useful in selecting competent and qualified sources. Unfortunately, program teams frequently fail to follow through with risk management once a selection has been made and the contract is awarded. The day-to-day pressures of program execution often relegate the team’s activities to problem management rather than focusing on problem prevention. However post award risk management is a potentially effective means of preventing contract issues. The basic premise of risk management is to focus management emphasis on those critical parts of a program that could cause
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cost, schedule, and performance problems. By applying preventative measures, problems are avoided or effectively mitigated and the probability of an issue is reduced. The post-award risk management effort needs to begin with the post award conference and must continue through the full duration of the effort. This presents an excellent opportunity for the program team to establish an issue resolution process for the program. A joint government/contractor team should be established and chartered to oversee the risk management effort. This team would ideally be comprised of functional area experts and either co-led by the government and contractor program managers or structured to report directly to them. This approach to risk management is program unique and can take many forms. However, it is important, to maintain a joint risk management plan and a joint risk list that are reviewed and updated at each program review. Risk measurement can and should be integrated with other program metrics wherever possible so that it becomes a routine part of the program management process. A good source of information on risk management is the Risk Management Guide for DoD Acquisition published by the Defense Systems Management College Press at Fort Belvoir, VA 22060-5565. The guide is available online at http://www.dsmc.dsm.mil/pubs/gdbks/risk_management.htm. Other sources of information on risk management are the ASTs located at each of the AFMC product, logistics, and test centers and the Centralized Acquisition Support Team (CAST) located at HQ AFMC.
CHAPTER 8
DRAFTING AND FUNDING SETTLEMENT AGREEMENTS I. INTRODUCTION........................................................................................................ 1
A. Government Policy.. ................................................................................................. 1
B. Settlement Agreements.. ........................................................................................... 1
II. NEGOTIATION OF A SETTLEMENT AGREEMENT. ........................................... 1
A. Authority to Settle..................................................................................................... 1
B. Settlement Timing..................................................................................................... 3
C. Preparations for Negotiations. .................................................................................. 4
D. Conducting Negotiations. ......................................................................................... 5
E. Finality of Agreement. .............................................................................................. 5
III. DRAFTING A SETTLEMENT AGREEMENT. ..................................................... 6
A. Goals. ........................................................................................................................ 6
B. Elements of a Settlement Agreement........................................................................ 7
IV. FISCAL ISSUES. ................................................................................................... 12
A. Importance in Litigation. ........................................................................................ 12
B. Definitions............................................................................................................... 13
C. Types of Appropriations Described by Period of Availability. .............................. 13
D. Rules for Obligation of Funds................................................................................. 14
E. Settlement Agreements. .......................................................................................... 14
F. Funding Judgments or Awards. .............................................................................. 15
G. Equal Access to Justice Act (EAJA) Fees. ............................................................. 15
H. Funds Received from the Contractor. ..................................................................... 15
V. LITIGATION ISSUES............................................................................................... 16
A. Jurisdiction over Settlement Agreements. .............................................................. 16
B. Review. ................................................................................................................... 17
C. Miscellaneous Issues............................................................................................... 17
VI. CONCLUSION....................................................................................................... 17
MAJ Jon Guden Disputes & Remedies
March 2001
CHAPTER 8
DRAFTING AND FUNDING SETTLEMENT AGREEMENTS
I. INTRODUCTION.
A. Government Policy. Try to resolve all contractual issues in controversy by mutual agreement at the contracting officer's level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim. FAR 33.204.
B. Settlement agreements. Most contract disputes are settled. The government must take great care to ensure it crafts an agreement that reflects the parties' intentions and protects the government.
II. NEGOTIATION OF A SETTLEMENT AGREEMENT.
A. Authority to Settle.
1. Government. Actual authority is required. Federal Crop Insurance Co. v. United States, 332 U.S. 380 (1947).
a. Contracting officer.
(1) Under FAR 33.210, contracting officers are authorized to decide or resolve all claims that are within the specific limitations of their warrants,1 except:
(a) Claims or disputes for penalties or forfeitures prescribed by statute of regulation that another Federal agency is specifically authorized to administer, settle, or determine; or
1 The agency may require the approval of a settlement at a level higher than the contracting officer. See Construcciones Electromecanicas S.A., ASBCA No. 41413, 94-1 BCA ¶ 26,296 (motion for summary judgment denied where settlement agreement had not received required approval of Directorate of Contracting Headquarters Tactical Air Command).
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(b) The settlement, compromise, payment or adjustment of any claim involving fraud.2
(2) In the Army, the contracting officer is required to advise the Chief Trial Attorney (CTA) of all offers of settlement made by the contractor, and must consult with the CTA prior to accepting an offer of settlement or making an offer of settlement. AFARS 33.212-90-7(a).
b. Trial Attorney.
(1) A trial attorney has no inherent authority to settle a claim. John C. Grimberg Company, Inc. and The Hartford Fidelity & Bonding Company, ASBCA No. 51693, 99-2 BCA ¶ 30,572 (board unwilling to assume trial attorney has authority to settle an appeal); J.H. Strain & Sons, Inc., ASBCA No. 34432, 88-3 BCA ¶ 20,909 (contracting officer refused to approve a "tentative settlement agreement" reached by trial attorney); Cf. Defoe Shipbuilding Co., ASBCA No. 17095, 74-1 BCA ¶ 10,537 (board found trial attorney lacked authority to concede liability in the government's brief, and allowed withdrawal of concession).
(2) Agency regulations may address the scope of a trial attorney's authority. See AFARS 33.212-90-7.
(3) The Chief Trial Attorney (CTA) of the Army has all necessary authority to conclude settlement agreements with the concurrence of the contracting officer, the reviewing official designated by the Head of the Contracting Activity, or the Deputy Assistant Secretary of the Army for procurement (DASA(P)). AFARS 33.212-90-7(b).
2 Where some aspect of fraud touches on the contract dispute, the agency should coordinate with the attorney(s) from the U.S. Department of Justice handling the civil or criminal actions.
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2. Contractor.
a. Principal. The government should obtain the signature of a person authorized to bind the contractor.
b. Attorney. An attorney retained for litigation purposes is presumed to possess express authority to enter into a settlement agreement on behalf of the client, and the client bears the burden of rebutting this presumption with affirmative proof that the attorney lacked settlement authority. Amin v. Merit Systems Protection Bd., 951 F.2d 1247 (Fed. Cir. 1991); HNV Central River Front Corporation v. United States, 32 Fed. Cl. 547 (1995).
B. Settlement Timing.
1. Settle when government believes it is advantageous.
2. Factors to Consider.
a. The issue(s) at stake.
(1) Will the case make good or bad law?
(2) Stem the tide of future claims.
b. The amount in controversy.
c. The cost of defending.
d. Strength of the respective cases.
e. Existence of other claims, and willingness to resolve multiple claims.
f. Interests of third parties, such as subcontractors, trustees in bankruptcy, Department of Justice.
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g. Signals from the judge.
h. Continuing relationship with the contractor.
3. Advantages of Early Settlement.
a. The government has not expended a lot of time or money.
b. The contractor may not be entrenched in its position.
c. The contractor may not know full strength of its claim.
d. Contractor more willing to take less money to get money now.
4. Advantages of Late Settlement.
a. Through discovery the government knows more about the case.
b. Contractor may see weaknesses in its case because of discovery.
C. Preparations for Negotiations.
1. Prepare a position.
a. Use litigation risk assessment.
b. Use DCAA audit findings.
c. Know funding limitations.
2. Predict Opponent's Position.
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a. Use claim, complaint, discovery, conversations.
b. Understand their alternatives.
3. Identify members of the settlement team. Always include the contracting officer.
D. Conducting Negotiations.
1. Negotiations can take place in person, in writing, or by telephone.
2. Regardless of the method, consider the following:
a. Maintain a record of negotiations.
b. It is best to make and withdraw offers in writing.
c. Bargain in good faith.
d. Ask for support of dollar positions.
e. Be able to justify agreements reached on individual points.
f. Make approval requirements clear to the other side.
E. Finality of Agreement.
1. In writing.
a. The settlement agreement should be drafted as a document separate from a contract modification.
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b. FAR 43.301 requires use of the Standard Form (SF) 30 for supplemental agreements. Incorporate the settlement agreement by reference and attach to a (SF) 30 to evidence the bilateral modification to the contract.
2. Oral agreements.
a. Courts and boards have found binding settlement agreements where the parties have yet to reduce them to writing. Essex Electro Engineers, Inc., ASBCA Nos. 30118, 30119, 88-1 BCA ¶ 20,440 (relying on price negotiation memoranda to find an agreement which Navy later refused to fund based on perceived bad deal); Kurz & Root Company, Inc., ASBCA No. 17146, 74-1 BCA ¶ 10,543; Brookfield Construction Co. v. United States, 661 F.2d 159 (Ct. Cl. 1981)(in dicta, citing with approval the decision in Kurz).
b. "The issue here is not whether a written executed settlement agreement memorialized on a Standard Form 30 would be 'better.' The issue is whether, looking at the totality of the discussions between the parties and the written record, can we determine whether a bargain was struck, and if so, what it was?" Essex Electro Engineers, Inc., supra.
c. An "agreement in principle" does not signify a contractual relationship. John C. Grimberg Company, Inc. and The Hartford Fidelity & Bonding Company, ASBCA No. 51693, 99-2 BCA ¶ 30,572 (denying motion for summary judgment where parties had only reached "agreement in principle to settle the case").
III. DRAFTING A SETTLEMENT AGREEMENT.
A. Goals.
1. Resolve the dispute.
a. Address all issues concerning the dispute.
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b. Clearly delineate the rights and obligations of the parties.
2. Avoid future problems.
a. Establish mechanisms to address foreseeable problems, such as payment of interest if payment is made after a certain date. Decker & Co. GmbH, ASBCA Nos. 44932, 44933, 94-2 BCA ¶ 26,629 (denying bad faith allegation where government paid contractor four months after execution of agreement which provided for interest on late payment); Essex Electro Engineers, Inc., ASBCA No. 46047, 94-1 BCA ¶ 26,457 (contractor entitled to interest where agreement did not provide for contingency of delay in issuing contract modification on SF 30).
b. Draft the agreement clearly to avoid interpretation problems. Beware of using form agreements--have a purpose for using every clause in the agreement.
B. Elements of a Settlement Agreement.
1. Title.
2. Recitations.
a. The "Whereas" clauses.
b. These clauses provide the factual basis for the settlement agreement. The parties should recite relevant facts, such as the contract number and the docketing number, such as ASBCA No. 12345.
c. If a hearing, ADR proceeding, or negotiations led to the settlement, identify the event and date.
d. The recitations can help a judge resolve a dispute concerning the settlement agreement.
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3. Payment clause.
a. Spell out how much the government will pay the contractor, to include any non-monetary relief.
b. State that the payment is made in full satisfaction of all claims to include costs, attorney's fees, and interest arising under or relating to the Contract and the ASBCA appeal.
c. Specify when the contractor will be paid (e.g., within 30 days after receipt of a proper invoice following execution of the contract modification which incorporates this settlement agreement).
d. Specify the remedy should the payment be late (e.g., interest shall be paid at the statutory rate applicable to the Prompt Payment Act).
e. Payments under a settlement agreement can have tax consequences to the contractor. Talley Industries, Inc. v. Commissioner of Internal Revenue, No. 27826-92, 1999 Tax Ct. Memo LEXIS 237 (T.C. June 18, 1999) (disallowing income tax deduction of a $2.5 million payment made in settlement of civil and criminal false claims where agreement silent as to penalty or compensation for losses).
4. Dismissal with prejudice. The party filing the appeal should agree to request dismissal of the case with prejudice.
5. General Release.
a. This is the most important clause for the government. Its drafting may determine whether the release operates as a bar to future claims.
b. An accord and satisfaction is a concept different from a release.
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(1) Accord and Satisfaction.
(a) Requires proper subject matter, competent parties, meeting of the minds, and consideration. Brock & Blevins Co. v. U.S., 170 Ct. Cl. 52 (1965); Computer Associates International, Inc., ASBCA No. 46922, 96-2 BCA ¶ 28,470.
(b) The contract modification or agreement is the accord, the subsequent performance is the satisfaction. Safeco Credit v. U.S., 44 Fed. Cl. 406 (1999).
(c) Use language such as: This agreement constitutes an accord and satisfaction and represents payment in full (for both time and money) for any and all costs, impact effect, and/or delays arising out of, or incidental to, the subject matter of ASBCA No. 12345. See Safeco Credit v. U.S., supra.
(2) Release. An agreement of a contracting party that the other party will not be liable if claims are asserted in the future.
c. A release will bar claims existing prior to the date of the release when the maker of the release had knowledge of the claims and failed to reserve its rights. Johnson, Drake & Piper, Inc. v. United States, 531 F.2d 1037 (Ct. Cl. 1976); General Dynamics Land Systems, Inc., ASBCA No. 44622, 96-1 BCA ¶ 28,099.
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d. A contractor's exception to a release is construed narrowly because the purpose of a release is to end the matter in controversy. Mingus Constructors, Inc., v. United States, 812 F.2d 1387 (Fed. Cir. 1987)(contractor failed to except a claim when it stated its intent to file a claim in undetermined amounts); S&J Contractors, VABCA No. 3743, 93-3 BCA ¶ 26,022 (release and referenced letter mentioning breach of contract, liquidated damages, and business losses did not put government on notice of any specific claims).
e. Make sure the release language bars any future claims or causes of action associated with the contract and the appeal. See Peterson Construction Company, Inc., ASBCA No. 44,197, 93-2 BCA ¶ 25,571 (contractor permitted to claim an equitable adjustment for a subcontractor's claim received after signing release that discharged "claims, demands, or causes of action . . . which the contractor has against the government arising out of this contract"; release applied only to claims the contractor had against the government as of effective date of modification).
f. It is questionable whether a release that purports to include "unknown" claims is an effective bar to a future claim. Inland Empire Builders, Inc., ASBCA No. 8077, 67-1 BCA ¶ 6162 ("However conclusive the language of the release may appear to be, it cannot be read to comprehend claims wholly unknown to the parties at the time of execution.")
(1) A board or court will focus on the intent of the parties at the time the release is executed, and intent will be sought from the settlement agreement. Futuronics Corporation, ASBCA No. 29324, 85-2 BCA ¶ 18,137.
(2) Tie the recitations in with the release language to provide support for a broad release.
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(3) A release that states "all parties agree that this represents full compensation for any and all time, delays, and costs, known and unknown, arising out of [the contract work]," may operate as a final disposition of all claims. Neal and Company, Inc., DOT BCA No. 2084, 90-2 BCA ¶ 22,789 (contractor barred from seeking interest).
g. Equal Access to Justice Act (EAJA) fees.
(1) When a party releases claims arising under or relating to a contract, such a release ordinarily excludes EAJA applications, which arise under 5 U.S.C. § 504.
(2) An EAJA claim arises out of an ASBCA appeal. Therefore, a release of claims arising under or related to an ASBCA appeal will bar an EAJA claim. Application Under the Equal Access to Justice Act of Hexatron Engineering Co., Inc., ASBCA No. 48674, 97-2 BCA ¶ 29,324.
h. Mutual release. The Army typically includes language releasing the contractor "to the extent permitted by law."
6. Integration Clause.
a. Integrated Agreement Defined. A writing or writings constituting a final expression of one or more terms of an agreement. Restatement (Second) of Contracts, § 209.
b. Form. No particular form is required. A contract may include an explicit declaration that there are no other agreements between the parties. Id.
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c. Parol evidence rule. Renders inoperative any prior or contemporaneous written and oral agreements that contradict or are otherwise inconsistent with the terms of a supplemental agreement, provided the supplemental agreement has been adopted as a binding integrated agreement. Restatement (Second) of Contracts, § 213, comment a; Triple "A" South, ASBCA No. 35824, 90-1 BCA ¶ 22,567.
d. A board or court may consider evidence of prior or contemporaneous agreements and negotiations to determine whether a writing is an integrated agreement. Triple "A" South, supra. See also D&R Machine Company, ASBCA No. 50730, 98-1 BCA ¶ 29,462 (government not entitled to summary judgment where no showing settlement agreement was an integrated agreement); United Technologies Corporation, Pratt & Whitney Group, Government Engines & Space Propulsion, ASBCA Nos. 46880, 46881, 97-1 BCA ¶ 28,818.
7. No Admission of Liability. Include a clause stating that the settlement agreement does not constitute an admission of liability by the government.
8. Signatures.
a. Prior to signature, provide the draft to the contracting officer and opposing counsel for review. Army trial attorneys provide to the CTA a settlement memorandum3 and the draft settlement agreement for review.
b. Obtain the signatures of the contracting officer and a contractor's authorized representative, and the dates of signatures.
IV. FISCAL ISSUES.
A. Importance in Litigation. 3 The memorandum includes a statement of facts, a discussion section identifying litigation risk and other factors influencing the decision to settle, and a recommendation whether to settle.
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1. Different funds are used to pay for settlements and judgments.
2. Consider these matters at an early stage of litigation. See U.S. Army Contract Appeals Division Practice Tip: Funding Considerations in Contract Disputes.
B. Definitions.
1. Unexpired appropriations (current funds). An appropriation account available for obligation during the current fiscal year. DFAS-IN 37-1, Glossary, p. 57.
2. Expired appropriations. Appropriations whose availability for new obligations has expired, but which retain their fiscal identity and are available to adjust and liquidate previous obligations. 31 U.S.C. § 1553(a); DFAS-IN 37-1, Glossary, p. 37.
3. Closed appropriations. Appropriations that are no longer available for any purpose. An appropriation is closed five years after the end of its period of availability as defined by the applicable appropriations act. 31 U.S.C. § 1552(a).
C. Types of Appropriations Described by Period of Availability.
1. Annual DOD Appropriations.
a. Operations & Maintenance (O&M); and
b. Personnel.
2. Multiple Year DOD Appropriations.
a. Research, Development, Test and Evaluation (RDT&E) - 2 years;
b. Procurement - 3 years;
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c. Shipbuilding and conversion - Navy - 5 years, except the navy may incur certain obligations over longer periods;
d. Military construction - 5 years;
e. Chemical Agents and Munitions Destruction, Defense - various periods;
f. Multiple Year - Varies up to five years depending on the program. For example, DOD has a two-year O&M appropriation for humanitarian assistance;
g. Stock and Industrial Funds (Working Capital Funds) - indefinite (no year).
D. Rules for Obligation of Funds.
1. In-scope contract changes (the "relation-back theory"). Claims arising out of an in-scope change to a contract are funded from the appropriation available at the time of the original contract. DOD 7000.14-R, vol. 3, ch. 8, para. 080304 E; DFAS-IN 37-1, Table 9-7; The Honorable Andy Ireland, House of Representatives, B-245856.7, 71 Comp. Gen. 502 (1992)("the liability relates back to the original contract and the price increase to pay the liability is charged to the appropriation initially obligated by the contract.").
2. Out-of-scope changes. Use funds current when the obligation was incurred.
E. Settlement Agreements.
1. Obligate funds using the same obligation rules that are used for normal contracts. DFAS-IN 37-1, Table 9-6, para. 14.
a. Use original funds on the contract. Use of expired funds requires written documentation. See DFAS-IN 37-1, Table 9-7, note 1.
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b. If original funds have closed, obligate current funds.
2. When a case goes into litigation, be aware of the availability of expired funds. Don't forfeit your opportunity to settle by delaying action on the case and allowing contract funds to become closed.
3. Identify the funds before you attempt to settle. Don't find yourself with a binding settlement agreement, but no money to pay.
F. Funding Judgments or Awards.4
1. Permanent Indefinite Judgment Fund. 31 U.S.C. § 1304.
a. Agencies can pay judgments or awards through the Judgment Fund.
b. Agencies are required to reimburse the fund out of available funds, or must obtain additional appropriations. 41 U.S.C. § 612 (c).
2. Current funds. An agency may pay the judgment or monetary award with funds current at the time of judgment or monetary award. DFAS-IN 37-1, Table 9-6, para. 15.
G. Equal Access to Justice Act (EAJA) Fees.
1. Judgment Fund. Attorneys fees and costs are not payable by the judgment fund.
2. The agency must use funds current at the time of the award. 5 U.S.C. § 504d; DFAS-IN 37-1, Table 9-6, para. 16.
H. Funds Received from the Contractor.
4 Courts make judgments and boards of contract appeals make monetary awards. See 41 U.S.C. 612.
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1. Miscellaneous Receipts Statute (MRS). 31 U.S.C. § 3302(b). Most funds received from a source outside the appropriations process must be deposited in the General Fund of the United States Treasury.
2. Exceptions. Exceptions to the MRS are scattered throughout the United States Code and public law.
a. Funds received in settlement of property damage have to be forwarded to the Treasury as miscellaneous receipts. Defense Logistics Agency--Disposition of Funds Paid In Settlement of Contract Action, B-226553, 67 Comp. Gen. 129 (Dec. 11, 1987).
b. For more on the MRS and its exceptions, see Major Timothy D. Matheny, Go On, Take the Money and Run: Understanding the Miscellaneous Receipts Statute and Its Exceptions, ARMY LAW., Sep. 1997, at 31.
V. LITIGATION ISSUES.
A. Board Jurisdiction over Settlement Agreements.
1. Jurisdiction under Contract Disputes Act (CDA). TDC Management Corp., DOT BCA No. 1802, 90-3 BCA ¶ 23,099 (modification to an existing contract).
2. Jurisdiction exists under Contract Disputes Act (CDA), but parties must comply with the requisite CDA procedures. Barnes, Inc., AGBCA Nos. 97-111-1, 97-112-1, 97-2 BCA ¶ 29,237 (requiring claim and final decision).
3. Lack of jurisdiction. Rimar Construction Co., AGBCA Nos. 88-231-1, 88-232-1, 89-3 BCA ¶ 22,974 (not a contract within the meaning of 41 U.S.C. § 602(a)).
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4. A court or board can't order specific performance of the agreement, but it can recognize and uphold the agreement for the benefit of the party seeking to perform the agreement. G.E.T. Construction, ASBCA Nos. 24234, 28709, 84-2 BCA ¶ 17,464 (refusing to reinstate appeal for failure of payment due to appellant's own breach).
B. Review.
1. The interpretation of a settlement agreement, i.e., a contract, is a question of law. Augustine Medical, Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367 (Fed. Cir. 1999).
2. An agreement that is complete on its face and reflects the contractor's unqualified acceptance and agreement with its terms will not be disturbed in the absence of fraud or other special circumstances such as mutual mistake, collusion, or duress. Klondike Enterprises, Inc., ASBCA 46572, 95-1 BCA ¶ 27,564; M.G. Technology Corporation, ASBCA No. 35249, 90-1 BCA ¶ 22,575 (no duress where contractor agreed to default termination remaining in effect in return for award of reprocurement contract to its subcontractor).
C. Miscellaneous Issues.
1. Discovery. A board may order production of documents concerning the negotiation or drafting of a settlement agreement, notwithstanding the existence of an attorney-client privilege, where a party is alleging unilateral or mutual mistake of fact or in integration of the settlement agreement. B.G.W. Limited Partnership v. General Services Administration, GSBCA No. 10501, 93-1 BCA ¶ 25,244.
2. Intervention. Under the CDA, a third party has no right to intervene and set aside a settlement agreement. Leland Stanford Junior University, ASBCA Nos. 43761, 46136, 46970, 46971, 95-1 BCA ¶ 27,335 (denying right of qui-tam relator to intervene).
VI. CONCLUSION.
MAJ Jon Guden Disputes and Remedies
March 2001
CHAPTER 9
ASBCA PROCEDURES
I. INTRODUCTION.
A. ASBCA Rule 8. After the parties have filed their pleadings, they advise the ASBCA whether they desire a hearing or submission of the case on the record without a hearing.
1. Hearing. Rules 17-25.
2. Record Submission. Rule 11.
B. Facts are King!
II. THE RECORD.
A. ASBCA Rule 13. The Board will render a decision based on the following:
1. Documents furnished and admitted in evidence under Rules 4 and 12;
2. Pleadings;
3. Prehearing conference memoranda or orders;
4. Prehearing briefs;
5. Depositions or interrogatories received in evidence;
6. Admissions or stipulations;
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7. transcripts of conferences and hearings;
8. hearing exhibits;
9. post-hearing briefs;
10. documents the Board specifically designates to be part of the record.
B. Closing of the Record. Rule 13(b).
1. Conclusion of Oral Hearing.
2. Board notice that case is ready for decision in case submitted on the record.
3. Board in its discretion may keep record open or reopen record.
III. HEARING PROCEDURES.
A. Administrative Preparation.
1. Direct the contracting activity to issue travel orders for government witnesses.
2. Arrange for a “Government Hotel” and, if necessary, for use of an office or conference room in a local government office.
3. Obtain ASBCA subpoenas for recalcitrant witnesses.
4. The good news is that it is different than being a trial counsel in military justice matters. You do not have to worry about:
a. The judge, the court reporter, the appellant, or the appellant’s witnesses.
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b. What if the appellant has requested the presence of a specific government employee?
B. Scheduling the Hearing. ASBCA Rules 17 and 18.
1. The hearing for an appeal will be held at such places as determined by the Board (presiding judge) to serve the interests of the parties.
2. The hearing will be scheduled at the discretion of the Board. The presiding judge usually will honor the hearing date(s) and location requested by the parties.
3. The hearing date may be adjusted for good cause (obtain concurrence of opposing side).
4. Parties receive (at least) 15 days notice of the time and place of the hearing.
5. Site selection factors.
a. Status of appellant (small business).
b. Status of appellant’s representation.
c. Amount in dispute.
d. Location of witnesses.
6. The Board, at its discretion, may bifurcate the proceeding.
C. Conduct of the Hearing. ASBCA Rule 20.
1. Hearings shall be as formal or informal as may be reasonable and appropriate under the circumstances.
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2. The unexcused absence at the hearing of party will not justify a delay.
a. The hearing will proceed and the case is regarded as submitted on the record (pursuant to ASBCA Rule 11) by the absent party. ASBCA Rule 19.
b. The party that fails to attend a scheduled hearing risks having its opponent introduce, without objection, evidence which otherwise would not have been admitted. Similarly, the missing party loses its right to cross-examine.
3. CDA-based hearings are de novo proceedings. Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994).
a. The government is not bound by the findings or reasoning in the Contracting Officer’s final decision.
b. The government may argue any theory/claim as long as the facts supporting it existed at the time of the final decision.
4. Order of Presentation. The order of presentation is dependent typically on which party has the burden of proof.
5. Scope of hearing factors.
a. Issues to be tried.
b. Consolidation of appeals.
c. Entitlement and/or quantum.
6. Opening proceedings.
a. Admit the Rule 4 file documents (including the Supplemental Rule 4 file) into evidence unless previously objected to.
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b. Stipulations of fact or expected testimony agreed upon by the parties may be regarded and used as evidence.
c. The parties may present an opening statement.
7. Presentation of Evidence.
a. Parties may offer such evidence as would be admissible under the Federal Rules of Evidence. ASBCA Rule 20.
(1) The Federal Rules of Evidence are not applied strictly in a hearing where one party is not represented by a lawyer or where small sums of money are in dispute.
(2) The Board dislikes documents prepared in anticipation of litigation. See Structural Painting Corp., ASBCA No. 33841, 89-3 BCA ¶ 21, 969.
b. Expert Witnesses.
(1) Identity must be disclosed prior to the hearing.
(2) Parties must disclose any written reports prepared by experts.
(3) The Board may require that the expert’s testimony be reduced to writing, in which case the Board may deny the request to conduct direct examination.
(4) The credibility of an expert witness is lessened when the witness has a financial interest in the outcome of the litigation. Melville Energy Sys., Inc., ASBCA No. 33890, 87-3 BCA ¶ 19,992.
c. Normally, the Board accepts hearing exhibits into evidence as they are introduced during the witness’ testimony. Keep a checklist to ensure that all exhibits are admitted into evidence.
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d. Voluntary Production of Witnesses. ASBCA Rule 21(b).
(1) Generally, the parties agree to produce their own employees as witnesses at no expense to the opposing party.
(2) Where the burden is disproportionate, a party should insist on obtaining witness expenses, or a more convenient hearing location. The Board will consider the relevance of the testimony, military necessity, costs of production, and other matters before ordering a party to produce a witness.
(3) The board may allow for telephonic testimony.
(4) Where the Board directs production of a witness, the Board speaks as a representative of the Secretary of Defense. Eagle Mgmt., Inc., ASBCA No. 35902, 90-1 BCA ¶ 22,513 (Board granted a claim after Air Force failed to comply with a Board order requiring production of mess hall superintendent).
8. Transcript of Proceedings. ASBCA Rule 24.
a. Testimony and argument is reported verbatim, unless the Board orders otherwise.
b. The government attorney receives a copy of the transcript at no cost.
c. Appellant must pay for its copy of the transcript.
d. Transcripts are ready approximately 2-6 weeks after the hearing.
IV. SMALL CLAIMS PROCEDURES.
A. Expedited Claims.
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1. At the sole election of the contractor, it may elect small claims (Expedited) Procedures when the amount in dispute is $50,000 or less. 41 U.S.C. § 608; ASBCA Rule 12.2.
2. The Board uses streamlined procedures (accelerated filings, limited discovery) to process the case within the statutory time limit. If appellant wants more procedure, it must withdraw its election.
3. The presiding judge decides the appeal. The presiding judge may issue an oral decision followed by a memorandum. The judge must decide within 120 days from the date of appellant’s election.
4. Neither party has the right to appeal an adverse decision in the absence of fraud, and the decision has no precedential value. Fossitt Groundwork, Inc., ASBCA No. 45358, 96-2 BCA ¶ 28,527 (collateral estoppel does not apply because Rule 12.2 procedures do not provide requisite due process).
B. Accelerated Claims Procedure. 41 U.S.C. § 607(f); ASBCA Rule 12.3.
1. At the sole election of the contractor, it may elect the accelerated procedure when the amount in dispute is $100,000 or less.
2. The presiding judge hears the appeal and drafts the decision. The presiding judge decides, with the concurrence of a vice chairman, or by a majority among these two and the chairman, in case of disagreement.
3. The Board encourages parties to limit briefs and discovery.
4. The Board shall resolve the case, whenever possible, within 180 days from the date of appellant’s election, unless appellant withdraws its election.
5. Either party may appeal to the Court of Appeals for the Federal Circuit within 120 days. The government needs the consent of the U.S. Attorney General. 41 U.S.C. § 607(g)(1).
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V. RECORD SUBMISSIONS.
A. ASBCA Rule 11.
1. Either party may elect to waive a hearing or to submit its case upon the record as settled pursuant to ASBCA Rule 13.
2. Submission of a case without a hearing does not relieve a party from the necessity of proving its allegations or defenses.
3. The parties may supplement the record with affidavits, depositions, admissions, answers to interrogatories, and stipulations.
4. The Board may permit the parties to supplement the documentary evidence by oral arguments (transcribed if desired) and briefs arranged pursuant to ASBCA Rule 23.
B. Selecting Cases for Record Submissions. Factors in deciding to waive a hearing and to submit the case upon the record:
1. Small dollar value.
2. Dispute can be decided based on documentary evidence.
3. Litigation costs do not warrant a hearing.
4. Witness considerations – availability, location, poor demeanor.
VI. DECISIONS.
A. The Board will issue a written decision. ASBCA Rule 28.
B. The Board will forward copies of the decision simultaneously to the parties.
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VII. CONCLUSION.
LTC Steven Gillingham Disputes & Remedies Elective
March 2001
CHAPTER 10 PRIVILEGES IN CONTRACT LITIGATION I. INTRODUCTION.
A. More than any other area of litigation practice, privileges presents a trove of "traps for the unwary." Succumbing to these assures outcomes ranging from client dissatisfaction and wasted attorney time to the compromise of national security.
B. Scope: This class will describe the most-frequently encountered privileges,
present the issues their invocation might raise, suggest practical concerns, and discuss several knotty problems.
C. Applicable Rules.
1. Fed. R. Civ. P. 26(b)(1) - "Parties may obtain discovery regarding any
matter, not privileged, which is relevant to the subject matter involved in the pending action . . . [or any matter that] appears reasonably calculated to lead to the discovery of admissible evidence."
2. COFC rule 26(b) is identical.
3. ASBCA permits discovery of "documents or objects not privileged, which
reasonably may lead to the discovery of admissible evidence." Rule 15. Otherwise, board follows Fed. R. Civ. P. Appeal of Ingalls Shipbuilding Division, Litton Systems, Inc., ASBCA No. 17717, 73-2 BCA ¶ 10,205.
D. Privileges Most Commonly Encountered in Contract Litigation.
1. Attorney-Client.
2. Attorney Work Product.
3. Governmental.
a) State Secret.
b) Deliberative Process. c) Others.
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(1) Informant's.
(2) Investigatory Files.
(3) Privilege For Information Given To The Government On A
Pledge Of Confidentiality.
(4) Confidential Report.
(5) Presidential Communications.
(6) Bank Examination.
E. General Principles.
1. “[A]ssertion of privileges is strictly construed because privileges impede full and free discovery of the truth.” Energy Capital Partners Ltd. v. U.S., 45 Fed. Cl. 481, 483 (2000) (citing cases).
2. "Washington Post Rule" - Before invoking privilege, realize that you are
the face of the government. Consider that the plaintiff is among the governed. In short, within the bounds of your duty to your client, consider whether a claim of privilege, which, in essence, is an assertion of government secrecy, comports with the larger public interest and whether the public would think so.
3. Before invoking privilege consider first whether the document is
responsive to the requests at issue, but construe them liberally, or pay the price of nonadmissibility, the judge's wrath, and perhaps sanctions later.
4. Rule of relevance - FRCP 26(b)(1) (only matters "relevant to the subject
matter involved in the pending action" or "reasonably calculated to lead to the discovery of admissible evidence" are discoverable.)
a) But, relevancy is broadly construed. "No longer can the time-
honored cry of 'fishing expedition' serve to preclude a party from inquiring into the fact underlying his opponent's case." Hickman v. Taylor, 329 U.S. 495, 507 (1947). Accord Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978) (discovery exceeds "issues raised in pleadings"); Appeal of Ingalls Shipbuilding, 73-2 BCA ¶ 10,205. As a practical matter, judges loathe having to decide whether something is discoverable and even more so deciding that
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it IS non-discoverable.
b) Very much ad hoc, but remember what is good for the goose is good for the gander, so be careful where you set the bar. It will limit your advocacy for more liberal treatment later on. (On the other hand, don't expect your generosity to be repaid in kind).
c) Special case of terminations where project continues in parallel to
the litigation.
(1) A practical suggestion: cut off everything involving only litigation administration.
(2) For purposes of work product, the ASBCA does "not view
the contracting officer's final decision as the automatic line of demarcation between routine contract administration and preparation for litigation." Appeal of B.D. Click Co., Inc., ASBCA Nos. 25,609 and 25,972, 83-1 ¶ BCA 16,328.
5. Party asserting privilege has the burden. E.g., Fisher v. United States, 425
U.S. 391 (1976); Appeal of Southwest Marine, Inc., DOTBCA Nos. 1497 et al, 87-2 BCA ¶ 19,769.
II. ATTORNEY-CLIENT PRIVILEGE.
A. Rationale.
1. Encourage solicitation of legal advice "to promote broader public interests in the observance of law and administration of justice." Upjohn Co. v. United States, 449 U.S. 383, 389 (1991).
B. Elements.
1. Protect communications between an "attorney" (acting as a lawyer) and
one who is or seeks to become a "client" in order to obtain legal assistance or a legal opinion that reasonably is expected and intended to be confidential (i.e., not to be disclosed to third persons) that has been claimed and not waived. Upjohn, 449 U.S. at 395; Appeal of B.D. Click, 83-1 BCA ¶ 16,328 (citing United States v. Shoe Machinery Corporation, 89 F. Supp. 357, 358 (D. Mass. 1950).
a) Includes the United States. United States v. Procter & Gamble,
356 U.S. 677, 681 (1958).
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C. Who is the client?
1. Government employees serving in official capacity. Deuterium Corp. v.
U.S., 19 Cl. Ct. 697, 699-700 (1990); Appeal of Storage Technology Corp, GSBCA No. 11306-P, 91-3 BCA ¶ 24,253 at 121,257 (communications to government counsel from government employees "at all levels" eligible); Appeal of B.D. Click, 83-1 ¶ BCA 16,328 at 81,173.
2. One who seeks to become a client. Standards of conduct "briefing" by
JAG attorneys to officer re: conflict of interest regulations held covered where officer completed card describing himself as client and attorneys answered his questions. United States v. Schaltenbrand, 930 F.2d 1554 (11th Cir.), cert. denied, 112 S. Ct. 640 (1991).
3. The agency attorney as client. Cities Service Helix, Inc. v. U.S., 216 Ct.
Cl. 470, 476 (1978); Town of Norfolk v. U.S. Army Corps of Eng'rs., 968 F.2d 1438 (1st Cir. 1992) (DOJ letters to agency protected).
4. Can extend to former employees.
D. What Is Protected?
1. The lawyer's and the client's communication. Upjohn, 449 U.S. at 383,
390-91. Appeal of B. D. Click, 83-2 BCA ¶ 16,328 (communication protected if it "exposes the confidentiality expected by the client," and includes the fact the communication was made, the facts contained in the communication, and the manner in which it was described, including the order and omission of facts). But see Carter v. Gibbs, 909 F.2d 1450 (Fed. Cir. 1990) (privilege applies only to client communications).
2. Which communications? Depends on circuit. Spectrum ranges from
those that might reveal the confidence to all related to the purpose of the confidence. See "The Attorney-Client Privilege and The Work Product Doctrine - March 1994 OGC Deskbook," Department of the Navy (Barlow et al) (1984) (unpublished), 4-8.
3. Attorney may be deposed under proper circumstances. Sparton
Corporation v. United States, 44 Fed. Cl. 557 (1999) (citing three-part test of Shelton v. American Motors Corp., 805 F.2d 1323, 1327 (8th Cir. 1986)).
E. Must be disclosed in order to obtain legal advice or assistance. Thus, mere
communication of information to a lawyer is not protected. E.g., Appeal of
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Ingalls Shipbuilding, 73-2 BCA ¶ 10,205 (but look for implied request).
F. Must be made in confidence and expected to be retained in confidence.
1. May be disclosed to agents of the attorney and others assisting the attorney in providing legal advice, if intended to remain in confidence.
2. In-house persons? Coastal States Gas Corp. v. Department of Energy, 617
F.2d 854, 863 (D.C. Cir. 1980) ("If facts have been made known to persons other than those who need to know them, there is nothing on which to base a conclusion that they are confidential").
3. Detailed factual showing needed to establish that independent contractors
have special relationship to corporation and transaction giving rise to the need for legal services, Energy Capital, 45 Fed. Cl. 481, 490-91.
4. Joint defense.
a) An extension of the A-C privilege. E.g., B.E. Meyers & Co., Inc.v. United States, 41 Fed. Cl. 729, 731 (1998). Applies to clients in a litigated or non-litigated matter, represented by separate attorneys, who agree to exchange information concerning the matter.
G. Waiver
1. Must be asserted and protected at all turns. (Thus, fair interrogatory is:
"for any claim of privilege, identify all occasions on which the privileged matter was disclosed to any person other than the attorney to whom the communication was originally made.")
2. It is the client, not the attorney who may waive. Cities Service Helex, Inc.
v. U.S., 219 Ct. Cl. 765 (1977); Appeal of B.D. Click, 83-1 BCA ¶ 16,328; Appeal of Ingalls Shipbuilding, 73-2 BCA ¶ 10,205.
3. The A-C privilege “can be waived by the client or prospective client only
if the communication is later disclosed to a third party and the client either did not take adequate steps in the circumstances to prevent the disclosure . . . .” B.E. Meyers & Co., Inc.v. United States, 41 Fed. Cl. 729, 731 (1998).
4. Putting advice in issue. E.g., United States v. Mendelsohn, 896 F.2d 1183
(9th Cir. 1990) (defendant made attorney advice an issue by asserting that the advice confirmed his activities were lawful - only advice about that
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matter required to be disclosed).
5. Discussion of attorneys' advice among management does not waive privilege. Appeal of B.D. Click, 83-1 BCA ¶ 16,328.
6. Putting the protected information at issue and denying opponent
information vital to defending that issue requires a finding of waiver. Afro-Lecon, Inc. v. United States, 820 F.2d 1198, 1204-05 (Fed. Cir. 1987).
7. What is waived?
a) Depends on circuit, ranging from only matter communicated to all
communications on subject matter. In re Sealed Case, 877 F.2d 976 (D.C. Cir. 1989) (company's disclosure to government auditor = waiver, even if inadvertent; district court to determine scope of subject matter).
b) Genentech v. United States Int’l. Trade Comm’n., 122 F.3d 1409
(Fed. Cir. 1997). Court considered whether 12,000 pages of documents inadvertently released in district court proceeding, found by lower court to have been released due to lax screening procedure, waived A-C privilege and work product protection. Considered whether breach of confidence should be limited to district court, and rejected the idea, noting that “a small number of courts” have done so, but Fed. Cir. never has. Cited Carter v. Gibbs for proposition that “[g]enerally disclosure of confidential communications or attorney work product . . . constitutes a waiver of privilege as to those items.” Genentech at 1415. Later in the opinion stated: “[o]nce the attorney-client privilege has been waived, the privilege is generally lost for all purposes and in all forums.” Id. at 1416.
H. Inadvertent Waiver.
1. What is it?
a) National Helium Corp. v. U.S., 219 Ct. Cl. 612 (1979) (no per se
waiver for inadvertent disclosure. Test is whether "the [screening] procedure followed was so lax, careless, or inadequate that plaintiff must objectively be considered as indifferent to disclosure or anything which happened to be shown to the Government).
b) Where appellant assembled 137,142 pages of documents in a 31-
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day period, it had ample time (government performed its review in two days). Failure of appellant to demonstrate that it had a screening technique or undertook any limited review did not support claim that disclosure was "inadvertent." Appeal of General Dynamics, DOTBCA No. 1232, 83-1 BCA ¶ 16,284.
2. Does it waive? Depends upon circuit.
a) Federal Circuit - ??
(1) Cat's out of the bag approach. Carter v. Gibbs, 909 F.2d
1452 (Fed. Cir. 1990). Appeal of Pinner Construction, VA BCA Nos. 1712, 1852, 2273, 2274 & 2301, 87-2 BCA ¶ 19,886 (citing Appeal of Southwest Marine, Inc., 87-2) (agreeing with DOTCAB that "weight of authority and better reasoned cases" hold that intent to waive is not a precondition to waiver and that it can occur inadvertently; VABCA also recognized that inadvertent disclosure may not constitute waiver where effectively compelled, such as an order to produce 17 million pages in three months).
(2) National Helium Corp., 219 Ct. Cl. 612 (no per se waiver
for inadvertent disclosure).
(3) IBM v. U.S., 37 Fed. Cl. 599 (1997) (Carter v. Gibbs did not overrule National Helium because the former was not decided en banc, as is necessary to overrule Court of Claims precedent).
3. Effect of inadvertent waiver agreements.
4. Basis for advocacy.
a) Intent. National Helium, 219 Ct. Cl. at 616 (test is did "the client
wish to keep back the privileged materials and did he take adequate steps in the circumstances to prevent disclosure of such document."). See also United States v. Moscony, 927 F.2d 742 (3rd Cir.). cert. denied, 111 S. Ct. 2812 (1991) (unsophisticated lay person held not to understand that he was waiving).
b) Care shown. National Helium, 219 Ct. Cl. at 615.
5. If shown to witness to refresh recollection before trial, different analysis.
See FRE 612.
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I. Particular Situations.
1. Updates not following a client communication?
2. Staff meeting with attorney present.
3. Letter forwarded to attorney "FYI."
4. Should you advise clients not to put sensitive matters in writing?
5. Providing common-sense business advice?
a) No. E.g., Cabot v. United States, 35 Fed. Cl. 442, 444-445 (1996). 6. KO testifies her decision was not an abuse of discretion because she relied
upon advice of counsel (beware of opponent attempting to boot strap, by asking "did you rely on advice of counsel?" and then asking about advice.)
J. Conclusion. - There is plenty of room for advocacy by the seeker and no room for
complacency of the communicator. III. WORK-PRODUCT DOCTRINE.
A. Rule.
1. Generally, a qualified protection for work performed by a party when litigation is anticipated or underway, which can be overcome by a showing of necessity.
2. Hickman v. Taylor, 329 U.S. 495 (1947). Attorneys and plaintiffs ordered
imprisoned for failure to disclose witness statements taken from third parties. Affirming appellate court reversal of district court, Supreme Court held: "Here is simply an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties. As such, it falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defense of legal claims. Not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney."
a) Court noted that, with respect to the lawyer's remembrance or
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selective notes of oral statements, "we do not believe any showing of necessity can be made." 329 U.S. at 512-513.
b) The doctrine protects the tangible things sought (written
statements, notes, recordings), but not the underlying facts learned. Id. at 504. Accord Appeal of Ingalls Shipbuilding, 73-2 BCA ¶ 10,205 (citing Fed. R. Civ. P. 26 and 33 (requiring responses to interrogatories and requests for admissions regarding opinions and application of law to facts)).
c) Court acknowledged, contrary to appellate court's opinion, these
materials were not covered by A-C privilege, but were protected.
d) The burden of showing necessity is on the discovering party.
3. Subsequent codification. Fed. R. Civ. P. 26(b)(3). ("party may obtain discovery of [materials] prepared in anticipation of litigation of for trial by or for another party or by of for that other party's representatives (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has a substantial need of the materials in he preparation of the party's case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by any other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.").
4. Protection does not extend to documents prepared in the normal course of
business. E.g., B.D. Click, 83-1 BCA ¶ 16,328.
B. Rationale.
1. It's not Cricket.
a) “In performing his various duties, however, it is essential that a lawyer work with a certain degree of privacy, free from unnecessary intrusion . . . . Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the
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interests of the clients and the cause of justice would be poorly served.” Hickman v. Taylor, 329 U.S. 495 at 510.
b) Sparton, 44 Fed. Cl. 557, 565 (citing United States v. Noble, 422
U.S. 225 91975) (“work product doctrine is a practical one grounded in the realities of litigation in our adversary system.”).
2. Promotes full preparation of case - even during a period when discovery
might be feared.
C. Applies to Government. Kaiser Aluminum & Chem. Corp. v. United States, 141 Ct. Cl. 38, 49 (1958).
D. Anticipation of Litigation Must Be A Reasonable Possibility.
1. Deuterium Corp. v. U.S., 19 Cl. Ct. 697 (1990); Appeal of Ingalls Shipbuilding, 73-2 BCA ¶ 10,205 at 48,104.
2. Inquiry should focus on the "primary motivating purpose behind the
creation of the document." United States v. Gulf Oil Corp., 760 F.2d 292, 296 (Temp. Emer. Ct. App. 1985).
3. "[T]he mere fact that a [REA] has been filed and is being analyzed does
not bring the matter in close enough proximity to litigation to trigger the automatic application of the work product rule . . . . [the] question does not lend itself to hard rules." Appeal of B.D. Click, 83-1 BCA ¶ 16,328.
4. NB: Extends to non-attorneys, but their involvement raises question of
whether their work was prepared for litigation or in ordinary course.
E. Waiver.
1. Waiver of attorney-client communication does not necessarily require waiver of work product based upon the disclosure.
2. Inadvertent disclosure rules apply, but the inadvertent discloser could
probably effectively argue that a complex analysis should be returned on grounds that other party could perform its own analysis. Of course, the underlying facts will have been disclosed.
3. Example - McDermott v. United States, No. 93-9C (Fed. Cl.) (production
of factual interview notes, pursuant to subpoena duces tecum, with small amount of documents, in plain sight, throughout depo, of producing party's attorney, not objected to until half way through examination).
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IV. GOVERNMENTAL PRIVILEGES.1
A. Introduction.
1. Courts generally accept evidentiary privileges "'only to the very limited extent that permitting a refusal to testify or excluding relevant evidence has a public good transcending the normally predominant principle of utilizing all rational means for ascertaining truth.'" Trammel v. United States, 445 U.S. 40, 50 (1980) (quoting Elkins v. United States, 364 U.S. 206, 234 (1960) (Frankfurter, J., dissenting)).
B. State Secrets.
1. The state secret privilege encompasses matters (not just communications)
which, if disclosed, would harm the nation's defense capabilities,2 disclose intelligence gathering methods or capabilities,3 or disrupt diplomatic relations with foreign governments.4 See generally Ellsberg v. Mitchell, 709 F.2d 51, 57 (D.C. Cir. 1983), cert. denied sub nom. Russo v. Mitchell, 465 U.S. 1038 (1984).
2. Applicable when "there is a reasonable danger that compulsion of the
evidence will expose military matters which, in the interest of national security, should not be divulged." Reynolds, 345 U.S. at 10.
3. It is not necessary to show that harm will inevitably flow from disclosure.
1 This portion of the outline is excerpted from "The Governmental Privileges Outline" (October 1999), an outline authored by Sandra Spooner, Deputy Director, Commercial Litigation Branch, Civil Division, Department of Justice. This outline does not represent the views of DOJ.
2 See United States v. Reynolds, 345 U.S. 1, 6-7, 10 (1953).
3 See Black v. United States, 62 F.3d 1115 (8th Cir. 1995) (state secret privilege exempted from disclosure information that would confirm or deny alleged contacts with government officers, including identities, nature and purpose of contacts, and locations of contacts), cert. dismissed, 517 U.S. 1154 (1996); Halkin v. Helms ("Halkin II"), 690 F.2d 977, 993 (D.C. Cir. 1982); Halkin v. Helms ("Halkin I"), 598 F.2d 1, 8-9 (D.C. Cir. 1978); Monarch Assurance v. United States, 36 Fed. Cl. 324 (1996) (state secret privilege upheld when confirmation or denial of relationship with CIA would jeopardize intelligence sources and result in loss of intelligence).
4 See Halkin II, 690 F.2d at 990 n.53, 993; Attorney General v. The Irish People, Inc., 684 F.2d 928 (D.C. Cir.), cert. denied, 459 U.S. 1172 (1983).
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Northrop Corp. v. McDonnell Douglas Corp. 751 F.2d 395, 402 (D.C. Cir. 1984). Instead, the government attorney's goal should be to present necessarily "speculative projections" of harm that the court can credit. See generally Ellsberg v. Mitchell, 709 F.2d at 58 n.35.
4. "In each case, the showing of necessity which is made will determine how
far the court should probe in satisfying itself that the occasion for invoking the privilege is appropriate." Reynolds, 345 U.S. at 11.
5. Once it is established that state secrets are involved, the privilege is
absolute. In re United States, 1 F.3d 1251 (Fed. Cir. 1993) (unpublished opinion); Ellsberg v. Mitchell, 709 F.2d at 57.
6. The Supreme Court has made it clear that, when a court is satisfied that
production of the evidence will expose matters which should not, in the interest of national security, be divulged, the security of the privilege should not be jeopardized by an examination of the evidence in camera. Reynolds, 345 U.S. at 10.
C. Deliberative Process.
1. Applicable to evidence that is: (1) predecisional and (2) deliberative in
nature,5 containing opinions, recommendations, or advice about agency decisions.6 Renegotiation Board v. Grumman Aircraft Engineering Corp.,
5 The terms "predecisional" and "deliberative" are discussed at length in Access Reports v. DOJ, 926 F.2d 1192 (D.C. Cir. 1991). The court of appeals suggests that "predecisional" is a threshold requirement that the document, as a whole, play a role in the decision-making process, while "deliberative" refers to that portion of the document which is privileged, i.e., non-factual. Id. at 1195. As to precisely what counts as nonfactual material, the court stated:
[T]he opinion-fact line that we have often used as a rough guide to separate exempt from non-exempt material grows out of the "deliberative" requirement. . . . The "key question" in identifying "deliberative" material is whether disclosure of the information would "discourage candid discussion within the agency."
Access Report, 926 F.2d at 1192 (quoting Dudman Communications Corp. v. Department of the Air Force, 815 F.2d 1565, 1567-68 (D.C. Cir. 1987)); see also A. Michael's Piano, Inc. v. FTC, 18 F.3d 138, 147 (2d Cir.) ("[A]dvisory reports by individuals without authority to issue final agency dispositions are predecisional."), cert. denied, 513 U.S. 1015 (1994).
6 In the Freedom of Information Act, Congress codified the deliberative process privilege in Exemption No. 5. See EPA v. Mink, 410 U.S. 73, 86-87 (1973). It provides that FOIA's affir-
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421 U.S. 168, 184 (1975); In re Sealed Case, 121 F.3d 729, 735-36 (D.C. Cir. 1997) and cases cited; Walsky Construction Co. v. United States, 20 Cl. Ct. 317 (1990).
2. See also National Wildlife Fed'n. v. Forest Service, 861 F.2d 1114, 1118-
19 (9th Cir. 1988) ("recommendations, draft documents, proposals, suggestions, and other subjective documents which reflect the personal opinions of the writer rather than the policy of the agency," as well as documents that would "inaccurately reflect or prematurely disclose the views of the agency").
3. Factual material that does not reflect deliberative processes is not
protected. EPA v. Mink, 410 U.S. at 87-89; Redland Soccer Club, Inc. v. Department of the Army, 55 F.3d 827, 854 (3d Cir. 1995), cert. denied, 516 U.S. 1071 (1996).
4. Unlike the state secrets privilege, the deliberative process privilege is not
absolute. Redland Soccer Club, Inc. v. Department of the Army, 55 F.3d 827, 853 n.18 (3d Cir. 1995), cert. denied, 516 U.S. 1071 (1996). After concluding that the privilege is properly invoked, the court must balance the public interest in nondisclosure with the individual need for the information as evidence. Redland Soccer Club, Inc., 55 F.3d at 854; Committee for Nuclear Responsibility, Inc. v. Seaborg, 463 F.2d 788, 791 (D.C. Cir. 1971).
a) E.g., Dominion Cogen, D.C., Inc. v. District of Columbia, 878 F.
Supp. 258, 268 (D.D.C. 1995) (an exception to the deliberative process privilege exists where "the deliberative process itself [is] directly in issue").
5. Rationale.
a) "Free and open comments on the advantages and disadvantages of
a proposed course of governmental management would be ad-versely affected if the civil servant or executive assistant were compelled by publicity to bear the blame for errors or bad judgment properly chargeable to the responsible individual with power to decide and act." Kaiser Aluminum & Chemical Corp. v. United States, 157 F. Supp. 939, 945-46 (Ct. Cl. 1958).
mative disclosure provisions do not apply to "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency." 5 U.S.C. ∋552(a)(5).
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b) Disclosure of inter-agency and intra-agency deliberations and
advice is injurious to the federal government's decision-making functions because it tends to inhibit the frank and candid discussion necessary to effective government. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150-51 (1975); EPA v. Mink, 410 U.S. 73, 87 (1973).
6. Examples.
a) Deliberations concerning whether to initiate litigation. United
States v. Farley, 11 F.3d 1385, 1389 (7th Cir. 1993) (referral memorandum from FTC to DOJ).
b) "Discussions among agency personnel about the relative merits of
various positions which might be adopted in contract negotiations are as much a part of the deliberative process as the actual recommendations and advice agreed upon." Mead Data Central, Inc. v. Air Force, 566 F.2d 242, 257 (D.C. Cir. 1977).
c) Drafts are almost always considered privileged. They represent
the personal opinion of the author, not yet adopted as the final position of the agency. Thus, by their nature, they are deliberative. Lead Industry Ass'n., Inc. v. OSHA, 610 F.2d 70, 86 (2d Cir. 1979); Judicial Watch, Inc. v. Clinton, 880 F. Supp. 1, 13 (D.D.C. 1995), aff'd, 76 F.3d 1232 (D.C. Cir. 1996); Grossman v. Schwarz, 125 F.R.D. 376, 385 (S.D.N.Y. 1989) (Lee, Mag.).
D. Others.
1. Confidential Informant.
a) Applicability.
(1) Allows the Government to withhold the identity of persons
who furnish information about violations of the law to officers charged with law enforcement. Roviaro v. United States, 353 U.S. 53 (1957).
(2) Does not protect the information disclosed unless its
disclosure would reveal identity, Roviaro, 353 U.S. at 60.
(3) [A] source may be considered confidential "if the informant's relation to the circumstances at issue supports
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an inference of confidentiality." Cofield v. LaGrange, 913 F. Supp. 608, 618 (D.D.C. 1996) (citing Department of Justice v. Landano, 508 U.S. 165 (1993)). "[C]ourts may look to the risks an informant might face were her identity disclosed, such as retaliation, reprisal or harassment, in inferring confidentiality." Massey v. FBI, 3 F.3d 620, 623 (2d Cir. 1993). "An employee-informant's fear of employer retaliation can give rise to a justified expectation of confidentiality." United Technologies v. NLRB, 777 F.2d 90, 94 (2nd Cir. 1985). In addition, "serious and damaging allegations of misconduct that could initiate criminal investigations or lead to other serious sanctions can reflect an implied assurance of confidentiality." Ortiz v. DHHS, 70 F.3d 729, 734 (2d Cir. 1995), cert. denied, 517 U.S. 1136 (1996).
(4) E.g., R.C.O. Reforesting v. United States, 42 Fed. Cl. 405
(1998) (implied assurance of confidentiality when informants' communications led to a criminal investigation of the company by whom they were employed).
b) Privilege is qualified.
(1) Government must show that its interest in effective law
enforcement outweighs the litigant's need for the information.7 Roviaro v. United States, supra;
2. Investigatory Files.
a) Applicability.
(1) Protects investigatory files compiled for law enforcement
purposes. Friedman v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336, 1341 (D.C. Cir. 1984); Black v. Sheraton Corp. of America, 564 F.2d 531 (D.C. Cir. 1977).8
7 See, e.g., Rovario v. United States, 353 U.S. 53, 60-61 (1957) (if disclosure is "relevant and helpful to the defense of an accused, or is essential to a fair determination of a cause, the privilege must give way"); United States v. Gutierrez, 931 F.2d 1482, 1490-91 (11th Cir.), cert. denied, 502 U.S. 916 (1991)(Government was not required to disclose informant's identity because he was always with at least one agent who could testify to everything that occurred except for a few instances, and because Government's affidavit indicated that threats had been made against informant); United States v. Smith, 780 F.2d 1102 (4th Cir. 1985). 8 See also Exemption 7 of the FOIA. 5 U.S.C. ∋552(b)(7). Exemption 7 covers "records or
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b) Rationale.
(1) Disclosure of investigatory files would undercut the
Government's prosecution by disclosing investigative tech-niques, forewarning suspects of the investigation, deterring witnesses from coming forward, and prematurely revealing the facts of the Government's case. In addition, disclosure could prejudice the rights of those under investigation. 40 Op. A.G. 45 (1941).
c) Privilege is qualified.
(1) Can be overcome if a litigant's need is sufficiently great.
(2) See Friedman v. Bache Halsey Stuart Shields, 738 F.2d
1336, 1341 (D.C. Cir. 1984) (setting out factors to consider: (1) the extent to which disclosure will thwart governmental processes by discouraging citizens from giving the government information; (2) the impact upon persons who have given information of having their identities disclosed; (3) the degree to which governmental self-evaluation and consequent program improvement will be chilled by disclosure; (4) whether the information sought is factual data or evaluative summary; (5) whether the party seeking discovery is an actual or potential defendant in any criminal proceeding either pending or reasonably likely to follow from the incident in question; (6) whether the police investigation has been completed; (7) whether any intradepartmental disciplinary proceedings have arisen or may arise from the investigation; (8) whether the plaintiff's suit is non-frivolous and brought in good faith; (9) whether the information sought is available through other discovery or from other sources; and (10) the importance of the information sought to the plaintiff's case).
3. Privilege For Information Given To The Government On A Pledge Of
information compiled for law enforcement purposes" under six specified conditions. DOJ v. Landano, 508 U.S. 165 (1993); John Doe Agency v. John Doe Corp., 493 U.S. 1064 (1989) (exemption for law enforcement records does not require that the records be originally compiled for law enforcement purposes).
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Confidentiality.
a) Applicability.
(1) United States v. Weber Aircraft Corp., 465 U.S. 792, 801 (1984) (while Exemption 5 of the FOIA might not implicate "novel" privileges, it certainly covers "well-settled" privileges like the one protecting confidential statements made to accident investigators). See generally Badhwar v. Department of the Air Force, 829 F.2d 182 (D.C. Cir. 1987).
b) Rationale.
(1) "[W]hen discovery of investigative reports obtained in
large part through promises of confidentiality would hamper the efficient operation of an important Government program and perhaps even as the Secretary here claims, impair the national security by weakening a branch of the military, the reports should be considered privileged.” Machin v. Zuckert, 316 F.2d 336, 339 (D.C. Cir.), cert. denied, 375 U.S. 896 (1963), cited with approval in United States v. Weber Aircraft Corp., 465 U.S. 792, 796 (1984).
c) Privilege is qualified.
(1) Can be overcome by a strong showing of need. Machin v.
Zuckert, 316 F.2d at 339.
4. Confidential Report.
a) Applicability.
(1) In Association for Women in Science v. Califano ("AWIS"), 566 F.2d 339 (D.C. Cir. 1977), the court of appeals recognized a governmental privilege termed the "confidential report privilege," also known as the "required reports" or "official information" privilege. Id. at 343-44.9
9 See Note, The Required Reports Privilege, 56 NW. L. Rev. 283 (1961); Note, Discovery of Government Documents and the Official Information Privilege, 76 Colum. L. Rev. 142, 149-52 (1976).
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(2) It is not sufficient for the government to maintain
confidentiality or denominate the information as confidential. There must be some statutory basis, other than a general housekeeping statute, for maintaining confidentiality.
(a) Baldridge v. Shapiro, 455 U.S. 345, 361-62 (1982),
statutory prohibition against release of raw census data creates a privilege to protect such data from disclosure during discovery.
b) Rationale.
(1) Foster governmental interest in protecting the free flow of
information to the Government. Baldridge, 455 U.S. 345.
c) Privilege is qualified.
(1) Agency must make a "substantial threshold showing" that particularized harms are likely to flow from the disclosure before a court will consider balancing the Government's interest in secrecy against the moving party's interest in disclosure. See, e.g., Morrissey v. City of New York, 171 F.R.D. 85, 90-91 (S.D.N.Y. 1997).
(2) Must be lodged formally by the head of the relevant
agency. AWIS, 566 F.2d at 347.
5. Presidential Communications.
a) Applicability.
(1) United States v. Nixon, 418 U.S. 683 (1974) (there is "a presumptive privilege for Presidential communications," founded on "a President's generalized interest in confidentiality.") Id. at 708, 711.
b) Rationale.
(1) To ensure that the "President and those who assist him [are]
free to explore alternatives in the process of shaping policies and making decisions . . . in a way many would be unwilling to express except privately."
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E. Issues With Governmental Privileges.
1. Sufficiency of the Affidavit.
a) For state secrets privilege: "[1] There must be a formal claim of
privilege, [2] lodged by the head of the department which has control over the matter, [3] after actual personal consideration by that officer." Reynolds, 345 U.S. at 7-8. See also Monarch Assurance v. United States, 36 Fed. Cl. 324, 326 (1996) (affidavit required from Director of Central Intelligence; affidavit from Associate Deputy Director for Operations of the CIA not sufficient).
b) Almost all courts require that any claim of governmental privilege
be accompanied by an affidavit from the head of the agency that has control over the documents. See United States v. Reynolds, 345 U.S. at 7-8; Zuckerbraun v. General Dynamics Corp., 935 F.2d 544, 546 (2d Cir. 1991); CACI Field Services, 12 Cl. Ct. 680, 687 (1987).
c) Affidavit not required until matter placed before court by motion
to compel motion for a protective order. In re Sealed Case, 121 F.3d 729, 741 (D.C. Cir. 1997) (White House was not obliged to "formally invoke its [executive] privileges in advance of the motion to compel;" it was sufficient that it said, in response to a subpoena, that it "believed the withheld documents were privileged."). Accord Abramson v. United States, 39 Fed. Cl. 290, 294 n.3 (1997)("procedural requirements generally are satisfied through the production of a declaration or affidavit by the agency head . . . in response to a motion to compel.").
2. Content of affidavit.
a) Affiant's credentials, description of documents, statement that
affiant has personally reviewed them,10 claim of privilege.
b) Object is to avoid in camera inspection. Thus, specificity of description of documents is critical.
10 For a case in which the court concluded that the agency's affiant had not, in fact, conducted the requisite personal review, see Yang v. Reno, 157 F.R.D. 625 (M.D. Pa. 1994).
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3. Comparisons to the Freedom of Information Act.
a) The Freedom of Information Act, 5 U.S.C. §∋ 552(b), provides that the Government "shall make available to the public," upon demand, agency records not falling within certain specified exemptions. In many instances, the exemptions are analogous to the governmental discovery privileges.11
b) There also are significant differences between the FOIA and the
evidentiary privileges applicable to the Executive Branch.12 Accordingly, care must be exercised in relying upon principles that underpin FOIA rulings.13
(1) Cases construing Exemption (b)(5) are authoritative with
respect to the deliberative process privilege because the exemption specifically provides that inter- and intra-agency memos are available under FOIA to the same extent they would be available in litigation. See NLRB v. Sears, Roebuck & Co., 421 U.S. at 149 n.16 (1975).
c) "FOIA neither expands nor contracts existing privileges, nor does
it create any new privileges." Association for Women in Science v. Califano, 566 F.2d 339, 342 (D.C. Cir. 1977).
d) Discovery rules are applied to FOIA decisions only by "rough
analogies." EPA v. Mink, 410 U.S. at 86. Differences include the fact that, in discovery matters, the courts consider the needs of the requesting party. That assessment is not part of the FOIA analysis. North v. Walsh, 881 F.2d at 1095; Baldridge v. Shapiro, 455 U.S. 345, 360 n.15 (1982)
4. Waiver.
11 See Note, Discovery of Government Documents and the Official Information Privilege, 76 Colum. L. Rev. 142, 152 (1976).
12 See Culinary Foods, Inc. v. Raychem Corp., 150 F.R.D. 122 (N.D. Ill. 1993), for a discussion of the distinctions between civil discovery and access to government information under FOIA.
13 Most courts have held that the FOIA exemptions do not create "privileges" within the meaning of the Federal Rules of Civil Procedure. See Baldridge v. Shapiro, 455 U.S. 345, 360 n.15 (1982).
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a) Because "executive privilege exists to aid the governmental
decisionmaking process, a waiver should not be lightly inferred." In re Sealed Case, 121 F.3d 729, 741 (D.C. Cir. 1997) .
b) Thus, the rule applied to many privileges that disclosure is a
waiver, not only as to the disclosed document, but also as to all related documents, "has not been adopted with regard to executive privileges generally, or to the deliberative process privilege in particular. Instead, courts have said that release of a document only waives these privileges for the document or information specifically released, and not for related materials." In re Sealed Case, 121 F.3d at 741, and cases cited.
V. ASSERTING/RESISTING PRIVILEGES.
A. Pre-litigation Planning/ Litigation Administration.
1. Control Your Forces.
a) Ensure those working on the litigation know the "rules of engagement."
b) Ensure "interested persons" not working on the litigation know the
rules.
c) Leaks - limit disclosures from litigation to non-litigation personnel.
d) Establish permissible lines of communication and limits on intra-
team communications (if an agency analyst/attorney discloses information or shares documents with a testifying expert, including DCAA, warn the analyst that s/he might as well make a copy right then and there for opposing counsel).
e) Understand that nondisclosure is not the goal of litigation and that
efficient work practices may entail an acceptable level of risk of disclosure. Just ensure everyone knows the risk exists.
2. Mark Documents.
a) Issue written instructions.
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b) Purpose.
(1) Prevent inadvertent disclosure.
(2) Assist those reviewing for privilege.
3. Identify who the attorneys were/are.
4. Document the anticipation of litigation and purpose of pre-litigation work product.
B. Authority. Make sure you have it (to waive or assert).
C. Privilege Logs.
1. See Fed. R. Civ. P. 26(b)(5) (party withholding must describe "the nature
of the . . . things not produced . . . without revealing information itself privileged or protected, [so as to] enable other parties to assess the applicability of the privilege or protection").
2. Provide sufficient information to describe the document uniquely
(normally date, to/from, serial number, and/or title/subject). Must be document by document, unless particular collections involve identical material.
3. Provide sufficient information to substantiate the privilege, e.g., "To John
Smith, Attorney")
4. Ensure that the log or description itself does not reveal what you are trying to protect or otherwise invite unwanted attention.
D. Redaction.
1. When privileged matter is severable, e.g., handwritten notes on an
otherwise non-privileged document, redact the privileged material, and produce the document. E.g. Sierra Rock v. Regents of Univ. of California, EBCA No. C-9705223, 98-2 BCA & 30,083.
E. In Camera Inspection.
1. Ellsberg v. Mitchell, 709 F.2d at 63-64 ("before conducting an in camera
examination of the requested materials, the trial judge should be sure that the government has justified its claims in as much detail as is feasible (and would be helpful) without undermining the privilege itself").
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2. Error to release following in camera inspection when no prima facie
showing by nonprivileged evidence sufficient to show need for such an inspection. United States v. De La Jara, 973 F.2d 746 (9th Cir. 1992). Accord Linder v. NSA, 94 F.3d 693, 696-97 (D.C. Cir. 1996) (if agency meets its burden through affidavits, in camera inspection is neither necessary not appropriate); Xerox Corp. v. U.S., 12 Cl. Ct. 93, 95 n.3 (1987); Appeal of Federal Data Corp., DOTBCA No. 2389, 91-3 BCA & 24,063.
3. In camera inspection "not automatic" and "possibly a dilution of a
properly asserted privilege." Appeal of B.D. Click, 83-1 BCA ¶& 16,328 (ordering in camera inspection where requesting party would require "clairvoyance" to respond to privileged party's affidavit concerning the material, and allegations of fraud and conspiracy made document potentially relevant ").
a) amount of detail in affidavit in support of privilege may preclude
this sort of situation.
4. If you lose the in camera battle, recusal?
F. Protective Orders.
1. Rule 26(c) - "any order that justice requires to protect from annoyance, embarrassment, oppression, or undue burden or expense."
2. Fashion orders to limit further disclosure of documents.
3. Limits may concern: place of review, copying of documents, who may
review, disposition of documents after litigation, special marking of documents, and certificates of non-use/non-disclosure of protected materials.
G. Resisting An Assertion Of Privilege.
1. Can the privilege be assessed from the log? Was one produced?
2. Does it clearly meet the standard of proof for the privilege claimed? E.g.,
is the author/recipient of the communication entitled to the protection? 3. Did the owner claim (Was it properly asserted?). 4. Did the owner waive?
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5. Is the privilege qualified?
a) Does the claim serve the principle giving rise to the privilege?
b) Are your clients needs greater?
6. Demand an in camera inspection.
7. Are there alternatives sources of the information?
8. Will a redaction or protective order obviate the privilege?
9. Horse trade.
VI. SELECTED PROBLEMS
A. Experts.
B. DCAA.
LTC Steven Gillingham Disputes and Remedies Elective
March 2001
CHAPTER 10
LITIGATION IN THE COURT OF FEDERAL CLAIMS
I. INTRODUCTION.
II. WHAT IS THE COFC? WHERE DID IT COME FROM?
A. Jurisdiction – Suits primarily for money, arising out of money-mandating statutes, Constitutional provisions, executive orders, executive agency regulations, and contracts.
1. 33% - Government contracts.
2. 25% - tax refunds (concurrent jurisdiction with United States district courts).
3. 10% - Fifth Amendment takings, including environmental and natural resource issues.
4. Balance.
a. civilian and military pay. b. intellectual property. c. Indian tribe claims. d. various claims pursuant to statutory loan guarantee or benefit
programs, including those brought by states and localities, and foreign governments.
B. Remedies Available.
1. Generally, money damages.
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2. Generally, COFC has no authority to issue injunctive relief or order specific performance.
a. Pursuant to the Tucker Act, the court may provide limited forms of equitable relief, including:
(1) Reformation in aid of a monetary judgment, or rescission instead of monetary damages. John C. Grimberg Co. v. United States, 702 F.2d 1362 (Fed. Cir. 1983); Paragon Energy Corp. v. United States, 645 F.2d 966 (Ct. Cl. 1981); Rash v. United States, 360 F.2d 940 (1966).
(2) “[T]o grant declaratory judgments and such equitable and extraordinary relief as it deems proper, including but not limited to injunctive relief" in bid protest cases. 28 U.S.C. § 1491(a)(3).
(3) Correct records incident to a monetary award, such as correcting military records to reflect a court finding of unlawful separation. See 28 U.S.C. § 1491(a)(2).
b. Pursuant to the CDA, COFC also may entertain certain nonmonetary disputes.
3. The court may award EAJA attorneys fees. 28 U.S.C. § 2412.
C. The Court. 28 U.S.C. §§ 171-172.
1. Composed of 15 judges (and now has 9 more in senior status).
a. Chief Judge is Lawrence Baskir (since 2001, appointed, 1998).
b. President appoints judges for 15-year term with advice and consent of Senate. President may reappoint after initial term expires.
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c. The CAFC may remove a judge for incompetence, misconduct, neglect of duty, engaging in the practice of law, or physical or mental disability.
D. Special Orders.
1. All of the below is tempered by the fact that RCFC 1 permits the judges to “regulate the applicable practice in any manner not inconsistent with these rules.” To date, at least 12 judges have adopted specialized procedural orders, regulating enlargements of time, dispositive motions in lieu of answers, other dispositive motion requirements, mandatory disclosure, joint preliminary status reports, preliminary status conferences, discovery, experts, and pretrial submissions.
E. Location.
1. 717 Madison Place, N.W., Washington, D.C. (across from White House and Treasury).
2. Trials routinely scheduled throughout the country, 28 U.S.C. §§ 403(c), 2505, and conducts telephonic hearings, motions, and status conferences.
F. Case Load.
1. According to the court: “The 2,200 plus pending cases involve claims currently estimated in the tens of billions of dollars, making the average claim well over one million dollars.”
G. Web site (includes judge’s bios): http://www.law.gwu.edu/fedcl/
H. Historical - Pre-Civil War.
1. Before 1855, Government contractors had no forum in which to sue the United States.
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2. In 1855, the Congress created the Court of Claims as an Article I (legislative) court to consider claims against the United States and recommend private bills to Congress. Act of February 24, 1855, 10 Stat. 612.
3. However, the service secretaries continued to resolve most contract claims.
a. As early as 1861, the Secretary of War appointed a board of three officers to consider and decide specific contract claims. See Adams v. United States, 74 U.S. 463 (1868).
b. Upon receipt of an adverse board decision, a contractor’s only recourse was to request a private bill from Congress.
I. Civil War Reforms.
1. In 1863, Congress expanded the power of the Court of Claims by authorizing it to enter judgments against the United States. Act of March 3, 1863, 12 Stat. 765.
2. In 1887, Congress passed the TUCKER ACT to expand and clarify the Court of Claims’ jurisdiction. Act of March 3, 1887, 24 Stat. 505 (codified at 28 U.S.C. § 1491).
a. The COFC has jurisdiction “to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1).
b. For the first time, a Government contractor could sue the United States as a matter of right.
J. Final Decisions.
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1. Agencies responded to the Court of Claim’s increased oversight by adding clauses to government contracts that appointed specific agency officials (e.g., the contracting officer or the service secretary) as the final decision-maker for questions of fact.
2. The Supreme Court upheld the finality of these officials’ decisions in Kihlberg v. United States, 97 U.S. 398 (1878).
3. The tension between the agencies’ desire to decide contract disputes without outside interference and the contractors’ desire to resolve disputes in the Court of Claims continued until 1978.
4. This tension resulted in considerable litigation and a substantial body of case law.
K. The Supreme Court Weighs In.
1. In a series of cases culminating in Wunderlich v. United States, 342 U.S. 98 (1951), the Supreme Court upheld the finality (absent fraud) of factual and legal decisions issued under the disputes clauses by agency boards of contract appeals.
2. The Supreme Court further held that the Court of Claims could not review board decisions de novo.
L. Congress Reacts.
1. In 1954, Congress passed the Wunderlich Act, 41 U.S.C. §§ 321-322, to reaffirm the Court of Claims’ authority to review factual and legal decisions by agency boards of contract appeals.
2. At about the same time, Congress changed the Court of Claims from an Article I (legislative) court to an Article III (judicial) court. Pub. L. No. 83-158, 67 Stat. 226 (1953).
M. The Supreme Court Weighs In Again.
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1. In United States v. Carlo Bianchi & Co, 373 U.S. 709 (1963), the Supreme Court held that boards of contract appeals were the sole forum for disputes “arising under” a remedy granting clauses in the contract.
2. Three years later, the Supreme Court reaffirmed its conclusion in Utah Mining and Constr. Co. v. United States, 384 U.S. 394 (1966).
3. As a result, agency boards of contract appeals began to play a more significant role in the resolution of contract disputes.
N. The Contract Disputes Act (CDA) of 1978, Pub. L. No. 95-563, 92 Stat. 2383 (codified as amended at 41 U.S.C. §§ 601-613).
1. In 1978, Congress passed the CDA to make the claims and disputes process more consistent and efficient.
2. The CDA replaced the previous disputes resolution system with a comprehensive statutory scheme.
O. Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25 (codified as amended in scattered sections of 28 U.S.C.).1
1. In 1982, Congress overhauled the Court of Claims and created a new Article I (legislative) court—named the United States Claims Court—from the old Trial Division of the Court of Claims.
2. Congress then merged the old Appellate Division of the Court of Claims with the Court of Customs and Patent Appeals to create the Court of Appeals for the Federal Circuit (CAFC).
P. Federal Courts Administration Act of 1992, Pub. L. No. 102-572, 106 Stat. 4506. For legislative history, see, inter alia, S. Rep. No. 102-342, 102d Cong., 2d Sess. (July 27, 1992); H. Rep. No. 102-1006 (October 3, 1992); Senator Heflin’s remarks, Volume 138 Cong. Rec. No. 144, at S17798-99 (October 8, 1992).
1 The Act substantially revised the jurisdiction of the new courts.
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1. In 1992, Congress changed the name of the Claims Court to the United States Court of Federal Claims (COFC).
2. In addition, Congress expanded the jurisdiction of the COFC to include the adjudication of nonmonetary disputes.
a. The COFC has jurisdiction “to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act of 1978, including a dispute concerning termination of a contract, rights in tangible or intangible property, compliance with cost accounting standards, and other nonmonetary disputes on which a decision of the contracting officer has been issued under section 6 of that Act.” Federal Courts Administration Act of 1992, Pub. L. No. 102-572, 106 Stat. 4506 (codified at 28 U.S.C. § 1491(a)(2)).
Q. The Federal Acquisition Streamlining Act of 1994 (FASA), Pub. L. No. 103-355, 108 Stat. 3243 (1994), slightly altered the court’s jurisdiction.
1. The COFC may direct that the contracting officer render a decision. The Boards of Contract Appeals (BCAs) no longer have exclusive authority under the CDA to entertain a request that the contracting officer be directed to issue a final decision in the event of undue delay by the contracting officer. FASA § 2351(e), amending 41 U.S.C. § 605(c)(4).
2. District courts may request advisory opinions from BCAs. On matters concerning contract interpretation (any issue that could be the proper subject of a contracting officer’s final decision), district courts may request that the appropriate agency BCA provide (in a timely manner) an advisory opinion. FASA § 2354, amending 41 U.S.C. § 609. (It is interesting to note that the statute did not permit a Federal district court to request an advisory opinion from the COFC.)
R. The Administrative Dispute Resolution Act of 1996 (ADRA), Pub. L. No. 104-320, § 12 (1996), significantly altered the COFC’s and U.S. District Courts’ bid protest jurisdiction. See 28 U.S.C. § 1491(b).
1. Concurrent Jurisdiction of COFC and District Courts
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2. Statutorily-Prescribed Standing Requirement
3. APA Standard of Review
4. Sunset Provision on District Court Jurisdiction (1/1/2001)
III. DAY-TO-DAY ADMINISTRATION.
A. The Judge. 28 U.S.C. § 173.
1. One judge presides and decides - NO JURY TRIALS
a. NB: different than ASBCA.
2. Judges not bound by the decisions of the other COFC judges. Are bound by Fed. Cir. and Court of Claims decisions.
B. The Plaintiff. RCFC 81(d)(8).
1. Individuals may represent themselves or members of their immediate family. Any other party must be represented by an attorney who is admitted to practice in the COFC.
2. Note: at ASBCA atty. not required.
C. The Defendant = “The United States.”
1. Represented by the Department of Justice (DOJ). 28 U.S.C. §§ 516, 518-519. The DOJ has plenary authority to settle cases pending in the COFC. See 28 U.S.C. § 516; see also Executive Business Media v. Department of Defense, 3 F.3d 759 (4th Cir. 1993).
a. A section of the Civil Division’s Commercial Litigation Branch represents the Government in all contract actions.
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b. The section has 130 trial attorneys and is located at 1100 L Street, N.W., Washington, D.C.
2. Practical Effect Upon Agency.
a. The AGENCY loses authority over the case’s disposition.
b. This CONTRACTING OFFICER loses authority to decide or settle claims arising out of the same operative facts. The Sharman Co., Inc. v. United States, 2 F.3d 1564 (1993).
c. AGENCY COUNSEL, because there is only one “attorney of record” per party, appears “of counsel,” and plays a different role than s/he would at the board or even a district court, where SAUSA appointments are common place.
d. NB: at ASBCA, agency is respondent and conducts the litigation. This is one of the features contractors consider in deciding whether to elect COFC.
3. Effect of “United States” as defendant. Who is DOJ’s client?
D. The Rules.
1. The Rules of the Court of Federal Claims (RCFC) – formerly the Rules of the United States Claims Court (RUSCC) -- became effective on October 1, 1982, and were last revised on March 15, 1992. They are based upon the Federal Rules of Civil Procedure (Fed. R. Civ. P.) and are published as an appendix to Title 28 of the United States Code.
2. Supplemented by General Orders.
a. GO 13 - ADR – mandatory notice of ADR options, voluntary participation, outlines methods.
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b. GO 33 – court’s name changed w/o legal effect – all prior rules applicable, cited as “Fed. Cl.,” rules as RCFC.
c. GO 34 - complaints of judicial misconduct – 43 pages (you wish you had these many rights).
d. GO 35 – student practice w/ supervisory atty. (no fee for service allowed).
e. GO 36 – Statement of related cases required (same parties, K), CJ may reassign cases in interest of economy.
f. GO 37 – price of admission to bar = $30 (hand-calligraphed cert. = $25).
g. GO 38 – Standard practice for bid protests (at discretion of judge) – see discussion below concerning bid protests.
IV. BID PROTESTS - THE AGENCY COUNSEL’S ROLE: YOU’VE GOT THE POINT.
A. Nature: Request for Injunctive Relief (halting the award). Protestor must prove:
1. Plaintiff will suffer irreparable harm;
2. Plaintiff’s harm outweighs the harm to the government;
3. Public interest favors equitable relief; and
4. Plaintiff is likely to succeed on the merits.
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B. Standard of Review. The ADRA incorporates by reference the Administrative Procedure Act’s Standard of Review. 28 U.S.C. § 1491(b)(4). That is, the CFC will examine whether the agency’s actions were arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706. In applying this standard, the CFC will examine whether:
a. There was subjective bad faith by the agency;
b. The agency decision had a reasonable basis;
c. The amount of the agency’s discretion given by statute or regulation; and
d. The agency violated statute or regulation.
C. Managing the Shock
1. The Administrative Record (G.O. 38(G)).
a. Government must produce by the date set at the status conference. The GO requires it to be submitted “as promptly as circumstances permit.”
b. Must include all relevant core documents. No “all-encompassing” definition of the administrative record.
c. The COFC should generally have before it the same information that was before the agency when it made its decision. Mike Hooks, Inc. v. United States, 39 Fed. Cl. 147, 154 (1997). Thus, the COFC should focus on “the ‘whole record’ before the agency; that is, all the material that was developed and considered by the agency in making its decision.” Cubic Applications, Inc. v. United States, 37 Fed. Cl. 339, 342 (1997).
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d. The COFC has permitted protesters to supplement this record through discovery in limited circumstances: “The administrative record is a post facto recreation of a procurement’s documentary trail. If and when the administrative record does not, or cannot, serve to explain or defend a party’s position, the record may be supplemented by other documents, including affidavits, or testimony.” Alfa Laval Separations, Inc. v. United States, 40 Fed. Cl. 215, 220 n.6 (1998); see also GraphicData, LLC v. United States, 37 Fed. Cl. 771, 780 (1997).
e. In deciding whether to permit the supplementation of the record, the COFC considers the eight factors articulated in Esch v. Yeutter, 876 F.2d 976 (D.C. Cir. 1989):
(1) (1) when agency action is not adequately explained in the record before the court; (2) when the agency failed to consider factors which are relevant to its final decision; (3) when an agency considered evidence which it failed to include in the record; (4) when a case is so complex that a court needs more evidence to enable it to understand the issues clearly; (5) in cases where evidence arising after the agency action shows whether the decision was correct or not; (6) in cases where agencies are sued for a failure to take action; (7) in cases arising under the National Environmental Policy Act; and (8) in cases where relief is at issue, especially at the preliminary injunction stage. See, e.g., Cubic Applications, Inc. v. United States, 37 Fed. Cl. 339 (1997) (stating that protester’s failure to seek to question a witness before the GAO weakened protester’s contention that it was necessary to do so at the COFC).
f. GAO Proceedings - by statute, all documents that are part of a GAO protest are considered part of the record before the COFC. 31 U.S.C. § 3556. Not binding, but RCFC 34(d) permits COFC to issue a call order to GAO to issue an advisory opinion on a protest. See Howell Constr. v. United States, 12 Cl. Ct. 450 (1987).
2. Scheduling.
a. 24 hr. advance notice.
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b. Scheduling Conference
c. Decide:
(1) Whether the agency can stay contract performance or award pending a hearing on the TRO/PI motion, which often happens (see, e.g., Aero Corp. v. United States, 38 Fed. Cl. 739, 746 (1997)); and
(2) Whether to consolidate final hearing on the merits with the PI hearing.
3. Protective Orders (G.O. 38(F)).
a. Order limiting the disclosure of source selection, proprietary, and other protected information to those persons admitted to that order. The order also governs how such information is to be identified and disposed of when the case is over. The COFC regularly issues these orders, although in at least one case, the COFC denied the request of the government and the apparent awardee to issue a protective order and ordered the release of the government’s evaluation documentation relating to the protester’s proposal to the protester. See Pike’s Peak Family Housing, Inc. v. United States, 40 Fed. Cl. 673 (1998).
b. Once the order is issued, one gets admitted to the order by submitting an appropriate application. General Order 38 contains a model protective order and model applications for access by outside counsel, inside counsel, and outside experts.
c. Ordinarily, objections must be made within 2 days of receipt of a given application. In deciding whether to admit an applicant against whose admission an objection has been lodged, the COFC will consider:
(1) Nature and sensitivity of the information;
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(2) The party’s need for access to the data to effectively represent its client;
(3) The overall number of applications; and
(4) Other concerns that may affect the risk of inadvertent disclosure.
(a) See U.S. Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir. 1984) (discussing that those who give advice or participate in competitive decision-making on behalf of a party should not be admitted to protective orders).
d. COFC, DOJ, and agency personnel are automatically admitted.
e. Most judges request or accept proposed redactions from court orders and opinions and decide what protected information to redact. See, e.g., WinStar Communications, Inc. v. United States, 41 Fed. Cl. 748, 750 n.1 (1998).
V. CONTRACT CLAIMS.
A. The Contract Disputes Act of 1978. 41 U.S.C. §§ 601-613.
1. Applicability. 41 U.S.C. § 602.
a. The CDA applies to all express or implied contracts an executive agency enters into for:
(1) The procurement of property, other than real property in being;
(2) The procurement of services;
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(3) The procurement of construction, alteration, repair or maintenance of real property; or
(4) The disposal of personal property.
b. The CDA does not normally apply to contracts funded solely with nonappropriated funds (NAFs). However, the CDA applies to Army and Air Force Exchange Service (AAFES), Navy Exchange, and Marine Corps Exchange contracts. 41 U.S.C. § 602(a).
2. Actions in the COFC. 41 U.S.C. § 609.
a. The CDA permits a contractor to appeal directly to the COFC. 41 U.S.C. § 609(a)(1).
b. Absent a Government claim (e.g., termination, LDs), the contractor must meet the same claim and final decision requirements as it must before the board.
(1) NB: no CDA interest is due unless the contractor submits a claim. The contractor may submit a claim even if a Government claim is at issue.
c. The COFC considers the case de novo. 41 U.S.C. § 609(a)(3).
3. Consolidation of Suits. 41 U.S.C. § 609(d). The COFC may order the consolidation of suits—or transfer suits to or among agency boards of contract appeals—if 2 or more suits arising from 1 contract are filed in the COFC or 1 or more boards of contract appeals.
4. The Election Doctrine. 41 U.S.C. §§ 606 and 609.
a. The CDA provides alternative forums for challenging a contracting officer’s final decision.
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b. Once a contractor files its appeal with a particular forum, this election is normally binding and the contractor may no longer pursue its claim in the other forum. See Bonneville Assocs. v. United States, 43 F.3d 649 (Fed. Cir. 1994) (dismissing the contractor’s suit because the contractor originally elected to proceed before the GSBCA); see also Bonneville Assocs. v. General Servs. Admin., GSBCA No. 13134, 96-1 BCA ¶ 28,122 (refusing to reinstate the contractor’s appeal), aff’d, Bonneville Assoc. v. United States, 165 F.3d 1360 (Fed. Cir. 1999).
c. However, the “election doctrine” does not apply if the forum originally selected lacked subject matter jurisdiction over the appeal. See Information Sys. & Networks Corp. v. United States, 17 Cl. Ct. 527 (1989) (holding that the contractor’s untimely appeal to the Agriculture Board of Contract Appeals did not preclude it from pursing a timely suit in the Claims Court).
B. Statute of Limitations.
1. In 1987, the CAFC decided that the Tucker Act’s six-year (from accrual of action, not COFD) statute of limitations did not apply to CDA appeals. Pathman Constr. Co. v. United States, 817 F.2d 1573 (Fed. Cir. 1987).
2. In 1994, Congress revised the CDA to impose a six-year statute of limitations on contract claims. Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, 108 Stat. 3243 (codified at 41 U.S.C. § 605(a)).
a. Beginning with contracts awarded on or after 1 October 1995, a contractor must submit its CLAIM within six years of the date the claim accrues.
b. This statute of limitations provision does not apply to Government claims based on contractor claims involving fraud.
3. Once it has met this six-year SOL, the contractor also must meet a 12 month COFC filing SOL.
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4. The contractor must initiate its action in the COFC within 12 months of the date it received the contracting officer’s final decision (COFD). 41 U.S.C. § 609(a)(3). See Janicki Logging Co. v. United States, 124 F.3d 226 (Fed. Cir. 1997) (unpub.); K&S Constr. v. United States, 35 Fed. Cl. 270 (1996); White Buffalo Constr., Inc. v. United States, 28 Fed. Cl. 145 (1992); Structural Finishing, Inc. v. United States, 14 Cl. Ct. 447 (1988).
a. The COFC generally considers the Clerk of Court’s records of receipt to be final and conclusive evidence of the date of filing.
b. However, the court will deem a late complaint timely if the plaintiff:
(1) Sent the complaint to the proper address by registered or certified mail, return receipt requested;
(2) Deposited the complaint in the mail far enough in advance of the due date to permit its delivery on or before that date in the ordinary course of the mail; and
(3) Exercised no control over the complaint from the date of mailing to the date of delivery.
See B.D. Click Co. v. United States, 1 Cl. Ct. 239 (1982) (holding that the contractor failed to demonstrate the applicability of exceptions to timeliness rules).
5. Contrast this with BCA practice:
a. BCA appeals must be initiated within 90 days;
b. Timeliness is based upon the mailing of the notice of appeal (vice receipt at COFC). 41 U.S.C. § 609(a). Structural Finishing, Inc. v. United States, 14 Cl. Ct. 447 (1988).
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VI. INITIATING SUIT (WHAT YOU’RE LIKELY TO GET AND WHEN).
A. Action Commenced With A Complaint.
1. A “short and plain” statement of jurisdiction, demonstrating entitlement, and demanding judgment for the entitled remedy. In addition, the complaint must contain:
a. a statement regarding any action taken on the claim by Congress, a department or agency of the United States, or another tribunal;
b. a clear citation to any statute, regulation, or executive order upon which the claim is founded; and
c. a description of any contract upon which the claim is founded.
2. NB: At BCAs, action commenced with notice of appeal.
B. The “Call Letter.” 28 U.S.C. § 520.
1. The Attorney General must send a copy of the petition (i.e., the complaint) to the responsible military department, along with a request for all of the facts, circumstances, and evidence concerning the claim that are within the possession or knowledge of the military department.
2. The responsible military department must then provide the Attorney General with a “written statement of all facts, information, and proofs.”
VII. DOJ RESPONSE (WHAT DOJ EXPECTS AND WHY).
A. The Answer. RCFC 8, 12, and 13.
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1. The Government must file its answer within 60 days of the date it receives the complaint.
2. The Government must admit or deny each averment in the complaint.
a. If the Government lacks sufficient knowledge or information to admit or deny a particular averment, the Government must say so.
b. If the Government only intends to oppose part of an averment, the Government must specify which part of the averment is true and deny the rest.
c. The Government may enter a general denial if it intends to oppose the plaintiff’s entire complaint, including the plaintiff’s averments regarding the court’s jurisdiction. But see RCFC 11.
d. Generally, DOJ files bare bones admissions and denials. Compare with ASBCA practice. However, each such statement must be supportable. See discussion of Rule 11, below.
3. Defenses. RCFC Nos. 8 and 12.
a. If a responsive pleading is required, the Government must plead every factual and legal defense to a claim for relief.
b. The Government may assert the following defenses by motion:
(1) Lack of subject matter jurisdiction; Lack of personal jurisdiction; Insufficiency of process; and Failure to state a claim upon which the court may grant relief.
c. The Government must plead the following affirmative defenses:
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(1) “accord and satisfaction, arbitration and award, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense.” RCFC 8(c).
4. Counterclaims. RCFC 13.
a. The Government must state any claim it has against the plaintiff as a counterclaim if:
(1) The claim arises out of the same transaction or occurrence as the plaintiff’s claim; and
(2) The claim does not require the presence of third parties for its adjudication.
b. The Government may state any claims not arising out of the same transaction or occurrence as the plaintiff’s claim as counterclaims.
B. Signing Pleadings, Motions, and Other Papers. RCFC 11.
1. The attorney of record must sign every pleading, motion, and other paper.
2. The attorney’s signature constitutes a certification that:
[T]he attorney . . . has read the pleading, motion, or other paper; that to the best of the attorney’s . . . knowledge, information, and belief formed after reasonably inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation . . . . [emphasis added].
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3. The COFC will strike a pleading, motion, or other paper if the attorney does not promptly sign it after the omission of the attorney’s signature is brought to the attorney’s attention.
4. The COFC will impose appropriate sanctions against the attorney and/or the represented party if the attorney signs a pleading, motion, or other paper in violation of this rule.
C. Early Meeting of Counsel. RCFC, App. G, Pt. II. The parties must meet within 15 days of the date the Government files its answer to:
1. Identify each party’s factual and legal contentions;
2. Discuss each party’s discovery needs and discovery schedule; and
3. Discuss settlement.
4. As a practical matter, DOJ orchestrates this.
D. Preparing The Joint Preliminary Status Report (JPSR). RCFC, App. G, Pt. III.
1. The parties must file a JPSR NLT 30 days after they meet.
2. The JPSR must set forth answers to the following questions:
a. Does the court have jurisdiction?
b. Should the case be consolidated with any other action?
c. Should trial of liability and damages be bifurcated?
d. Should further proceedings be deferred pending consideration of another case?
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e. Will a remand or suspension be sought?
f. Will additional parties be joined?
g. Does either party intend to file a motion to dismiss for lack of jurisdiction, failure to state a claim, or summary judgment?
h. What are the relevant issues?
i. What is likelihood of settlement?
j. Do the parties anticipate proceeding to trial? If so, does any party want to request expedited trial scheduling?
k. Is there any other information of which the court should be made aware?
l. What do the parties propose for a discovery plan and deadline.
3. As a practical matter, DOJ orchestrates this.
VIII. BASIS FOR DOJ RESPONSE - THE LITIGATION REPORT.
A. The agency is required, by statute, to file a litigation report. 28 U.S.C. § 520(b).
1. Not a Rule 4 File. Counsel, rather than the contracting officer, should prepare the litigation report. Neither the CFC nor the plaintiff sees the report. Err on the side of inclusion, not exclusion. Stamp “Attorney Work Product.”
2. AR 27-40, “Litigation.” Chapter 3.9, “Litigation Reports.”
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a. Statement of Facts. - a complete statement of the facts upon which the action and any defense thereto are based. Where possible, support facts by reference to documents or witness statements. Include details of previous administrative actions, such as the filing and results of an administrative claim.
b. Setoff or Counterclaim. Identify with supporting facts.
c. Responses to Pleadings. Prepare a draft answer or other appropriate response to the pleadings. (See fig 3-1, Sample Answer). Discuss whether allegations of fact are well-founded. Refer to evidence that refutes factual allegations
d. Memorandum of Law. “Include a brief statement of the applicable law with citations to legal authority. Discussions of local law, if applicable, should cover relevant issues such as measure of damages . . . . Do not unduly delay submission of a litigation report to prepare a comprehensive memorandum of law.”
(1) Identify jurisdictional defects and affirmative defenses.
(2) Assess litigation risk. Do not hesitate to form (and support) a legal opinion. Give a candid assessment of the potential for settlement.
e. Potential witness information. “List each person having information relevant to the case and provide an office address and telephone number. If there is no objection, provide the individual's social security account number, home address, and telephone number. This is "core information" required by Executive Order No. 12778 (Civil Justice Reform). Finally, summarize the information or potential testimony that each person listed could provide.”
(1) DOJ probably does not care about SSNs, but REALLY cares about a witness’s expected availability (retiring? PCS’ing to Greenland?)
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f. Exhibits – “Attach a copy of all relevant documents . . . .Copies of relevant reports of claims officers, investigating officers, boards, or similar data should be attached, although such reports will not obviate the requirement for preparation of a complete litigation report . . . Where a relevant document has been released pursuant to a Freedom of Information Act (FOIA) request, provide a copy of the response, or otherwise identify the requestor and the records released.
g. Draft an answer.
h. Identify documents and information targets for discovery. Think about things you know exist or must exist that will help the agency position as well as things that might exist that might undermine the agency’s position.
i. Consider drafting a motion to dismiss for lack of jurisdiction, RCFC 12(b)(1), or for failure to state a claim, RCFC 12(b)(4).
j. Consider drafting motion for summary judgment, RCFC 56, App. H.
(1) RCFC 56(d) requires that the moving party file a separate document entitled Proposed Findings of Uncontroverted Fact, and that the responding party file a “Statement of Genuine Issues,” and permits the responding party to file proposed findings of uncontroverted facts.
B. Above All, Be A Good Intel Analyst.
1. THEM: If the plaintiff’s position is unbelievable, there is a good chance the agency has simply misunderstood it (perhaps because the position was poorly presented). Identify the questions that will assure the Government understands the contractor’s point so we can target discovery, properly respond, and be assured the Government will not be blind-sided at trial.
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2. US: Identify any agency concerns, uncertainty, hard or soft spots (the CO will fight to the death vs. the CO was surprised the contractor never called to negotiate), witness problems or biases, and anything else you would like to know if you were trying the case.
IX. AGENCY ROLE THROUGHOUT DISCOVERY.
A. General Provisions. RCFC 26.
1. Methods of Discovery. RCFC 26(a). The parties may obtain discovery by depositions upon oral examination or written questions, written interrogatories, requests for the production of documents, and requests for admissions.
2. The Court May Limit Discovery If:
a. The discovery sought is unreasonably cumulative or duplicative;
b. The party seeking the discovery may obtain it from a more convenient, less burdensome, or less expensive source;
c. The party seeking the discovery has had ample opportunity to obtain the information sought; or
d. The burden or expense of the proposed discovery outweighs its likely benefit.
3. Protective Orders. RCFC 26(c) and App. G. The court may make “any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”
B. Depositions.
1. Offensive - Preparation.
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a. 3 essential components:
(1) Purpose – lock in testimony, pure exploration, testing a theory, confirming a negative.
(2) Questions.
(3) Documents.
b. Agency has a role to play in all three, such as coordinating with fact/technical witnesses, but be careful to preserve those efforts as work product.
2. Defensive – Notice.
a. Agency counsel should coordinate service.
(1) If the party that gave notice of the deposition failed to attend (or failed to subpoena a witness who failed to attend), the court may order that party to pay the other party’s reasonable expenses, including reasonable attorney’s fees.
b. Prior employees who acted within scope of duties are entitled to representation by DOJ. Agency counsel should identify such circumstances and ensure DOJ forms are completed and returned.
3. Defensive – G2ing.
a. DOJ should take lead in preparing witnesses, including how much and how to prepare.
(1) Agency may be asked to identify relevant documents and likely questions.
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b. All contact with witness must be coordinated with DOJ.
4. Submission of Transcript to Witness. RCFC 30(e).
a. The deponent must examine and read the transcript unless the witness and the parties waive the requirement.
(1) The deponent may make changes; however, the deponent must sign a statement that details the deponent’s reasons for making them.
b. Agency counsel should coordinate this.
5. Obtaining Transcripts.
a. Expenses. RCFCs 28(d) and 30(g). The party taking the deposition must pay the cost of recording the deposition.
b. Tell DOJ what you will need: disk; condensed (with word index); full. Making copies may or may not be permitted.
C. Interrogatories. RCFC 33.
1. The Government may serve interrogatories on the plaintiff after the plaintiff files the complaint, and the plaintiff may serve interrogatories on the Government after the Government receives the complaint.
2. The party upon whom the interrogatories have been served (i.e., the answering party) must normally answer or object to the interrogatories within 30 days of service.
3. The answering party may answer an interrogatory by producing business records if:
a. The business records contain the information sought; and
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b. The burden of deriving or ascertaining the answer sought is substantially the same for both parties.
(1) The responding party must be specific about where the information can be located. Otherwise, the burden is not the same.
4. The answering party must sign a verification attesting to the truth of the answers. The answering party’s attorney must sign the objections.
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D. Requests for the Production of Documents. RCFC 34.
1. The rules are similar to the rules for interrogatories.
2. The party producing the records for inspection/copying may either:
a. Produce them as they are kept in the usual course of business; or
b. Organize and label them to correspond to the production request.
E. Requests for Admission. RCFC 36.
1. The rules are similar to the rules for interrogatories.
2. The answering party must:
a. Specifically deny each matter; or
b. State why the answering party cannot truthfully admit or deny the matter.
3. The answering party cannot allege lack of information or knowledge unless the answering party has made a reasonable inquiry into the matter.
4. If the answering party fails to answer or object to a matter in a timely manner, the matter is admitted.
5. Admissions are conclusive unless the court permits the answering party to withdraw or amend its answer.
F. Agency Counsel Role in Responding to Interrogatories, Requests for Production and Admissions.
1. Identify Who Should Answer.
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2. Inform all potential witnesses and affected activities that a lawsuit has been filed; that, as a normal part of discovery, plaintiff is entitled to inspect and copy all related documents; that “documents” includes electronic documents, such as email and “personal” notes kept in performing official duties, such as field notebooks; that witnesses are not to dispose of any such documents; that they should begin to collect and identify all files related to the lawsuit – including those at home.
3. Clients also should be told they are represented by DOJ and the contractor is represented by counsel, and they should not talk to the contractor or its attorneys about the lawsuit.
4. Discovery Planning Conference.
a. Agency counsel and answering witnesses should discuss with DOJ atty. concerning a strategy for responding. E.g.:
(1) Objections in lieu of responses (what we won’t tell them);
(2) Objections with limited responses (what we will tell them), e.g., requests for “all documents” or “all information related to.”
(3) In which cases will we produce documents instead of responding to an interrogatory IAW RCFC 33(c).
(4) How documents will be organized and stamped, including adoption of a stamping protocol (e.g.. “HQDA0001 . . . ,” “AMC0001 . . . .”) to identify source of produced documents and to identify them as having been subject to discovery effort.
(5) How copying and inspection will be handled – security concerns? Cost concerns?
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b. Preparation of a privilege log. All relevant documents not produced and not covered by an objection must be listed on a privilege log furnished to the other side. Typically, they list to, from, date, subject, and privilege claimed. They should be sufficiently detailed so that the basis for the privilege is evident but does not disclose the privileged matter. E.g., Ltr. From MAJ Jones, AMC Counsel, to Smith, CO re: claim.
G. Failure to Cooperate in Discovery. RCFC 37.
1. Motion to Compel Discovery. RCFC 37(a)(2). If a party or a deponent fails to cooperate in discovery, the party seeking the discovery may move for an order compelling discovery.
2. Expenses. RCFC 37(a)(4). The court may order the losing party or deponent to pay the winning party’s reasonable expenses, including attorney fees.
3. Sanctions. RCFC 37(b).
a. If a deponent fails to answer a question after being directed to do so by the court, the court may hold the deponent in contempt of court.
b. If a party fails to provide or permit discovery after being directed to do so, the court may take one or more of the following actions:
(1) Order that designated facts be taken as established for purposes of the action;
(2) Refuse to allow the disobedient party to support or oppose designated claims or defenses;
(3) Refuse to allow the disobedient party to introduce designated facts into evidence;
(4) Strike pleadings in whole or in part;
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(5) Stay further proceedings until the order is obeyed;
(6) Dismiss the action in whole or in part;
(7) Enter a default judgment against the disobedient party;
(8) Hold the disobedient party in contempt of court; and
(9) Order the disobedient party—and/or the attorney advising that party—to pay the other party’s reasonable expenses, including attorney’s fees.
X. TRIAL – YOU’RE NOT DONE YET.
A. Pretrial Conference. RCFC, App. G, Pt. V.
1. Preparatory Actions.
a. The parties must exchange the following information through their attorneys NLT 60 days before the pretrial conference:
(1) All exhibits (except exhibits to be used for impeachment);
(a) Exceptions based upon practicalities, particularly WRT documents already produced. Generally, a list of documents will meet this requirement.
(b) No rule on demonstrative exhibits.
(c) What about FRE 1006 compilations.
(2) A final witness list.
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b. The parties must also confer to:
(1) Resolve any evidentiary objections;
(2) Disclose all contentions as to applicable facts and law;
(3) Engage in good-faith, diligent efforts to enter into factual stipulations; and
(4) Exhaust all possibilities of settlement.
c. Ordinarily, the parties must file:
(1) A Memorandum of Contentions of Fact and Law;
(2) A joint statement setting forth the factual and legal issues that the court must resolve NLT 21 days before the pretrial conference;
(3) A witness list;
(4) An exhibit list.
2. The attorneys who will try the case must attend the pretrial conference.
B. PreTrial Preparation.
1. Contacting all witnesses -- ensuring none will be gone during trial and that former Government employees have signed representation agreements if they wish to.
2. Outlining Witness Testimony.
3. Preparing Witnesses.
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4. Preparing FRE 1006 summaries.
5. Copying and organizing documents.
C. Offers of Judgment. RCFC 68.
1. The Government may make an offer of judgment at any time more than 10 days before the trial begins.
2. If the offeree fails to accept the offer and the judgment the offeree finally obtains is not more favorable than the offer, the offeree must pay any costs the Government incurred after it made the offer.
XI. SETTLEMENT.
A. Attorney General has authority to settle and has delegated that authority depending upon dollar value of settlement. 28 C.F.R. § 0.160, et seq., .e.g., AAG, Civil Division may settle a defensive claim when the principal amount of the proposed settlement does not exceed $2 million. The AAG has redelegated office heads and U.S. Attorneys, but redelegation subject to exceptions, including case where agency opposes settlement.
B. Agencies must be consulted regarding “any significant proposed action if it is a party, if it has asked to be consulted with respect to any such proposed action, or if such proposed action in a case would adversely affect any of its policies.” U.S. Attorney’s Manual, para.4-3.140C (available at www.usdoj.gov).
C. Assume a Discussion About Settlement Is Coming.
1. The agency has little influence on the process when the agency counsel is not sufficiently familiar with case developments to offer a persuasive opinion.
2. Prepare your “clients” that ADR and, if warranted, settlement are more arrows in the quiver for resolving the dispute.
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3. Explain that settlement should be used when it avoids injustice, when the defense is unprovable, when a decision can be expected to create an unfavorable precedent; and when settlement provides a better outcome (including the fact it might include consideration that a court judgment will not) than could be expected from a trial. The availability of expiring contract funds might also be considered.
a. In that regard, help client understand difference between their believing a fact, and it being legally significant and provable.
4. Identify early on who within the agency has authority to recommend settlement, and who within the agency has the natural interest or “pull” to affect that recommendation, such that they should be continually updated on the litigation.
D. Alternative Dispute Resolution (ADR). General Order No. 13.
1. The COFC has implemented two ADR methods for use in appropriate cases.
a. Use of a Settlement Judge.
b. Mini-Trial.
(1) Each party presents an abbreviated version of its case to a neutral advisor, who then assists the parties to negotiate a settlement.
(2) Suggested procedures are set forth in the General Order.
2. Both ADR methods are designed to be voluntary and flexible.
3. If the parties want to employ one of the ADR methods, they should notify the presiding judge as soon as possible.
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a. If the presiding judge determines that ADR is appropriate, the presiding judge will refer the case to the Office of the Clerk for the assignment of an ADR judge.
b. The ADR judge will exercise ultimate authority over the form and function of each ADR method.
c. If the parties fail to reach a settlement, the Office of the Clerk will return the case to the presiding judge’s docket.
XII. POST JUDGMENT.
A. Unless timely appealed, a final judgment of the court bars any further claim, suit, or demand against the United States arising out of the matters involved in the case or controversy. 28 U.S.C. § 2519.
B. New Trials. 28 U.S.C. § 2515; RCFC 59.
1. The COFC may grant a new trial or rehearing or reconsideration based on common law or equity.
2. The COFC may grant the Government a new trial—and stay the payment of any judgment—if it produces satisfactory evidence that a fraud, wrong, or injustice has been done to it:
a. While the action is pending in the COFC;
b. After the Government has instituted proceedings for review; or
c. Within 2 years after final disposition of the action.
C. Appeals. A party may appeal an adverse decision to the CAFC within 60 days of the date the party received the decision. 28 U.S.C. § 2522. See RCFC 72.
D. Payment of Judgments.
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1. An agency may access the “Judgment Fund” to pay “[a]ny judgment against the United States on a [CDA] claim.” 41 U.S.C. § 612(a). See 31 U.S.C. § 1304; cf. 28 U.S.C. § 2517.
a. The Judgment Fund also pays compromises under the Attorney General’s authority.
b. If an agency lacks sufficient funds to cover an informal settlement agreement, it may “consent” to the entry of a judgment against it. Bath Irons Works Corp. v. United States, 20 F.3d 1567, 1583 (Fed. Cir. 1994).
2. An agency that accesses the Judgment Fund to pay a judgment must repay the Fund from appropriations that were current at the time the judgment was rendered against it. 41 U.S.C. § 612(c).
XIII. CONCLUSION.
CHAPTER 11
BRIEF WRITING
I. INTRODUCTION. ...............................................................................................................1 II. DIFFERENT TYPES OF BRIEFS. ......................................................................................1
A. General...............................................................................................................................1
B. Pre-hearing Briefs. .............................................................................................................1
C. Post-hearing Briefs. ...........................................................................................................3
D. Reply Briefs. ......................................................................................................................3
E. Briefs Submitted in Lieu of a Hearing...............................................................................4
III. PREPARATION OF A BRIEF.............................................................................................4
A. Assembling Evidence.........................................................................................................4
B. Format and Content............................................................................................................5
IV. ADVOCACY TECHNIQUES............................................................................................10
A. Making the Judge’s Job Easier. .......................................................................................10
B. No Evidence is a Fact.. ....................................................................................................10
C. Humanize Your Argument...............................................................................................10
D. Follow the Real Order of Precedence. .............................................................................10
E. Repeat Offenders. ............................................................................................................11
V. CONCLUSION....................................................................................................................11
MAJ Jon Guden Disputes & Remedies
April 2001
CHAPTER 11
BRIEF WRITING
I. INTRODUCTION.
II. DIFFERENT TYPES OF BRIEFS.
A. General.
1. Purpose. In contract disputes before the Armed Services Board of Contract Appeals, briefs replace closing arguments for summarizing the evidence presented, drawing inferences and conclusions from the evidence, and advocating conclusions of law.
2. Facts v. law.
a. Good legal arguments will not overcome a weak factual presentation. Most cases are won or lost on the facts.
b. Make sure you separate facts from legal argument.
3. Format. There is no required format for briefs. The Army, however, has developed a standard format for post-hearing briefs.
4. Length. The Board may place page limits on briefs. In all cases, briefs should be well-organized, concise, and thorough. They should address all relevant factual and legal issues. Normally, the proposed findings of fact (“PFF”) are much more extensive than the legal arguments.
B. Pre-hearing Briefs. ASBCA Rule 9.
1. The Board may order the parties to file pre-hearing briefs in any case in which a hearing has been requested. They may be requested before an ADR proceeding, such as a summary trial with binding decision.
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2. Generally, the Board will request pre-hearing briefs whenever the record does not set forth the issues adequately.
3. The Board may request pre-hearing briefs to encourage the parties to simplify or to settle the issues.
4. When the Board does not require pre-hearing briefs, either party may, following timely notice to the other party, file a pre-hearing brief.
5. Pre-hearing briefs are due to the Board at least 15 days prior to the hearing date, and a copy is due to the other party simultaneously.
6. Contents.
a. Proposed findings of fact.
b. Statement of the legal issues.
c. Summary of legal argument.
7. There are advantages to filing a pre-hearing brief.
a. It requires the trial attorney to assemble evidence and identify weaknesses and strengths in the case earlier in the proceedings.
b. It helps to simplify the issues in dispute.
c. It makes stipulations of fact easier to prepare.
d. It educates the presiding judge on the facts and law.
e. It makes the post-hearing brief easier to prepare.
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C. Post-hearing Briefs. ASBCA Rule 23.
1. The post-hearing brief replaces the final argument. The primary purpose of a post-hearing brief is to provide the Board with proposed findings of fact and legal argument to support a decision in favor of the client.
2. Briefs are submitted upon the terms set by the presiding judge.
a. The parties may submit post-hearing briefs simultaneously (general rule), or sequentially, with the party with the burden of proof submitting its brief first.
b. Parties typically submit the original post-hearing brief, and three copies, to the Board. The Board will forward a copy to the opposing party.
c. Parties should not attempt to supplement the record with exhibits attached to the post-hearing brief.
D. Reply Briefs.
1. The reply brief is the last opportunity to persuade the Board to reach a decision favorable to the client. Don’t underestimate the importance of the reply brief-it may well be the first thing read by the board judges.
2. The reply brief has two main purposes. It should:
a. Rebut the opponent’s facts and arguments as set forth in its brief.
b. Reemphasize the merits of the Government’s case.
3. A reply brief should not merely repeat arguments made in the original brief.
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4. Generally, a party may not supplement the record with attachments to the reply brief. However, you may want to supplement proposed findings of fact.
E. Briefs Submitted in Lieu of a Hearing. ASBCA Rule 11.
1. Parties may supplement the record with affidavits, depositions, admissions, answers to interrogatories, and stipulations.
2. Make sure you get what you need into the record. See ARCO Engineering, Inc., ASBCA No. 52450, 01-1 BCA ¶ 31,218 (appeal of reprocurement cost assessment sustained where Government included only the first two pages of the reprocurement contract in the record for R11 submission).
III. PREPARATION OF A BRIEF.
A. Assembling Evidence.
1. Although brief writing is an adversarial process, the brief must propose only factually correct findings of fact. You should have ensured that the required evidence was placed into the record, either through documents or hearing testimony.
2. First, assemble and review pleadings, admissions, stipulations, hearing exhibits, transcripts, and Rule 4 documents (including the Supplemental Rule 4 file).
3. Second, draft the proposed findings of fact, with citation to the factual sources supporting the fact. Citation can be to multiple sources, such as to a document and testimony.
4. Next, review your legal support and the proposed findings of fact to ensure you have enough factual support for your legal arguments.
5. Finalize the proposed findings of fact; then finalize legal arguments.
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6. If time permits, have the contracting officer, field attorney, and key witnesses review a draft copy of the brief.
B. Format and Content. One should tailor the brief to present the Government’s case in the best possible light. A normal brief would include the following.
1. Table of Contents.
a. Begins at page i.
b. Provides an outline of the Government’s case, including arguments, while making the brief readable and easy to use.
2. Table of Authorities.
a. Immediately follows the last page of the table of contents.
b. Lists cases alphabetically and by court of decision (e.g., U.S. Supreme Court, Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims) and Boards of Contract Appeals.
c. May be omitted when a brief is short and there are few authorities cited.
3. Introduction.
a. Summarizes the matters in dispute.
b. Summarizes the respective positions of the parties.
c. States whether the hearing was limited to the issue of entitlement or included matters of quantum.
d. Indicates whether a hearing was held or waived. If a hearing was held, it should state the date(s) and location(s) of the hearing.
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e. Identifies any conventions used when referring to the evidentiary record.
f. Includes other preliminary matters, as appropriate.
4. Statement of the Issues.
a. Identifies the issues discussed in the Argument section of the brief, in the order discussed.
b. Frames the issues in the light most favorable to the Government.
5. Proposed Findings of Fact.
a. The Board is essentially a fact-finding body. A detailed, supportable statement of the facts is critical to success.
b. Well-prepared, neutral, proposed findings of fact enable the Board to incorporate the Government’s facts verbatim into the decision.
c. Support proposed findings of fact (PFF) by reference to the source of the facts. Follow Judge Ting’s guide for citation.
d. Avoid legal arguments or conclusions in this section of the brief and omit unsubstantiated conclusions of “fact.”
e. Support findings of fact by circumstantial evidence, or by inference from other undisputed facts. Remember that the absence of proof may establish facts favorable to the Government’s case (i.e., the failure of appellant’s president to testify when his testimony was warranted may support the conclusion that the president had something to hide).
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f. Insert significant specifications and clauses into the brief in their entirety. Do not rely upon the judge to determine which clauses support the Government’s case, and do not expect the judge to obtain “old” copies of regulations like the FAR, DFARS, AFARS, and AFFARS.
g. Propose every factual averment necessary to support the Government’s position.
h. For disputed factual propositions, explain your position.
(1) Consider including within the proposed finding of fact a short discussion stating how the conflict can be resolved in your favor.
(2) Inform the Board that the Government will address the proposition in the Argument section of the brief (perhaps in a footnote).
i. Organization.
(1) Generally, proposed findings of fact are set forth in chronological order.
(2) Number proposed findings of fact separately and sequentially.
(3) Generally, include only one factual averment in each proposed finding of fact.
(4) It may be desirable to organize the facts according to general topics, such as by the issues presented.
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6. Argument.
a. The Argument section sets forth the legal arguments supporting the Government’s position, the reasons the Board should adopt the Government’s version of the disputed facts, and the inferences the Board should draw from undisputed facts.
b. The brief should confront weaknesses in the Government’s case directly and attempt to persuade the Board to accept the Government’s version of the facts. Additionally, the brief should advise the Board of the legal authorities supporting and contradicting the Government’s position.
c. The Argument section begins with a summary of the argument and an overview of the law.
d. Discuss issues in the same order as identified in the Statement of the Issues section.
e. Identify each part of the Argument section with a caption that states the topic (Issue) of that part.
f. The argument should address the legal theories underlying the contractor’s and the Government’s theories of the case. These elements of proof are the “black letter law” for the particular claim or defense. Ensure that the brief addresses these elements even though the elements themselves are not disputed.
g. Normally, withhold your attack on the contractor’s position until the reply brief. If you will not have an opportunity to file a reply brief, you need to attack the opponent’s position in your brief.
h. Make arguments in the alternative, if appropriate, but identify them clearly to avoid confusing the Board.
i. When making an argument, cite to the proposed findings of fact which support the conclusions advocated (e.g., PFF 47).
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j. Support legal arguments with:
(1) Statutes.
(2) Regulations (FAR, DFARS, AFARS/AFFARS).
(3) Cases. DO NOT USE STRING CITES!
(4) Legal texts and treatises.
7. Conclusion.
a. Summarizes the essence and theme of the party’s case.
b. Also contains the party’s request for relief (e.g., “Wherefore, the Government respectfully requests that the Board deny this appeal in its entirety”).
8. Appendices.
a. May contain important but lengthy items such as statutes, contract clauses, and FAR/DFARS/AFARS/AFFARS provisions. This is especially true when the case turns on old regulations.
b. May wish to provide a list to define acronyms or identify all of the key parties or individuals to the dispute. The judge can use that document while reading through the brief.
c. It is inappropriate to include additional evidence in your brief, such as new documents or summaries of other evidence.
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IV. ADVOCACY TECHNIQUES.
A. Making the Judge’s Job Easier.
1. Armed Services BCA judges have significant workloads. Writing an ASBCA opinion is time consuming, and often takes years to complete.
2. You want the judges to use your proposed findings of fact and legal analysis in the written opinion.
3. You will reduce the Judges’ workload and enhance your own standing with the Board by providing legitimate support for your PFFs, and providing them with the most recent and applicable case law.
B. No Evidence is a Fact. If your opponent has introduced no evidence to support a proposition, that fact may be cited as evidence of the contrary proposition.
C. Humanize Your Argument. A case is easier to understand if Boeing and the Army are the parties to the contract rather than Appellant and Respondent. Use real names, when appropriate (such as when there are numerous contracting officers involved in a contract dispute). If a contractor or subcontractor has changed names, identify this fact early in the brief and explain how you are going to refer to the party.
D. Follow the Real Order of Precedence. The real order of precedence for case law is normally:
1. the administrative judge’s own opinions;
2. decisions of the Court of Appeals for the Federal Circuit and its predecessor (before 1982), the former U.S. Court of Claims;
3. other administrative judges of the Armed Services Board of Contract Appeals;
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4. Engineer Board of Contract Appeals (as of 2000, the ENG BCA merged with the ASBCA);
5. U.S. Court of Federal Claims; and
6. other boards of contract appeals.
E. Repeat Offenders.
1. Some contractors repeatedly file unsubstantiated claims using similar theories of relief.
2. Identifying these cases and citing them as authority for your legal arguments directs the Board’s attention to these unfounded allegations.
3. This may undermine appellant’s credibility and irritate the Board because of the appellant’s failure to learn the law.
V. CONCLUSION.
PRICING OF ADJUSTMENTS
MAJ Louis A. Chiarella Contract and Fiscal Law Department
Disputes and Remedies Elective April 2001
I. INTRODUCTION. Following this block of instruction, students will understand:
A. The basic philosophy and prerequisites for pricing contract adjustments.
B. A comprehensive methodology for quantum case analysis.
C. The measurement, methods, and burden of proving price adjustments.
D. The special items that often comprise a contractor’s claim.
II. QUANTUM CASE PLANNING.
A. The Philosophy. It is necessary to approach pricing of adjustments with a guiding philosophy. To do otherwise renders your litigation efforts half-hearted. The elements of quantum litigation planning are two-fold:
1. The fact that a contractor prevails on entitlement is meaningless in your quantum case.
2. Your game plan for the contractor’s claim is a simple one: First you are going to cut it up, and then you are going to defeat it.
B. The Prerequisites. There exist two essential prerequisites to your efforts.
1. You must have a thorough understanding of the law on pricing of adjustments.
2. Facts are king, and getting all the facts will take hard work.
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C. The Methodology: DAMS.
1. Divide the contractor’s claim into component parts.
2. Apply Cost/Cost Accounting Standards (CAS) principles.
3. Make the contractor prove the amount claimed.
4. See what really happened.
III. APPLYING THE DAMS METHODOLOGY.
A. Divide the Contractor’s Claim into Component Parts.
1. A contractor claim is really a series of smaller claims all added together. Each piece must stand on its own, in terms of being both legally permitted and factually supported.
2. Quantum case litigation requires analyzing each section of the contractor’s claim separately. This leads to a more thorough examination and prevents overpayment regardless if the case is settled or litigated.
B. Apply Cost/CAS Principles.
1. Generally. The government does not pay all the costs actually incurred and/or claimed by a contractor. Applying Cost/CAS principles entails analyzing each part of the total claim for allowability, allocability, reasonableness, and CAS compliance.
2. Allowability. The government does not pay certain costs, even if they were actually incurred, reasonable in nature and amount, in furtherance of the particular contract, and properly accounted for. The contact itself, FAR Part 31.2, and case law all establish that certain costs are not allowable.
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a. Profit.
(1) A contractor is not always entitled to profit as part of its claim. In many instances, profit is expressly not allowable. The rationale for lack of profit is that there is no change in the underlying work and/or risk—only the period in which performance occurs.
(2) Work stoppage adjustments. These adjustments preclude profit as part of the price increase. Contract clauses providing for such profit-less adjustments are:
(a) FAR 52.242-14, Suspension of Work. See Thomas J. Papathomas, ASBCA No. 51352, 99-1 BCA ¶ 30,349; Tom Shaw, Inc., ASBCA No. 28596, 95-1 BCA ¶ 27457.
(b) FAR 52.242-17, Government Delay of Work. NB: an unabsorbed overhead claim is essentially one for the indirect costs of a government-caused delay, and therefore, profit is also precluded. ECC Int’l Corp., ASBCA Nos. 45041 et. al, 94-2 BCA ¶ 26,639.
(3) Labor standards adjustments. Adjustments under labor standards clauses include only the increased costs of direct labor (and preclude both profit and overhead). See FAR 52.222-43; FAR 52.222-44 (Fair Labor Standards Act and Service Contract Act); All Star/SAB Pacific, J.V., ASBCA No. 50856, 98-2 BCA ¶ 29,958; U.S. Contracting, Inc., ASBCA No. 49713, 97-2 BCA ¶ 29,232. But see BellSouth Communications Syss., Inc., ASBCA No. 45955, 94-3 BCA ¶ 27,231 (holding that a price adjustment under the Davis-Bacon Act (FAR 52.222-6) did not preclude profit).
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(4) Equitable adjustment. By contrast, for equitable adjustments a contractor is generally entitled to profit as part of its claim for additional performance costs. United States v. Callahan Walker Constr. Co., 317 U.S. 56 (1942). Equitable adjustments are based on contract clauses granting that remedy, including: FAR 52.243-1 thru –7 (Changes); FAR 52.245-2, -4, -5, and –7 (Government Furnished Property); FAR 52.248-1 thru -3 (Value Engineering); and FAR 52.236-2 (Differing Site Conditions).
(5) Convenience Termination Settlements. A contractor is not entitled to profit as part of a termination for convenience settlement proposal if the contractor would have incurred a loss had the entire contract been completed. FAR 49.203. The government has the burden of proving that the contractor would have incurred a loss at contract completion. R&B Bewachungs, GmbH, ASBCA No. 42214, 92-3 BCA ¶ 25,105. A contractor is not entitled to anticipatory profits as part of a convenience termination settlement proposal. Dairy Sales Corp. v. United States, 593 F.2d 1002 (Ct. Cl. 1979).
b. Attorneys Fees.
(1) Costs related to prosecuting and defending claims and appeals against the federal government are unallowable. FAR 31.205-47; Singer Co. v. United States, 215 Ct. Cl. 281, 568 F.2d 695 (1977); Stewart & Stevenson Servs., Inc., ASBCA No. 43631, 97-2 BCA ¶ 29,252 modified by 98-1 BCA ¶ 29,653; Marine Hydraulics Int’l, Inc., ASBCA No. 46116, 94-3 BCA ¶ 27,057; P&M Indus., Inc., ASBCA No. 38759, 93-1 BCA ¶ 25,471. This is consistent with the general rule that attorneys’ fees are not allowed in suits against the United States absent an express statutory provision allowing recovery. Piggly Wiggly Corp. v. United States, 112 Ct. Cl. 391, 81 F. Supp. 819 (1949).
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(2) The Equal Access to Justice Act, 5 U.S.C. § 504, authorizes courts and boards to award attorneys fees to qualifying prevailing parties unless the government can show that its position was “substantially justified.” See, e.g., Midwest Holding Corp., ASBCA No. 45222, 94-3 BCA ¶ 27,138.
(3) Costs incurred incident to contract administration, or in furtherance of the negotiation of the parties’ disputes, are allowable. Bill Strong Enters. v. Shannon, 49 F.3d 1541 (Fed. Cir. 1995)(holding that when the genuine purpose of incurred legal expenses is that of materially furthering a negotiation process, such cost should normally be allowable); FAR 31.205-33 (consultant and professional costs may be allowable if incurred to prepare a demand for payment that does not meet the CDA definition of a “claim”).
(4) Legal fees unrelated to presenting or defending claims against the government are generally allowable. Info. Sys. & Networks Corp., ASBCA No. 42659, 00-1 BCA ¶ 30,665 (holding that legal expenses incurred in lawsuits against third-party vendors were allowable as part of convenience termination settlement). But see Caldera v. Northrop Worldwide Aircraft Servs., Inc., 192 F.3d 962 (Fed. Cir. 1999) (holding that legal expenses incurred unsuccessfully defending wrongful termination actions by employees who would not partake in contractor fraud were not recoverable).
c. Breach Damages. The contractor can recover common law breach of contract damages in certain very narrow situations.
(1) A contractor may not assert a claim for breach of contract damages when there is a remedy-granting contract clause. Info. Sys. & Network Corp., ASBCA No. 42659, 00-1 BCA ¶ 30,995 (holding that claim for breach damages barred by convenience termination clause); Hill Constr. Corp., ASBCA No. 49820, 99-1 BCA ¶ 30,327 (denying a breach claim for lost profits where the underlying changes were within the ambit of the Changes clause).
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(2) Situations where breach damages may be recovered include:
(a) Breach of a requirements contract. Bryan D. Highfill, HUDBCA No. 96-C-118-C7, 99-1 BCA ¶ 30,316.
(b) Bad faith termination for convenience. Torncello v. United States, 231 Ct. Cl. 20, 681 F.2d 756 (1982).
(c) Government’s failure to disclose material information. Shawn K. Christensen, dba Island Wide Contracting, AGBCA No. 95-188-R, 95-2 BCA ¶ 27,724.
(3) Breach damages are measured under common law principles, although cost principles may apply. See AT&T Technologies, Inc. v. United States, 18 Cl. Ct. 315 (1989); Shawn K. Christensen, AGBCA No. 95-188R, 95-2 BCA ¶ 27,724.
(a) Consequential Damages. The general rule is that consequential damages are not recoverable unless they are foreseeable and caused directly by the government’s breach. Prudential Ins. Co. of Am. v. United States, 801 F.2d 1295 (Fed. Cir. 1986); Land Movers Inc. and O.S. Johnson - Dirt Contractor (JV), ENG BCA No. 5656, 91-1 BCA ¶ 23,317 (no recovery of lost profits based on loss of bonding capacity; also no recovery related to bankruptcy, emotional distress, loss of business, etc.).
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(b) Compensatory Damages. A contractor whose contract was breached by the government is entitled to be placed in as good a position as it would have been if it had completed performance. PHP Healthcare Corp., ASBCA No. 39207, 91-1 BCA ¶ 23,647 (the measure of damages for failure to order the minimum quantity is not the contract price; the contractor must prove actual damages). Compen-satory damages include a reliance component (costs incurred as a consequence of the breach), and an expectancy component (lost profits). Keith L. Williams, ASBCA No. 46068, 94-3 BCA ¶ 27,196.
d. Interest.
(1) Pre-Claim Interest. Contractors are not entitled to interest on borrowings, however represented, as part of an equitable adjustment. FAR 31.205-20; Servidone Constr. Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991); D.E.W. & D.E. Wurzbach, A Joint Venture, ASBCA No. 50796, 98-1 BCA ¶ 29,385; Superstaff, Inc., ASBCA Nos. 48062, et al., 97-1 BCA ¶ 28,845; Tomahawk Constr. Co., ASBCA No. 45071, 94-1 BCA ¶ 26,312. This is consistent with the general rule that the United States is immune from interest liability absent an express statutory provision allowing recovery. Library of Congress v. Shaw, 478 U.S. 310 (1986).
(2) Lost Opportunity Costs. The damages for the “opportunity cost of money” are unrecoverable as a matter of law. Adventure Group, Inc., ASBCA No. 50188, 97-2 BCA ¶ 29,081; Envtl. Tectonics Corp., ASBCA No. 42,540, 92-2 BCA ¶ 24,902 (not only interest on actual borrowings, but also the economic equivalent thereof, are unallowable); Dravo Corp. v. United States, 219 Ct. Cl. 416, 594 F.2d 842 (1979).
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(3) Cost of Money. Contractors may recover facilities capital cost of money (FCCM) (the cost of capital committed to facilities) as part of an equitable adjustment. FAR 31.205-10. Among the various allowability criteria, a contractor must specifically identify FCCM in its bid or proposal relating to the contract under which the FCCM cost is then claimed. FAR 31.205-10(a)(2). See also McDonnell Douglas Helicopter Company d/b/a McDonnell Douglas Helicopter Systems, ASBCA No. 50756, 98-1 BCA ¶ 29,546.
(4) Prompt Payment Act Interest. Under the Prompt Payment Act (31 U.S.C. §§ 3901-3907), the contractor is entitled to interest if the contractor submits a proper voucher and the government fails to make payment within 30 days.
(5) Contract Disputes Act (CDA) Interest. A contractor is entitled to interest on its claim based upon the rate established by the Secretary of the Treasury, as provided by the Contract Disputes Act, 41 U.S.C. § 611. Interest begins to run when the contracting officer receives a properly certified claim (Dawco Constr., Inc. v. United States, 930 F.2d 872 (Fed. Cir. 1991)), or upon submission of a defectively certified claim that is subsequently certified. Federal Courts Administration Act of 1992, Title IX, Pub. L. No. 102-572, 106 Stat. 4506, 4518. Interest runs regardless of whether the claimed costs have actually been incurred at the date of submission of a claim. Servidone Constr. Co. v. United States, 931 F.2d 860 (Fed. Cir. 1991).
(a) A termination for convenience settlement proposal (FAR 49.206) is not initially considered a CDA claim, as it is generally submitted for purposes of negotiation. Ellett Constr. Co. v. United States, 93 F.3d 1537 (Fed. Cir. 1996). Accordingly, a contractor is not entitled to interest on the amount due under a settlement agreement or determination. FAR 49.112-2(d); Ellett Constr., supra. If a termination settlement proposal matures into a CDA claim (once settlement negotiations reach an impasse), then a contractor is entitled to interest.
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(6) Payment of Interest. When the contracting officer pays a claim, the payment is applied first to accrued interest. Then the payment is applied to the principal amount due. Any unpaid principal continues to accrue interest. Paragon Energy Corp., ENG BCA No. 5302, 91-3 BCA ¶ 24,349.
e. Nonappropriated Fund (NAF) Claims.
(1) The CDA does not generally apply to contracts funded solely with nonappropriated funds, with the exception of Army and Air Force, Navy and Marine Corps exchange contracts. 41 U.S.C. § 602(a). However, the government may choose to include a disputes clause in a NAF contract, thereby giving a contractor recourse to the disputes process.
(2) For those NAF claims not under the CDA, a contractor is not entitled to interest on its claim to the contracting officer, or the appeal of its claim per the contractual disputes clause.
(3) A contractor is not entitled to attorney’s fees on its appeal of a denied claim, as the entitlement to EAJA applies only to appropriated fund contracts.
3. Allocability.
a. A cost is allocable if incurred specifically for the contract; or the cost benefits both the contract and other work, and is distributed to them in reasonable proportion to the benefits received; or is necessary for the overall operation of the business. FAR 31.201-4. See Caldera v. Northrop Worldwide Aircraft Servs., Inc., 192 F.3d 962 (Fed. Cir. 1999) (holding that attorneys fees incurred unsuccessfully defending wrongful termination actions resulted in no benefit to the contract and were not allocable); Boeing North American, Inc., ASBCA No. 49994, 00-2 BCA ¶ 30,970; Informa-tion Systems & Network Corp., ASBCA No. 42659, 00-1 BCA ¶ 30,665; P.J. Dick, Inc., GSBCA No. 12415, 96-2 BCA ¶ 28,307 (finding that accounting fees were costs benefiting the contract).
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b. In certain instances (i.e., impact on other work), the contract appeals boards may ignore the principle of allocability. See Clark Concrete Contractors, Inc. v. General Servs. Admin., GSBCA No. 14340, 99-1 BCA ¶ 30,280 (holding that costs incurred on an unrelated project were recoverable because they were “equitable and attributable” by-products of agency design changes).
4. Reasonableness.
a. Entitlement is an equitable adjustment or price adjustment does not provide the contractor with the authority to fleece the government. A contractor’s additional costs must be reasonable—i.e., the expenses in both nature and amount must not exceed that which a prudent person would incur in the conduct of a competitive business. FAR 31.201-3.
b. Reasonable in nature. See Lockheed-Georgia Co., Div. of Lockheed Corp., ASBCA No. 27660, 90-3 BCA ¶ 22,957 (finding that air travel to the Greenbrier resort for executive physicals was unreasonable because competent physicians were available in Atlanta); Stewart & Stevenson Servs., Inc. , ASBCA No. 43631, 98-1 BCA ¶ 29,653, modifying 97-2 BCA ¶ 29,252 (buying materials in anticipation of option quantities was unreasonable).
c. Reasonable in amount. TRC Mariah Associates, Inc., ASBCA No. 51811, 99-1 BCA ¶ 30,386; Kelly Martinez d/b/a Kelly Martinez Constr. Servs., IBCA Nos. 3140, 3144-3174, 97-2 BCA ¶ 29,243. But see Raytheon STX Corp., GSBCA No. 14296-COM, 00-1 BCA ¶ 30,632 (holding that salaries paid key employees during a shutdown were reasonable in amount).
d. Profit. In determining the reasonableness of profit as part of an equitable adjustment, profit is calculated as:
(1) The rate earned on the unchanged work;
(2) A lower rate based on the reduced risk of equitable adjustments; or
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(3) The rate calculated using weighted guidelines. See Doyle Constr. Co., ASBCA No. 44883, 94-2 BCA ¶ 26,832.
5. Compliance with CAS.
a. Treat like costs in like manner: consistency. Were costs double-counted? Did the contractor charge like expenses both directly and indirectly?
b. Measured in accordance with accounting standards. Contractors can determine costs by using any generally accepted cost accounting method that is equitably and consistently applied. FAR 31.201-1.
C. Make the contractor prove the amount claimed.
1. Burden of Proof.
a. The burden—a preponderance of the evidence standard—is on the party claiming the benefit of the adjustment. Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994); Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 767 (Fed. Cir. 1987) (moving party “bears the burden of proving the amount of loss with sufficient certainty so that the determination of the amount of damages will be more than mere speculation”); Deval Corp., ASBCA Nos. 47132, 17133, 99-1 BCA ¶ 30,182 (holding that a contractor’s clear entitlement to an equitable adjustment did not diminish the contractor’s burden of proving the amount of such an adjustment).
b. What must the party prove for quantum damages?
(1) Entitlement (Liability)—the government did something that changed the contractor’s costs, for which the government is legally liable. T.L. James & Co., ENG BCA No. 5328, 89-1 BCA ¶ 21,643.
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(2) Causation—there must be a causal nexus between the basis for liability and the claimed increase (or decrease) in cost. Hensel Phelps Constr. Co., ASBCA No. 49270, 99-2 BCA ¶ 30,531; Stewart & Stevenson Servs., Inc., ASBCA No. 43631, 98-1 BCA ¶ 29,653, modifying 97-2 BCA ¶ 29,252; Libby Corp., ASBCA No. 40765, 96-1 BCA ¶ 28,255; Oak Adec, Inc. v. United States, 24 Cl. Ct. 502 (1991).
(3) Resultant Injury—that there is an actual injury or increased cost to the moving party. Servidone Constr. Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991); Cascade General, Inc., ASBCA No. 47754, 00-2 BCA ¶ 31,093 (holding that a contractor claim was deficient when it failed to substantiate what specific work and/or delays resulted from the defective government specifications).
2. Measurement of an adjustment.
a. Costs. “Costs” for adjustment formula purposes are the sum of allowable direct and indirect costs, incurred or to be incurred, less any allowable credits, plus cost of money. FAR 31.201-1. If it is an equitable adjustment, one must also calculate the profit on the allowable costs.
b. Direct Costs.
(1) A direct cost is any cost that is identified specifically with a particular contract. Direct costs are not limited to items that are incorporated into the end product as material or labor. All costs identified specifically with a claim are direct costs of that claim. FAR 31.202.
(2) Direct costs generally include direct labor, direct material, subcontracts, and other direct costs.
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c. Indirect Costs.
(1) Indirect costs are any costs not directly identified with a single final cost objective, but identified with two or more final cost objectives, or with at least one intermediate cost objective. FAR 31.203. There are two types of indirect costs:
(2) Overhead. Allocable to a cost objective based on benefit conferred. Typical overhead costs include the costs of personnel administration, depreciation of plant and equipment, utilities, and management.
(3) General and administrative (G&A). Not allocable based on benefit, but necessary for overall operation of the business. FAR 31.201-4.
(4) Calculating indirect cost rates. The total indirect costs divided by the total direct costs equals the indirect cost rate. For example, if a contractor has total indirect costs of $100,000 in an accounting period, and total direct costs of $1,000,000 in the same period, the indirect cost rate is 10%.
(5) Some agencies limit the recoverable overhead through contract clauses. Reliance Ins. Co. v. United States, 931 F.2d 863 (Fed. Cir. 1991) (court upheld clause which limited recoverable overhead for change orders).
3. Pricing Formula.
a. The basic adjustment formula is the difference between the reasonable cost to perform the work as originally required, and the reasonable cost to perform the work as changed. B.R. Servs., Inc., ASBCA Nos. 47673, 48249, 99-2 BCA ¶ 30,397 (holding that the contractor must quantify the cost difference—not merely set forth the costs associated with the changed work); Buck Indus., Inc., ASBCA No. 45321, 94-3 BCA ¶ 27,061. See also Wilner v. United States, 24 F.3d 1397 (Fed. Cir. 1994).
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b. Pricing adjustments should not alter the basic profit or loss position of the contractor before the change occurred. “An equitable adjustment may not properly be used as an occasion for reducing or increasing the contractor’s profit or loss...., for reasons unrelated to a change.” Pacific Architects and Eng’rs, Inc. v. United States, 203 Ct. Cl. 499, 508 491 F.2d 734, 739 (1974). See also Stewart & Stevenson Servs., Inc., ASBCA No. 43631, 97-2 BCA ¶ 29,252 modified by 98-1 BCA ¶ 29,653 (holding that a contractor is entitled to profit on additional work ordered by the Army even though the original work was bid at a loss); Westphal Gmph & Co., ASBCA No. 39401, 96-1 BCA ¶ 28194;.
c. Pricing Additional Work. Agencies price additional work based on the reasonable costs actually incurred in performing the new work. Delco Elecs. Corp. v. United States, 17 Cl. Ct. 302 (1989), aff’d, 909 F.2d 1495 (Fed. Cir. 1990). The contractor should segregate and accumulate these costs.
d. Pricing Deleted Work.
(1) Agencies price deleted work based on the difference between the estimated costs of the original work and the actual costs of performing the work after the change. Knights’ Piping, Inc., ASBCA No. 46985, 94-3 BCA ¶ 27,026; Anderson/Donald, Inc., ASBCA No. 31213, 86-3 BCA ¶ 19,036. But see Condor Reliability Servs, Inc., ASBCA No. 40538, 90-3 BCA ¶ 23,254.
(2) When the government partially terminates a contract for convenience, a contractor is generally entitled to an equitable adjustment on the continuing work for the increased costs borne by that work as a result of a termination. Deval Corp., ASBCA Nos. 47132, 47133, 99-1 BCA 30,182; Cal-Tron Sys., Inc., ASBCA Nos. 49279, 50371 97-2 BCA ¶ 28,986; Wheeler Bros., Inc., ASBCA No. 20465, 79-1 BCA ¶ 13,642.
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e. Responsibility. Where the contractor shares the fault, it shares liability for the added costs. See Essex Electro Engineers, Inc., v. Danzig, 224 f.3d 1283 (Fed. Cir. 2000); Dickman Builders, Inc., ASBCA No. 32612, 91-2 BCA ¶ 23,989.
4. Methods of Proof.
a. Actual Cost Method. The actual cost method is the preferred method for proving costs. Dawco Constr., Inc. v. United States, 930 F.2d 872 (Fed. Cir. 1991).
(1) A contractor must prove its costs using the best evidence available under the circumstances. The preferred method is actual cost data. Cen-Vi-Ro of Texas, Inc. v. United States, 210 Ct. Cl. 684, 538 F.2d 348 (1976); Deval Corp., ASBCA Nos. 47132, 47133, 99-1 BCA 30,182.
(2) The contracting officer may include the Change Order Accounting clause, FAR 52.243-6, in a contract. This clause permits the contracting officer to order the accumulation of actual costs. A contractor must indicate in its proposal, which proposed costs are actual and which are estimates.
(3) Failure to accumulate actual cost data may result in either a substantial reduction or total disallowance of the claimed costs. Delco Elecs. Corp. v. United States, 17 Cl. Ct. 302 (1989), aff’d, 909 F.2d 1495 (Fed. Cir. 1990) (recovery reduced for unexcused failure to segregate); Togaroli Corp., ASBCA No. 32995, 89-2 BCA ¶ 21,864 (costs not segregated despite the auditor’s repeated recommendation to do so; no recovery beyond final decision); Assurance Co., ASBCA No. 30116, 86-1 BCA ¶ 18,737 (lack of cost data prevented reasonable approximation of damages for jury verdict, therefore, the appellant recovered less than the amount allowed in the final decision).
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b. Estimated Cost Method.
(1) Good faith estimates are preferred when actual costs are not available. Lorentz Brunn Co., GSBCA No. 8505, 88-2 BCA ¶ 20,719 (estimates of labor hours and rates admissible). Estimates are generally required when negotiating the cost of a change in advance of performing the work. Estimates are an acceptable method of proving costs where they are supported by detailed substantiating data or are reasonably based on verifiable cost experience. J.M.T. Mach. Co., ASBCA No. 23928, 85-1 BCA ¶ 17,820 (1984), aff’d on other grounds, 826 F.2d 1042 (Fed. Cir. 1987).
(2) If the contractor uses detailed estimates based on analyses of qualified personnel, the government will not be able to allege successfully that the contractor used the disfavored total cost method of adjustment pricing. Illinois Constructors Corp., ENG BCA No. 5827, 94-1 BCA ¶ 26,470.
(3) Estimates based on Mean’s Guide must be disregarded where actual costs are known. Anderson/Donald, Inc., ASBCA No. 31213, 86-3 BCA ¶ 19,036.
c. Total Cost Method.
(1) The total cost method is not preferred because it assumes the entire overrun is solely the government’s fault. The total cost method calculates the difference between the bid price on the original contract and the actual total cost of performing the contract as changed. Servidone v. United States, 931 F.2d 860 (Fed. Cir. 1991); Dawco Constr., Inc. v. United States, 930 F.2d 872 (Fed. Cir. 1991); Stewart & Stevenson Servs., Inc., ASBCA No. 43631, 98-1 BCA ¶ 29,653, modifying 97-2 BCA ¶ 29,252; Santa Fe Eng’rs, Inc., ASBCA No. 36682, 96-2 BCA ¶ 28,281; Concrete Placing Inc. v. United States, 25 Cl. Ct. 369 (1992).
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(2) The use of a total cost method is tolerated only when no other means are possible, when the reliability of the supporting documentation is fully substantiated, and when the contractor establishes the subsequent four factors:
(a) The nature of the particular cost is impossible or highly impracticable to determine with a reasonable degree of certainty;
(b) The contractor’s bid was realistic;
(c) The contractor’s actual incurred costs were reasonable; and
(d) The contractor was not responsible for any of the added costs. Servidone Constr. Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991); Northrop Grumman Corp. v. United States, 47 Fed. Cl. 20 (2000).
d. Modified total cost method.
(1) A modified total cost method involves use of a total cost method that the contractor has adjusted to account for other factors, usually because the original bid was not realistic, or because there were independent causes for certain extra costs. A modified total cost method of assessing damages or price adjustment may also be used only as a last resort in those extraordinary circumstances where no other way to compute damages is feasible. ECC Int’l Corp., ASBCA Nos. 45041, 44769, 39044, 94-2 BCA ¶ 26,639; Servidone Constr. Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991).
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(2) With the exception of the modification, contractor must again establish the same four factors as with total cost claims. Olsen v. Espy, 26 F.3d 141 (Fed. Cir. 1994); River/Road Constr. Inc., ENG BCA No. 6256, 98-1 BCA ¶ 29,334; Libby Corp., ASBCA No. 40765, 96-1 BCA ¶ 28,255).
e. Jury Verdicts. Jury verdicts are not a method of proof, but a means of resolving disputed facts. Northrop Grumman Corp. v. United States, 47 Fed. Cl. 20 (2000); Delco Elecs. Corp. v. United States, 17 Cl. Ct. 302 (1989), aff’d, 909 F.2d 1495 (Fed. Cir. 1990); River/Road Constr. Inc., ENG BCA No. 6256, 98-1 BCA ¶ 29,334; Cyrus Contracting Inc., IBCA Nos. 3232 et. al, 98-2 BCA ¶ 29,755; Paragon Energy Corp., ENG BCA No. 5302, 88-3 BCA ¶ 20,959. Before adopting a jury verdict approach, a court must first determine three things:
(1) There is clear proof of injury;
(2) No more reliable method exists. See Dawco Constr. Co. v. United States, 930 F.2d 872 (Fed. Cir. 1991) (actual costs are preferred; where contractor offers no evidence of justifiable inability to provide actual costs, then it is not entitled to a jury verdict); Service Eng’g Co., ASBCA No. 40274, 93-2 BCA ¶ 25,885; and
(3) The evidence is sufficient for a fair approximation of the damages. Northrop Grumman Corp. v. United States, 47 Fed. Cl. 20 (2000).
5. Supported by the facts.
a. Generally. In order to sustain its burden of proof regarding the amount claimed, a contractor must submit adequate and material supporting documentation. Libby Corp., ASBCA No. 40765, 96-1 BCA ¶ 28,255 (denying contractor’s claim where claim was prepared by outside counsel, who did not testify, and unsupported by contractor’s witnesses, who had no actual knowledge of how the claim was prepared).
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b. Pertinent Inquiries. While not exclusive, the following questions aid in determining whether the claimed amount is adequately supported: Was the claim prepared and/or validated by the contractor’s witnesses?; Can the contractor explain how the claim was derived?; Is it supported by contemporaneous records?; Are the contractor’s submissions, especially with regard to historical information, consistent?; Does the contractor’s treatment of costs adhere to its CAS disclosure statement?
6. Certification Requirements. The Federal Acquisition Streamlining Act of 1994 (FASA), Pub. L. 103-355, § 2301, 108 Stat. 3243 (1994) amended 10 U.S.C. § 2410, Requests for Equitable Adjustment or Other Relief: Certification.
a. In DOD, a request for equitable adjustment that exceeds the simplified acquisition threshold (currently, $100,000) may not be paid unless a person authorized to certify the request on behalf of the contractor certifies that:
(1) The request is made in good faith, and
(2) The supporting data is accurate and complete to the best of that person’s knowledge. 10 U.S.C. § 2410(a).
b. Similarly, after negotiating an agreement on a modification settling a request for equitable adjustment on a negotiated contract, the contractor must furnish a certificate of current cost and pricing data if the modification exceeds $500,000 under the Truth in Negotiations Act. 10 U.S.C. § 2306(a).
D. See What Really Happened (take the offensive).
1. A contractor’s cost data will tell you what really happened. Accordingly, you must seize the initiative/go on the offensive. This allows you to develop the “real story” of how the contractor incurred extra costs.
2. Determine the true root causes of the contractor’s extra costs.
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a. Was the job as a whole underbid?
b. Did the contractor change planned facilities?
c. Did the contractor purchase cheap and unworkable component parts?
d. Did the contractor select subcontractors that were unable to perform?
e. Was there reliance upon less competent vendors?
f. Were there increases in material costs?
g. Did the contractor change components for cost reasons? Did this in turn result in engineering problems? Did prior design work become worthless? Did this in turn cause the need for redesign work, with more time and effort?
h. Was there an overall lack of efficient organization?
i. Did the contractor waste time recompeting components and vendors?
j. What expenses were unrelated to the claimed causation?
k. Did the contractor order surplus material (for potential options and possible commercial jobs)?
3. Important Documents. There are many important contractor documents that will assist you in determining what really happened.
a. As-Bid Bill of Materials (BOM), and Final BOM.
b. Production Schedules
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c. As-Bid Bid Rates (Overhead Rates).
d. Actual Overhead Rates.
e. Expected and Actual Direct Costs—for the specific contract and plant-wide.
f. Expected and Actual Labor Amounts—for the specific contract and plant-wide.
g. Material Invoices for Major Component Parts.
h. CAS Disclosure Statement.
4. The Quantum Case Litigation Team. It is necessary to enlist the support of many individuals in both your defensive and offensive quantum case litigation efforts. These individuals will help you decipher the contractor's accounting documentation, as well as explain relevance in relation to contract performance.
a. DCAA Auditor.
b. Contracting Officer.
c. Program Manager/End User.
d. Contracting Officer’s Representative (COR).
e. Project Managers, Site Inspectors, Project Engineers, Quality Assurance Representatives.
IV. SPECIAL ITEMS.
A. Unabsorbed Overhead.
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1. Generally. A type of cost associated with certain types of claims is “unabsorbed overhead.” Unabsorbed overhead has been allowed to compensate a contractor for work stoppages, idle facilities, inability to use available manpower, etc., due to government fault. In such delay situations, fixed overhead costs, e.g., depreciation, plant maintenance, cost of heat, light, etc., continue to be incurred at the usual rate, but there is less than the usual direct cost base over which to allocate them. Therm-Air Mfg. Co., ASBCA No. 15842, 74-2 BCA ¶ 10,818.
2. Contracts Types. Most unabsorbed overhead cases deal with recovery of additional overhead costs on construction and manufacturing contracts. The qualitative formula adopted in Eichleay Corp., ASBCA 5183, 60-2 BCA ¶ 2688, aff’d on recons., 61-1 BCA ¶ 2894, is the exclusive method of calculating unabsorbed overhead for both construction contracts (Wickham Contracting Co. v. Fischer, 12 F.3d 1574 (Fed. Cir. 1994)) and manufacturing contracts (West v. All State Boiler, Inc., 146, F.3d 1368 (Fed. Cir. 1998); Genisco Tech. Corp., ASBCA No. 49664, 99-1 BCA ¶ 30,145, mot. for recons. den., 99-1 BCA ¶ 30,324; Libby Corp., ASBCA No. 40765, 96-1 BCA ¶ 28,255).
a. Under this method, calculate the daily overhead rate during the contract period, then multiply the daily rate by the number of days of delay.
b. To be entitled to unabsorbed overhead recovery under the Eichleay formula, the following three elements must be established:
(1) a government-caused or government-imposed delay,
(2) the contractor was required to be on “standby” during the delay, and
(3) while “standing by,” the contractor was unable to take on additional work.
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Melka Marine, Inc. v. United States, 187 F.3d 1370 (Fed. Cir. 1999); West v. All State Boiler, 146 F.3d 1368 (Fed. Cir. 1998); Satellite Elec. Co. v. Dalton, 105 F.3d 1418 (Fed. Cir. 1997); Altmayer v. Johnson, 79 F.3d 1129 (Fed. Cir. 1995); Mech-Con Corp. v. West, 61 F.3d 883 (Fed Cir. 1995).
c. If work on the contract continues uninterrupted, albeit in a different order than originally planned, the contractor is not on standby. Further, a definitive delay precludes recovery “because ‘standby’ requires an uncertain delay period where the government can require the contractor to resume full-scale work at any time.” Melka Marine, Inc. v. United States, 187 F.3d 1370 (Fed. Cir. 1999).
d. A contractor’s ability to take on additional work focuses upon the contractor’s ability to take on replacement work during the indefinite standby period. Replacement work must be similar in size and length to the delayed government project and must occur during the same period. Melka Marine, Inc. v. United States, 187 F.3d 1370 (Fed. Cir. 1999); West v. All-State Boiler, 146 F.3d 1368, 1377 n.2 (Fed. Cir. 1998).
3. Proof Requirements.
a. Recovery of unabsorbed overhead is not automatic. The contractor should offer credible proof of increased costs resulting from the government-imposed delay. Beaty Elec. Co., EBCA No. 403-3-88, 91-2 BCA ¶ 23,687; but see Sippial Elec. & Constr. Co. v. Widnall, 69 F.3d (Fed. Cir. 1995) (allowing Eichleay recovery with proof of actual damages).
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b. A contractor must prove only the first two elements of the Eichleay formula. Once the contractor has established the Government- caused delay and that it had to remain on “standby,” it has made a prima facie case that it is entitled to Eichleay damages. The burden of proof then shifts to the government to show that the contractor did not suffer or should not have suffered any loss because it was able to either reduce its overhead or take on other work during the delay. Satellite Elec. Co. v. Dalton, 105 F.3d 1418 (Fed. Cir. 1997); Mech-Con Corp. v. West, 61 F.3d 883 (Fed Cir. 1995).
c. When added work causes a delay in project completion, the additional overhead is absorbed by the additional costs and Eichleay does not apply. Community Heating & Plumbing Co. v. Kelso, 987 F.2d 1575 (Fed. Cir. 1993) (Eichleay recovery denied because overhead was “extended” as opposed to “unabsorbed”); accord C.B.C. Enters., Inc. v. United States, 978 F.2d 669 (Fed. Cir. 1992).
4. Subcontractor Unabsorbed Overhead. Timely completion by a prime contractor does not preclude a subcontractor’s pass-through claim for unabsorbed overhead. E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369 (Fed. Cir. 1999).
5. Multiple Recovery. A contractor may not recover unabsorbed overhead costs under the Eichleay formula where it has already been compensated for the impact of the government’s constructive change on performance time and an award under Eichleay would lead to double recovery of overhead. Keno & Sons Constr. Co., ENG BCA No. 5837-Q, 98-1 BCA ¶ 29,336.
6. Profit. A contractor is not entitled to profit on an unabsorbed overhead claim. ECC Int’l Corp., ASBCA Nos. 45041, 44769, 39044, 94-2 BCA ¶ 26,639; Tom Shaw, Inc., ASBCA No. 28596, 95-1 BCA ¶ 27,457; FAR 52.212-12, 52.212-15.
B. Subcontractor Claims.
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1. The government consents generally to be sued only by parties with which it has privity of contract. Erickson Air Crane Co. of Wash. v. United States, 731 F.2d 810, 813 (Fed. Cir. 1984); E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369 (Fed. Cir. 1999).
2. A prime contractor may sue the government on a subcontractor’s behalf, in the nature of a pass-through suit, for the extra costs incurred by the subcontractor only if the prime contractor is liable to the subcontractor for such costs. When a prime contractor is permitted to sue on behalf of a subcontractor, the subcontractor’s claim merges into that of the prime, because the prime contractor is liable to the subcontractor for the harm caused by the government. Absent proof of prime contractor liability, the government retains its sovereign immunity from pass-through suits. Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied, 322 U.S. 733 (1944)); E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369 (Fed. Cir. 1999).
3. The government may use the Severin doctrine as a defense, however, only when it raises and proves the issue at trial. If the government fails to raise its immunity defense at trial, then the subcontractor claim is treated as if it were the prime’s claim and any further concern about the absence of subcontractor privity with the government is extinguished. Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied, 322 U.S. 733 (1944)); E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369 (Fed. Cir. 1999).
C. Loss of Efficiency. The disruption caused by government changes and/or delays may cause a loss of efficiency to the contractor.
1. Burden of Proof. A contractor may recover for loss of efficiency if it can establish both that a loss of efficiency has resulted in increased costs and that the loss was caused by factors for which the Government was responsible. Luria Bros. & Co. v. United States, 177 Ct. Cl. 676, 369 F.2d 701 (1966). See generally Thomas E. Shea, Proving Productivity Losses in Government Contracts, 18 Pub. Cont. L. J. 414 (March 1989).
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2. Applicable Situations. Loss of efficiency has been recognized as resulting from various conditions causing lower than normal or expected productivity. Situations include: disruption of the contractor’s work sequence (Youngdale & Sons Constr. Co. v. United States, 27 Fed. Cl. 516 1993)); working under less favorable weather conditions (Warwick Constr., Inc., GSBCA No. 5070, 82-2 BCA ¶ 16,091); the necessity of hiring untrained or less qualified workers (Algernon-Blair, Inc., GSBCA No. 4072, 76-2 BCA ¶ 12,073); and reductions in quantity produced.
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D. Impact on Other Work.
1. General Rule. A contractor is generally prohibited from recovering costs under the contract in which a Government change, suspension, or breach occurred, when the impact costs are incurred on other contracts. Courts and boards usually consider such damages too remote or speculative, and subject to the rule that consequential damages are not recoverable under Government contracts. See General Dynamics Corp. v. United States, 218 Ct. Cl. 40, 585 F.2d 457 (1978); Sermor, Inc., ASBCA No. 30576, 94-1 BCA ¶ 26,302.
2. Exceptions. In only exceptional circumstances, especially when the impact costs are definitive in both causation and amount, contractors have recovered for additional expenses incurred in unrelated contracts. See Clark Concrete Contractors, Inc. v. General Servs. Admin., GSBCA No. 14340, 99-1 BCA ¶ 30,280 (allowing recovery of additional costs incurred on an unrelated project as a result of government delays and changes).
V. CONCLUSION.
A. Have the right philosophy.
1. The fact that contractor entitlement exists is meaningless for quantum. 2. The contractor’s claim: Cut it up and then kill it.
B. Recognize certain prerequisites.
1. Have a thorough understanding of the law on pricing of adjustments. 2. Facts are king, and getting all the facts will take hard work.
C. Apply the DAMS Methodology.
1. Divide the contractor’s claim into component parts. 2. Apply Cost/Cost Accounting Standards (CAS) principles. 3. Make the contractor prove the amount claimed. 4. See what really happened.
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The Appeal of Simple Simon Services, Inc. (S3I)
Summary of Facts
In 1995, the Army awarded a contract to S3I to manufacture trailer-mounted tactical generators, for a price of $9.3 million. Although the Army has been buying military standard generators for years, they were both loud and frequently broke down. Therefore, senior Army leadership wanted “quiet, reliable generator sets,” and wanted them now, even if it meant foregoing many military features. This was a firm fixed-price contract, based upon a negotiated procurement (initial offers and BAFOs), and utilizing performance specifications. The basis for award was low cost, technically-acceptable offer. The Army incorporated S3I’s technical proposal by reference into the awarded contract.
The original schedule called for delivery of initial production units at 150 days after
contract award. There was no requirement for delivery of a first article unit – the contractor received a production release at the time of contract award. S3I failed to meet the original delivery schedule. After the Army unilaterally extended the delivery date, S3I delivered production units to the Army for testing. The units were of poor quality, and didn’t meet many of the performance requirements of the contract. Of particular important, many of the generators experienced critical failures – the result of underpowered engines. The Army stopped accepting additional units until S3I could prove through contractor testing that units met the specifications. During this period of delay, the parties began finger-pointing and assessing blame for the state of affairs.
During this period of delay, the Army decided to change the durability requirements of
the trailer. S3I provided a cost estimate to the Army for this proposed change, but it was unsupported by cost data. In the end, the Army unilaterally imposed the change order, and later unilaterally decided upon the appropriate contract price adjustment ($2.9 million). S3I eventually (18 months later) delivered the modified units, in accordance with the performance specifications of the contract. In the end, the Army discovered that while the units were quiet and reliable, they lacked many military features that the troops could not live without (and decided against ordering any of the option quantities). S3I’s Claim
At the end of contract performance, S3I filed its claim with the contracting officer. This was long-anticipated: the parties had been blaming each other for years now. There was no need to file first a request for equitable adjustment—the parties were way beyond that. S3I’s claim requested the KO to issue a final decision, although the outcome was largely a foregone matter. S3I’s claim, for $30.6 million, alleged five separate reasons for entitlement:
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1. Impossibility of Performance. S3I alleged that the 150 day schedule for delivery of initial production units was not only ambitious, but impossible of being performed. Despite its valiant efforts, there was no way this schedule could be met.
2. Allocation of Risk (design vs. performance specifications). S3I alleged that by
incorporating its technical proposal, the Army essentially changed the contract from a performance specification to a design one, thus making the Army responsible and liable for all changes between the original technical proposal and the finished product.
3. Government Bad Faith. The Army knew that the schedule was not achievable but
plunged ahead anyway with a fatal acquisition plan.
4. Government’s Unilateral Design Changes. The increase in trailer durability was a government change in requirements for which it is liable.
5. Government Delay. The government was responsible for the contractor’s delay in
contract performance. Government’s Entitlement Defenses
The Army did not believe it was responsible for any S3I’s shortcomings. Its defenses to the contractor’s specific allegations were as follows:
1. The schedule was not impossible to perform, if the contractor had performed certain actions before contract award (and S3I had said that it would do certain things before contract award).
2. This was a performance specification, and the risk was with the contractor. S3I
varied from its technical proposal and never sought permission from the Army when doing so. S3I’s actions at the time said that all parties understood that this was a performance specification. The Army’s incorporation of the technical proposal into the contract did not affect allocation of risk.
3. There was no government bad faith. The Army knew the schedule was ambitious, but
did not know that schedule was not achievable. The Army had “watered down” many areas of its standard military specification, so as to facilitate this procurement.
4. Government did make design changes that were within the scope of the contract.
S3I’s performance of the design changes meant that they were processed under the Changes Clause. The contractor’s cost proposal was unsupported and unrealistic.
5. The contractor was responsible for contract delays.
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Litigation Twelve months after claim submission, the contracting officer issued her final decision denying the claim in whole. The Contracting Officer restated the facts as the Army saw them, as well as the aforementioned defenses to the contractor’s entitlement arguments. S3I then appealed the final decision to the ASBCA in a timely manner. The Board has decided to try both entitlement and quantum together. During discovery, the trial attorneys discovered many interesting facts. S3I badly and intentionally underbid the job (hoping that the contract would lead to commercial sales of same or similar products). DCAA estimated that S3I underbid the job by about $4 million (S3I itself admitted to underbidding the contract, but only by $1 million (see claim)). S3I then changed planned manufacturing facilities soon after contract award, which added another $1 million to its costs. The contractor made many decisions that affected its performance and costs. It purchased surplus materials for possible options (about $1.7 million) with no guarantee that the Army would exercise such options (the Army did not). The attempt to make smaller, underpowered engines work in the generator sets cost the contractor as well (estimated at $1 million). S3I experienced problems with the trailer vendor it had chosen. When that vendor went bankrupt and S3I had to do the work itself, that resulted in about $1.2 million in additional costs. General poor workmanship on the part of the prime contractor (sheet metal housing, fuel tanks, etc.) resulted in about $500,000 in additional costs. S3I’s claim, prepared by outside counsel, had its own peculiarities. First, certain types of expenses that S3I usually treated as indirect costs (such as its costs incurred bids and proposals on all jobs—both successful and unsuccessful) were treated as direct costs (labeled as “pre-production costs”). Further, while S3I alleged that the complete disruption of contract performance precluded tracking costs by causal factor, the contractor did separate track the costs for its trailer changes (about $6.2M in direct costs and overhead). Lastly, despite all the problems associated with this contract, S3I continued to be successful on other jobs. Total plant production volume exceeded annual estimates, and therefore, actual overhead rates were less than the overhead estimates that S3I prepared and used to bid contracts. Quantum Litigation As trial attorney, you may not prevail on some (or all) of your entitlement defenses. It is, therefore, necessary to prepare your quantum defense as well. Attached are a summary of S3I’s modified total cost claim (executive summary) and a spreadsheet that the contractor attached to the claim. Tell me about your defense on quantum. Specifically, regardless of the outcome on entitlement, what amount do you believe the contractor should receive and why.
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S3I’s Modified Total Cost Claim (Executive Summary)
Original Contract Price 9.3M
What I Should Have Bid 10.4M
What I Spent 30.7M Difference 20.3M
Unabsorbed Overhead 5.4M
Profit 3.8M
Interest/Borrowings 3.8M
Legal Expenses 0.3M Subtotal 33.5M
Unilateral Govt payments (2.9M) Claim Total 30.6M*
*At the time of hearing, S3I alleged entitlement to an additional $4.4M in CDA interest.
(I’ve indicated with asterisks those figures on the spreadsheet that correspond with this claim summary).
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SIMPLE SIMON SERVICES, INC.
Contract DAAK01-95-D-C079, Quiet Generator Sets Projected Total Actual Total Total Increased Bid Estimate Costs w/o Changes Costs Costs Pre-Production Costs 29,880 2,109,513 2,079,633 Material 6,016,808 6,632,262 10,981,418 4,349,156 Manufacturing Labor (Contract) 1,081,159 1,081,159 Manufacturing Labor 153,196 362,977 2,349,682 1,986,705 Quality Labor 316,134 316,134 Quality Labor (Contract) 294,472 294,472 Engineering Labor 34,860 74,969 1,047,993 973,024 Administration Support 12,254 12,254 Manufacturing Overhead 283,269 725,935 5,414,885 4,688,950 Engineering Labor (Contract) 1,206,536 1,206,536 Subcontract, Misc./Other 1,292,863 1,292,863 1,133,930 (158,933) Total Direct & Overhead 7,780,996 9,118,886 25,947,976 16,829,090 G&A 1,089,339 1,276,641 4,706,000 3,429,359 Subtotal Costs 8,870,335 10,395,527 30,653,976* 20,258,449* Unabsorbed Overhead 5,418,020 5,418,020* Total Costs 8,870,335 10,395,527 36,071,996 25,676,469 Profit 458,052 3,793,485 3,793,485* Cost of Money 3,719,414 3,719,414* Legal Expenses 329,880 329,880* Total Price 9,328,387* 10,395,527* 43,914,775 33,519,248* Unilateral Credits 2,895,173* TOTAL CLAIM 30,624,075*
CHAPTER 13
LITIGATION MANAGEMENT
I. INTRODUCTION............................................................................................................... 1
A. GOAL................................................................................................................................. 1 B. TOOLS. .............................................................................................................................. 1
II. THE MANAGEMENT CHALLENGES. ......................................................................... 1
A. WORKLOAD. ..................................................................................................................... 1 B. THE INDIVIDUAL CASE......................................................................................................2
III. MANAGEMENT TOOLS................................................................................................. 2
A. THE TRIAL ATTORNEY NOTEBOOK................................................................................. 2 B. THE ELECTRONIC CASE FOLDER. ................................................................................... 3 C. THE BUSINESS PLAN (SEE ATTACHMENT A). .................................................................. 3 D. THE SITE VISIT(S). ........................................................................................................... 3 E. THE LITIGATION RISK ASSESSMENT. .............................................................................. 3 F. THE ASBCA STATUS REPORT (KEEPS THE PARTIES MOVING?) .................................... 4
IV. THE BIG CASE. ................................................................................................................. 4
V. CONCLUSION. .................................................................................................................. 4
MAJ Jon Guden Disputes and Remedies Elective
49th Graduate Course April 2001
CHAPTER 13
LITIGATION MANAGEMENT
I. INTRODUCTION.
A. Goal. The primary goal of litigation management is to preserve Government resources by resolving contract disputes as economically as possible considering the monetary value of the dispute, the potential cost of the litigation, and the value of the Government’s position.
B. Tools. There are many tools that you can use to accomplish the goal. Get smart on information technology, and continue to look for ways to improve your management methods.
II. THE MANAGEMENT CHALLENGES.
A. Workload.
1. Trial attorneys are generally responsible for 10 - 20 appeals (and perhaps bid protests) at any given time.
a. The cases will include construction, supply, and service contracts for a broad range of clients (installation, Major Command, buying command, NAFI).
b. The contracts span the globe.
2. Assignments may be made based on personal preferences, trial attorney qualifications, and pending caseloads (number and geographic considerations).
3. Formal teaming arrangements (multiple attorneys assigned to a case) are the exception, not the rule. Trial attorneys handling complicated cases should seek a teaming arrangement whenever possible.
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B. The individual case.
1. Cases vary from very low dollar to multi-million dollar disputes. BEWARE: Dollars do not equal degree of difficulty.
2. Cases may hinge on one issue, or contain multiple issues.
3. Placing the new case in context (i.e., how important is this case?).
a. Upon receipt, review the case file to determine the general nature of the appeal. Initially, you may only have a notice of appeal.
b. Contact the Contracting Officer and the Local Counsel.
(1) Learn their views regarding the matters in dispute; and
(2) Discuss the contractor, the contract, the Rule 4 file, and related matters.
(3) Keep an open mind, but ask searching questions.
(4) The “S” word—do you bring it up?
III. MANAGEMENT TOOLS.
A. The Trial Attorney Notebook.
1. Notice of Appeal.
2. Telephone numbers and addresses.
3. Pleadings.
4. Board letters and orders.
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5. Correspondence.
6. Discovery.
B. The Electronic Case Folder.
1. Identify by the ASBCA Number.
2. Include subfolders for case filings and correspondence.
3. Package the case on a CD – R4 and all?
C. The Business Plan (see Attachment A).
1. Timing of production dependent upon experience and knowledge of facts.
2. Must update periodically, and shared with the client.
D. The Site Visit(s).
1. Identify place(s) of performance.
2. Supply, service, or construction?
3. Brief the stakeholders? (see Attachment B)
E. The Litigation Risk Assessment.
1. Simple or complex? Consider use of outside consultant for complex, big dollar, multiple-issue cases.
2. For an overview of detailed litigation risk assessment tools, such as influence diagrams and decision trees, see Craig D. Miller, Litigation Risk Assessment—Part I-III, CONTRACT MANAGEMENT, July, November, and December 1999.
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F. The ASBCA Status Report (keeps the parties moving?)
1. Required every 45 days after filing of the pleadings.
2. Status report should remind you what is/is not happening with a case.
3. Ultimately, you’ll put out the fire that is closest to you.
IV. THE BIG CASE.
A. A challenge by itself!
B. The need for organization. See Attachment C, authored by Mr. Jeff Stacey.
V. CONCLUSION.
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[S: SUSPENSE DATE] JALS-CA (715y) [DATE] MEMORANDUM FOR [Rank and Name], Chief, Team [__], Contract Appeals Division, U.S. Army Legal Services
Agency, 901 North Stuart, Arlington, Virginia 22203-1837 SUBJECT: Business Plan - ASBCA No. [__], Appeal of [____________], Under Contract No. [___________] 1. Case synopsis:
a. [Briefly state the facts of the case. Include the date of award, the buying command, the widget or service, the cost and type of the contract.]
b. [Identify what went wrong with the contract, when the claim was filed, the value of the claim, the date of
the final decision, etc.] c. [Identify when the Appeal was filed and the general allegations in the Appeal.] d. [Identify the Government’s position as to the allegations.]
2. Litigation Plan: [Provide your best estimate as to the hours required to perform the following actions:]
a. Initial Pleadings................................................................................................................................ [40 hours] b. First Army Discovery Request ........................................................................................................... [8 hours] c. Response to Appellant’s Discovery Request...................................................................................... [8 hours] d. Second Army Discovery Request....................................................................................................... [8 hours] e. Response to Appellant’s Second Discovery Request ......................................................................... [8 hours] f. Fact Finding Trips [include number and location] ........................................................................... [40 hours] g. Taking and Defending Depositions .................................................................................................. [60 hours] h. Misc. [identify]................................................................................................................................. [50 hours] i. Hearing............................................................................................................................................. [50 hours] j. Brief and Reply Brief ....................................................................................................................... [50 hours] k. Administrative Closing.........................................................................................................................[1 hour] TOTAL:.......................................................................................................................................... [323 hours]
3. Estimated Litigation Timeline: [Provide your best estimate. The estimate included herein is only an example, and the estimate is not applicable if the case is accelerated.]
a. Initial pleadings ..................................................................................................[notice of appeal + 3 months] b. Initial written discovery requests........................................................................[notice of appeal + 4 months] c. Initial written discovery responses .....................................................................[notice of appeal + 6 months] d. Subsequent written discovery and document discovery...............................................[hearing – 5 ½ months] e. Exchange preliminary witness lists ..................................................................................[hearing – 5 months] f. Taking and defending depositions....................................................................................[hearing – 3 months] g. Exchange final witness lists and supplement Rule 4 file..............................................[hearing – 1 ½ months] h. Prehearing briefs. .............................................................................................................. [hearing – 2 weeks] i. Hearing.............................................................................................................[notice of appeal + 14 months] j. Brief and reply brief ........................................................................................................ [hearing + 3 months]
JALS-CA SUBJECT: [Subject]
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k. Decision and possible appeal .............................................................................................................. Variable 4. Estimated Litigation Costs:
a. Expenses funded by Contract Appeals Division: Trial Attorney Time (323 hours @ $125.00 per hour) ................................................................. [$40,375.00] Trial Attorney TDY........................................................................................................................ [$3,000.00] TOTAL:........................................................................................................................................ [$43,375.00] (Note: This amount does not include overhead expenses for the Contract Appeals Division.)
b. Expenses funded by [the buying command]: Copying Services............................................................................................................................ [$5,000.00] Court Reporter Services ............................................................................................................... [$10,000.00] Expert Expenses/TDY.................................................................................................................... [$1,000.00] TOTAL:........................................................................................................................................ [$16,000.00]
5. Risk Analysis: [Insert a risk analysis and identify that an updated risk analysis will be provided to the Contracting Officer after written discovery is completed and after depositions are completed.] [If an adequate risk analysis cannot be conducted at the time this document is prepared, the following language may be used: A risk analysis will be provided to the Contracting Officer by [DATE]. No accurate risk analysis can be conducted until discovery is substantially complete. Discovery is expected to be substantially complete by [Month, Year]. This allows [days/months] for written discovery; [days/months] for document discovery; and [days/months] to conduct depositions. If discovery is delayed, the risk analysis may also be delayed.] 6. Point of contact is the undersigned at (703) 696-[number] or DSN 426-[number]; facsimile ext. [number]. [[#] Encl(s)] [TRIAL ATTORNEY’S NAME (in caps)] 1. [enclosure] [RANK ABBV], JA 2. [enclosure] Trial Attorney CF: [Contracting Officer] [Address] [Field Counsel] [Address]
COL Jonathan H. Kosarin 49th Graduate Course
May 2001
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CHAPTER 14
POST-HEARING PROCEDURES AND RESPONSIBILITIES I. INTRODUCTION. As a result of this class, students will understand: A. The procedures and actions necessary in a contract dispute after the hearing concludes. B. Procedures for filing Motions for Reconsideration at the ASBCA. C. Procedures for appeals to the Court of Appeals for the Federal Circuit. D. Equal Access to Justice Act matters. II. OVERVIEW. A. The hearing does not conclude the disputes process. B. Post-hearing responsibilities are important. C. Protection of documents. D. Stay in touch with the contracting officer, local counsel, and key witnesses. E. Send letters of appreciation and status reports, as appropriate.
III. ACTIONS UPON RECEIPT OF THE BOARD'S DECISION. A. The Decision. Forward a copy of the decision to the field. 1. Generally, unless an appeal is filed, take no further action. 2. Review an unfavorable decision for possible motion for reconsideration. B. Reconsideration. File a motion for reconsideration, if appropriate. Forward a copy of the Board's decision on a motion for reconsider- ation to the field. 1. Unless an appeal is filed, take no further action. 2. Review an unfavorable reconsideration decision for possible appeal. IV. POSTTRIAL PROCESS. A. Posttrial Procedures. 1. Motions for reconsideration (ASBCA Rule 29). Bio-Temp Scientific, Inc., ASBCA No. 41388, 95-2 BCA ¶ 86,242; Arctic Corner, Inc., ASBCA No. 33347, 92-2 BCA ¶ 24,874. a. Either party may file. b. Set forth specifically the grounds relied upon in the motion. c. File the motion within 30 days of receiving the Board's decision. Motions filed after 30 days will
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be dismissed as untimely. Bio-Temp Scientific, Inc., ASBCA No. 41388, 95-2 BCA ¶ 86,242; Arctic Corner, Inc., ASBCA No. 33347, 92-2 BCA ¶ 24,874. 2. Appeals to the Court of Appeals for the Federal Circuit (CAFC). 41 U.S.C. § 607(g)(1). a. Appeal within 120 days following receipt of decision. Federal Circuit Rule 15(a)(2); Placeway Constr. Corp. v. United States, 713 F.2d 726 (Fed. Cir. 1983). b. Obtain approval from the Department of Justice, (Civil Division) for all Government appeals. 41 U.S.C. § 607(g)(1)(B). c. Presenting matters on appeal. Follow the CAFC’s Rules of Practice (December 1, 1998 edition). CAFC uses both the Federal Rules of Appellate Procedure and its own Federal Circuit Rules. d. Scope of review under CDA is Wunderlich Act, 41 U.S.C. §§ 321-322. 41 U.S.C. § 609(b). 1. Questions of law. Not final and conclusive. The court will review questions of law. 2. Questions of fact. Final and conclusive unless the court or board decision is fraudulent, arbitrary, capricious, made in bad faith, or not supported by substantial evidence. 41 U.S.C. § 609(b); United States v. General Elec. Corp., 727 F.2d 1567, 1572 (Fed. Cir. 1984)(court holds that it will affirm a board’s decision if there is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”); Tecom, Inc. v. United States, 732 F.2d 935, 938 n.4 (Fed. Cir. 1995)(credibility determinations of the trier of fact are virtually unreviewable).
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B. Coordination With Other Offices. 1. Procurement fraud issues. a. Suspension and debarment. b. Prosecution. 2. Litigation Division. a. Appeals to CAFC. b. Related cases. 3. Other services Contract Appeals/Litigation Divisions. a. Same appellants b. Same issues. c. Mutual assistance. You are not alone out there! V. INVENTORY AND RETIREMENT OF THE FILE. A. Documents. Maintain legible and complete copies of all key documents. Develop a list of key documents and annotate it with the box number. 1. Pleadings. 2. Rule 4 and Supplemental Rule 4 files.
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3. Trial Attorney’s Litigation File (TALF). 4. Depositions. 5. Other discovery. a. Discovery requests. b. Discovery responses. 6. Prehearing motions. 7. Prehearing briefs. 8. Post-hearing briefs, including reply briefs. 9. All decisions of the Board. 10. Post-decision motions, replies and briefs. 11. Any Court decisions. B. Witnesses. Maintain a list of key witnesses. 1. Full name. 2. Social security number. 3. Address (home and work). 4. Telephone number (home and work).
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C. Retirement of the File. Dependent upon expected receipt of the Board's decision and any appeals. D. Administrative File. Retain an administrative file with copies of key documents and list of witnesses. 1. Post-hearing brief. 2. Contracting officer. 3. Field attorney. 4. Key technical personnel. VI. EQUAL ACCESS TO JUSTICE ACT MATTERS. A. General. 1. Authority. Boards of Contract Appeals may award attorneys fees pursuant to the Equal Access to Justice Act (EAJA) for disputes processed under the CDA. 5 U.S.C. §.504. Appellants claiming EAJA fees and costs must qualify as small businesses. Q.R. Sys. North, Inc., ASBCA No. 39618, 96-1 BCA ¶ 27,943 (Board rejected contractor attempt to transfer corporate assets so as to fall within EAJA ceiling). 2. Purpose. B. Standard for Award. 1. Prevailing party. 10 U.S.C. § 504(a)(1). 2. Position of the Government. 5 U.S.C. § 504(b)(1)(E).
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3. Substantially justified. 5 U.S.C. § 504(a)(1). North Chicago Disposal Co., ASBCA No. 25535, 86-3 BCA ¶ 19,052; R&B Bewachungsgesellschaft mbh, ASBCA No. 42221, 94-1 BCA ¶ 26010. C. Allowable Fees. 5 U.S.C. § 504(b)(1)(A). 1. Attorneys. Generally $125 per hour. The ASBCA has awarded fees in excess of the statutory amount. Cape Tool & Die, Inc. ASBCA No. 46433, 95-1 BCA ¶ 27,465 (although $75 per hour [the old rate] used as guideline for
attorneys fees rates in some cases, rates in excess of that amount found reasonable for Washington DC area attorneys with government contracts expertise – $225/hr for partners; $80 - 110/hr for associates).
2. Experts/Consultants. Limited to no more than the highest rate payable to a GS-15. C&C Plumbing & Heating, ASBCA No. 44270, 96-1 BCA ¶ 28,100. 3. Paralegals. Lamb Engineering & Construction Co., EBCA No. E-9803274, 98-2 BCA ¶ 30,075 (Paralegal expenses recoverable at the rate normally charged to the
client for similar work.). 4. Other costs and expenses. 5. Subonctractor’s legal costs. Prime contractors may not automatically recover a subcontractor’s legal costs for a “pass through” claim. R.C. Construction v. United States, 42 Fed. Cl. 57 (1998). D. Time for Filing. Great Western Utility Corp., ENGBCA Nos. 4866-F, 4899-F, 4934-F, 4935-F, 86-3 BCA ¶ 19,011. VII. CONCLUSION.
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