Alternative dispute resolution

In last year's Year in Review, (1) the authors commented on an Air Force alternative dispute resolution (ADR) initiative that included the timely identification and resolution of issues in controversy as a consideration in contractor past performance evaluations. (2) Despite resistance from private contractors and attorneys, the Air Force officially revised its Contractor Performance Assessment Reporting System (CPARS) and incorporated this initiative into its December 2001 CPARS guide. (3) In May 2002, the Air Force revised the CPARS's coverage of ADR again, "to clarify [that the Air Force] encourage[s] timely resolution of issues, but [does] not mandate how an issue is resolved." (4)

The Air Force's most recent revision came on the heels of a directive from Angela Styles, Administrator of the Office of Federal Procurement Policy (OFPP). On 1 April 2002, Ms. Styles instructed all federal agencies that the "filing of protests, the filing of claims, or the use of Alternative Dispute Resolution, must not be considered by an agency in either past performance or source selection decisions." (5) While encouraging federal agencies to use ADR where appropriate, the OFPP directive states that "contractors should feel free to avail themselves of the rights provided them by law." (6) The OFFP directive also instructs procurement executives to emphasize to all agency acquisition personnel, but especially source selection officials, that: (1) "[c]ontractors may not be given 'downgraded' past performance evaluations ... for filing protests and claims or deciding not to use ADR;" and (2) "[c]ontractors may not be given 'positive' past performance evaluations for refraining from filing claims or protests or for agreeing to use ADR." (7)

In February 2002, David Drabkin, Deputy Associate Administrator for the General Services Administration (GSA), had issued similar guidance in a policy letter applicable to all GSA-issued or administered contracts, including those of agencies that make use of GSA multiple award schedules and government-wide contracts. (8) Mr. Drabkin stated that a "contractor's judicious exercise of a process protection is not evidence of unreasonable or uncooperative behavior" and therefore, "absent a clear pattern of frivolous or bad faith exercise of such protections, you cannot downgrade a contractor's performance for filing a protest or claim, or declin[e] to participate in an ADR process. " (9)

ADR and Schedule Disputes ... It's Final

While the OFPP and the GSA frown upon contracting agencies evaluating contractors' past performance based on their (un)willingness to participate in ADR procedures, it is clear that agencies encourage the use of ADR in resolving disputes. In June 2002, a final rule announcement amended the Federal Acquisition Regulation (FAR) to incorporate policies for dispute resolution in federal schedule contracts. (10) The proposed rule stated that contracting officers should, when resolving disputes arising out of federal schedule contracts, "use the alternative dispute resolution (ADR) procedures, when appropriate." (11) Based on public comments that the language used should be consistent with ADR policy statements found elsewhere in the FAR, the final rule revised the proposed language to reflect that parties should use ADR "to the maximum extent possible" and incorporated references to both FAR section 33.204 and FAR section 33.214. (12)

ADR Doesn't Get Agency Off the Hook for Costs

In National Opinion Research Center--Costs, (13) the General Accounting Office (GAO) held that when an agency takes corrective action pursuant to the GAO outcome-prediction ADR (14) and after filing its agency report, the agency will presumably be "on the hook" for the protestor's costs. The National Opinion Research Center (NORC) sought reimbursement of costs for filing and pursuing a protest challenging the award of a contract by the Department of Health and Human Services (HHS) to operate a patient safety research coordinating center. In its protest filing, the NORC argued that the agency's evaluation and source selection determination were improper. (15) After an outcome-prediction conference, the GAO attorney advised the parties that the protest was likely to be sustained based on a "clearly flawed" source selection decision. (16) In response, the HHS advised that it would take corrective action by arranging for a new source selection authority from outside the HHS to conduct a new source selection. Based on the proposed corrective action, the GAO dismissed the protest as academic. (17)

While the outcome prediction ADR successfully resolved the case, the NORC still sought reimbursement of its costs for filing and pursuing its protest. The HHS did not oppose reimbursement, but requested a formal recommendation from the GAO. The GAO started with the general rule that it will recommend agency reimbursement of costs when "we determine that the agency delayed taking corrective action in the face of a clearly meritorious protest, thereby causing protestors to expend unnecessary time and resources to make further use of the protest process in order to obtain relief." (18) In an outcome prediction ADR, the GAO noted, the assigned attorney informs the parties that the GAO is likely to sustain a protest "only if she or he has a high degree of confidence regarding the outcome." (19) The GAO attorney's "willingness to do so," concluded GAO, is an "indication that the protest is viewed as clearly meritorious, and satisfies the 'clearly meritorious' requirement for purposes of recommending reimbursement for protest costs." (20) The GAO concluded by stating that agency corrective action following outcome-prediction ADR and the filing of the agency report (21) presumptively satisfies the cost-reimbursement standard, absent contrary persuasive evidence. (22)