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Alternative Dispute Resolution (ADR)!

Dayton NCMA Chapter

2004

Charles E. Rumbaugh

ADROffice@Rumbaugh.net

"The parties shall exchange with each other and submit to the Arbitrator their last best offer(s) to the other.  The Arbitrator shall select one or the other of such two offers and shall award such selection.“


A Framework for Negotiations

Styles of managing conflict.

· Contending (Competing): Try to convince the other to accept a position that favors only our own interests. This approach requires persuasion, manipulation, concealment of our true position, the use of threats, pressure tactics, etc. 

· Accommodating (Yielding): We focus on the other party’s needs rather than our own. Accommodating may be used to end negotiations, to leave the other party satisfied so we can (perhaps) ask for something later, or because the issues are much more important to the other party than to us.

· Compromising (Splitting the Difference): Both parties view the issue in zero-sum negotiations and settle differences by each getting a piece of the pie.

· Collaborating (Problem Solving): Both parties work together to maximize the joint outcome. Problems are defined in terms of shared goals and interests verses “position.”  The parties work together creatively to invent options that meet both of their needs in an optimal manner.

· Avoiding (Inaction):   Neither pushes for his/her own objectives nor shows concern for the other’s objectives. The other will be able to do what he/she wants (if not dependent on you for some action) - or will be frustrated (if dependent on you for some action).  

Source: Roy J. Lewicki, et al Negotiation, 3 rd edition (Boston: Irwin McGraw-Hill, 1999).  ISBN 0-256-20832-8.


 

NEGOTIATION PREPARATION CHECKLIST

1.    Prepare your negotiating agenda .

Know other party’s agenda .

What are the underlying issues/interests—not necessarily “position,” of the parties?   (What information do you plan to elicit during any “information phase” to determine other party’s underlying needs, interest, and objectives?  What questions do you anticipate using?  What information are you willing to disclose and how do you plan to divulge it?  Can you prevent disclosure of “sensitive” information?  What does “good faith” negotiations “really” mean?  Any “external” factors impacting disclosure obligation?)

2.    Your minimum settlement point (lowest result you and organization would accept given your alternatives to negotiated settlement):

3.    Determine “your” ultimate goal.  What is your target point (best result you might achieve in negotiations): 

4.    Estimate of other party’s minimum settlement point (based in part upon the external options that appear to be available to that party):

5.    Try to use an analysis or value system that the other party may have available in order to estimate the other party’s target point (e.g. where price is an issue—assume you are a Seller, use price analysis techniques available to Buyer to establish their “cost” basis/analysis of your quote):


NEGOTIATION PREPARATION CHECKLIST

6.    Your factual/legal/persuasive/logical “leverage” with respect to each unsettled item (issue/interest) that may be in “contention/dispute.”  Prepare an explanation supporting each strength and anticipate ways in which you might minimize your weaknesses and/or expand the universe of options.

7.    Estimate of other party’s factual/legal/persuasive/logical “leverage” with respect to each unsettled item (issue/interest).  Prepare “counter-arguments” that are consistent with “your” universe of options.

8.    What is your negotiating strategy? Competitive verses Cooperative OR “both?” 

Plan your anticipated concession pattern carefully including “signals” that may be required as well as the disclosure of information you intend to divulge to the other party.  Prepare explanations for each planned concession and how it satisfies the applicable issue/interest.  Ask probing “why” questions in order for all to obtain greater information/insight in the underlying interest(s) of the parties!

What is other party’s negotiating strategy?  How will you “respond” to it?

Prepare opening position and rationale to support it.  Prepare other responses/counter-offers:

9. What role does BATNA have in the negotiation process?

 


ALLOWABILITY OF ADR COSTS, GOVERNMENT POLICY ON ADR TECHNIQUES, ETC.

(Regulatory Excerpts)

 

 

FAR 33.201 Definitions.

 

 

As used in this subpart-

"Alternative dispute resolution (ADR)" means 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, minitrials, arbitration, and use of ombudsmen.

"Issue in controversy" means a material disagreement between the Government and the contractor that-

(1) May result in a claim or

(2) Is all or part of an existing claim.

FAR 52.233-1 Disputes.

(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….

(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.

FAR 33.207 Contractor certification.

(a) Contractors shall provide the certification specified in paragraph (c) of this section when submitting any claim exceeding $100,000.

(b) The certification requirement does not apply to issues in controversy that have not been submitted as all or part of a claim.

(c) 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.

(d) The aggregate amount of both increased and decreased costs shall be used in determining when the dollar thresholds requiring certification are met (see example in 15.403-4(a)(1)(iii) regarding cost or pricing data).

(e) The certification may be executed by any person duly authorized to bind the contractor with respect to the claim.

(f) A defective certification shall not deprive a court or an agency BCA of jurisdiction over that claim. Prior to the entry of a final judgment by a court or a decision by an agency BCA, however, the court or agency BCA shall require a defective certification to be corrected.

 


FAR 33.214 Alternative dispute resolution (ADR).

 

(a) The objective of using ADR procedures is to increase the opportunity for relatively inexpensive and expeditious resolution of issues in controversy. Essential elements of ADR include-

(1) Existence of an issue in controversy;

(2) A voluntary election by both parties to participate in the ADR process;

(3) An agreement on alternative procedures and terms to be used in lieu of formal litigation; and

(4) Participation in the process by officials of both parties who have the authority to resolve the issue in controversy.

(b) If the contracting officer rejects a contractor's request for ADR proceedings, the contracting officer shall provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute. In any case where a contractor rejects a request of an agency for ADR proceedings, the contractor shall inform the agency in writing of the contractor's specific reasons for rejecting the request.

(c) ADR procedures may be used at any time that the contracting officer has authority to resolve the issue in controversy. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim. When ADR procedures are used subsequent to the issuance of a contracting officer's final decision, their use does not alter any of the time limitations or procedural requirements for filing an appeal of the contracting officer's final decision and does not constitute a reconsideration of the final decision.

(d) When appropriate, a neutral person may be used to facilitate resolution of the issue in controversy using the procedures chosen by the parties.

(e) The confidentiality of ADR proceedings shall be protected consistent with 5 U.S.C. 574.

(f)(1) A solicitation shall not require arbitration as a condition of award, unless arbitration is otherwise required by law. Contracting officers should have flexibility to select the appropriate ADR procedure to resolve the issues in controversy as they arise.

(2) An agreement to use arbitration shall be in writing and shall specify a maximum award that may be issued by the arbitrator, as well as any other conditions limiting the range of possible outcomes.

(g) Binding arbitration, as an ADR procedure, may be agreed to only as specified in agency guidelines. Such guidelines shall provide advice on the appropriate use of binding arbitration and when an agency has authority to settle an issue in controversy through binding arbitration.

31.205-47 Costs related to legal and other proceedings.

 

(a) Definitions. As used in this subpart-

"Costs" include, but are not limited to, administrative and clerical expenses; the costs of legal services, whether performed by in-house or private counsel; the costs of the services of accountants, consultants, or others retained by the contractor to assist it; costs of employees, officers, and directors; and any similar costs incurred before, during, and after commencement of a judicial or administrative proceeding which bears a direct relationship to the proceeding.

(f) Costs not covered elsewhere in this subsection are unallowable if incurred in connection with:

(1) Defense against Federal Government claims or appeals or the prosecution of

claims or appeals against the Federal Government (see 2.101).


DCAA AUDIT MANUAL 12-606 Costs of Preparing and Supporting Equitable Adjustment Proposals or Claims.

a.       Costs incurred in the preparation and support of a request for equitable adjustment (REA) proposal, and in negotiations, with the contracting officer are allowable.   However, refer to 7-2105 for further guidance on the allowability of professional and consultant costs.

b.      Costs incurred in the prosecution of a claim or appeal against the Federal Government are unallowable per FAR 31. 205-47(f)(1).  The use of the alternative disputes resolution (ADR) process does not make the costs allowable.  Costs incurred in the prosecution of a claim include:

·        Legal, accounting, and consultant fees relating to the preparation and submission of a CDA claim.

·        Costs incurred supporting negotiations subsequent to claim filing

·        Costs incurred in providing information to the contracting officer in support of claimed costs.

·        Costs incurred in the appeal of the contracting officer’s decision to an agency board of contract appeals, the Court of Federal Claims, the Court of Appeals for the Federal Circuit, or ADR procedures.

c.  While there is a strong legal presumption that costs incurred prior to the filing of a CDA claim are not unallowable claim prosecution costs, if factual evidence clearly and directly relates the costs to the submission of a CDA claim, the auditor should question those costs.  Claim prosecution costs incurred after the submission of the CDA claim to the contracting officer are unallowable even if incurred in support of negotiations.  In addition, costs associated with an ADR process (FAR 33.214) on a CDA claim upon which a final contracting officer decision has been issued and appealed are unallowable claim prosecution costs.