Government Contract Feuds Ended Faster With Mediation.

• Author: Freeman, Brian
• Position: Mediation techniques and use of independent mediators in disputes between Federal Government and contractors

A contractor wins a prized multimillion-dollar government contract. But almost immediately, things begin to go badly. Costs balloon, designs fail, and schedules slip. After assuring the government for months that the company can turn things around, the contractor finally concedes that the project is in serious trouble. Shortly thereafter, the government terminates the contractor for default.

The government wants its money back. The contractor, anxious to avoid a negative past performance rating, wants a termination for convenience and millions in extra funds to cover its additional expenses.

As recently as five years ago, this kind of dispute would likely have led to protracted litigation, taking many years to progress through exhaustive discovery and multiple appeals, and costing both sides tens of millions of dollars in legal fees.

"We've all been brought up in an inherently adversarial system," says Richard Busch, senior government contracts lawyer at the law firm of Faegre & Benson and a former general counsel for defense contractor Lockheed Martin Corporation. "Litigation isn't about managing conflicts. It's about winning," he adds. "But many businesses and agencies have begun to question the time, money, and risk involved in all-or-nothing litigation. More and more, they're turning to tools like mediation to resolve disputes."

Mediation Technique

Mediation is one of many techniques under the alternative dispute resolution (ADR) approach. It's also the technique preferred by most federal agencies. Mediation relies on a trained neutral party, who helps the principals in the dispute negotiate a settlement that is acceptable to both sides. Like most forms of ADR, mediation is a voluntary process. Although it isn't intended to eliminate litigation, it can be effective in settling many disputes without the need for further legal action.

Congress and the White House have made ADR a top federal priority. Thanks to a series of executive orders since 1995, and the Administrative Dispute Resolution Act of 1996, agencies have faced a series of mandates designed to increase the use of ADR, including:

* Requiring agencies to appoint a dispute resolution specialist to implement ADR policies

* Establishing an interagency ADR working group to promote development of ADR programs

* Requiring a written explanation citing specific statutory reasons whenever a contractor or contracting officer declines a request for ADR

* Amending the Federal Acquisition Regulations to encourage agencies to use ADR procedures to the maximum extent practicable

* Encouraging agencies and their contractors to adopt an ADR pledge, committing them to resolve disputes by ADR whenever...