Original Date: 02/24/1997
Revision Date: 04/14/2003

The Industrial Operations Command (IOC) has developed an effective methodology for resolving disagreements with prime contractors before they become adversarial issues and formal contract disputes. This change was driven by recent Government initiatives for acquisition reform as well as by a recognized need to reduce the time and expense involved with resolving issues through litigation.

Prior to initial implementation in late 1995, many issues and disagreements with prime contractors were settled through the Armed Services Board of Appeals or the Court of Claims under the Contracts Disputes Act. This consumed significant resources in litigation and fostered adversarial relationships with contractors. Previous major contracts for the 120MM Mortar program and the HYDRA 70 Rocket program had a multitude of dispute actions and continuing unresolved claims. Claims for one program exceeded $30 million.

In 1995, the IOC developed a process for Alternate Dispute Resolution (ADR) for subsequent contracts for these two programs. The approach emphasized the need for partnering with industry, and identified to potential contractors the need to commit to resolving contract problems at the lowest possible level.

A key part of the process includes identifying to bidders, up front or in the solicitation, that partnering arrangements and any associated costs in training and implementation will become formalized. This includes identifying which parties and levels are appropriate for early resolution, and also a step-by-step process for resolution of continued disputes at those levels. A primary addition to partnering under ADR is the implementation of “Assisted Negotiation” where a neutral third party is identified in advance by both sides to listen to the issues and recommend actions for resolution prior to mediation or arbitration.

A lesson learned in implementing the ADR process is that all organizations involved (contracting office, contract administration, contractor, and subcontractors) must be willing to expend the resources necessary to ensure effective teaming and partnering. This is best facilitated through training and workshops, using an experienced third party source. Programs selected for the ADR process must be carefully chosen, as a significant amount of time and personnel resources may be required to implement the process. Identification of the effort involved in ADR should be addressed up front in the proposal.

Partnering, combined with establishing ADR procedures, has shown to significantly improve the chance for success on complex contracting actions. Many types of claims encountered on previous contracts for the 120MM Mortar and HYDRA 70 Rocket programs were avoided on the subsequent contracts by using ADR. For example, on-time delivery schedules were maintained, working relationships have improved through use of less adversarial methodologies, and claims or disputes have diminished. The improved relationships had the additional benefit of contributing to resolution of some old claims on the previous contracts.

For more information see the Point of Contact for this survey.