Editor’s Note: Over the past few months we have focused on the factors that have led to the high rate of failure of complex contracting relationships, as well as the challenges it poses in terms of engaging an increasingly cynical supply base. The latter is particularly true in relation to the public sector procurement process as highlighted by my January 26th post “Breaking News: Vendor’s efforts to sue government for $62 million as a result of losing bid understandable but misguided by Jon Hansen.”
We have also focused on the importance of taking preventative measures and the emergence of the Relational Model as the “new relationship paradigm in contract management.”
All this being said, disputes do and will likely continue to happen. As a result we reached out to you the reader to solicit your feedback on the best way to handle a dispute. Today’s post by Commodore Consulting, LLC – President, Shené Commodore, CPCM provides both an informative and adept outline of how to go about filing a dispute.
Preventive law is cheaper than litigation, do you know how to handle Contract Disputes? Contract Disputes can happen at any stage of the contract; (pre-award, award, and post-award) but proper documentation is key in terms of reaching the best resolution.
Disputes should be resolved quickly to preserve relationships. If important contract terms are omitted or unclear, performance will suffer. Be sure you understand what the contract says, what it does not say, and your legal rights. This article is written to briefly discuss how to analyze contract dispute terms and conditions and how to file a dispute.
A dispute is defined as a debate, discussion, or disagreement. If you are dealing with government contracts there are specific regulations for Contract Disputes. As a government contractor you should be familiar with the Federal Acquisition Regulations (FAR); while commercial practices focus on the Uniform Commercial Code (UCC). Some government agencies have FAR supplements. On-line Versions of the FAR can be found at http://farsite.hill.af.mil. Government regulations are also based on U.S. statutes, laws, and executive orders.
Common misunderstandings which lead to contract disputes often happen because of misused phrases or understandings, ambiguous contract terms, implied terms, lack of provisions. The most common disagreements arise from breach of “implied obligations”. Be sure to seek revisions of any contract terms in excess of what is required or any requirements more than what is usually required with commercial/ industry practices. Be sure to read the entire contract and related attachments. Contracts should be reviewed by legal, contract staff, and subject matter experts. In order to properly analyze a contract during disputes, there are some specific clauses one must review.
Key Terms you should review during a dispute:
- Language pertaining to your legal rights
- Know what constitutes a contract breach and the required remedies
- The law and jurisdiction that apply
- Notices, Disputes, and Arbitration
- Contract terms that identify the tasks required to receive payment
- If there are any requirements more than what is usually required in commercial/industry practices (obligations, warranties, liabilities)
- Deliverables and reports
- FAR 52.232-20 “Limitation of Costs” and FAR 52.232-21 “Limitation of Funds”
Your notice should list the contract number, title, effective date, and any related contracts. Be sure you attempt to settle all rights and liabilities of the parties under the contract and identify if the contract is continuing. Again, be sure you have the authorized representatives involved or the discussions will not be valid. This is usually the contract officer, not the contract officer technical representative. Ask the other party to provide a list of names, job titles, and contact numbers for the responsible parties.
Once you have decided to file a dispute, be sure you are prepared. Did you notify the other party in a timely manner? Did you notify the authorized representative of the other party or responsible government official of matters pertaining to your claim? It is important to resolve the dispute, but equally important to maximize cost recovery and maintain the business relationship. You must provide detailed documentation that is specific, demonstrates that authorized representatives were aware of each incident surrounding the dispute; as well as a list of related costs and what steps you took to mitigate costs.
Be sure to review the notice and dispute clauses in the contract. If your contract includes a Limitation of Funds or Limitation of Costs clause, be sure you have sent notice to the contract officer if you have expended 75% or more of the obligated contract funds. In any case, you must submit your dispute in accordance with the Notices and Disputes clauses in your agreement. Pay close attention to the format and time requirement stipulated in your agreement.
Supporting documents should include:
- Site any contract terms related to the dispute
- List the dates, people involved, method (email, telephone, meeting) of discussion your company informed them of the problem(s), and related costs
- Directions received from related parties and company/government official
- Notice that the documentation is a claim
- Any other supporting documentation to validate the facts stated in your claim
Once you have adequately prepared your claim document, submit your dispute in accordance with the Dispute instructions in the contract. If dealing with the US Federal government, it is normal procedure to submit the claim and required forms to that particular Agency’s Office of Disputes. In doing so, your claim will be reviewed, and a meeting date will be set with an Administrative Judge at the Office of Disputes and Resolution. Here you will be able to present your case and negotiate a termination settlement. Whether dealing in the commercial market or the government; be patient, do not make it personal, and document, document, document.
Nothing herein is intended or should be taken as legal advice.
Ms. Shené Commodore, CPCM
Commodore Consulting, LLC – President