Alternative Dispute Resolution (ADR) in Procurement

Alternative Dispute Resolution (ADR) in procurement refers to a set of structured but informal processes that allow contractors and federal agencies to resolve contract disputes faster and at lower cost than traditional litigation before a Board of Contract Appeals or the United States Court of Federal Claims. ADR in the federal contracting context is grounded in the Administrative Dispute Resolution Act of 1996 and is explicitly encouraged under the Contract Disputes Act (CDA) at 41 U.S.C. 7103.

What is ADR in Procurement?

Federal agencies are required under the Administrative Dispute Resolution Act to designate a Dispute Resolution Specialist and to consider ADR for every contract dispute before proceeding to formal adjudication. FAR 33.214 establishes the policy that agencies and contractors should use ADR where feasible. Common ADR methods used in procurement include:

Mediation, where a neutral third party facilitates negotiation between the agency and contractor without imposing a decision. The mediator helps each side understand the other's position and identify a mutually acceptable resolution. The outcome is binding only if both parties agree to a settlement.

Mini-trial, where each side presents an abbreviated version of its case to senior decision-makers from both the agency and the contractor who have settlement authority. The goal is to get the dispute in front of people who can resolve it without the formality of an evidentiary hearing.

Neutral evaluation, where an experienced neutral (often a retired judge or senior practitioner) provides a non-binding assessment of the strengths and weaknesses of each party's position. This reality-testing function often breaks settlement logjams.

Boards of Contract Appeals have formal ADR programs. The Armed Services Board of Contract Appeals (ASBCA), Civilian Board of Contract Appeals (CBCA), and Postal Service Board of Contract Appeals all offer mediation and other ADR services without requiring a formal appeal to be pending.

Why it matters for contractors

ADR is almost always faster and cheaper than formal adjudication. A Board of Contract Appeals case can take three to five years to reach a decision; a mediated resolution can be reached in weeks or months. For disputes involving equitable adjustments, termination settlements, or claim calculations, ADR preserves the working relationship between agency and contractor more effectively than adversarial litigation.

There are limits. ADR is voluntary; neither party can be compelled to participate. If the agency is unwilling to engage, the contractor must proceed through the CDA claim and appeal process. ADR outcomes are also not precedential, so they do not establish interpretive guidance for future disputes.

Example

A construction contractor submits a $2.4 million certified claim to the Army Corps of Engineers for differing site conditions encountered during a levee rehabilitation project. Rather than appealing to the ASBCA, the parties agree to use the ASBCA's mediation program. A retired federal judge serves as mediator over three days of structured sessions. The parties reach a negotiated settlement of $1.9 million. The case is closed within four months of the claim submission, saving both parties the cost and delay of a multi-year appeal.