FAR 33.204—Policy.
Plain-English Summary
FAR 33.204 states the Government’s basic policy for handling contract disputes and other contractual issues in controversy: resolve them first by mutual agreement at the contracting officer’s level, and do so before a claim is formally submitted whenever possible. The section also encourages agencies to use alternative dispute resolution (ADR) procedures to the maximum extent practicable, while recognizing that some disputes may not be suitable for ADR under the factors in 5 U.S.C. 572(b). It further explains that agencies have authority to use ADR under legal authority separate from the Administrative Dispute Resolution Act (ADRA), except when arbitration is conducted under the ADRA itself, and that agencies may also choose to proceed under the ADRA’s authority and requirements. In practice, this section is about early, cooperative dispute resolution, preserving working relationships, reducing litigation and claims costs, and giving agencies flexibility to choose the dispute-resolution framework that best fits the situation. For contractors, it signals that informal negotiation and ADR are expected steps before escalation; for contracting officers, it establishes a duty to actively seek resolution at their level whenever feasible.
Key Rules
Resolve at CO level first
The Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. This makes the contracting officer the primary point for early dispute resolution before matters escalate.
Use reasonable pre-claim efforts
Reasonable efforts should be made to resolve controversies before a claim is submitted. The section favors early engagement and settlement discussions rather than waiting for a formal claims process.
ADR should be used broadly
Agencies are encouraged to use alternative dispute resolution procedures to the maximum extent practicable. ADR is intended to provide faster, less adversarial ways to resolve disputes when appropriate.
Some disputes are not suitable
Certain factors may make ADR inappropriate, as referenced in 5 U.S.C. 572(b). Agencies must consider whether the nature of the dispute, the parties, or other circumstances make ADR a poor fit.
Separate ADR authority exists
Except for arbitration under the ADRA, agencies have authority separate from the ADRA to use ADR procedures to resolve issues in controversy. This gives agencies flexibility to use ADR without relying solely on the ADRA framework.
ADRA remains an option
Agencies may also elect to proceed under the authority and requirements of the ADRA. When they do, they must follow the ADRA’s applicable rules and limits, including for arbitration.
Responsibilities
Contracting Officer
Take the lead in trying to resolve contractual issues in controversy by mutual agreement at the contracting officer’s level. Make reasonable efforts to settle disputes before a claim is submitted and consider whether ADR is appropriate.
Agency
Encourage and support use of ADR to the maximum extent practicable, while evaluating whether any statutory factors make ADR inappropriate. Decide whether to use separate agency ADR authority or proceed under the ADRA.
Contractor
Engage in good-faith efforts to resolve controversies early and consider ADR before submitting a claim. Participate in negotiated resolution or ADR when offered and appropriate.
Dispute Resolution Participants
Assess whether the dispute is suitable for ADR in light of the factors referenced in 5 U.S.C. 572(b). If arbitration is used under the ADRA, follow the ADRA’s specific authority and requirements.
Practical Implications
This section pushes both sides to talk early and often, so contractors should not assume a claim is the first or best step.
Contracting officers should document reasonable settlement efforts and ADR consideration, especially when a dispute later becomes formal.
ADR is encouraged, but not mandatory in every case; parties should evaluate whether the dispute is a good candidate before investing time in mediation or other procedures.
A common pitfall is treating ADR as a box-checking exercise instead of a real attempt to resolve the issue; another is ignoring the statutory limits that can make ADR inappropriate.
Because agencies may use either separate ADR authority or the ADRA, practitioners should confirm which legal framework governs the process before agreeing to terms or selecting an arbitrator.
Official Regulatory Text
The Government’s policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer’s level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim. Agencies are encouraged to use ADR procedures to the maximum extent practicable. Certain factors, however, may make the use of ADR inappropriate (see 5 U.S.C. 572(b) ). Except for arbitration conducted pursuant to the Administrative Dispute Resolution Act (ADRA), ( 5 U.S.C.571 , etseq .) agencies have authority which is separate from that provided by the ADRA to use ADR procedures to resolve issues in controversy. Agencies may also elect to proceed under the authority and requirements of the ADRA.