FAR 33.214—Alternative dispute resolution (ADR).
Plain-English Summary
FAR 33.214 explains when and how alternative dispute resolution (ADR) may be used to resolve federal contract disputes more quickly and at lower cost than formal litigation. It covers the core purpose of ADR, the essential elements required for a valid ADR process, and the requirement that both sides voluntarily agree to participate and to the procedures that will be used. It also addresses what happens when one side rejects ADR, including the contracting officer’s duty to give a written explanation and the contractor’s duty to explain a rejection in writing. The section clarifies that ADR can be used at any time the contracting officer has authority to resolve the issue, including after a claim is submitted, and that post-final-decision ADR does not stop appeal deadlines or reopen the final decision. It further covers the use of neutrals, confidentiality protections, limits on requiring arbitration in solicitations, the need for written arbitration agreements with a maximum award and other limits, and the special rule that binding arbitration is allowed only under agency guidelines. In practice, this section gives agencies and contractors a flexible dispute-resolution tool, but only when authority, consent, confidentiality, and procedural safeguards are all in place.
Key Rules
ADR aims for faster resolution
The purpose of ADR is to provide a relatively inexpensive and expeditious way to resolve issues in controversy. It is meant to supplement, not replace, formal dispute processes when the parties can agree to use it.
Both parties must agree
ADR requires a voluntary election by both parties, agreement on the procedures and terms, and participation by officials who have authority to resolve the dispute. Without mutual consent and decision-making authority, ADR is not properly established.
Written reasons for rejecting ADR
If the contracting officer rejects a contractor’s request for ADR, the officer must give a written explanation citing a reason under 5 U.S.C. 572(b) or another specific reason ADR is inappropriate. If the contractor rejects an agency’s request, the contractor must also respond in writing with specific reasons.
ADR may be used anytime authority exists
ADR can be used whenever the contracting officer has authority to resolve the issue in controversy. If a claim has been filed, ADR may address all or only part of the claim, allowing targeted settlement of disputed issues.
Post-decision ADR does not affect appeals
Using ADR after a contracting officer’s final decision does not change appeal deadlines or procedural requirements, and it is not a reconsideration of the final decision. Parties must still preserve and track all appeal rights separately.
Neutrals may facilitate resolution
When appropriate, the parties may use a neutral person to help facilitate settlement or resolution. The neutral’s role depends on the procedure selected by the parties, such as mediation or another assisted process.
Confidentiality must be protected
ADR confidentiality must be protected consistent with 5 U.S.C. 574. This means the parties must handle ADR communications and materials in a way that preserves the statutory confidentiality protections applicable to the process.
Arbitration cannot be forced in solicitations
A solicitation may not require arbitration as a condition of award unless another law requires it. Contracting officers should retain flexibility to choose the ADR method that best fits the dispute as it arises.
Arbitration terms must be written
Any agreement to use arbitration must be in writing and must state a maximum award the arbitrator may issue, along with any other limits on possible outcomes. This ensures the parties understand the scope and risk of the process.
Binding arbitration needs agency authority
Binding arbitration may be used only as allowed by agency guidelines. Those guidelines must explain when binding arbitration is appropriate and when the agency has authority to settle a dispute through that method.
Responsibilities
Contracting Officer
Consider ADR when there is an issue in controversy and the contracting officer has authority to resolve it. If rejecting a contractor’s ADR request, provide a written explanation citing a statutory basis or other specific reason; if using ADR after a final decision, ensure appeal rights and deadlines are not affected; and avoid requiring arbitration in a solicitation unless authorized by law.
Contractor
May request ADR and, if the agency proposes ADR, must decide whether to participate voluntarily. If rejecting an agency’s ADR request, provide written reasons; if entering arbitration, ensure the agreement is written and understand that post-final-decision ADR does not extend appeal deadlines.
Agency
Establish and follow guidelines for binding arbitration, including when it is appropriate and when the agency has authority to settle through it. Ensure ADR use is consistent with confidentiality requirements and that officials participating have authority to resolve the dispute.
Neutral Person
Facilitate resolution of the issue in controversy when the parties choose a procedure that uses a neutral. The neutral assists the process but operates within the terms and limits agreed to by the parties.
Officials with Settlement Authority
Participate in the ADR process on behalf of each party and have actual authority to resolve the issue in controversy. Their presence is essential because ADR cannot function effectively if the participants cannot bind their organizations to a resolution.
Practical Implications
ADR is most useful when both sides want a businesslike settlement and have decision-makers at the table; if the wrong people attend, the process can fail even if everyone is cooperative.
A common mistake is assuming ADR pauses appeal deadlines after a final decision; it does not, so parties must track CDA appeal and litigation deadlines separately.
Another pitfall is treating ADR as informal and therefore ignoring confidentiality rules; ADR communications still need protection under the statute.
Contracting officers should not bake arbitration into solicitations as a mandatory award condition unless a separate law requires it, because the FAR generally preserves party choice.
If arbitration is used, the written agreement should be very specific about the maximum award and any limits on remedies, otherwise the parties may face avoidable disputes about scope later.
Official Regulatory Text
(a) The objective of using ADR procedures is to increase the opportunity for relatively inexpensive and expeditious resolution of issues in controversy. Essential elements of ADR include- (1) Existence of an issue in controversy; (2) A voluntary election by both parties to participate in the ADR process; (3) An agreement on alternative procedures and terms to be used in lieu of formal litigation; and (4) Participation in the process by officials of both parties who have the authority to resolve the issue in controversy. (b) If the contracting officer rejects a contractor’s request for ADR proceedings, the contracting officer shall provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute. In any case where a contractor rejects a request of an agency for ADR proceedings, the contractor shall inform the agency in writing of the contractor’s specific reasons for rejecting the request. (c) ADR procedures may be used at any time that the contracting officer has authority to resolve the issue in controversy. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim. When ADR procedures are used subsequent to the issuance of a contracting officer’s final decision, their use does not alter any of the time limitations or procedural requirements for filing an appeal of the contracting officer’s final decision and does not constitute a reconsideration of the final decision. (d) When appropriate, a neutral person may be used to facilitate resolution of the issue in controversy using the procedures chosen by the parties. (e) The confidentiality of ADR proceedings shall be protected consistent with 5 U.S.C. 574 . (f) (1) A solicitation shall not require arbitration as a condition of award, unless arbitration is otherwise required by law. Contracting officers should have flexibility to select the appropriate ADR procedure to resolve the issues in controversy as they arise. (2) An agreement to use arbitration shall be in writing and shall specify a maximum award that may be issued by the arbitrator, as well as any other conditions limiting the range of possible outcomes. (g) Binding arbitration, as an ADR procedure, may be agreed to only as specified in agency guidelines. Such guidelines shall provide advice on the appropriate use of binding arbitration and when an agency has authority to settle an issue in controversy through binding arbitration.