Armed Services Board of Contract Appeals Backlog Shrinks, But Challenges Remain

The ASBCA issued its Fiscal Year 2017 annual report on October 10, and the statistics offer some insight and direction for contactors seeking to resolve their appeals at the Board. The Board has reduced its backlog by about 10 percent in the past year, from 1118 active appeals on December 31, 2016, to 970 active appeals at the conclusion of this fiscal year. This reversed a five year trend of increased docketing and backlog. Most of this reduction was due to fewer new cases being filed at the Board; as the number of appeals disposed of only increased slightly over recent years (the Board disposed of 654 appeals in FY2016 versus 678 in FY2017). We attribute the reduction in docketed appeals to the decreasing volume of contracts being performed in contingency environments, particularly in Iraq and Afghanistan. Those contracts have largely ended – and the performance disputes pursued under those contracts had contributed substantially to the growing backlog that started in 2011. The U.S. Army Corps of Engineers continues to account for the greatest number of appeals, followed by the Army, the Defense Logistics Agency and Defense Contract Management Agency (DLA/DCMA), the Navy and the Air Force, in that order.

Of the 139 appeals decided on the merits in 2017, 57.6 percent found merit in whole or in part for the contractors. This number is slightly deceptive, as a number of cases published over the year found merit in part, resulting in awards of a very small portion of the damages sought. Nonetheless, this number is the highest we have seen since 2007, when the meritorious appeal rate reached 71 percent.

Surprisingly, despite the still significant backlog, the use of ADR did not increase, as it was only requested 31 times, down from 41 in 2016. Further, the rate of appeals successfully resolved through ADR actually decreased in 2017, where only 66 percent of the cases were successfully resolved, down from prior years where the incidence hovered closer to 88 percent. That said, ADR remains a very attractive option. For example, in a recent appeal we obtained a mediation date, led by a Board Judge, within 60 days of our joint request to the Board for ADR. The matter settled during that mediation. That this happened two weeks before the conclusion of the fiscal year demonstrates a willingness and flexibility by both the judges and the government to quickly and fairly resolve appeals through ADR in certain instances. Compared to a traditional litigation cycle – which routinely requires three to four years to obtain a decision on the merits in larger matters, ADR is an attractive option and its reduced use in 2017 was a surprise.

The ASBCA also offers Accelerated and Expedited procedures under Board Rule 12 to dispose of appeals less than $150,000. These procedures were used to process 64 appeals during 2017, which reflects a sharp increase over the past few years (31 in 2016 and 41 in 2015).

The Board has increased its number of judges to 23. Though we know from experience that some may be on the cusp of retirement, new judges were added in 2017 to help decrease the appeal backlog.

Beyond the statistics, the Board issued a number of important decisions in the past year, covering topics such as cost disallowance, the Contract Disputes Act’s statute of limitations for claims, and important victories for contractors in contingency environments facing substantial delays and changed conditions.

A contractor’s quickest, and thus usually its best way to resolve contract disputes still remains the negotiation of a fair settlement with the contracting officer. When that it not possible, the Boards and COFC are the two options available to seek resolution of unresolved claims. While both have advantages and disadvantages, recent data suggests that the ASBCA remains a forum where contractors can obtain a fair – if not fast – outcome in resolving their disputes via negotiation, ADR or hearing. If you have unresolved disputes, consult with experienced counsel to ensure your claims are substantiated, properly filed, and aggressively prosecuted. Also, ask whether and when ADR might be appropriate.