Takeaways

The ASBCA is reducing its backlog of appeals. FY 2018 ended with 901 pending appeals, which is the lowest number since the conclusion of FY 2013 and a net decrease of 69 appeals from the conclusion of FY 2017.
Use of ADR to resolve appeals fell slightly during FY 2018; however, the success rate for ADR experienced an increase.
Contractors who had their matters resolved on the merits experienced a sustain rate of nearly 70 percent.

The Armed Services Board of Contract Appeals (ASBCA) issued its FY 2018 annual report on October 10th, and the statistics offer some insight and direction for contactors seeking to resolve their appeals in that venue. The number of new appeals docketed in FY 2018 was 490. Accordingly, for five years in a row, the ASBCA has experienced fewer docketed appeals. In FY 2014, contractors docketed 708 appeals. That number fell to 571 docketed appeals last year and, as stated, to 490 in FY 2018. We attribute the reduction in docketed appeals in part to the reduced overseas contingency contracting opportunities in recent years compared to previous years where contractors were more active in locations like Iraq and Afghanistan. Further, we have experienced a renewed effort toward partnering among the parties to government contracts that has resulted in agreements rather than disputes.

The Board reduced its backlog in the past year from 970 active appeals on October 1, 2017 (the conclusion of FY 2017) to 901 active appeals at the conclusion of FY 2018. This continued what is now a three-year reversal of an earlier five-year trend of increased docketing and backlog. The statistics suggest that most of this reduction likely can be attributed to fewer new cases being docketed rather than more aggressive disposition of pending cases by the Board. For example, as noted above, the number of new docketed appeals has gone down each of the previous five fiscal years. Further, while the backlog is dropping, the number of appeals disposed of in FY 2018 also dropped—from 678 in FY 2017 to 559 in FY 2018.

With respect to the new appeals docketed in FY 2018, contractors adverse to the U.S. Army Corps of Engineers accounted for 127 of the 490. Contractors also frequently docketed matters in FY 2018 adverse to the Navy (93/490), the Defense Logistics Agency/Defense Contract Management Agency (89/490), the Army (75/490) and the Air Force (61/490).

The ASBCA decided 139 appeals on the merits in FY 2018. The Board sustained 69.1 percent in whole or in part. In FY 2017, the sustain rate for contractors was 57.6 percent, when the ASBCA similarly disposed of 139 appeals on the merits. This is great news for contractors seeking resolution at the Board. Moreover, 69.1 percent is the highest meritorious appeal rate we have seen since 2007, when it reached 71 percent.

The incidence of ADR did not increase. ADR was requested only 24 times in FY 2018, down from 31 times a year prior and 41 times in FY 2016. The ASBCA completed 27 ADR proceedings in 2018. (Some were “requested” during previous FYs.) Twenty-three of those 27 proceedings resulted in settlements. This ADR settlement rate of 85 percent is a dramatic increase from 66 percent in FY 2017, but in line with the 85 percent average over the past five years. We believe ADR remains a very attractive option, and the increased success rate for FY 2018 is a welcome development.

The ASBCA also offers Accelerated and Expedited procedures under Rule 12 to dispose of smaller Appeals (less than $150,000). These procedures were used to process 20 Appeals during FY 2018, which reflects a sharp decrease over the past few years (64 in FY 2017 and 31 in FY 2016).

A contractor’s quickest, and thus usually its best outcome to resolving contract disputes still remains negotiating a fair settlement with the Contracting Officer. When that is not possible, the Boards of Contract Appeals and Court of Federal Claims are the two options available to seek resolution of unresolved claims that reach a final decision. While both have advantages and disadvantages, recent data suggests that 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.

(*We would like to thank Senior Law Clerk Dinesh Dharmadasa for his contribution to this alert.)