Government Contracting Database

A significant number of disputes and claims between contractors and the government are settled without a decision by a Board of Contract Appeals judge. Negotiation and settlement of claims may occur at any time during the disputes process. In fact, claims have often been settled immediately prior to the commencement of a hearing. Certainly, the filing of a claim or the issuance of a Contracting Officer’s decision does not prevent negotiation and settlement of the dispute.

Negotiation is such an important element that not only are there courses that explain negotiation techniques, but one government agency, the Corps of Engineers, publishes a book entitled “Construction Contract Negotiating Guide.” (Also See Corps of Engineers Negotiation Procedures). The Corps’ guide covers contracts, contract modifications, and settlement of disputes. The guide offers a number of practical tips on negotiating, including defining the roles of the various government personnel involved in the negotiations.

The most important principle of negotiation is preparation. You cannot have a successful negotiating session without preparation. You need to gather your supporting facts and documents, define your objectives and determine the persons who should attend the negotiation on your behalf. Each of these points will be discussed in greater detail below.

A solid command of the facts, with supporting documentation, will enable you to negotiate from a position of strength. The government negotiators will always seek a factual justification for any settlement because the record must reflect a legitimate basis for settlement and payment. A thorough knowledge of your quality control reports, progress schedules, correspondence, interpretation of the contract and as-built conditions will enable you to support your position during negotiations. The key again to a successful negotiation is preparation.

As part of that preparation, you must set the goals or objectives to be achieved during negotiations. While your initial focus may be in terms of the dollar amount of the settlement, you should also consider other elements, for example, removal of an unsatisfactory performance rating, acceptance of in-place work that does not strictly conform to the specifications, substitution of equipment or materials, time extensions, or remission of liquidated damages. Once you have your goals or objectives established, you will be able to plan your strategy for negotiations. You will understand which points you can concede and which points are firm.

The third part of this preparation is the selection of persons who will attend the negotiation on your behalf. This is not as easy as you may think, and you should form a team to negotiate. You should take a number of key employees who have factual knowledge to support your position, but be aware that there may be a problem in having a large number of people present at the negotiating session. The government may attempt to engage these people in extensive questioning to undermine your position. Another hazard is that the negotiations may stray from your objectives. On the other hand, if you do not take the right people you may not factually support your position. Above all, you must have someone who has authority to settle at the meeting.

During the actual negotiations, you should keep your objectives in mind and keep the government focused on your position and not stray into other areas. The government may attempt to cloud the negotiations by citing safety violations, labor violations, non-conforming work, delays by you and your subcontractors and unreasonable prices in an effort to get you to reduce your dollar amount. You must be aware of these tactics and be ready to counter them with facts. For example, your subcontractor may have been late in its portion of the work, but that delay may not have delayed the project.

At the conclusion of the negotiations, you should make a written memo of the points of settlement. The government will also make a memo. You should either make a joint written agreement or review and approve a written agreement. One of the dangers of negotiating with the government concerns the authority of the government’s agent. The only persons who can bind the government are the Contracting Officer and his authorized representatives. You must determine the authority of the government’s representatives at the negotiation. These representatives may not be able to bind the government, but will only make a recommendation to the Contracting Officer regarding the settlement. Even the government’s trial attorney handling the dispute does not have binding authority. Generally, the Contracting Officer endorses these recommendations and the settlement becomes binding on the government.

There are a number of games some negotiators play such as “good guy-bad guy,” lack of funding to pay a higher settlement, lack of authority when the Contracting Officer later rejects the settlement and the threat of an audit of your records. You probably have experienced some of these tactics. The best counter-tactic is to recognize it as a “game” and maintain a strong position on your entitlement to the additional monies or other objectives. Again, the key to a good negotiation and settlement is preparation. The government will not sustain its bluff if you are prepared with facts and reasons for the higher recovery on your claim.

Updated: July 2, 2018