What is a dispute?

A dispute is formed under a contract when a controversy develops about:

Payment for contract work

The time period allotted for performance

Money due to either party

Contract terms.

When the contractor's written request does not include all the criteria for a claim, the CO will return the request along with a written response explaining its deficiencies, as outlined in the disputes clause in the contract.

Notifying the CO of Potential Disputes

What conditions can lead to disputes under a contract?

The COR should be aware that controversies can stem from disagreements and can give rise to disputes under the contract. For instance:

Complex projects may form troublesome interrelationships between the government and contractor personnel administering the contract.

Lengthy contract documents and multiple revisions of those documents can foster differing interpretations of contract terms.

Unforeseen events may create problems that cause disagreements between the contractor and the government; for example, changing weather conditions may disrupt delivery schedules.

Well-intentioned actions can create out-of-scope changes. For example, a contractor may try a different approach than the one initially agreed upon when performing the contract work, thinking that the new approach would be more efficient and cost-effective. The COR might even have agreed that the contractor could use the new approach. But what if it is later determined that this approach is more expensive than the original approach because of a factor that was not initially considered? At this point, it is likely that a dispute will arise regarding which party is responsible for the added costs associated with the out-of-scope change. Does the contractor have sole responsibility or did the COR's actions or inactions create government liability for the added costs?

How does a dispute become a claim?

For a contractor's disagreement or dispute with the government to constitute a claim, the contractor must first initiate a request for a claim and demand that the CO make a final decision on the written request. A CO's final decision can be discretionary, but it must be within the terms and conditions of the contract. The Contract Disputes Act does not require the board of contract appeals to review the CO's decision.

The process of analyzing a potential claim, leading up to the CO's final decision, can be categorized into five phases:

1. Identifying the issue(s) being disputed

2. Performing an analysis of the impact the claim will have on performance and cost

3. Evaluating project documentation (see Question 395)

4. Performing a price/cost analysis of the claim and damage apportionment

5. Preparing a report.

What kinds of disputes often develop into claims?

A decision from the CO may be necessary when various types of disagreements arise between the government and the contractor. Disagreements can develop with regard to the following issues:

Payment of invoices

Settlement of contract claims

Reinstatement of a previously terminated contract

Termination of a breached contract for default

Acceptance or rejection of nonconforming items.

What are the warning signs of a potential dispute?

The COR should be aware of the warning signs of a dispute and should notify the CO as soon as the possibility of a dispute has arisen. These warning signs include:

Lack of specific information from a contractor during a preproposal conference about how the job will be completed

Failure of a contractor to begin work within approximately 10 percent of the contract's total period of performance

Repeated failure of a contractor to meet milestones on the critical path of a project's schedule

Repeated safety violations or accidents, possibly indicating poor management

Repeated incidents of poor-quality work or rework

Complaints from site workers to government personnel about working conditions

Refusal by a contractor to sign bilaterally negotiated contract modifications or agreements containing the language necessary to release a modification

Letters from a contractor alluding to field problems, without specific details regarding those problems

Numerous contractor correspondences about insignificant matters that require replies, creating a nightmare of paperwork

Persistent complaints, without foundation, from a contractor, concerning the behavior, motives, or requirements of the inspector or contract administrator

Complaints from subcontractors concerning late payments or nonpayment.