Looking for Defense Contract Appeal Trends in ASBCA Annual Report
The Armed Services Board of Contract Appeals (ASBCA) recently published its annual report for fiscal year (FY) 2023. The ASBCA Charter requires the Board to forward a report on its transactions and proceedings to high-ranking acquisition officials at the U.S. Department of Defense (DoD), Army, Navy, and Air Force within 30 days after the close of each fiscal year. The report is also made available to the public and can provide key insights for contractors in the defense and national security arenas. The FY 2023 report shows interesting trends in cases filed at the ASBCA. In this article, we review how statistics for FY 2023 compare to previous fiscal years and discuss emerging trends in government contracts cases before the ASBCA.
The ASBCA is a neutral and independent administrative forum whose primary function is to hear and decide post-award contract disputes between government contractors and executive agencies of the U.S. government. The Board's administrative judges hear appeals under the Contract Disputes Act. A majority of cases heard by the ASBCA involve appeals by contractors from a contracting officer's final decision on a contractor's claim. The ASBCA hears appeals not only from decisions by the Army, Navy, Air Force, and U.S. Army Corps of Engineers, but also decisions from the Central Intelligence Agency (CIA), National Aeronautics and Space Administration (NASA), the Washington, DC, Metropolitan Area Transit Authority (WMATA), and DoD agencies, including the Defense Logistics Agency, the Defense Contract Management Agency, the Defense Contract Audit Agency, the Missile Defense Agency, the Washington Headquarters Service, and many others.
The Board operates pursuant to the ASBCA rules and uses the Federal Rules of Evidence and Federal Rules of Civil Procedure as a guide. ASBCA rules allow for accelerated processing of small dollar claims. ASBCA Board Rule 12 allows an appellant to elect to have its appeal processed using expedited or accelerated procedures.
Expedited procedures are allowed for disputes valued at $50,000 or less, or, in the case of a small business, $150,000 or less. Expedited cases normally result in a written decision within 120 days. Accelerated procedures are allowed where the amount in dispute is $100,000 or less. Accelerated cases normally result in a written decision within 180 days.
The Board also has a thriving alternative dispute resolution (ADR) program. Parties can make a joint request to the ASBCA to use the Board's mediation services pre- or post-claim. If the Board agrees that the case is suitable for mediation, they will provide a judge to assist the parties in developing an ADR process with hopes of eventually resolving the appeal. Parties can also decide to use a private mediator at their own expense.
The Number of Cases Docketed Decreased, Continuing a Trend
The ASBCA docketed only 342 new cases in FY 2023. This is a 14.5 percent decrease from prior FYs, when 400 new cases were docketed in both FY 2022 and FY 2021. Cases docketed in FYs 2021 and 2022 already represented a substantial decrease of 19.5 percent from the 497 cases docketed in FY 2020.
At the same time, the number of cases disposed of during FY 2023 decreased. Last FY, the ASBCA disposed of 375 cases compared to 397 cases disposed of in FY 2022. Importantly, the decrease in cases filed in FYs 2021 and 2022 likely resulted from fewer contract awards during the height of the COVID-19 pandemic.
However, the number of cases continues to drop, albeit at a slower rate, in this post-pandemic period. This sustained decrease reflects a continued decrease in contract awards rather than a decrease in disputes between contractors and the government. There has been a steady decrease in the number of contract awards by the military components as well as DoD agencies, from FY 2018 through FY 2022, according to USA Spending.
The ASBCA Ruled in Favor of Contractors in 67 Percent of Merits Decisions
During FY 2023, the ASBCA sustained in 67 percent of cases that went to a merits decision. This is down from the 71 percent merit sustain rate recorded in FY 2022.
Overall, 24 percent of all cases resolved in FY 2023 resulted in a merits decision favorable to contractors. This percentage includes those cases dismissed by the Board. This compares to an overall 25 percent sustain rate reported in FY 2022.
Interestingly, the number of cases dismissed by the Board in FY 2023 — 243 (or 65 percent) of resolved cases — remained static compared to FY 2022. In FY 2022, 255 (or 64 percent) of all cases resolved by the Board were dismissals.
While we cannot discern whether there were more dismissals resulting from settlements in FY 2023, the Board noted that most of these dismissals reflected settlements.
The Number of Pending Motions Increased
As of October 1, the ASBCA had 1,078 motions pending decision compared to 848 motions pending on October 1, 2022. This represents a 27.1 percent increase in pending motions at the close of the fiscal year.
Notably, the number of summary judgment motions increased substantially. In FY 2022, there were only 252 pending motions for summary judgment at the end of the fiscal year, whereas there were 554 pending motions for full or partial summary judgment at the end of FY 2023.
On the other hand, the number of pending motions to dismiss decreased. At the end of FY 2022 there were a total of 209 pending motions to dismiss for failure to state a claim, lack of jurisdiction, failure to prosecute or alleging multiple bases. At the end of FY 2023, there were only 148 pending motions to dismiss for the same reasons.
It appears that the increased submission of summary judgment motions, which are significantly more complex and time-consuming to resolve than motions to dismiss, likely accounts for the increase in motions pending resolution at the close of the fiscal year. This considerable number of pending summary judgment motions may cause further delays in hearings or the potential for hearings to occur without resolution of case-dispositive motions. In turn, this could lengthen the time for resolution of more complex appeals.
The Number of Hearings Remained the Same but Hearings on a Per-Case Basis Increased
In FY 2023, the ASBCA held 23 hearings adjudicating 61 cases. This is the same number of hearings as was held in FY 2022. However, in FY 2022, the Board held hearings in 87 cases. This could indicate that the Board is holding more hearings on a per-case basis than it was in FY 2022. This may also be related to the fact that parties are filing more dispositive motions, as discussed above, than they did in the past. On the other hand, the Board conducted hearings that likely resolved more cases with multiple claims — i.e., multiple appeals — in FY 2022.
Most interesting is that one would expect the Board's overall hearing count to have significantly increased in a post-COVID-19 environment when both in-person hearings and virtual hearings were available without significant restrictions. The Board's annual report does not distinguish between either form of hearing. Rather, FY 2023 saw no overall increase in the number of hearings at all.
The Number of Suspended Cases Increased
As of October 1, the ASBCA had 189 suspended cases, representing 20.4 percent of its pending cases. This is an increase from the end of FY 2022 when there were only 163 suspended cases, representing 17 percent of pending cases. This slight increase could indicate a variety of things, including increased audits and pending investigations of contractors. What is unclear from the report is whether "suspended" cases include those cases on an ADR track. Since this ADR-related metric is a separate status in the ASBCA report, we can presume that the 189 suspended cases at the end of FY 2023 did not include those accepted for ADR procedures by the Board.
Pursuit of Alternative Dispute Resolution Decreased
The number of cases on the ADR track at the end of the fiscal year significantly decreased from 2022 to 2023. In FY 2022, there were 63 cases on the ADR track, representing 6.5 percent of the Board's pending cases. In FY 2023, on the other hand, only 38 cases were pending ADR procedures at the end of the fiscal year, representing a mere 4.1 percent of cases pending at the Board. Presuming this downward trend was not caused by numerous related appeals, this represents a substantial downward departure in the number of cases pursuing ADR at the Board.
Additionally, fewer cases were resolved through the Board's ADR program during FY 2023. In FY 2023, only 83 cases were diverted to the Board's ADR program, compared to 125 cases diverted to the ADR program in FY 2022. Of the 83 ADR cases in FY 2023, 69 were successfully resolved, while seven remain pending into FY 2024, resulting in an 83.1 percent success rate. Of the 125 ADR cases in FY 2022, 111 cases were successfully resolved with only two pending into FY 2023, resulting in an 88.8 percent success rate.
The Board's ADR statistics are surprising considering the static count of hearings, increased number of pending dispositive motions, and overall sharp decrease in the count of disposed cases in FY 2023. Again, it is possible several large families of appeals that had been consolidated were pending at the end of FY 2023, which would skew these statistics and the authors' conclusions.
The Number of Expedited or Accelerated Cases Substantially Increased, Almost Returning to 2021 Numbers
The number of Rule 12 cases subject to expedited or accelerated procedures doubled from seven cases in 2022 to 14 cases in 2023. In order to ensure speedier resolution of the dispute, appellants can elect to utilize expedited procedures for cases claiming $50,000 or less, or for small businesses, $150,000 or less. Alternatively, appellants can elect accelerated procedures for cases claiming $100,000 or less.
Expedited cases and accelerated cases normally result in a written decision within 120 days or 180 days, respectively, from the date of the Rule 12 election. This results in truncated briefing and hearing schedules that keep these cases moving. The increase in the use of these procedures could indicate that contractors are deciding to limit their recoveries to the Rule 12 caps in favor of a quicker resolution.
Such a decision by an appellant will keep the dispute on the fast-track to resolution. Of note, Rule 12 procedures are not available to the government in affirmative government claims.
Overall, the reduction in new appeals at the ASBCA appears to coincide with a lower resolution of cases this past fiscal year. However, the ASBCA's merit sustain rate remains high. Parties also appeared to pursue ADR less frequently but were more likely to pursue expedited or accelerated appeals procedures. At the same time, parties filed significantly more dispositive and non-dispositive motions than in prior fiscal years, making it much more likely that the appeal or parts of the appeal will eventually be resolved before a hearing — even if the final resolution may take longer than in years past.
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This alert was originally published in Law360.
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