[Senate Report 104-245]
[From the U.S. Government Publishing Office]
104th Congress Report
SENATE
2d Session 104-245
_______________________________________________________________________
Calendar No. 350
ADMINISTRATIVE DISPUTE RESOLUTION ACT OF 1995
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE
to accompany
S. 1224
TO AMEND SUBCHAPTER IV OF CHAPTER 5 OF TITLE 5, UNITED STATES CODE,
RELATING TO ALTERNATIVE MEANS OF DISPUTE RESOLUTION IN THE
ADMINISTRATIVE PROCESS, AND FOR OTHER PURPOSES
March 27 (legislative day, March 26), 1996.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
TED STEVENS, Alaska, Chairman
JOHN GLENN, Ohio WILLIAM V. ROTH, Jr., Delaware
SAM NUNN, Georgia WILLIAM S. COHEN, Maine
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DAVID PRYOR, Arkansas THAD COCHRAN, Mississippi
JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii BOB SMITH, New Hampshire
BYRON L. DORGAN, North Dakota HANK BROWN, Colorado
Albert L. McDermott, Staff
Director
Leonard Weiss, Minority Staff
Director
Michal Sue Prosser, Chief Clerk
------
SUBCOMMITTEE ON OVERSIGHT OF GOVERNMENT MANAGEMENT AND THE DISTRICT OF
COLUMBIA
WILLIAM S. COHEN, Maine, Chairman
CARL LEVIN, Michigan FRED THOMPSON, Tennessee
DAVID PRYOR, Arkansas THAD COCHRAN, Mississippi
JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii HANK BROWN, Colorado
Kim Corthell, Staff Director
David H. Schanzer, Chief Counsel
Linda J. Gustitus, Minority Staff
Director and Chief Counsel to the
Minority
Frankie de Vergie, Chief Clerk
C O N T E N T S
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Page
I. Purpose..........................................................1
II. Background.......................................................1
III. Legislative History..............................................3
IV. Summary of Legislation...........................................3
V. Section-By-Section Analysis......................................9
VI. Estimated Cost of the Legislation...............................11
VII. Evaluation of Regulatory Impact.................................12
VIII.Committee Vote..................................................12
IX. Changes to Existing Law.........................................12
Calendar No. 350
104th Congress Report
SENATE
2d Session 104-245
_______________________________________________________________________
REAUTHORIZING ALTERNATIVE MEANS OF DISPUTE RESOLUTION IN THE FEDERAL
ADMINISTRATIVE PROCESS AND FOR OTHER PURPOSES
_______
March 27 (legislative day, March 26), 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Stevens, from the Committee on Governmental Affairs, submitted the
following
R E P O R T
[To accompany S. 1224]
The Committee on Governmental Affairs, to which was
referred the bill (S. 1224) to reauthorize alternative means of
dispute resolution in the Federal administrative process and
for other purposes, reports favorably thereon and recommends
the bill as amended do pass.
I. Purpose
The purpose of S. 1224 is to reauthorize permanently the
Administrative Dispute Resolution Act of 1990 (``the ADR
Act''). That legislation has succeeded in promoting the use of
cost-saving alternative dispute resolution (``ADR'') techniques
in the federal administrative process. This reauthorization
bill will improve the ADR Act by broadening its confidentiality
protections, promoting use of binding arbitration to settle
disputes, streamlining the process for hiring neutrals to
participate in alternative dispute resolution, and making a
number of other minor adjustments to the Act.
II. Background
Over the past decades, a consensus has emerged that
traditional litigation is an inefficient way to resolve
disputes. Not only is litigation costly, but due to its
adversarial, contentious nature, litigation often deteriorates
working relationships and fails to produce long-term solutions
to problems.
Congress enacted the Administrative Dispute Resolution Act
in 1990 to encourage federal agencies to use consensual dispute
resolution techniques, otherwise known as alternative dispute
resolution or ``ADR'' in lieu of litigation. It has been proven
that ADR saves money and helps preserve working relationships
between federal agencies and parties that have matters before
them. In addition, since ADR is based on reaching a consensus
among parties instead of deciding which party ``wins'' the
dispute, ADR helps to build relationships and construct lasting
solutions to conflict. The ADR Act was based on the premise
that the government should take advantage of these beneficial
methods of conflict resolution.
By all accounts, the ADR Act has enjoyed a successful five
years. Agencies are using ADR to resolve contracting disputes,
discrimination and other employment claims, and regulatory
enforcement matters. By reducing contracting delays and
litigation costs, ADR improves the way government functions and
provides tangible savings to the American taxpayer.
The Administrative Conference of the United States (ACUS)
issued a comprehensive report on the ADR Act in February, 1995.
Although the Conference could not estimate the total
government-wide savings that have been achieved due to ADR, the
report is replete with examples of large, multimillion dollar
disputes that were resolved more quickly and with far less
acrimony than in the past due to ADR.
A. Contracting Disputes
According to ACUS, nineteen agencies are using ADR to
resolve contracting disputes. The Army Corps of Engineers, for
example, used ADR in 55 contract disputes from 1989-1994 and
resolved 53 of them successfully. In one case, a $55.6 million
claim was settled for $17.3 million in four days. The
Department of Defense reported that it is beginning to use ADR
earlier in the contracting process to avoid the development of
disputes. This ADR method, known as partnering, focuses on
creating cooperative working relationships and maintaining open
communications between the contracting parties.
B. Employment Disputes
Agencies' use of ADR in resolving discrimination claims and
labor-management disputes has grown rapidly in recent years.
The Department of Interior attempts to mediate equal employment
opportunity cases at an early stage and the Secretary credits
this policy for a 43 percent reduction in formal case filings
between fiscal years 1992 and 1993. The Equal Employment
Opportunity Commission intends to use mediation to relieve its
backlog of discrimination complaints.
c. regulatory enforcement disputes
The Environmental Protection Agency has been the leading
agency in using ADR to resolve regulatory enforcement actions.
Pilot programs have been instituted to test the use of
mediation in civil actions under the Superfund program for
cleanup of hazardous waste sites. Mediation has been used in
over 30 cases under the Clean Water Act. In addition, the
Federal Deposit Insurance Corporation estimates that it saved
$9.3 million in legal fees and expenses using ADR to resolve
disputes over loan workouts and creditor claims against failed
financial institutions.
The Governmental Affairs Committee's 1990 report on the ADR
Act noted that the government was a party in 55,000 of the
220,000 civil cases filed in federal court in 1989. While the
number of cases filed rose to approximately 239,000 in fiscal
year 1994, the federal government was a party in only 44,531.
Although it is not known if this decrease in government
litigation has been caused by increased use of ADR, this is a
positive trend that will hopefully continue.
III. Legislative History
The ADR Act expired on October 1, 1995. On September 8,
Senators Grassley and Levin introduced S. 1224, a bill to
provide for permanent reauthorization of the Act. A hearing on
the bill was held by the Subcommittee on Oversight of
Government Management and the District of Columbia on November
29. On December 12, the Committee on Governmental Affairs
unanimously reported S. 1224 with an amendment in the nature of
a substitute.
IV. Summary of the Legislation
The primary purpose of S. 1224 is to reauthorize the ADR
Act. All the government agencies and private groups that have
contacted the Subcommittee on Oversight of Government
Management have strongly endorsed reauthorization. Likewise,
all the witnesses testifying at the Senate hearing supported
permanent reauthorization. As Marshall Breger, former Chair of
ACUS, stated: ``The ADR Act of 1990 laid the foundation for
change by forcing agencies to focus on the opportunities
inherent in ADR. The ADR Act should be reauthorized without a
sunset provision so that the efficiencies and flexibility
inherent in non-litigation resolutions can be better
realized.'' Permanent reauthorization of the Act is warranted
to continue the progress government agencies have made over the
past five years incorporating ADR into their normal operating
procedures.
S. 1224 also makes a number of necessary adjustments to the
ADR Act in order to promote the increased use of ADR.
a. confidentiality
Concerns have been voiced by both federal agencies and
private parties that the original ADR Act did not provide
sufficient confidentiality protections to ADR participants. For
ADR to operate effectively, a party must have complete
confidence that its confidential communications with the
mediator or other neutral will not be revealed to the other
party or the general public. As Dr. Steve Kelman, Administrator
of the Office of Federal Procurement Policy, testified,
``without adequate assurances of confidentiality, contractors
are understandably reluctant to engage in the kind of open
discussions necessary for a successful mediation.''
The original ADR Act attempted to create an environment
conducive to successful ADR by prohibiting parties and neutrals
from disclosing confidential ADR communications unless the
communications had already been made public, a statute required
disclosure, or a court ordered the disclosure to promote law
enforcement or avoid a threat to public health or safety.
The effectiveness of these confidentiality provisions was
partially undermined, however, by section 574(j) of the Act,
which provided that confidential ADR communications did not
qualify for an automatic exemption from the Freedom of
Information Act (FOIA). Due to section 574(j), documents
provided to or generated by an agency in the course of an ADR
proceeding could be subject to public disclosure through the
FOIA. Likewise, under the original Act, the notes and records
of government employees serving as ADR neutrals could be
subject to a FOIA request. According to Philip Harter of the
American Bar Association, ``the insecurity section 574(j)
produces inhibits the use of mediation in situations where it
would clearly be helpful.''
S. 1224 would close this gap in the ADR Act's
confidentiality provisions by exempting confidential ADR
communications from the FOIA. The bill makes clear that this
exemption applies not only to communications generated by or
provided to an agency, but also to communications generated by
or provided to an ADR neutral, regardless of whether the
neutral works for a federal agency, private company, or other
third-party.
This is a narrow exemption. First, it would apply only to
``dispute resolution communications,'' which are defined in the
Act as communications that are ``prepared for the purposes of''
ADR proceedings other than final agreements reached as a result
of ADR. Documents that are created for other purposes do not
qualify for the FOIA exemption. Second, the FOIA exemption
would apply only to communications that qualify for
confidential treatment under the Act. This change in the ADR
Act, the Department of Justice concluded, would be ``an
important and beneficial step toward encouraging greater use of
ADR by administrative agencies.''
S. 1224 improves the Act's confidentiality provisions in
two other ways. First, it clarifies that the Act's
confidentiality protections apply only to communications
prepared for use in a dispute resolution proceeding. The
original Act extended these protections to ``information
concerning'' such communications. By deleting the phrase
``information concerning,'' S. 1224 eliminates a vague and
unjustified extension of the Act's confidentiality provisions.
Second, S. 1224 eliminates section 574(b)(7), which removed all
confidentiality protection from documents that were provided to
all parties to an ADR proceeding. There appears to be no sound
reason why the Act's confidentiality provisions should not
apply to such documents. By eliminating this exception, S. 1224
will promote open communication between the parties to a
dispute, which is often necessary to resolve contentious
issues.
The Department of justice strongly supports the bill's
confidentiality provisions, testifying that they ``strike
exactly the right balance . . . between the inherent needs of
confidentiality in an ADR process, and the desires and entirely
appropriate needs for freedom and openness in Government.''
b. arbitration ``escape clause''
The original ADR Act authorized agencies to refer
administrative disputes to binding arbitration. However, to
accommodate a constitutional concern raised by the Department
of Justice (DOJ) when the legislation was under consideration,
it included an ``escape clause'' permitting the head of an
agency to vacate unilaterally the results of an arbitration.
The Act did not give such powers to private parties.
DOJ's view was that giving arbitrators the power to issue
binding decisions on the executive branch of the government
would violate the Appointments Clause of the Constitution
because arbitrators are not appointed or subject to removal by
the President. This was a minority view at the time and
contrary to the testimony of ACUS, the American Bar
Association, and a leading legal scholar. Nevertheless, to
accommodate DOJ's concern, the legislation was amended to give
the head of an agency unilateral authority to vacate arbitral
awards, which deprived arbitrators of the power to issue
binding decisions on the government.
On September 7, 1995, DOJ's Office of Legal Counsel (OLC)
reversed DOJ's position and issued a detailed opinion
concluding that federal agencies could submit to binding
arbitration without violating the Constitution. OLC determined
that arbitrators are not ``officers of the United States'' that
must be appointed by the President and confirmed by the Senate
because they do not occupy a ``position of employment within
the federal government.'' OLC concluded that arbitrators are
``private actors who are, at most, independent contractors to,
rather than employees of, the federal government.''
Since the constitutional objection to binding arbitration
has been removed, there is no longer any reason to reauthorize
the agency ``escape'' clause. Over the past five years, the
clause has never been invoked. More importantly, its unilateral
nature has, understandably, deterred private parties from
entering into binding arbitration with the government. As
Charles Pou, Jr., the former Director of ACUS' ADR Program
concluded, unless the ``escape clause'' is eliminated,
``arbitration likely will never become a viable alternative for
the federal government.''
This would be unfortunate. Throughout the private sector,
companies are saving money and reducing litigation costs by
using arbitration to resolve commercial disputes instead of
resorting to litigation. If we want the government to enjoy the
efficiencies of the private sector, it must have the
flexibility to operate as a private business, especially when
the government is acting as a commercial entity. Indeed, the
government achieves a double benefit when a case is resolved
through arbitration rather than litigation because not only are
agency litigation costs and attorneys fees reduced, but
judicial resources are freed to pursue criminal cases or other
civil matters.
The ADR Act ensures that the government's interest in
controlling policymaking and protecting the federal budget are
not compromised when matters are referred to arbitration.
First, the Act is permissive--it authorizes agencies to use
binding arbitration, but does not require them to do so.
Consequently, as Marshall Breger testified in the 1989 hearing,
``arbitration can in no way be said to reduce accountability in
agency decisionmaking because it can only be invoked with the
prior, knowing agreement of responsible agency officials, who
are subject to presidential supervision. Arbitration, in other
words, would be employed only if the appropriate government
official wants it.'' Second, the Act enables the parties to
choose the precise issues that are submitted to arbitration and
enter into pre-arbitral agreements requiring that the award
must be within a range of possible outcomes. Thus, the Act
gives the government discretion to limit both the types of
issues an arbitrator will decide and the amount of any award
that might be imposed by the arbitrator. These are powers that
the government does not enjoy when cases are decided by the
federal courts.
In sum, the ``escape clause'' included in the original ADR
Act has effectively precluded federal agencies from using
arbitration to resolve administrative disputes and prevented
substantial cost savings. In order to resurrect binding
arbitration as a viable means of resolving administrative
disputes, S. 1224 repeals the escape clause and all the
provisions in the ADR Act related to it.
An agency's decision to use ADR methods, including binding
arbitration, to resolve disputes is not intended to impact the
current operation of the judgment fund established by 31 U.S.C.
1304. The Committee understands that under current agency
practice the nature of a claim determines whether it is
eligible to be paid from the judgment fund, regardless of the
procedures used to resolve it. The Committee intends that
claims qualifying for payment from the judgment fund, such as
claims decided by the Board of Contract Appeals, still qualify
for payment from that fund even if they are settled through
mediation or another ADR method, or decided pursuant to binding
arbitration.
c. procurement of neutrals
The dynamics for hiring mediators or other third-party
neutrals for ADR is different from typical government
procurement. Unlike ordinary government purchases, agencies
choose the neutral together with a private party and then share
the cost.
There is some evidence that the process for procuring
neutral services from the private sector is not working. Philip
Harter testified that he has waited over six months to be hired
as a mediator by an agency. Indeed, it appears that the
cumbersome federal procurement process has caused agencies to
use government employees as neutrals instead of procuring
mediators from the private sector.
One of the purposes of the Federal Acquisition Streamlining
Act (FASA) of 1994 was to give agencies relief from competitive
bidding procedures under certain circumstances, including the
procurement of expert witnesses for use in ADR. S. 1224 amends
FASA to clarify that this exemption includes the hiring of
neutrals for use in ADR. This clarification is intended to
encourage contracting agents in federal agencies to take
advantage of the flexibility that FASA provides to expedite the
process for contracting for neutrals. In addition, S. 1224
instructs the Federal Mediation and Conciliation Service (FMCS)
to work with appropriate agencies, which should include the
Office of Federal Procurement Policy in the Office of
Management and Budget, to develop procedures for hiring
neutrals on an expedited basis. Improvements can and should be
made to facilitate ADR. The governmental savings that can be
accomplished through increased use of ADR should not be
hindered by unnecessary reliance on federal procurement
policies intended for more complex contracts.
d. reassignment of implementation duties
ACUS, the agency that was primarily responsible for
implementing the ADR Act, did not receive funding in fiscal
year 1996 to continue its operations. Consequently, S. 1224
eliminates or reassigns ACUS' ADR responsibilities.
The bill charges FMCS with the role of encouraging and
facilitating agency use of ADR. FMCS will operate a library of
ADR materials and serve as a clearinghouse for dispute
resolution specialists. FMCS will also continue ACUS' role in
federal-sector policy development by initiating and continuing
inter-agency working groups and conducting training seminars.
S. 1224 authorizes such appropriations as may be necessary to
accomplish these important functions.
The ADR Act had directed ACUS to establish qualification
standards for neutrals and maintain a roster of neutrals
eligible to participate in ADR with the federal government.
Neither of these projects was successful. ACUS determined that
it was more useful to train agencies how to evaluate mediators
instead of establishing a set of standards. In addition, the
centralized roster of neutrals was used infrequently and many
agencies chose instead to establish their own rosters.
Consequently, S. 1224 does not reassign to another agency ACUS'
standard-setting or roster responsibilities.
The responsibility for filing annual reports to Congress on
agency use of ADR has also been eliminated. Since ADR programs
have now been established in the covered agencies, the
Committee believes annual reports would consume limited
resources better spent elsewhere. Congress can play a more
effective role in promoting ADR by conducting meaningful
oversight than requiring agencies to file reports.
e. employment grievances
The original ADR Act did not authorize federal agencies to
use ADR methods to resolve certain claims and grievances by
federal employees, apparently to avoid complicating the multi-
layered federal employee appeal process.
As John Calhoun Wells, Director of the Federal Mediation
and Conciliation Service, testified, this exclusion
``discouraged the use of ADR in some disputes where it might
have been effective.'' ``Access to ADR for these disputes,'' he
concluded, ``should be available, particularly if it can reduce
the number of disputes or resolve them at an early stage.'' For
this reason, S. 1224 repeals the provision that excluded
federal employee complaints from the scope of the Act. ADR has
been a highly effective tool for handling employment related
claims in both the private and public sectors. Application of
the ADR Act to employment decisions in the federal workforce
would provide agencies the opportunity to stem the tide and
cost of employment litigation in the federal government. This
change in the law will not prejudice the interests of federal
employees or unnecessarily complicate the employee appeal
process because ADR may be utilized only with the consent of
both the agency and the employee. Those who wish to use the
standard procedures may continue to do so.
Since the Act has not applied to this area in the past,
leadership from the highest levels in each agency will be
necessary to reap the benefits of ADR. This will involve
direction and support from the agency head and all senior
managers who supervise employees, especially directors of
personnel and general counsels. It will also require planning,
training, the identification and budgeting of needed funds, and
a commitment to make the program work. Programs established
under the Act for covered personnel actions and grievances must
be implemented quickly and ensure neutrality, objectivity, and
trust in the dispute resolution process.
F. Contract Disputes Act
The Contract Disputes Act requires contractors that file
claims against the government in excess of $100,000 to certify
that the claims are made in good faith, the supporting data is
accurate, and the amount requested accurately reflects the
amount for which the government is liable. Smaller claims are
exempted from the certification requirement to reduce the
paperwork burden on contractors.
The original ADR Act required that any claim referred to an
ADR proceeding must be certified, regardless of the amount of
the claim. This requirement imposed significant paperwork
burdens on small claims and discouraged use of ADR in these
matters. S. 1224 would correct this inequity by providing that
claims referred to ADR are subject to the same certification
requirements as all other claims subject to the Contract
Disputes Act.
G. Scope of Coverage
S. 1224 amends the definition of ``alternative means of
dispute resolution'' to include ``the use of ombuds.'' Ombuds
are agency employees designed to serve as neutral arbiters of
agency disputes. To increase the effectiveness of the work of
ombuds, the bill would extend the protections of the ADR Act's
confidentiality provisions to disputes in which they serve as
neutral parties.
S. 1224 also deletes the phrase ``settlement negotiations''
from the statutory list of ADR procedures. This deletion is
necessary to clarify that agencies cannot fulfill the mandate
of the ADR Act by merely engaging in conventional settlement
negotiations to resolve disputes. Rather, the Act requires
agencies to take affirmative steps to incorporate ADR
techniques such as mediation, arbitration, partnering, and
minitrials into their customary operations. As Philip Harter
testified, ``settlement negotiations do not fit that model.''
H. Performance Standards and Budgeting
A number of witnesses at the Senate hearing suggested that
a change in the ``litigation culture'' of agencies would be
necessary to realize the full potential of the ADR Act. In
other words, the incentive system for federal employees needs
to be adjusted so that government lawyers and managers are
rewarded for resolving disputes consensually instead of
``winning'' them through an adjudicatory process.
One way that has been suggested to alter the ``litigation
culture'' of many agencies would be to include ADR skills in
the performance evaluations of agency managers and attorneys.
As Marshal Breger commented: ``Only when attorneys know that
ADR skills are part of their job description will they include
it as part of their dispute settlement armorarium. Otherwise,
they will naturally view it as supplementary to their `main'
job--litigation.''
The Committee supports this suggestion, but declines to
impose a statutory mandate in recognition of the need for
agency flexibility in managing employees. Nonetheless, it is
expected that agencies will modify their employee performance
evaluation systems to reflect that timely and inexpensive
resolution of conflicts, whether through conventional
settlement negotiations or ADR, has an equal or greater value
to the federal government than victories in litigation.
Likewise, performance evaluations should reflect the failure of
appropriate agency officials to use ADR when appropriate to
avoid unnecessary litigation.
The Committee also urges agencies to take further
administrative steps to integrate ADR into their normal
operating procedures. In conjunction with the Office of
Management and Budget, agencies should include ADR in their
annual performance plans and budget for ADR training, hiring of
neutrals, and other ADR related expenses. Use of ADR will
result in cost-savings for agencies in the long run. Thus,
agencies should be encouraged to incorporate ADR into their
annual budgets, even though so doing may reflect increased
short-run expenditures.
V. Section-by-Section Analysis
section 1. short title
The section states that the title of the bill shall be the
``Administrative Dispute Resolution Act of 1995.''
section 2. amendments to definitions
Section 2 amends Section 571 of Title 5 of the United
States Code, which establishes the definition of terms used in
the ADR Act. The definition of ``alternative means of dispute
resolution'' is altered to include ``the use of ombuds'' as
well as ``binding and non-binding arbitration,'' but exclude
``settlement negotiations.'' The definition of ``issue in
controversy'' is amended to delete the provision excluding
employee grievance proceedings specified under section 2302 or
7121(c) of Title 5 from the ADR Act. This change would permit
parties to use ADR to resolve these employment related
disputes.
section 3. amendments to confidentiality provision
Section 3 amends Section 574 of Title 5 of the United
States Code, the confidentiality provisions of the ADR Act.
Subsection (a) deletes the provision that disqualifies from
confidentiality protection documents exchanged between all
parties to an ADR proceeding. Subsection (b) clarifies that the
ADR Act's confidentiality provisions apply only to
communications prepared for purposes of a dispute resolution
proceeding by deleting provisions that had extended the scope
of the confidentiality protections to ``any information
concerning'' such communications. Subsection (c) provides that
alternative confidentiality procedures established by the
parties to an ADR proceeding can qualify for the Act's new
exemption from the Freedom of Information Act only if these
procedures provide for the same or less disclosure than the ADR
Act itself.
Subsection (d) deletes the provision stating that
confidential ADR documents do not qualify for the exemption
from the Freedom of Information Act established by section
552(b)(3) of Title 5. A new subsection makes it clear that
confidential dispute resolution communications generated by or
provided to an agency or neutral are exempt from the Freedom of
Information Act.
section 4. amendment to reflect the closure of the administrative
conference
Section 4 contains amendments reflecting that the
Administrative Conference of the United States (ACUS) has not
received funding to continue its operations and its ADR
responsibilities must be eliminated or reassigned. Subsection
(a) eliminates the requirement that agencies must consult with
ACUS in developing policies to promote the use of ADR.
Subsection (b) repeals the provision requiring ACUS to compile
information concerning agency use of ADR. Subsection (c)
deletes the reference to ACUS in the Labor Management Relations
Act.
section 5. amendments to support service provision
This section amends section 583 of Title 5 to authorize
agencies to use the services and facilities of State, local,
and tribal governments for the purposes of implementing the ADR
Act.
section 6. amendments to the contract disputes act
Subsection 1 amends the Contract Disputes Act to authorize
contractors using ADR methods to resolve a claim against the
federal government to follow the same certification procedures
that are applicable to any other claim subject to that Act.
Subsection 2 amends the Contract Disputes Act to reflect
the permanent reauthorization of the ADR Act.
section 7. amendments on acquiring neutrals
Section 7 amends the sections of the ADR Act concerning
neutrals. Subsection (a) amends the Federal Property and
Administrative Services Act and section 2304(c)(3)(C) of Title
10, to clarify that agencies may use expedited procurement
procedures when hiring neutrals for ADR proceedings. Subsection
(b) amends section 573 of Title 5, which authorizes the
government to use neutrals in ADR proceedings. This section now
requires the Federal Mediation and Conciliation Service to take
on the responsibilities formerly performed by ACUS of
encouraging and promoting the use of ADR in the federal
agencies and developing procedures for agencies to hire
neutrals on an expedited basis. The statutory requirements for
the government to establish professional standards for neutrals
and maintain a roster of eligible neutrals are repealed.
section 8. arbitration awards and judicial review
Section 8 repeals the provision of the ADR Act which had
authorized agency heads to vacate unilaterally the results of
an arbitration, and related provisions.
Section 9. Permanent Authorization of the Alternative Dispute
Resolution Provision of Title 5, United States Code
Section 9 deletes the ADR Act's sunset provision, thereby
permanently reauthorizing the Act.
section 10. authorization of appropriations
Section 10 creates a new section 584 in Title 5 of the
United States Code authorizing such funds as may be necessary
to carry out the purposes of the ADR Act.
VI. Estimated Cost of the Legislation
U.S. Congress,
Congressional budget Office,
Washington, DC, February 6, 1996.
Hon. Ted Stevens,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 1224, the Administrative Dispute Resolution Act of
1995, as ordered reported by the Senate Committee on
Governmental Affairs on December 12, 1995. Enacting S. 1224
could result in some net savings to the federal government from
increased use of alternative means of dispute resolution (ADR),
but we cannot estimate the amount of any savings. Any
improvement in the dispute resolution process would allow
agencies to make more efficient use of their appropriated
funds, but would affect total spending only if appropriations
were reduced correspondingly. Enacting S. 1224 would not affect
direct spending or receipts. Therefore, pay-as-you-go
procedures would not apply to the bill.
S. 1224 would make many changes and additions to the
current laws relating to the application of ADR to conflicts
involving the federal government. The bill would change the
definition of ADR to include the use of ombudsmen and non-
binding arbitration. It would also exclude the use of
settlement negotiations--that is, negotiations of a complaint
by an employee and his or her agency without involving a
neutral party--as a form of ADR. In addition, S. 1224 would
permit parties to use ADR to resolve employment-related
disputes and would increase the responsibilities of the Federal
Mediation and Conciliation Service (FMCS).
Federal Budgetary Impact. Currently, many executive branch
agencies utilize various methods of ADR. Data complied by the
General Accounting Office (GAO) indicates that the use of ADR
tends to result in more efficient resolutions of disputes,
although such conclusions are based mainly on anecdotal
evidence. Implementation of this bill likely would result in
increased use of ADR by federal agencies. If greater use of ADR
leads to more efficient dispute resolution, then agencies could
realize some savings, and such savings could more than offset
any increased spending by the FMCS in support of ADR. However,
CBO does not have sufficient information to estimate the
likelihood or magnitude of such potential savings.
The bill would require the FMCS to take on some of the
responsibilities formerly performed by the Administrative
Conference of the United States (ACUS), which received $1.8
million in appropriations for fiscal year 1995. Any increase in
federal spending by the FMCS, however, would be subject to
annual appropriations actions. Furthermore, as noted above, any
additional costs from this provision could be offset by savings
from enhanced use of alternative means of dispute resolution by
federal agencies.
Impact on State, Local, and Tribal Governments. S. 1224
contains no intergovernmental mandates as defined in Public Law
104-4 and would impose no direct costs on state, local, or
tribal governments. Such governments currently may resolve
disputes with the Federal Government through the use of certain
forms of ADR. S. 1224 would broaden the forms of ADR that are
available and would eliminate the federal government's ability
to nullify the results of arbitration proceedings.
State, local, and tribal governments could decide to
resolve disputes with the federal government through the use of
these additional forms of ADR. However, instances where ADR is
used are rare and usually involve highly complex legal and
regulatory issues. In those cases, savings may accrue; however,
the magnitude of any savings resulting from the changes in S.
1224, in all likelihood, would be relatively small.
Private Sector Mandates. This bill would impose no new
private sector mandates, as defined in Public law 104-4.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz and John Righter, who can be reached at 226-2860,
Christi Hawley, who can be reached at 226-2820, and, for state
and local impacts, Leo Lex, who can be reached at 225-3220.
Sincerely,
June E. O'Neil, Director.
VII. Evaluation of Regulatory Impact
The statute is not expected to require the issuance of
additional regulations by any federal agency.
VIII. Committee Vote
The Committee ordered S. 1224, as amended, to be reported
to the full Senate by a unanimous voice vote of the Senators
then present.
IX. Changes to Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 349, as reported, are shown as follows: (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
ADMINISTRATIVE DISPUTE RESOLUTION ACT
Pub. L. No. 101-552, as amended by Pub. L. 102-354
* * * * * * *
SEC. 3. [5 U.S.C. 581 note] PROMOTION OF ALTERNATIVE MEANS OF DISPUTE
RESOLUTION.
(a) Promulgation of Agency Policy.--Each agency shall adopt
a policy that addresses the use of alternative means of dispute
resolution and case management. In developing such a policy,
each agency shall--
(1) consult with [the Administrative Conference of
the United States and] the Federal Mediation and
Conciliation Service; and
(2) examine alternative means of resolving disputes
in connection with--
(A) formal and informal adjudications;
(B) rulemakings;
(C) enforcement actions;
(D) issuing and revoking licenses or permits;
(E) contract administration;
(F) litigation brought by or against the
agency; and
(G) other agency actions.
* * * * * * *
[SEC. 11. [5 U.S.C. 581 note] SUNSET PROVISION.
The authority of agencies to use dispute resolution
proceedings under this Act and the amendments made by this Act
shall terminate on October 1, 1995, except that such authority
shall continue in effect with respect to then pending
proceedings which, in the judgment of the agencies that are
parties to the dispute resolution proceedings, require such
continuation, until such proceedings terminate.]
* * * * * * *
TITLE 5, UNITED STATES CODE: GOVERNMENT ORGANIZATION AND EMPLOYEES
* * * * * * *
CHAPTER 5--ADMINISTRATIVE PROCEDURE
* * * * * * *
Subchapter IV--Alternative Means of Dispute Resolution in the
Administrative Process
Sec. 571. Definitions
For the purposes of this subchapter, the term--
* * * * * * *
(3) ``alternative means of dispute resolution'' means
any procedure that is used, in lieu of an adjudication
as defined in section 551(7) of this title, to resolve
issues in controversy, including, but not limited to,
[settlement negotiations,] conciliation, facilitation,
mediation, factfinding, minitrials, [and arbitration,]
use of ombuds, and binding or nonbinding arbitration,
or any combination thereof;
* * * * * * *
(8) ``issue in controversy'' means an issue which is
material to a decision concerning an administrative
program of an agency, and with which there is
disagreement--
``(A) between an agency and persons who would
be substantially affected by the decision; or
``(B) between persons who would be
substantially affected by the [decision,]
decision;
[except that such term shall not include any matter
specified under section 2302 or 7121(c) of this title;]
* * * * * * *
Sec. 573. Neutrals
* * * * * * *
[(c) In consultation with the Federal Mediation and
Conciliation Service, other appropriate Federal agencies, and
professional organizations experienced in matters concerning
dispute resolution, the Administrative Conference of the United
States shall--
(1) establish standards for neutrals (including
experience, training, affiliations, diligence, actual
or potential conflicts of interest, and other
qualifications) to which agencies may refer;
(2) maintain a roster of individuals who meet such
standards and are otherwise qualified to act as
neutrals, which shall be made available upon request;
(3) enter into contracts for the services of neutrals
that may be used by agencies or an elective basis in
dispute resolution proceedings; and
(4) develop procedures that permit agencies to obtain
the services of neutrals on an expedited basis.]
(c) In consultation with other appropriate Federal agencies
and professional organizations experienced in matters
concerning dispute resolution, the Federal Mediation and
Conciliation Service shall--
(1) encourage and facilitate agency use of
alternative means of dispute resolution; and
(2) develop procedures that permit agencies to obtain
the services of neutrals on an expedited basis.
* * * * * * *
(e) Any agency may enter into a contract with any person
[on a roster established under subsection (c)(2) or a roster
maintained by other public or private organizations, or
individual] for services as a neutral, or for training in
connection with alternative means of dispute resolution. The
parties in a dispute resolution proceeding shall agree on
compensation for the neutral that is fair and reasonable to the
Government.
Sec. 574. Confidentiality
(a) Except as provided in subsections (d) and (e), a
neutral in a dispute resolution proceeding shall not
voluntarily disclose or through discovery or compulsory process
be required to disclose [any information concerning] any
dispute resolution communication or any communication provided
in confidence to the neutral, unless--
* * * * * * *
(b) A party to a dispute resolution proceeding shall not
voluntarily disclose or through discovery or compulsory process
be required to disclose [any information concerning] any
dispute resolution communication, unless--
* * * * * * *
(5) a court determines that such testimony or
disclosure is necessary to--
(A) prevent a manifest injustice;
(B) help establish a violation of law; or
(C) prevent harm to the public health and
safety, of sufficient magnitude in the
particular case to outweigh the integrity of
dispute resolution proceedings in general by
reducing the confidence of parties in future
cases that their communications will remain
confidential; or
(6) the dispute resolution communication is relevant
to determining the existence or meaning of an agreement
or award that resulted from the dispute resolution
proceeding or to the enforcement of such an agreement
or award[; or].
[(7) the dispute resolution communication was
provided to or was available to all parties to the
dispute resolution proceeding.]
* * * * * * *
(d)(1) The parties may agree to alternative confidential
procedures for disclosures by a neutral. Upon such agreement
the parties inform the neutral before the commencement of the
dispute resolution proceeding of any modifications to the
provisions of subsection (a) that will govern the
confidentiality of the dispute resolution proceeding. If the
parties do not so inform the neutral, subsection (a) shall
apply.
(2) To qualify for the exemption established under
subsection (j), an alternative confidential procedure under
this subsection may not provide for less disclosure than the
confidential procedures otherwise provided under this section.
* * * * * * *
[(j) This section shall not be considered a statute
specifically exempting disclosure under section 552(b)(3) of
this title.]
(j) A dispute resolution communication which is generated
by or provided to an agency or neutral, and which may not be
disclosed under this section, shall also be exempt from
disclosure under section 52(b)(3).
* * * * * * *
Sec. 580. Arbitration awards
* * * * * * *
[(c) The head of any agency that is a party to an
arbitration proceeding conducted under this subchapter is
authorized to terminate the arbitration proceeding or vacate
any award issued pursuant to the proceeding before the award
becomes final by serving on all other parties a written notice
to that effect, in which case the award shall be null and void.
Notice shall be provided to all parties to the arbitration
proceeding of any request by a party, nonparty participant or
other person that the agency head terminate the arbitration
proceeding or vacate the award. An employee or agent engaged in
the performance of investigative or prosecuting functions for
an agency may not, in that or a factually related case, advise
in a decision under this subsection to terminate an arbitration
proceeding or to vacate an arbitral award, except as witness or
counsel in public proceedings.]
[(d)] (c) A final award is binding on the parties to the
arbitration proceeding, and may be enforced pursuant to
sections 9 through 13 of title 9. No action brought to enforce
such an award shall be dismissed nor shall relief therein be
denied on the grounds that it is against the United States or
that the United States is an indispensable party.
[(e)] (d) An award entered under this subchapter in an
arbitration proceeding may not serve as an estoppel in any
other proceeding for any issue that was resolved in the
proceeding. Such an award also may not be used as precedent or
otherwise be considered in any factually unrelated proceeding,
whether conducted under this subchapter, by an agency, or in a
court, or in any other arbitration proceeding.
[(f) An arbitral award that is vacated under subsection (c)
shall not be admissible in any proceeding relating to the
issues in controversy with respect to which the award was
made.]
[(g) If an agency head vacates an award under subsection
(c), a party to the arbitration (other than the United States)
may within 30 days of such action petition the agency head for
an award of attorney fees and expenses (as defined in section
504(b)(1)(A) of this tile) incurred in connection with the
arbitration proceeding. The agency head shall award the
petitioning party those fees and expenses that would not have
been incurred in the absence of such arbitration proceeding,
unless the agency head or his or her designee finds that
special circumstances make such an award unjust. The procedures
for reviewing applications for awards shall, where appropriate,
be consistent with those set forth in subsection (a) (2) and
(3) of section 504 of this title. Such fees and expenses shall
be paid from the funds of the agency that vacated the award.]
Sec. 581. Judicial review
* * * * * * *
(b)[(1)] A decision by an agency to use or not to use a
dispute resolution proceeding under this subchapter shall be
committed to the discretion of the agency and shall not be
subject to judicial review, except that arbitration shall be
subject to judicial review under section 10(b) of title 9.
[(2) A decision by the head of an agency under section 590
to terminate an arbitration proceeding or vacate an arbitral
award shall be committed to the discretion of the agency and
shall not be subject to judicial review.]
[Sec. 582. Compilation of information
The Chairman of the Administrative Conference of the United
States shall compile and maintain data on the use of
alternative means of dispute resolution in conducting agency
proceedings. Agencies shall, upon the request of the Chairman
of the Administrative Conference of the United States, supply
such information as is required to enable the Chairman to
comply with this section.]
Sec. 583. Support services
For the purposes of this subchapter, an agency may use
(with or without reimbursement) the services and facilities of
other Federal agencies, State, local, and tribal governments,
public and private organizations and agencies, and individuals,
with the consent of such agencies, organizations, and
individuals. An agency may accept voluntary and uncompensated
services for purposes of this subchapter without regard to the
provisions of section 1342 of title 31.
Sec. 584. Authorization of Appropriations
There are authorized to be appropriated such sums as may be
necessary to carry out the purposes of this subchapter.
* * * * * * *
TITLE 10, UNITED STATES CODE: ARMED FORCES
* * * * * * *
Sec. 2304. Contracts: competition requirements
* * * * * * *
(c) The head of an agency may use procedures other than
competitive procedures only when--
* * * * * * *
(3) it is necessary to award the contract to a
particular source or sources in order (A) to maintain a
facility, producer, manufacturer, or other supplier
available for furnishing property or services in case
of a national emergency or to achieve or to achieve
industrial mobilization, (B) to establish or maintain
an essential engineering, research, or development
capability to be provided by an educational or other
nonprofit institution or a federally funded research
and development center, or (c) to procure the services
of an expert for use, in any litigation or dispute
(including any reasonably foreseeable litigation or
dispute) involving the Federal Government, in any
trial, hearing, or proceeding before any court,
administrative tribunal, or [agency, or] agency, or to
procure the services of an expert or neutral for use in
any part of an alternative dispute resolution process,
whether or not the expert is expected to testify;
* * * * * * *
TITLE 29, UNITED STATES CODE: LABOR
* * * * * * *
Sec. 173. Functions of service
* * * * * * *
(f) The Service may make its services available to Federal
agencies to aid in the resolution of disputes under the
provisions of subchapter IV of chapter 5 of title 5, United
States Code. Functions performed by the Service may include
assisting parties to disputes related to administrative
programs, training persons in skills and procedures employed in
alternative means of dispute resolution, and furnishing
officers and employees of the Service to act as neutrals. Only
officers and employees who are qualified in accordance with
section 583 of title 5, United States Code, may be assigned to
act as neutrals. The Service shall consult with [the
Administrative Conference of the United States and] other
agencies in maintaining rosters of neutrals and arbitrators,
and to adopt such procedures and rules as are necessary to
carry out the services authorized in this subsection.
* * * * * * *
TITLE 41, UNITED STATES CODE: PUBLIC CONTRACTS
* * * * * * *
CHAPTER 4--PROCUREMENT PROCEDURES
* * * * * * *
Sec. 253. Competition requirements
* * * * * * *
(c) An executive agency may use procedures other than
competitive procedures only when--
* * * * * * *
(3) it is necessary to award the contract to a
particular source or sources in order (A) to maintain a
facility, producer, manufacturer, or other supplier
available for furnishing property or services in case
of a national emergency or to achieve or to achieve
industrial mobilization, (B) to establish or maintain
an essential engineering, research, or development
capability to be provided by an educational or other
nonprofit institution or a federally funded research
and development center, or (C) to procure the services
of an expert for use, in any litigation or dispute
(including any reasonably foreseeable litigation or
dispute) involving the Federal Government, in any
trial, hearing, or proceeding before any court,
administrative tribunal, or [agency, or] agency, or to
procure the services of an expert or neutral for use in
any part of an alternative dispute resolution process,
whether or not the expert is expected to testify;
* * * * * * *
CHAPTER 9--CONTRACT DISPUTES
* * * * * * *
Sec. 605. Decision by contracting officer
* * * * * * *
(d) Notwithstanding any other provision of this Act, a
contractor and a contracting officer may use any alternative
means of dispute resolution under subchapter IV of chapter 5 of
title 5, United States Code, or other mutually agreeable
procedures, for resolving claims. [In a case in which such
alternative means of dispute resolution or other mutually
agreeable procedures are used, the contractor shall certify
that the claim is made in good faith, that the supporting data
are accurate and complete to the best of his or her knowledge
and belief, and that amount requested accurately reflects the
contract adjustment for which the contractor believes the
Government is liable.] The contractor shall certify the claim
when required to do so as provided under subsection (c)(1) or
otherwise required by law. All provisions of subchapter IV of
chapter 5 of title 5, United States Code, shall apply to such
alternative means of dispute resolution.
(e) [The authority of agencies to engage in alternative
means of dispute resolution proceedings under subsection (d)
shall cease to be effective on October 1, 1995, except that
such authority shall continue in effect with respect to then
pending dispute resolution proceedings which, in the judgment
of the agencies that are parties to such proceedings, require
such continuation, until such proceedings terminate.] In any
case in which the contracting officer rejects a contractor's
request for alternative dispute resolution proceedings, the
contracting officer shall provide the contractor with a written
explanation, citing one or more of the conditions in section
572(b) of Title 5, or such other specific reasons that
alternative dispute resolution procedures are inappropriate for
the resolution of the dispute. In any case in which a
contractor rejects a request of an agency for alternative
dispute resolution proceedings, the contractor shall inform the
agency in writing of the contractor's specific reasons for
rejecting the request.