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board work suffers. Finally, the lack of uniformity in rules and procedures among agency boards and the use of non-lawyer board members who are not sufficiently familiar with the adjudication process have been frequent subjects of criticism.

These criticisms are all aimed at the general standards of individual agency boards, rather than the institutional criticism of the sort discussed in the previous two paragraphs. The fact that there are numerous boards presently in operation invites comparison, and although some degree of individuality between boards quite likely is valuable, many believe that some minimum standards for the general operation of boards should be adopted.

dence, examine and cross-examine witnesses, and submit written arguments, but the proceedings would be characterized by informality, speed, and low cost. No elaborate opinion would be issued by the board, just a statement of the decision. The boards, in effect, would be restored to something close to the role envisioned for them when the present boards were first established after World War II.

The second approach would treat the agency boards as essentially independent, quasi-judicial tribunals and would strengthen their operation by adding procedural safeguards to ensure the independence and objectivity of the board members and improve the quality of the board record.

Fundamental Approaches to the Boards

After considering a wide range of proposals, we concentrated our study and analysis on what appeared to be the two best alternative approaches to meeting the problems concerning the present agency boards of contract appeals. Both approaches recognize the fact that the agency boards are presently the centerpieces of the disputes-resolving system. Thus, the ultimate organization of those boards— their method of operation, jurisdiction, independence, and degree of formality and due process-has a decisive impact on the remaining elements of the system.

The first approach essentially would treat the agency boards of contract appeals as tools of management designed more to produce negotiated settlements of disputes rather than to adjudicate the disputes in a court-like proceeding. The boards would act truly as an alter ego of the head of the procuring agency, and would provide a forum where contracting officer decisions could be reviewed objectively. The boards would issue a recommended decision that would be adopted, modified, or rejected by the agency head. A contractor receiving an adverse decision would have a right to a de novo trial in court, but the Government would be bound by a decision adverse to it, as an accord and satisfaction. Both parties before the board would be permitted to submit evi

The Need for a Flexible System

The boards of contract appeals originally were designed to provide a swift, inexpensive method of resolving contract disputes. Their operations and procedures have, however, been changed over the years by the demand and requirement for due process. Because of Supreme Court decisions and the Wunderlich Act, contractors and their counsel have become increasingly aware that a hearing before an agency board was often their only opportunity fully to develop and present their case. As a consequence, the parties pressed for adoption and implementation at the board level of all procedures associated with due process: full discovery, filing of responsive pleadings and briefs, and thorough adversary hearings with witness cross-examination. The dictates of justice in these disputes have emphasized thoroughness and due process at the expense of both speed and cost, and the procedures of the boards have thus become increasingly formalized through demands by contractors and their counsel that further safeguards be afforded them.

But the present procedures neither provide full due process for the large, important claims, nor a speedy, economical administrative remedy for resolution of small claims. By compromising these inherent contradictions in the agency board system, neither has been met. adequately.

The aim of any remedial system is to give the parties what is due them as determined by a thorough, impartial, speedy, and economical adjudication. However, it is difficult to be economical, yet thorough; thorough, yet speedy. A balance of these variables that is appropriate in one case may not be appropriate in another case. The overriding problem with the present agency board system is that the boards attempt to adjudicate claims across the entire spectrum of size and complexity. Although the boards generally are doing an adequate job under the circumstances, this is not the most effective way to handle contract disputes.

Justice and efficient operation of the contract disputes-resolving system can be obtained best with a flexible system that provides alternative forums for resolution of particular kinds of disputes. The claimant should be able to choose a forum according to the needs of his particular case; that is, one where the degree of due process desired can be balanced by the time and expense considered appropriate for the case. To this end, we conclude that alternate forums, each with special characteristics, should be maintained for initial resolution of disputes above the contracting officer and informal agency review level.

Key elements of our recommended system would be agency boards of contract appeals, acting as quasi-judicial forums and strengthened by adding additional safeguards to assure objectivity and independence. Some moderate consolidation of the boards would be achieved by eliminating part-time and ad hoc boards.

We have chosen this approach over a reversion to more informal boards for several reasons. First, the boards of contract appeals have developed into generally satisfactory forums for the resolution of most contract disputes, and, with only relatively minor changes, can be strengthened to continue in this role even more effectively. Second, the existing problems of judicial review of board decisions can be satisfactorily resolved by changes in the Wunderlich Act to provide broader discretion in the courts to supplement the board record. Finally, the management effort for resolution of disputes would be better conducted through an informal conference without any of the trappings of a due process procedure.

Specific recommendations concerning the ad

ministrative forums other than the contracting officer are discussed in the remainder of this section.

Agency Boards of Contract Appeals

Recommendation 3. Retain multiple agency boards; establish minimum standards for personnel and caseload; and grant the boards subpoena and discovery powers.

This recommendation is essentially the middle ground of the two most common proposals regarding the boards: consolidation of the boards into a single court-like "superboard," or the removal of the boards as a layer of review.

Theoretically, a consolidated "superboard" would benefit from economies of scale; the use of full-time personnel on the consolidated board would eliminate the unfairness or appearance of unfairness attributed to the use of part-time personnel on existing boards; and a more uniform practice would result from the coordinated application and improvement of rules and practice that would be possible with a large caseload in such a board. The consolidated board, while it doubtless would approach the status and appearance of a court, would nonetheless be solely procurementoriented, with the resultant Government contract expertise and flexibility that courts of less specialized jurisdiction will never have. While the consolidated board would not be as responsive to individual agencies as would an agencyoriented board, it would be responsive to Government-wide procurement policy and would foster a desirable uniformity among agency procurement practices.

At the other extreme, the agency boards could be eliminated from the remedial process and the contractor forced to go directly to court in appealing a contracting officer's decision. This proposal stresses that the speedy administrative remedy has been lost in the modern world of large, complex claims and pressures for increased due process. The courts were the original forums for resolution of contract disputes, and elimination of the boards

would be a return to that system, after providing maximum incentive for the parties to reach a resolution through negotiation within the agency.

Our recommendation adopts the advantages of both proposals and avoids the disadvantages. The major advantages of board consolidation-more uniformity, consistency, economy, and efficiency-are achieved by a moderate consolidation that would be realized under our recommendation through the application of minimum size standards. At the same time, there are several disadvantages in total consolidation that would be minimized under our recommendation. The existing agency boards, being a part of the procuring agencies, are familiar with the procurement mission and operating procedures of the agencies. It is argued that such familiarity assists the boards in performing their functions; does' not make the operation of the boards any less fair to contractors; and removal of the boards from the agencies would be counterproductive to the operation of the agencies and their boards. We believe that the expertise in agency peculiarities attributed to agency boards does not outweigh the advantages of some consolidation; contract disputes do not vary so widely from agency to agency that each agency needs to have its own board. However, under our recommendation, boards will still remain in the major procuring agencies to use to advantage whatever expertise may exist.

Similarly, the major advantage of the proposal to eliminate the boards also would be realized under our recommendation to provide a contractor option of direct access to court after a mandatory informal review conference. The disadvantage of removing the boards as a review layer prior to court is that if appeals now being handled by the boards were sent directly to the Court of Claims commissioners, many new commissioners would have to be added. This would obviously work a fundamental change in the operation of the Court, and its effect is difficult to predict. Under our recommendation, this problem would be eliminated since it is probable that the option of direct access would be exercised only for cases involving large money amounts, new legal questions, interpretation of new statutes or regulations, or fraud or corruption.

In order to assure uniformly high quality decisions and to ensure that the agency boards continue to perform the functions for which they are designed, uniform minimum standards should be applied to each board. The standards, which affect appointment of personnel and caseload requirements, are discussed in the following subsections.

MINIMUM CASELOAD

The establishment or maintenance of an agency board of contract appeals should be prohibited unless the agency can justify the maintenance of a full-time board with no other duties but to hear and decide contract appeals. For example, if the number of appeals sufficient to justify a full-time board were 100, then only three of the existing boards would be continued. If the number were 75, four would remain. If 35, seven would remain. Agencies that lack sufficient appeals to justify economically the maintenance of an affiliated board of contract appeals should be required to delegate their appeals to one of the other boards.

PERSONNEL

Agency boards would be more objective if all members of the boards were selected in a manner that minimized their ties to the agency head. This would be achieved if they were chosen in the same manner as hearing examiners under the Administrative Procedure Act.33

DISCOVERY AND SUBPOENA POWERS

The quality of the board records would improve if the boards were given discovery and subpoena powers. This would ensure that the tools to make complete and accurate findings are available, and would minimize the need for a court to supplement the board record on review. See Recommendation 9.

335 U.S.C§ 551 (1970).

Small Claims Boards

Recommendation 4. Establish a regional small claims boards system to resolve disputes involving $25,000 or less.

Because our recommendations concerning the agency boards of contract appeals would not alleviate the problem of processing small claims, we recommend establishment of a system of small claims boards of contract appeals (SCBCA) as a mechanism to provide a fast, relatively informal forum for the adjudication of claims of $25,000 or less.31

The SCBCA system would be under central administrative control and located in geographically dispersed cities according to caseload demands. A contractor would have the option of taking a dispute involving $25,000 or less to an SCBCA. There would be no judicial review of an SCBCA decision, but a contractor could receive a new (de novo) trial in court after an adverse SCBCA decision if it desired. A decision adverse to the Government would be final, except in cases of fraud.

The SCBCA system would operate under informal, accelerated procedures, and the agency boards of contract appeals would no longer have an optional accelerated procedure. The natural tendency for any quasi-judicial administrative board is to become increasingly formal and cumbersome, as have the agency boards in recent years. In the case of the SCBCA system, the lack of pressure to build a record due to the de novo judicial review will subdue the tendency to become more formal. However, the system should have appropriate supervision and control to ensure that it remains expeditious and informal.

We consider $25,000 an appropriate ceiling for the SCBCA's jurisdictional limit. Based on data developed in our study, 63 percent of the present appeals handled by agency boards would be eligible for the SCBCA procedure.3

35

The SCBCA system could be independent, or could operate as an arm of an agency board, or

Bills to establish regional small claims divisions of existing boards were introduced in Congress by Senator McIntyre (S. 3616) and Rep. Conte (H.R. 15045) in May 1972. Apart from the fact that their small claims boards would be divisions of existing boards, these bills differ from our recommendations in that they make no provisions for an option of a due process hearing or de novo judicial review, and propose a higher jurisdictional limit.

35 See table 2, supra.

even the Court of Claims. However, the operation of the SCBCA system should be as autonomous as possible from any parent board or court, since it is important that the SCBCAS establish their own tradition, organization, and procedures that are distinct and highly visible. If the SCBCAs were closely tied to the agency boards or courts, they would appear to be merely a second-class version of the parent forum, and like the present accelerated procedures, they might not be used. More important, the members of the SCBCAS must develop a particular expertise in handling small claims rapidly and fairly, with a minimum of "due process" procedures. This will require a firm approach with litigants who want to overjudicialize their appeals.

Finally, the SCBCA system should be staffed with board members of a grade and caliber equal to the members of the agency boards.

All Disputes Power

Recommendation 5. Empower contracting agencies to settle and pay, and administrative forums to decide, all claims or disputes arising under or growing out of or in connection with the administration or performance of contracts entered into by the United States.

We can find no valid reason for the distinction between disputes "under the contract," that procuring agencies may settle and pay, and disputes in "breach of contract," that they may not.

The irony in the present situation is that, while the procuring agencies are not supposed to have the power to decide or settle breach of contract disputes, that is, disputes not based on a contract clause conveying board jurisdiction, they may in effect gain this power merely by placing a clause in the contract providing an administrative remedy for the particular dispute.36 This transforms the dispute into one administratively cognizable under the contract. The distinction between disputes arising under the contract and breach of contract disputes is not logical or useful, since it is based on the

3 Shedd, Administrative Authority to Settle Claims for Breach of Government Contracts, 27 Geo. Wash. L. Rev. 481, 517 (1959).

technically correct but, in practice, erroneous assumption that the authority to settle contract disputes is derived from the contract itself, whereas the authority of a Government official to settle breach of contract disputes must have as its ultimate source the Constitution and acts of Congress.

This recommendation does not present a drastic innovation. The procuring agencies have steadily added clauses to bring more and more types of disputes under board jurisdiction, and it is generally conceded that the executive branch has the power to promulgate an "all disputes" clause bringing every type of dispute under the jurisdiction of the boards.37 Indeed, an "all disputes" clause was used by the War Department during World War II, under which some 3,061 cases were disposed of by the War Department Board of Contract Adjustment during its 21/2 year existence.38 The legality of such a clause was suggested by the Supreme Court when it endorsed the practice of converting breach of contract claims into claims for relief under the contract by adding remedial clauses to the standard contract form.39

Although this recommendation standing alone would further curtail the access of the contractor to judicial relief, it must be considered in conjunction with the recommendation for optional direct access to judicial forums. See Recommendation 6. Under the recommended system, the contractor may elect the forum within which to present its dispute. The elimination of the distinction between disputes under the contract and those in breach of contract ensures that the choice of forums available to the contractor will not be defeated by an artificial classification of disputes.

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ministrative decision, usually that of a board of contract appeals, or by an original suit for breach of contract. The jurisdiction of the Court of Claims and the U.S. district courts is based on the Tucker Act.40 An action that is initiated in one of these courts is handled in accordance with normal court procedures; appeals to higher courts are subject to the same appellate review standards and procedures as other cases. However, the scope of judicial review of agency board decisions is set forth in the Wunderlich Act." That act recognizes the finality of agency decisions on questions of fact except where the decision is "fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith or is not supported by substantial evidence." With respect to questions of law, the act provides that no Government contract is to contain a clause "making final on a question of law the decision of any administrative official, representative, or board."

Direct Access to Court

Recommendation 6. Allow contractors direct access to the Court of Claims and district courts.

As a third alternative forum for the resolution of contract disputes, we recommend that contractors have the option of direct access to court, in addition to the SCBCA system and the agency boards of contract appeals. The recommendation would allow contractors, at their option, to bypass administrative disputes-resolving forums and seek review of adverse contracting officer decisions directly in either the Court of Claims or in a U.S. district court.

Because of judicial interpretation of the Wunderlich Act, the contractor presently is denied a full judicial consideration of most disputes. For the contractor to be entitled to a full trial in court, its dispute cannot be redressable under the contract. If it is redressable under the contract, the contractor must exhaust its administrative remedies before it

40 28 U.S.C. §§ 1346, 1491 (1970).

41 41 U.S.C. §§ 321-22 (1970). See supra note 28 for text.

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