ConstructionPro Week, Volume: 3 - Issue: 29 - 07/18/2014

Do Administrative Claim Procedures Favor Public Project Owners?

By Bruce Jervis

 

It is common, almost standard, for public works construction contracts to stipulate an administrative claim resolution procedure. A contractor must initially submit a claim to an agency official. If the agency denies the claim, the contractor may appeal to an administrative board, whose decision may subsequently be reviewed by a court.

 

A Vermont highway contractor recently argued it could skip this wasteful process and take its claim directly to court. The contractor said the initial claim decision is made by agency employees, who lack objectivity and are not required to conduct a full fact-finding hearing. The appeals board then deferentially reviews the agency’s incomplete and biased findings of fact, essentially rubber stamping the agency decision. The contractor contended this was a denial of due process of law.

 

The Vermont Supreme Court agreed with the contractor’s characterization of the agency-level procedure. The court ruled, however, that the administrative board had statutory authority to conduct its own fact-finding hearing and review the agency decision with a clean slate. This afforded the contractor due process of law. The contractor was not entitled to take its claim straight to court.

 

What is your opinion? Are these administrative claim procedures a waste of time and money, clearly stacked in favor of the public project owner? Or, do the procedures provide a balanced review of carefully developed findings of fact? I welcome your comments.

 

COMMENTS

people in the government agencies are usually unqualified to understand the issues let alone able to make a decision.

We need a collective organization to advocate for contractors as a group like the ACLU.
Posted by: William Fortune - Friday, July 18, 2014 11:38 AM


Many owner agency contracts have specified or accepted the DRB (Dispute Review Board) process world wide since the DRB Foundation's inception in the mid-'90's, and used with much success for almost 20 years. Yes, administrative remedies can cumbersome; the alternatives, including legal expenses and clogged court calendars do not serve the interests of the industry either. The success of the DRB process speaks for itself. If you are not aware of it, check it out.
Posted by: John W. Goode, P.E. - Friday, July 18, 2014 11:39 AM


I agree with the court. Just because certain portions of the contract requirements are potentially going to result in a biased outcome, the process still needs to be followed. The majority of issues can be worked out without court and that is the point of having them.
Posted by: Jim - Friday, July 18, 2014 11:44 AM


I think the court has it about right - assuming that the agency and Board are doing their jobs. An agency whose claim denials are regularly overturned by a Board, or a Board whose decisions are consistently refuted in court, should become subject to scrutiny for bias.
Posted by: Maynard Smith - Friday, July 18, 2014 12:01 PM


A court should never be the first level of dispute resolution for either public, or private owners. Courts and juries don't typically have any construction expertise either.

A reasonably fair administrative process can uncover quite a bit. A dispute may be caused simply by an unreasonable project manager, or an engineer trying to cover up an error. On the other hand, some low bidders assume that their profit will come from disputes.

Administrative boards do not want to lose in court, and can often make a reasonable judgement where line staff cannot.
Posted by: Eden Milroy, Pilot Development Partners, Inc. - Friday, July 18, 2014 1:20 PM


Most of my experience is with military agencies. I worked for one for 26 years and now consult to contractors on various contract admin functions. my experience on both sides is that the administrative process is fair and judged by construction knowledgeable personnel. In general on claims under $100K contracting officers are more interested in closing the proceedings than pushing it to the claims court. It becomes a win/wind for both sides. Most claims not settled early by contract modification (admitting government culpability) have elements of problems on both sides. A contracting officers decision is the lowest level of mitigation.
Posted by: Ronald Vietmeier - Friday, July 18, 2014 2:22 PM


 









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