Dispute Resolution in Construction

Construction disputes cost the U.S. industry an estimated $5 billion annually in unresolved claims, litigation fees, and project delays, according to the American Arbitration Association. On federal projects in the Commonwealth of the Northern Mariana Islands (CNMI) and across U.S. territories, contractors operate under a layered framework of federal statutes, agency-specific regulations, and industry rules that determine how claims get filed, heard, and resolved. Knowing which mechanism applies — and when — directly affects whether a contractor recovers legitimate costs or absorbs losses that should never have been theirs.

The Legal Foundation: Contract Disputes Act

The primary federal statute governing contractor claims against the U.S. government is the Contract Disputes Act, 41 U.S.C. §§ 7101–7109. This statute applies to contracts with executive branch agencies for procurement of construction, services, and supplies. Under the CDA, a contractor asserting a claim of $100,000 or more must certify that the claim is made in good faith, that the supporting data is accurate and complete, and that the amount claimed accurately reflects the contract adjustment the contractor believes is due.

Key procedural points under the CDA:

Contracting Officer Final Decision (COFD): The contractor submits a written claim to the Contracting Officer, who must issue a Final Decision within 60 days for claims of $100,000 or less, or within a reasonable time for larger claims.
Appeal Window: A contractor has 90 days from receipt of the COFD to appeal to the appropriate Board of Contract Appeals, or 12 months to file suit in the U.S. Court of Federal Claims.
Interest Accrual: The CDA mandates that interest on contractor claims begins accruing from the date the claim is submitted, not the date of the decision.

Failure to submit a proper certified claim before appealing is a jurisdictional defect — boards and courts have dismissed claims for this reason alone.

Federal Acquisition Regulations: Procedural Layer

The eCFR Title 48 — the Federal Acquisition Regulation (FAR) — implements the CDA at the agency level. FAR Subpart 33.1 governs protests, disputes, and claims. FAR 33.103 requires agencies to use reasonable efforts to resolve disputes by mutual agreement before issuing a COFD. FAR 52.233-1, the standard "Disputes" clause incorporated into most federal construction contracts, requires the contractor to continue performance even while a dispute is pending, except where the dispute concerns the amount of payment due and continuing performance would exceed the contract price.

This "keep working" obligation has significant cash-flow implications for CNMI contractors working on federal infrastructure projects through agencies such as the U.S. Army Corps of Engineers or the GSA.

Alternative Dispute Resolution: Structured Flexibility

Alternative Dispute Resolution (ADR) provides contractors with faster, cheaper pathways than formal litigation or board hearings. The Cornell LII identifies the three primary ADR mechanisms relevant to construction:

Mediation — A neutral third party facilitates negotiation. Non-binding; parties retain final decision authority. Typically costs 60–80% less than arbitration when resolved in a single session.
Arbitration — A neutral arbitrator (or panel) issues a binding award. The American Arbitration Association Construction Industry Arbitration Rules set the procedural standard for most private construction arbitrations. For claims under $100,000, the AAA Fast Track procedure limits the process to a single arbitrator and a documentary hearing unless a physical hearing is requested.
Dispute Review Boards (DRBs) — Standing panels established at project inception that review disputes in real time. The FHWA recommends DRBs for contracts exceeding $10 million as a dispute avoidance mechanism, not merely resolution.

Federal agencies are also authorized to use ADR under 10 CFR § 2.338, which establishes a regulatory framework for settlement and ADR in contested federal proceedings.

Common Dispute Triggers on Construction Projects

Understanding dispute origins allows contractors to build documentation practices that support their claims. The most frequent categories include:

Changed conditions: Subsurface conditions differing materially from what the contract represented. FAR 52.236-2 (Differing Site Conditions clause) governs federal projects.
Scope disputes: Owner-directed work that the contractor considers outside the original contract scope — a direct source of change order conflicts.
Delay and disruption: Schedule impacts caused by owner actions, third-party interference, or agency-issued stop-work orders (governed by FAR 52.242-15).
Safety-related shutdowns: OSHA construction standards enforcement actions — particularly violations under 29 CFR Part 1926 — can trigger stop-work conditions that produce compensable delay claims if the underlying cause is attributable to the owner's design or site conditions.

Small Business Contractor Protections

The SBA provides additional dispute resources for small business contractors on federal construction projects. The SBA's Office of Government Contracting administers size protests and certificate of competency proceedings, which are separate from CDA claims but equally consequential when a contract award or performance is at stake. Small business set-aside contracts in the CNMI, which fall under the same federal procurement rules as mainland contracts, are subject to these protections without modification.

U.S. Army Corps of Engineers Claims Process

The U.S. Army Corps of Engineers processes construction contract disputes through its contracting commands. Contractors submit claims to the Contracting Officer of the issuing district. Unresolved claims appeal to the Armed Services Board of Contract Appeals (ASBCA), which has jurisdiction over Army, Air Force, NASA, and several other agency contracts. ASBCA decisions are published and searchable — prior decisions on similar fact patterns carry significant persuasive weight in new proceedings.

Documentation: The Foundation of Any Claim

Every successful dispute resolution — whether settled in mediation or litigated to a board decision — rests on contemporaneous project documentation. Daily reports, meeting minutes, RFI logs, certified payroll records, and photographic evidence establish the factual record. A claim unsupported by documented notice, submitted within the contractually required notice window, is a claim that routinely fails on procedural grounds before the merits are ever examined.

FAQ

What is the difference between a claim and a request for equitable adjustment?

A Request for Equitable Adjustment (REA) is an informal pre-claim submission requesting a contract modification. It is not subject to CDA certification requirements and does not trigger the formal dispute process. A certified CDA claim is a formal demand that initiates statutory timelines and appeal rights.

How long does a contractor have to file a CDA claim?

The Contract Disputes Act imposes a 6-year statute of limitations on contractor claims (41 U.S.C. § 7103(a)(4)(A)). The clock starts from the date the contractor knew or should have known the basis of the claim.

Can a contractor stop work during a federal dispute?

Under FAR 52.233-1, contractors must continue performance during a dispute unless issued a stop-work order or unless continuing would require spending beyond the contract price. Stopping work without authorization exposes the contractor to default termination.

What happens if the Contracting Officer misses the decision deadline?

If the Contracting Officer fails to issue a decision within the required timeframe, the contractor may treat the deemed failure as a denial and proceed directly to appeal before the applicable Board of Contract Appeals or the U.S. Court of Federal Claims.

References

The law belongs to the people. Georgia v. Public.Resource.Org, 590 U.S. (2020)

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