SECNAVINST 5800.15 

 OGC 

05 March, 2007 

SECNAV INSTRUCTION 5800.15

From: Secretary of the Navy 

Subj: USE OF BINDING ARBITRATION FOR CONTRACT CONTROVERSIES 

Ref: (a) Federal Acquisition Regulations Part 33.2 

 (b) DoD Instruction 4105.71, Nonappropriated Fund 

 (NAF) Procurement Policy, 2 May 2001 

 (c) Administrative Dispute Resolution Act of 1996; 

 codified at 5 U.S.C. 571, et seq. 

 (d) DoD Directive 5145.5, Alternative Dispute Resolution, 

22 Apr 1996 

 (e) SECNAVINST 5800.13A 

 (f) Navy Marine Corps Acquisition Regulation Supplement, 

Chapter 5233, Nov 2003 

 (g) Armed Services Board of Contract Appeal “Notice 

Regarding Alternative Means of Dispute Resolution” 

 (h) Contract Disputes Act of 1978; codified at 41 U.S.C. 

 601, et seq. 

Encl: (1) Department of the Navy Contract Arbitration 

 Procedural Guidance 

1. Purpose. To provide a comprehensive Department of the Navy 

(DON) policy for the use of binding arbitration for contract 

issues in controversy under references (a) and (b). 

2. Background 

 a. Overview of Binding Arbitration. Contractors and 

contracting officers can use binding arbitration to resolve 

disputes quickly, conclusively and with minimum expense. 

Binding arbitration is a voluntary dispute resolution process in 

which the parties select a neutral decision-maker (arbitrator) 

to hear their dispute and resolve it by rendering a final and 

binding award. Like litigation, arbitration is an adversarial 

process designed to resolve specific issues submitted by the 

parties. Arbitration differs from litigation by reducing 

procedural and evidentiary rules, allowing flexibility in timing 

and choice of decision-makers, and resulting in awards with no 

DEPARTMENT OF THE NAVY 

OFFICE OF THE SECRETARY 

1000 NAVY PENTAGON 

WASHINGTON DC 20350-1000 
2

SECNAVINST 5800.15 

05 March, 2007 

precedential value in other disputes. Also, there are very 

limited rights of appeal from a binding arbitration award. 

Arbitration may offer an advantage over the usual claims process 

under references (a) and (b) by allowing the parties to address 

an issue in controversy once, rather than repeatedly through 

claims followed by appeals. 

 b. References (a), (c), (d), and (e) encourage Federal 

agencies to use Alternative Dispute Resolution procedures, 

including binding arbitration, albeit subject to statutory 

restrictions. Prior to using binding arbitration authorized by 

reference (c), agency heads must consult with the Attorney 

General and issue guidance on the appropriate uses of the 

technique. This instruction is intended to meet that 

requirement. 

3. Scope. This instruction applies to all contracting 

activities of the Department of the Navy. This instruction does 

not apply to grievance arbitrations under the Federal Service 

Labor Management Relations Act, 5 U.S.C. 7121 or the National 

Security Personnel System. 

4. Policy. Contracting Officers are authorized to use binding 

arbitration procedures contained in enclosure (1) for issues in 

controversy as defined by Federal Acquisition Regulation (FAR) 

33.201, subject to: 

 a. The limitations and requirements of references (a), (c) 

and (d), and enclosure (1); 

 

 b. The approval of the Associate General Counsel 

(Litigation) (AGC(L)) on a case-by-case basis in consultation 

with the Assistant General Counsel (Alternative Dispute 

Resolution) (AGC(ADR)), and; 

 c. The approval of appropriate contracting officers and 

other officials ordinarily required for approval of settlements, 

as measured by the maximum award cap identified for the proposed 

arbitration. See reference (f). 

 

5. Relationship to Other ADR Methods. Arbitration under this 

instruction may be used in conjunction with other methods 

agreeable to the parties. For example, the parties may consider 

using combinations of mediation and arbitration (commonly called 

“Med-Arb”). Another option is to incorporate arbitration as a 

feature of a Dispute Resolution Board (DRB). One intent of this 
3

SECNAVINST 5800.15 

05 March, 2007 

instruction is to provide as many options to the parties as 

possible for cost-effective, collaborative dispute resolution. 

6. Action

a. The AGC(ADR) shall develop recommended procedures and 

forms to assist activities wishing to use binding arbitration. 

 b. All contracting activities shall consider the use of 

alternative dispute resolution methods, including arbitration, 

for pending and future claims and issues in controversy. 

 c. The AGC(ADR) shall provide training to OGC attorneys and 

other interested DON personnel in the effective use of 

arbitration under this instruction. 

 d. Parties rejecting offers of binding arbitration under 

this instruction shall provide written reasons in accordance 

with FAR 33.214. Contracting officers issuing or receiving such 

written statements shall forward them to the DON ADR Program 

electronically at adr@mail.navy.mil for the purpose of trend 

analysis. 

 Donald C. Winter 

Distribution: 

Electronic only, via Navy Directives Web site 

https://neds.daps.dla.mil
SECNAVINST 5800.15 

 05 March, 2007

Enclosure (1) 

DEPARTMENT OF THE NAVY 

CONTRACT ARBITRATION PROCEDURAL GUIDANCE 

Issues in controversy resolved through binding arbitration 

under this instruction may differ greatly in complexity and 

level of risk. Accordingly, parties should tailor arbitration 

procedures to their particular needs, guided by the principle 

that binding arbitration should be quicker and less expensive 

than the standard administrative procedures found in the 

Contract Disputes Act (CDA), the Federal Acquisition Regulation 

(FAR), and supplements to the FAR. Further, such arbitration 

procedures must conform to the procedures described herein. 

1. Parties

 a. Under this instruction, the term “parties” is limited to 

the DoN and its contractors as defined in 41 U.S.C. 601. 

Subcontractors wishing to raise issues for binding arbitration 

are not parties, and must obtain sponsorship by the prime 

contractor. 

 b. The Office of the General Counsel (OGC) has sole 

authority to represent the DoN in arbitrations under this 

instruction. DoN attorneys who are not part of OGC may 

represent the DoN only with the approval of the AGC(L), after 

demonstrating sufficient background in government contract law. 

Similar to CDA claims and appeals processing under the Navy 

Marine Corps Acquisition Regulation Supplement (NMCARS), the 

contracting activity involved should ordinarily maintain the 

continuity of any DON contract team that might have investigated 

and evaluated the issue in controversy. Such teams should 

continue to function in an assisting capacity under the 

leadership of the OGC attorney assigned to handle the 

arbitration. However, no final settlement agreement will be 

made without the written approval and signature of the 

contracting officer. (See reference (f)). 

2. The Decision to Use Binding Arbitration

 a. Reference (e) encourages all DON personnel to use ADR 

techniques like arbitration to the maximum extent practicable. 

The decision to arbitrate must be voluntary on the part of all 

parties to the arbitration, and the DON shall not require anyone 

to consent to arbitration as a condition of award of a contract. 

(See 5 U.S.C. 575(a); FAR 33.214(f))). But ADR procedures are 

not right for all cases. Reference (a) calls for agencies to 
SECNAVINST 5800.15 

 05 March, 2007

2 Enclosure (1) 

consider not using any form of ADR, including binding 

arbitration, in a number of specified circumstances. See 5 

U.S.C. §572(b). Accordingly, unless it can be established to 

the satisfaction of the AGC(L) that the use of binding 

arbitration for the resolution of a contract issue in 

controversy will be in the best interests of the Government, 

binding arbitration will not be used whenever: 

 (1) A definitive or authoritative resolution of the 

matter is required for precedential value, and binding 

arbitration is not likely to be accepted generally as an 

authoritative precedent; 

 (2) The matter involves or may bear upon significant 

questions of Government policy that require additional 

procedures before a final resolution may be made, and binding 

arbitration would not likely serve to develop a recommended 

policy for the agency; 

 (3) Maintaining established policies is of special 

importance, so that variations among individual decisions are 

not increased and binding arbitration would not likely reach 

consistent results among individual decisions; 

 (4) The matter significantly affects persons or 

organizations that are not parties to the proceeding; 

 (5) A full public record of the proceeding is important, 

and binding arbitration cannot provide such a record; 

 (6) The agency must maintain continuing jurisdiction over 

the matter with authority to alter the disposition of the matter 

in the light of changed circumstances, and binding arbitration 

would interfere with the agency's fulfilling that requirement; 

 (7) Any related issues, claims, counterclaim, cross-claim 

or defenses which would require the arbitrator to rule on legal 

issues beyond the scope of contract dispute jurisdiction 

ordinarily provided by the Contracts Disputes Act of 1978; or, 

 (8) The claim involves fraud. (See reference (a) at FAR 

33.209 and 33.210(b)). 
SECNAVINST 5800.15 

 05 March, 2007

3 Enclosure (1) 

3. The Arbitration Agreement

 a. Prior to commencing binding arbitration, the contractor 

and the contracting officer must execute an arbitration 

agreement that defines the scope and procedures for the 

arbitration. 

 b. Subject to paragraph 4 above of this instruction, a DoN 

contracting officer who otherwise has authority to enter into a 

settlement concerning the matter may execute a binding 

arbitration agreement. (See 5 U.S.C. 575(b)(1) and (2)). 

 c. An arbitration agreement must be in writing, signed, and 

dated. It must set forth the subject matter submitted to the 

arbitrator, and must specify the maximum award or “cap” that may 

be granted by the arbitrator. (See 5 U.S.C. 575(a)(2)). The 

issue of whether these agreements are contingent liabilities 

needs to be addressed. As a result, contracting officers should 

consult with the appropriate comptroller’s office prior to 

execution. Further: 

 (1) All agreements to arbitrate shall explicitly exclude 

any award of punitive, consequential, special or exemplary 

damages by the arbitrator. 

 (2) All agreements to arbitrate shall explicitly state 

that the parties to the arbitration proceedings must each bear 

their respective arbitration costs, including all attorney fees 

and expenses. The agreement to arbitrate shall explicitly 

exclude any award of attorneys’ fees or arbitration costs by the 

arbitrator. 

 d. The parties may limit the issues that they agree to 

submit to arbitration. (See 5 U.S.C. 575(a)(1)(A)). 

 e. In addition to the required cap under 3.b. above, the 

parties may agree to arbitrate on the condition that 

the award is limited to a range of possible outcomes. (See 5 

U.S.C. 575(a)(1)(B)). 

 f. To maximize the time and cost savings that arbitration 

offers, arbitration proceedings should not ordinarily exceed the 

claim processing times found in FAR 33.211(c). Accordingly, the 

following time parameters are recommended for inclusion in 

arbitration agreements: 
SECNAVINST 5800.15 

 05 March, 2007

4 Enclosure (1) 

 (1) Claims of $100,000 or less. The record (as defined 

by the arbitration agreement) should close, and briefing should 

be completed, within sixty days of the execution of the 

agreement to use arbitration. Unless the parties agree in 

writing, no hearing should begin less than 40 days from the date 

of execution of the agreement to use arbitration. 

 (2) Non-monetary Claims and Claims Exceeding $100,000. 

The record should close, and briefing should be completed, 

within 180 days of the execution of the agreement to use 

arbitration. Unless the parties agree in writing, no hearing 

should begin until at least 60 days from the date of execution 

of the agreement to use arbitration. 

 (3) Docketed Appeals at the ASBCA and matters in court. 

Ideally arbitration should be used prior to appeal, but subject 

to the rules and orders of the Armed Services Board of Contract 

Appeals (ASBCA), binding arbitration may be used in appeals to 

the ASBCA in a manner consistent with the principles of this 

instruction. Counsel should consider whether the use of Summary 

Trial with Binding Decision (see reference (g)) offers 

appropriate benefits. Recognizing that actions in the United 

States District courts and the United States Court of Federal 

Claims are outside the scope of reference (a), this instruction 

does not authorize the use of binding arbitration in those fora. 

 g. The arbitration agreement shall establish 5 U.S.C. 574, 

“Confidentiality,” as the confidentiality standard for dispute 

resolution communications. Under that statute, neither the 

agreement to use binding arbitration nor an arbitral award will 

be confidential. Notably, except for those dispute resolution 

communications generated by the arbitrator, dispute resolution 

communications available to all parties are not deemed 

confidential under the statute. (See 5 U.S.C. 547(b)(7)). 

 h. The arbitration agreement should define and limit the 

scope of discovery needed to support the arbitration proceeding. 

 i. The arbitration agreement should specify whether the 

arbitration proceeding will involve a hearing or if the award 

will be made simply on a written record. Regardless of the 

procedures used, the parties retain the burden of proving the 

facts supporting their allegations or defenses. Affidavits, 

declarations, depositions, admissions, answers to 

interrogatories, stipulations and hearing testimony under oath 

may be employed to supplement other documentary evidence in the 

record. 
SECNAVINST 5800.15 

 05 March, 2007

5 Enclosure (1) 

 j. The arbitration agreement should address any 

requirements or restrictions on briefs, expert reports or other 

expected filings. 

4. Arbitrators

 a. The selection of the arbitrator shall be upon mutual 

agreement of the parties. (See 5 U.S.C. 577(a)). The ASBCA has 

agreed to make administrative judges available to serve as 

arbitrators under this instruction. Requests for ASBCA 

administrative judges must be filed with the Chairman of the 

ASBCA. The parties also may elect to use a mutually acceptable 

arbitrator from another source if the parties agree as to how 

the costs are to be shared. In no event shall the arbitrator 

have an official, financial or personal conflict of interest 

with respect to the issue in controversy, unless that interest 

is fully disclosed in writing and all parties agree that he/she 

may serve as the arbitrator. (See 5 U.S.C. 573 and 577(b)). 

The AGC(L) serves as the approving official for the DON in such 

matters. 

 b. The arbitrator may regulate the course and conduct of 

the arbitration hearing. (See 5 U.S.C. 578(1)). 

 c. The arbitrator may administer oaths and affirmations. 

(See 5 U.S.C. 578(2) and 18 U.S.C. 1621). 

d. The arbitrator may order the attendance of witnesses and 

the production of documents under the control of the parties, 

for discovery or hearings within the scope of the arbitration 

agreement. Arbitrators may consider a party’s failure to comply 

when weighing that party’s evidence. An arbitrator may also 

draw an adverse inference against a party that fails to comply 

with an order requiring attendance of witnesses or production of 

evidence under its control. (See 5 U.S.C. § 578(1) and 

580(a)(1)). For arbitration of issues in controversy that have 

been sponsored by prime contractors on behalf of subcontractors, 

such subcontractors are considered under the control of the 

prime contractor. 

 e. If the issues before the arbitrator are the subject of 

an appeal under the CDA, and the arbitrator otherwise has 

authority as an administrative judge sitting on the Armed 

Services Board of Contract Appeals, the arbitrator may compel 

testimony and production of evidence at the hearing using the 

authority conferred by 41 U.S.C. 610 and 5 U.S.C. 578(3). 
SECNAVINST 5800.15 

 05 March, 2007

6 Enclosure (1) 

 f. An arbitrator may make awards. (See 5 U.S.C. 578(4)). An 

“award” is any decision by an arbitrator resolving the issues in 

controversy. (See 5 U.S.C. 571(4)). 

 g. The arbitrator shall set the time and place for the 

arbitration hearing and shall notify the parties at least ten 

business days before the hearing is to take place. 

 h. The arbitrator may hear sworn testimony and consider 

documentary evidence that is not irrelevant, immaterial, unduly 

repetitious, or privileged. (See 5 U.S.C. 579(c)(4)). 

 i. The arbitrator shall interpret and apply any relevant 

statutes, regulations, legal precedents and policy directives. 

(See 5 U.S.C. 579(c)(5)). 

 j. No party shall have any unauthorized ex parte 

communication with the arbitrator. If a party violates this 

provision, the arbitrator may require that party to show 

cause why the issue in controversy should not be resolved 

against it for the improper conduct. (See 5 U.S.C. 579(d)). 

5. Arbitration Hearings

 a. Parties are entitled to a record of the arbitration 

hearing. Any party wishing a record shall: (1) make the 

arrangements for it; (2) notify the arbitrator and other parties 

that a record is being prepared; (3) supply copies to the 

arbitrator and the other parties; and (4) pay all costs, unless 

the parties have agreed to share the costs. (See 5 U.S.C. 

579(b)(1)-(4)). 

 b. At any arbitration hearing, parties are entitled to be 

heard and present evidence. (See 5 U.S.C. 579(c)(1) and (2)). 

Parties are also entitled to cross-examine witnesses appearing 

at the hearing, but the parties may voluntarily waive this 

entitlement in the interest of providing an expeditious and 

informal proceeding, to conduct a hearing on written 

submissions, or for other reasons. Parties may agree to use 

affidavits or declarations for witnesses who do not appear. The 

arbitration agreement should address methods of crossexamination (or waiver) for such out-of-hearing statements. 

Parties should recognize that arbitrators have discretion 

regarding the weight to give statements that are not subject to 

advance notice and an opportunity for cross-examination. (See 5 

U.S.C. 579(c)(1) and (3)). 
SECNAVINST 5800.15 

 05 March, 2007

7 Enclosure (1) 

6. Awards

 a. Under 5 U.S.C. 579(e), the arbitrator shall make the 

award within 30 days after the close of the hearing, or the date 

of the filing of any briefs authorized by the arbitrator, 

whichever date is later. 

b. An arbitration award shall include a brief informal 

discussion of the factual and legal basis for the award. Formal 

findings of fact and law are not required. (See 5 U.S.C. 

580(a)(1)). 

c. Arbitrators shall use formal service of process 

procedures to deliver the award to the General Counsel of the 

Navy and other parties. Under DoD Directive 5530.1 of 22 August 

1983 (NOTAL), the Secretary of the Navy’s sole delegate for 

service of process is the General Counsel of the Navy (see 32 

C.F.R. 257.5(c). All process for such documents shall be served 

via certified mail or Federal Express upon the: General Counsel 

of the Navy, Navy Litigation Office, 720 Kennon Street SE, Bldg 

36 Room 233, Washington Navy Yard, DC 20374-5013, (202) 685-

7039, who will refer the matter to the proper delegate for 

action. 

d. The award in an arbitration proceeding shall become final 

30 days after it is served on all parties. The DoN may extend 

this 30-day period for an additional 30-day period by serving a 

notice of such extension on all other parties before the end of 

the first 30-day period. (5 U.S.C. 580(b)). 

e. Implicitly recognizing that arbitration under the statute 

would be worthless if unsuccessful parties could refile claims, 

final awards are binding on the parties, and confirmation is not 

required. Nevertheless, an award may be enforced using the 

confirmation procedures found in 9 U.S.C. 9. Awards also may be 

vacated, modified or corrected using the procedures found in 9 

U.S.C. 10 to 13. (See 5 U.S.C. 580(c)). 

f. Prior awards may be cited in factually related 

proceedings (arbitral, administrative or judicial) to raise the 

defense of res judicata, to serve as precedents, or otherwise. 

Although bounded by the terms of the contract at issue and the 

arbitration agreement, subsequent arbitrators have considerable 

discretion in how they use prior awards. The statute, however, 

does not permit using the prior award in factually unrelated 
SECNAVINST 5800.15 

 05 March, 2007

8 Enclosure (1) 

proceedings, or for issue preclusion under the theory of 

collateral estoppel. (See 5 U.S.C. 580(d)). 

g. For the purposes of 6.f., above, proceedings are 

sufficiently “factually related” when they arise between the 

same parties (or their legal successors or assignees) under the 

same contract, basic agreement, basic ordering agreement, or 

other similar documents. Delivery orders under the same 

indefinite delivery, indefinite quantity contract are factually 

related. For other proceedings between the same parties (or 

their legal successors or assignees) that arise out of different 

contracts, the arbitrator has discretion in determining whether 

the proceedings are factually related. Factors to consider 

include, but are not limited to, whether the subsequent contract 

is a follow-on contract, the prior award provides evidence of 

the intent of the parties, or the parties conformed their predispute behavior in the subsequent contract to the terms of the 

prior award. 

h. Contractors may invoice for final awards in accordance 

with established contractual procedures, provided that the 

arbitration award has been made part of a formal modification of 

the contract. The modification should include an acceptable 

release of all claims that were the subject of the arbitration, 

as well as a release of all motions or actions to vacate, 

correct, modify or confirm the award. Awards in favor of the 

DoN can result in deductive modifications to the contract, and 

any necessary demands for payment and recoupment action under 

FAR Subchapter 32.6 or other methods. Awards regarding nonmonetary issues may be incorporated into the contract as 

appropriate. Prior to modifying the contract, the government 

shall ensure that the proper funds are available and all of the 

required approvals have been obtained. 

7. Review in the United States District Court

 a. The decision to use binding arbitration is subject to 

judicial review under 9 U.S.C. 10(b) for awards or uses of 

arbitration that are inconsistent with 5 U.S.C. 572. (See 5 

U.S.C. 581(b)). 

 b. Any action for review of an arbitration award must be 

made pursuant to 9 U.S.C. 9 through 13. (See 5 U.S.C. 581(a)). 

Under 9 U.S.C. 12, “a notice of a motion to vacate, correct or 

modify an award must be served on the adverse party or his 

attorney within three months after the award is filed or 

delivered.” In order to ensure compliance with this provision, 
SECNAVINST 5800.15 

 05 March, 2007

9 Enclosure (1) 

DON activities seeking review must immediately consult with the 

AGC(L) and AGC(ADR) to ensure timely processing.