Appeal denied April 2, 2021
The Civil Board of Contract Appeals (CBCA) decision of appeal 6904 is a lesson on why contractors should be very wary of signing releases incorporated into contract modifications. This appeal grows from an $8.3 million contract the Veteran Affairs (VA) awarded Glen/Mar Construction Inc. (Glen/Mar) July 31, 2017. The contract was for demolition and replacement work secondary to seismic deficiencies in the VA’s Southern Oregon Rehabilitation Center in White City, Oregon. The total original contract value was $8,349,793.
A little more than seven months after the beginning of the contract, Glen/Mar and the VA began to disagree about who was responsible for completing some CenturyLink work. Eventually, the VA took responsibility for the work and issued a change order reflecting the agreement. The VA then asked Glen/Mar to submit a change proposal, which they did - asking for 15 additional calendar days and $21,679.95 to complete the work.
On April 25, 2018, the VA and Glen/Mar commenced a phone call. Unfortunately, neither party agrees upon the content of the discussion besides the date it occurred. Glen/Mar claims the VA asked them to remove the additional days and cost from the change proposal and promised they would address those issues after the work was completed. The VA asserted it made no such promise and expected Glen/Mar to perform the work at no additional cost and no additional time.
Whatever the substance of the phone call, Glen/Mar removed the additional days and included $37,796 in additional costs for the CenturyLink work, but no additional days or cost was included for the additional work. The VA later sent Glen/Mar a modification for the negotiated additional price of $37,796.33 and no additional time for completion of the additional work. The modification also included the following language:
This modification represents full and complete compensation for all costs, direct, indirect, associated with the work agreed to herein, including but not limited to, all costs incurred for extended overhead, supervision, disruption or suspension of work, and labor inefficiencies, and this change impacts on unchanged work.
The modification also included the following language, “the contractor hereby released the government from any and all liability under this contract for further adjustment attributed to the contractor’s proposals.” This final bit of language would be the linchpin the CBCA relied on in denying Glen/Mar’s appeal.
The originally scheduled completion date for the contract was March 17, 2018. Glen/Mar did not complete the contract until November 1, 2019. Glen/Mar submitted a “schedule delay package” around August 27, 2019 and a request for equitable adjustment (REA) seeking $859,917.60 in additional costs associated with the additional days required to perform the CenturyLink work. The VA and Glen/Mar held another phone conversation on November 6, 2019. Again, by the time of the appeal, the VA and Gen/Mar disagreed significantly on the substance of the phone call. Glen/Mar asserted the VA agreed to resolve the cost of delays at a later date. The VA continued to assert it had never made such a promise.
Glen/Mar Files A Claim
On April 7, 2020, Glen/Mar filed a certified claim seeking total damages of $642,021.65 due to the CenturyLink work. The contracting officer’s final decision denied the claim on June 5, 2020. Glen/Mar subsequently filed an appeal at the CBCA.
In denying Glen/Mar’s appeal, the Board opined “the release before us unambiguously discharges any government liability related to the CenturyLink fiber work, including impacts and delays and is binding on both parties. Further, the modification does not preserve any claims on behalf of Glen/Mar, regardless of whether the claims related to work completed before or after the initial contract completion date.”
The Board did point out there are “special and limited” circumstances that may arise that would allow the consideration of a claim despite a general release. Those circumstances include “when the parties continue to consider the claim after the execution of the release.” The Board further held that “such conduct manifests an intent that the parties never construed the release as an abandonment of plaintiff’s earlier claim.” However, in the appeal before it, the Board opined that while there was evidence of discussions before the signing of the release, there were no facts that supported Glen/Mar’s contention that the VA engaged in negotiations on the delay claim after the modification was executed.
Based on the outcome of this appeal, contractors should understand why they should never sign a modification of the total release of claims without including some reservation of rights unless they do not plan to make any claims later. As happened in Glen/Mar’s case, signing a release without reserving any rights in the modification will likely forever foreclose your company seeking damages from the government at a later date.
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