07.06.2009
|
Updates
Bell involved a construction contract under which the government issued an extensive series of change orders. Following the first of those change orders, the parties executed Modification 93, which stated in part that the increased contract amount set forth in the modification represented "full and equitable adjustment for the remaining direct and indirect costs of the [changed work] . . . and full and equitable adjustment for all delays resulting from any and all Government changes transmitted to the Contractor on or before August 31, 2000." Bell, 2009 WL 1796783 at *1. Modification 93 also included the following "release" language:
The modification agreed to herein is a fair and equitable adjustment for the Contractor's direct and indirect costs. This modification provides full compensation for the changed work, including both Contract cost and Contract time. The Contractor hereby releases the Government from any and all liability under the Contract for further equitable adjustment attributable to the Modification.
Id.
Following a trial on the merits, the Court of Federal Claims (COFC) awarded Bell $2,058,456 for "labor inefficiency costs attributable to the cumulative impact of the [series of government] changes." Bell BCI v. United States, 81 Fed. Cl. 617, 619 (2008). As noted by the Federal Circuit:
In finding for Bell, the Court of Federal Claims drew a distinction between a "delay" claim and a "disruption" or "cumulative impact" claim. . . . The court then looked to the contract's "Changes" clause . . . and determined that "[u]nless provided otherwise, the bilateral modifications will compensate the contractor for performing the changed work, but not for the impact of multiple change orders on the unchanged work." Because in the court's view Mod 93 did not "provide otherwise," the court concluded that Bell did not release its cumulative impact claims.
Bell, 2009 WL 1796783 at *3 (citations omitted).
The Federal Circuit reversed the COFC, however, departing from well-established COFC and the boards of contract appeals precedent on cumulative impact claims. In Bell, the Federal Circuit examined the plain language of the release and, after determining that its terms were unambiguous, ruled that "Bell released the government from any and all liability for equitable adjustments attributable to Mod 93." Id. at *4. The Federal Circuit then remanded the issue to the COFC to determine "which of Bell's cumulative impact claims, if any, are 'attributable to' modifications other than those modifications that contain the release language discussed above." Id.
The Bell decision can be interpreted to require contractors to reserve their right to recover for cumulative impacts in each modification that resolves an individual change order, regardless of whether such impacts are known or foreseeable when the modification is executed. This may create a dilemma for contractors, particularly because the government often requires that no exception may be taken to the standard release language set forth in the Federal Acquisition Regulation. In view of Bell, contractors should now consider, where warranted, expressly reserving the right to recover cumulative impact costs in any "release" provision that may be included in modifications that resolve the underlying changes.
