Please Release Me But Don't Let it All Go

Well, I’ve blogged about releases before, but a recent case from the Armed Services Board of Contract Appeals (“ASBCA”) has spurred me to bring it up again.

Federal contractors absolutely, positively must pay attention when they sign contract modifications that, among other things, settle disputes, compensate for contract changes, or grant price adjustments for the increased cost of complying with new wage determinations under the Service Contract Act. They always have release provisions that are boilerplate clauses that are ridiculously easy to gloss over particularly when you don’t want to allow haggling over the fine print to derail an otherwise good settlement.

What happens if the contract modification does not actually address all aspects of the contract change, dispute or price adjustment? Will that boilerplate language get in the way? Consider this provision:

In consideration of the modification agreed to herein as complete equitable adjustments for the Contractor’s Request for Unit Price adjustment, the Contractor hereby releases the Government from any and all liabilities under this contact for further equitable adjustments attributable to such facts or circumstances giving rise to the price adjustment (except for: N/A).

This is the release language from a contract modification that memorialized an agreement between the Government and a contractor to resolve a Request for Equitable Adjustment (“REA”) relating to two of a number of task orders under a contract. See Sonabend Co., ASBCA No. 63359, slip op. at 6 (December 19, 2023). If you read through the facts, you’ll see that there were three REAs. Among those, the REAs related to multiple task orders and related to various periods. The contractor and the Contracting Officer knew they were making progress on resolving pieces of it, so the Government sent a draft modification to the contractor. Kudos to the contractor for raising a concern over the release language because he knew not everything was resolved and believed that the modification only related to two task orders within a specific timeframe. The Contracting Officer replied that the release language could not be changed.

Ultimately, the contractor signed the modification with the release language left unchanged. That said, there was a lot of contemporaneous discussion regarding what items were being addressed in the modification and the modification included statements regarding its purposes that referred to a specific contracting officer final decision as well as particular task orders.

Later, the contractor submitted another REA for costs that were not covered by the earlier modification. Well, whoopsies - the Contracting Officer - a different Contracting Officer - rejected the REA on the basis that the release language precluded the later REA. Well, the parties couldn’t resolve this and it went to the ASBCA.

If you take a look at my earlier blog, you’ll see that a broad release can have disastrous consequences if it’s not qualified in some manner in the release provision or in other language in the modification. Ordinarily, the language is deemed to speak for itself and evidence outside the document (referred to as “parol” or “exrinsic” evidence) often is ignored. In this case, however, the Board found that the terms of the modification were not without ambiguity. Moreover, the modification’s terms suggested that its scope was limited. Moreover, the Board concluded that the extensive trail of communications could/should be considered to evaluate whether the release was limited even if the language, in isolation, was not. While the Board wasn’t willing to hand a win to the contractor, the decision did strongly suggest that the release was not nearly as broad as the Government would have liked.

In my view, that’s kind of a win in this situation. The contractor in this case tried to get some clarifications embodied in the release language but was rebuffed. The contractor ultimately signed the modification with the original release language and I can understand why.

Our clients regularly contend with price adjustments, particularly those that arise under the SCA. Modifications to resolve those adjustments always have release provisions. Are you confident that there’s nothing left to resolve? If so, then signing the mod probably makes sense. If you think there are contingent issues that remain that could come up, but haven’t yet, consider adding language to the release that carves out exceptions to the broad terms of the release.