Contractor Waives its Right to Pursue Claim Through its Invoice for Final Payment
The Armed Services Board of Contract Appeals (the “Board”) recently issued another reminder in [Redacted], ASBCA No. 61065, that government contractors need to specifically reserve their rights to Contract Disputes Act claims in modifications and releases for final payment. While its name doesn’t quite rival the best of those associated with civil forfeiture cases (for example, United States of America v. An Article Consisting of 50,000 Cardboard Boxes More or Less, Each Containing One Pair of Clacker Balls), [Redacted] does serve as a useful reminder to keep an eye out for any waiver language in payment requests, modifications, or (as here) an invoice for final payment.
In the appeal, [Redacted] (the “Contractor”) claimed it was owed $142,000.00 for extra work performed on a contract to construct and upgrade the Afghan National Police and Central Unit Headquarters in Kabul, Afghanistan. The construction contract incorporated a final payment provision for fixed-price construction contracts under FAR 52.232-5, which provides:
(h) Final payment. The Government shall pay the amount due the Contractor under this contract after –
(3) Presentation of release of all claims against the Government arising by virtue of this contract, other than claims, in stated amounts, that the Contractor has specifically excepted from the operation of the release.
The Contractor’s invoice for final payment contained the required release language:
“…the undersigned contractor does release and discharge the Government… of and from all liabilities, obligations, and claims whatsoever in law and equity arising out of or by virtue of said contract, except specified claims in stated amounts, or in estimated amounts when the amounts are not susceptible of exact statement by the contractor, as follows.”
The Contractor did not complete the section detailing any outstanding claims, submitted the release, and received final payment. More than two years after receiving final payment (and after having an initial appeal to the Board dismissed because it failed to submit a certified claim to the Contracting Officer), the Contractor submitted a proper CDA claim to the contracting officer seeking payment for the extra work. The CO issued a final decision denying the claim and the contractor filed an appeal to the Board.
The Contractor claimed that it had forgotten to “check our record for this contract” when it signed the release, and thus signed the final release in error. The Government filed its motion for summary judgment based on the executed final release. Instead of responding to the Government’s motion, the Contractor invited the Board to perform a site visit in Kabul (the purpose of which neither the Contractor nor the Board in its decision made clear). The Board respectfully declined to make the site visit.
Instead, the Board relied upon its precedent that “[a] final release followed by a final payment to a contractor generally bars recovery of the contractor’s claims under the contract except for those excepted on the release.” When a claim is not excepted in a general release, it can only be prosecuted by the contractor in “special and limited situations” of “mutual mistake, continued consideration of a claim after the execution of the release, fraud, or duress.” Although the Contractor had previously argued that it had mistakenly signed the release, the Board determined that such a mistake was not mutual—it was solely the Contractor’s mistake and did not involve the Government—as is required to overcome the waiver under that basis.
The Board also addressed the Contractor’s previous assertion that the Government had knowledge that it was asserting an additional claim. The Board had previously held that “final payment does not bar a claim where the contracting officer knows that the contractor is asserting a right to additional compensation, even though a formal claim has not been filed.” However, in failing to respond to the Government’s motion, the Contractor failed to present any evidence that the Government had such knowledge, and it lost the potential defense.
The Government cannot predicate final payment on a release of the contractor’s claims. However, a contractor’s outstanding claim(s) must be excepted from the contractor’s release, which is what the Contractor failed to do here.