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Volume 7 - Number 30 | July 27, 2009

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Recent Issues

  EDITOR'S NOTES | Issue 7-30
Contract modifications commonly contain broad waiver and release provisions. The contractor acknowledges it is being compensated in full for the contract changes and thus waives and releases any claim against the owner for additional compensation. If the contractor wishes to reserve or except a claim, it must do so with clear, express language. But, can the waiver and release clause reasonably be applied to claims that arise after execution of the contract modification?

In the first case reported this week, a project owner issued 279 extra work orders after entering into a contract modification with the contractor. When the contractor filed a claim for the cumulative impact of those changes on the contractor's labor efficiency, the owner said the contractor had waived the claim under the terms of the prior contract modification. A federal appeals court, in a puzzling and controversial split decision, agreed with the owner, overturning $2 million in labor inefficiency costs and $1.6 million in delay costs awarded by the federal claims court.

Other cases reported this week involve a joint check agreement with a subcontractor and a supplier's right to seek payment after missing a payment bond claim deadline. The subcontractor was not allowed to bring a claim directly against the government despite the government's breach of the joint check agreement. The supplier fared better and was allowed to pursue other remedies despite its tardiness with the bond claim.
  CONTRACTOR RELEASED CUMULATIVE IMPACT CLAIM
Even though 279 extra work orders had a cumulative impact of more than $2 million on a contractor’s labor efficiency, the contractor had released that claim under a prior contract modification. The contractor's $1.6 million delay claim award received the same treatment. A dissenting opinion argued that the claim had not even arisen at the time the modification was signed.
  TWO-PARTY CHECK AGREEMENT DID NOT MAKE SUBCONTRACTOR A CLAIMANT
The government modified a prime contract to call for a subcontractor to be a named payee on a government check. The government breached that agreement but the subcontractor could not bring a payment claim against the government.
  PAYMENT BOND WAS NOT SUPPLIER’S SOLE REMEDY
A supplier missed a payment bond claim deadline but was allowed to pursue other remedies against the prime contractor. The payment bond was not the supplier’s sole remedy on a public works project.