The Armed Services Board of Contract Appeals (ASBCA) is a neutral, independent forum which has been in existence for over fifty years. One of its primary functions is to hear and decide post-award contract disputes between government contractors and the Department of Defense. A typical case involves what is called an “Equitable Adjustment.” In a decision issued on May 6 of this year, the ASBCA demonstrated just how independent and neutral it is.
The case involved a contract between the Naval Facilities Engineering Command in Gulfport, Miss., and a licensed Mississippi general contractor. The contractor had submitted an Equitable Adjustment claim related to labor, equipment, overhead, material costs, taxes, and delays associated with underground double wall piping.
While the Equitable Adjustment claim was pending, the contractor submitted its final invoice for the balance due under the contract. Before the Government paid the invoice, it required the contractor to sign a “Final Release,” wherein the contractor discharged the government from any claims related to the contract. The contractor failed to exclude its Equitable Adjustment claim from the release. The government then refused to pay the Equitable Adjustment claim, even though it had merit, because a clause in the Federal Acquisition Regulations excludes payment of claims not specifically exempted from the Final Release.
The ASBCA Administrative Judges hearing the appeal considered the government’s argument that a final release followed by final payment to a contractor generally bars recovery of the contractor’s claims excepted on the release. However, they noted that "There are... special and limited situations in which a claim may be prosecuted despite the execution of a general release. For instance, where it is shown that, by reason of mutual mistake, neither party intended that the release cover a certain claim, the court will reform the release." And this doctrine extended "to include cases where the Government knew or should have known of a mistake in a bid costly to the bidder."
The ASBCA then directed that an evidentiary hearing must be held to determine whether the contracting officer knew or should have known that the contractor made a mistake when it signed the release. If so, then the contractor’s Equitable Adjustment claim will be revived.
Bill Martin is a former B-52 and B-18 pilot and senior attorney for the Federal Deposit Insurance Corporation. He is currently a partner in the law firm of Keefe, Anchors & Gordon in Fort Walton Beach. Bill is admitted to practice in the U.S. Court of Federal Claims.