U.S. Court Of Appeals for the Federal Circuit Rules Contractor Cannot Pursue Claims for Cumulative Impact, Holds Release Terms in Modifications Were Unambiguous

Bell BCI Co. v. United States
570 F.3d 1337 (Fed. Cir. Jun. 25, 2009)

Plaintiff, Bell BCI Company (Bell), a general contractor, sued the United States (the “Government”) for damages plus interest under the Contract Disputes Act for the unpaid balance of the contract price, unresolved change order claims, delay damages, labor inefficiency costs and profit thereon. Bell also asserted claims on behalf of five subcontractors.

Bell contracted with Government to construct a laboratory building for the National Institute of Health (the “Agency”). After 9 months of construction, the Agency added a new floor, issued over 200 modifications that delayed completion by 19 ½ months and increased the price by 34 percent or $21.4 million. To govern the contractual changes, the parties entered into Modification 93 on October 2, 2000, which included a price increase to pay for the new floor, and set forth a revised completion date, fourteen substantial completion milestones, and a liquidated damages clause for delay. Modification 93 contained release language providing that “[t]his 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.” Subsequent modifications for changes also included this same release language. Shortly after Bell completed construction, Bell asserted an impact claim for the cumulative effect of the changes on Bell’s overall performance and asserted pass-through impact claims on behalf of five of its subcontractors. The Government denied liability based on the defense of accord and satisfaction and claimed that Bell was liable for $447,678 in liquidated damages for failing to complete the project on time.

The United States Court of Federal Claims found for Bell in all regards and awarded Bell $2 million for inefficiency costs attributable to the cumulative impact of changes; $1.6 million for delays remaining on the Project after April 30, 2001 (the revised substantial completion date taking into account all extensions); $366,000 for profit on the delay and labor inefficiency costs; $563,000 as the unpaid contract balance; and $1.6 million for unresolved changes not included in any prior change order.

On appeal, the Court of Appeals found that while it agreed with the trial court’s finding that Bell suffered a cumulative impact, the issue was whether Bell had released the Government from liability for that impact by virtue of the release language in the modifications. The trial court determined that the release language in the modification was ambiguous and considered parole evidence to conclude that there was no meeting of the minds, and thus there could not be accord and satisfaction. The Court of Appeals held that parole evidence could not be considered because the language of the modification was unambiguous. The Court of Appeals concluded that the language of the modification plainly stated that Bell released the Government from any and all liability for equitable adjustments attributable to Modification 93. The Court of Appeals also concluded that adequate consideration was provided for Bell’s release as the Government paid Bell over $2 million. The Court of Appeals remanded to the Court of Federal Claims for a determination of which of Bell’s cumulative impact claims, if any, are “attributable to” modifications other than those modifications that contain the release language.

The Court of Appeals also concluded that the release language in Modification 93 released the Government from any liability for Bell’s delay claims. The Court of Appeals remanded to the Court of Federal Claims to determine which delays, if any, are “attributable to” modifications other than those modifications that contain the release language. Having remanded Bell’s cumulative impact and delay claim, the Court of Appeals also vacated the trial court’s award of 10% profits on those claims.

The Court of Appeals affirmed the Court of Federal Claims’ methodology of calculating delays and damages, the award of the balance of the contract price, the extra work orders that were not incorporated into any modification, the award to a subcontractor, and the decision to deny the Government liquidated damages.

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