Contractors working with the federal government understand that contract modifications are a fact of life. Projects rarely unfold exactly as planned – and changes to the scope of work, performance deadlines, and pricing (just to name a few) all require formal contract modifications.
With those modifications often comes something else expected — but still dangerous: a waiver or release of claims.
A contractor that mechanically signs a modification including a waiver or release without considering the full extent of the language risks foregoing significant claims that could have been asserted against the government.
A recent decision from the Federal Circuit highlights just how consequential waivers embedded in a modification can be. Waivers may seem like boilerplate, but they carry real weight. For contractors, the lesson is clear: Do not sign away claims you may later want to assert.
Highlighting the Risk of Broad Waivers
The case we are examining today involves a construction project for the State Department’s Bureau of Overseas Building Operations.
The contractor encountered significant issues at the Issued‑for‑Construction (IFC) drawings stage. The contractor argued that the drawings were riddled with defects, requiring significant changes to the work.
Over the life of the project, the contractor and the government executed several bilateral modifications to deal with these issues. Each modification included broad release language – including the specific representation that the contractor waived “any and all liability” for claims arising from the circumstances covered in the modification.
Later, the contractor sought to unwind the release (and re-open the door to damages against the government) by claiming that the contract was subject to cardinal changes (i.e., changes that made the work stray so far from the original bargain that it was like building an entirely different project) and other government breaches. The Federal Circuit would have none of it.
The court upheld prior decisions that the contractor had already waived its right to pursue those claims when it accepted the earlier modifications. This was true even though one later modification included language reserving “potential breach of contract claims.” That general statement, issued so late in the game, was insufficient to undo the sweeping waivers signed earlier.
Best Practices for Federal Contractors Executing Modifications
Not every modification that includes waiver language is risky for contractors.
A sufficiently narrow waiver can represent the closure of a good faith negotiation where both the government and contractor know that a dispute has been settled for just compensation, the issue is closed, and the project can move forward without lingering claims. There are benefits for all involved. The contracting officer gains budget control and limits government risk, while the contractor secures immediate compensation and avoids drawn‑out disputes.
But less carefully crafted waivers can potentially present catastrophic risks when they sweep far broader than needed or intended. Contractors executing modifications including a waiver / release need to be mindful of the following best practices:
- Avoid Broad Releases of All Claims. Sweeping releases of all claims on a project are unnecessary and cut against your interests. Keep waivers narrowly tailored to the specific issue giving rise to the modification.
- General Reservations Are Insufficient. While better than nothing, general reservations of rights tend to hold up poorly over time. If you are aware of a specific claim, make sure to carve it out in detail.
- Read Every Word. Before signing, take the time to consider the entire modification (including the release) in the context of the contract as a whole.
Contractors must face waivers head on. The government will always want the cost control and risk mitigation benefits they offer. Contractors must be proactive, agile, and vigilant in managing modifications. Keep release and waiver language reasonable, consistent, and narrowly tailored.
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