Change order releases and reservation of rights in the United States

A contractor prices a change at direct cost, signs the bilateral modification, gets paid and moves on. Two years and forty modifications later it puts together the cumulative impact claim it always meant to bring. The government's answer is on page two of every one of those modifications.

In the United States that answer usually wins, and there is a body of law explaining why. A release on a bilateral modification is a genuine claim-killer. It is construed as a contract term. If the release is unambiguous, the government can prove it from the words alone, without evidence of what anybody actually intended. The leading authority is a Federal Circuit decision that is still widely cited the wrong way round. No comparable line of authority has been located in the other jurisdictions this library covers.

Where the release comes from

In federal work the release is a regulatory template. FAR 43.204(c) tells the contracting officer, "to avoid subsequent controversies," to make sure every element of the equitable adjustment has been presented and resolved, and to include in the supplemental agreement "a release similar to the following":

"In consideration of the modification(s) agreed to herein as complete equitable adjustments for the Contractor's _______ (describe) _________ 'proposal(s) for adjustment,' the Contractor hereby releases the Government from any and all liability under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the 'proposal(s) for adjustment' (except for ____________)."

Two points follow from the text. First, the release reaches everything attributable to the facts or circumstances behind the proposal, not just the priced work. Second, the regulation's own model includes a blank for exceptions. When a contractor signs a modification with that blank empty, it is choosing not to reserve anything.

★ Under the Revolutionary FAR Overhaul, the Part 43 model deviation text carries the same Statement of Release at 43.304(c)(2), in a restructured Subpart 43.3. Agencies adopt the deviation by class deviation, one agency at a time. The contract clause behind the modification is unchanged: FAR 52.243-4 Changes (JUN 2007). Read the clause as it is incorporated in your contract, not as it appears in the current FAR, and expect a 2026 modification to cite either section number.

Private work is different in a way that matters. In AIA A201–2017, a Change Order is "a written instrument prepared by the Architect and signed by the Owner, Contractor, and Architect stating their agreement upon" the change in the Work, the amount of any adjustment to the Contract Sum and the extent of any adjustment to the Contract Time (§7.2.1). The base form's Article 7 contains no release or accord wording; the only waiver in it is the §7.4 minor-change waiver. (Inference.) Leaving the time box at "nil" or blank on a signed Change Order is still a recorded agreement that the time adjustment is zero. Owners also add release wording through amendments. One publicly posted owner-modified A201–2017 inserts a new §7.2.3 saying that acceptance of a Change Order "constitutes full accord and satisfaction for any and all Claims, whether direct or indirect, arising from the subject matter of the Change Order." Read the supplementary conditions before the general conditions. A second release sits at §9.10.5: "Acceptance of final payment by the Contractor, a Subcontractor, or a supplier, shall constitute a waiver of claims by that payee except those previously made in writing and identified by that payee as unsettled at the time of final Application for Payment." That is the base-form text; owners commonly amend it, so take the operative wording from the executed contract.

Two defences, not one

The government usually pleads the release and accord and satisfaction together. They are separate defences, and the difference decides cases.

• Release is a contract term. It "is contractual in nature and must be interpreted in the same manner as any other contract term or provision," as the ASBCA put it in Korte-Fusco Joint Venture. If the words are unambiguous, the tribunal does not look at evidence of what the parties meant. Holland v United States holds that the two defences are distinct.
• Accord and satisfaction is an affirmative defence and the government carries the burden. Four elements: proper subject matter, competent parties, a meeting of the minds, and consideration. Brock & Blevins Co. v United States, applied in Meridian Engineering Co. v United States.

(Inference.) The contractor's best evidence — what the parties actually understood at the negotiation table — is relevant to accord and satisfaction. It can be excluded altogether on a release that the tribunal reads as unambiguous. That is the difference between the two courts in Bell BCI.

Bell BCI: what the Federal Circuit actually decided

Bell BCI Co. v United States is the reason the US has a body of doctrine on this subject. It is also the case most often cited backwards.

The contractor won in the Court of Federal Claims. On an NIH building project the trial court awarded Bell $6,200,672, including $2,058,456 in labour inefficiency attributed to cumulative impact and $1,602,053 for delay. It rejected the government's accord-and-satisfaction defence, finding no meeting of the minds and no consideration for the release.

The contractor lost in the Federal Circuit. The release sat in paragraph 8 of Modification 93:

"The modification agreed to herein is a fair and equitable adjustment for the Contractor's direct and indirect costs. This 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."

The majority held: "We hold that the language in paragraph 8 of Mod 93 is unambiguous, and the court clearly erred in holding that Bell did not release its cumulative impact claims attributable to that modification." Because there was no ambiguity, it declined to examine the extrinsic evidence of intent. The same wording, which had been "repeated in a number of subsequent modifications," also released the government from delay liability.

Get the disposition right as well. The judgment was affirmed in part, vacated in part, and remanded. The Federal Circuit did not hold that one release swept in every later change. It sent the case back for the trial court to decide "which of Bell's cumulative impact claims, if any, are 'attributable to' modifications other than those modifications that contain the release language." It did the same for delay, and vacated the 10% profit on both heads. The dissent records that about 47 modifications carried the same release, read as limited to the modification in which it appeared, not to future modifications and extra work orders.

(Inference, and it changes the practical lesson.) Bell lost because the release was repeated. Each signed modification settled what was attributable to that modification. The claims the Federal Circuit left open for the remand were the ones tied to changes processed without the release. The contractor's real exposure is every unreserved signature, not one early release.

Reservation of rights: what works

Alares: the reservation held, and the claim still shrank

Alares Construction, Inc. v Department of Veterans Affairs involved an ICU project at the Providence VA medical center.

Bilateral modification P00005 (23 May 2017) added a second steam generator for $42,398.86. The consideration clause described the modification as "the adjustment for the contractor's proposal and for the contractor's rights to submit claims for unresolved issues which are not covered by this change." The contractor's change proposal, incorporated with RFIs 26 and 31, said the price was "only [for] the direct costs of the change" and that Alares:

"reserves its rights to additional costs for impact of this change, alone or in combination with other changes, on unchanged work; for additional time, due to impacts, if any, on the schedule; and for time-related extended time of performance costs, all of which will be evaluated separately."

The VA argued, through its scheduling expert, that by signing P00005 Alares had assumed responsibility for the generator delays. The Board rejected that argument. First, the question was one of contract interpretation, "a matter of law for which expert testimony is irrelevant." Second, because the modification defined its payment as the adjustment for the contractor's proposal, the Board read the proposal to fix the modification's scope. On that reading the modification was "limited to the direct costs of the change," and Alares "did not assume responsibility and reserved its right to seek compensation for time delays caused by the change." The VA was held responsible for 38 days of critical delay from the generator redesign.

Then the rest of the claim met the schedule. Alares had attributed all 765 days of delay to the VA and sought extended general conditions for 653. It claimed about $1.69 million, reduced to roughly $1.5 million for earlier settlements. The Board found 218 days of compensable delay, "for which there were no concurrent delays," and awarded $285,800 plus CDA interest. For the generator period, Alares's expert had claimed 113 days using an analysis that "ignores at least two contemporaneous schedule updates." The concurrency analysis is covered on concurrent delay in the United States.

Two things Alares is not. Its P00005 holding is not a release holding, and it is not authority that reservations fail. The reservation preserved the claim. It did not prove it. And the same decision enforced releases against Alares elsewhere: modification P00006 released direct-cost claims, and a settlement release incorporated in P00015 waived labour costs that Alares tried to recover again inside its general conditions. One contractor, one project, one decision: the modification that carried a reservation kept its claim, and the ones that did not lost theirs.

What fails, and what only buys a trial

• A letter the modification does not incorporate. In B.L. Harbert International, LLC v United States, modification P2 stated it was "compensation in full on behalf of the Contractor and its Subcontractors and Suppliers for all costs and markups directly or indirectly attributable for the change ordered, for all delays related thereto, for all extended overhead costs." The court held that "when a contractor signs a general release, it is barred from seeking damages for the events connected to and contemplated by the release." Because the modification language was clear, it did not let pre-modification letters override it. The complaint was dismissed on the pleadings.
• A reservation narrower than the loss. A later modification in Harbert excepted "any time extension due to the changed work, and resulting increased costs." The contractor accelerated instead of taking time, and the court held that "acceleration is not a time extension." Name acceleration, disruption and cumulative impact expressly. A time-only reservation will not cover them.
• A reservation in the proposal and its cover letter, plus later conduct. In Walsh/Davis Joint Venture v GSA, the subcontractor reserved its impact costs in two ways: its cover letter reserved "working out of sequence, disruption, hindrances, interferences, acceleration, compression, [and] loss of efficiency," and its proposal said "This quote covers direct costs only and we reserve the right to claim for impact and consequential costs." The modification settled "all costs, direct, indirect, and impact and delay associated with this change." Affidavits that the parties never intended that wording to cover inefficiency, and evidence that GSA later negotiated similar claims from other subcontractors, raised a triable issue of intent, and summary relief was denied. That is better than Harbert, but it is not a win.
• No release in the words. In Appeals of Thalle Construction Co., modification P00009 did "not contain the release language that the government alleges it contains." The government lost summary judgment on both release and accord and satisfaction. The Board said in terms that it "need not resolve" the effect of the separate weather reservation in P00017.
• Delay in issuing the modification. In Appeal of Group III Management, Inc., a closing statement covering "all delays related thereto" did not unambiguously reach the government's delay in funding and issuing that same modification, and summary judgment was denied. The contracting officer had written that he considered funding delay "a separate issue."

The continuing-negotiation exception. In Community Heating & Plumbing Co. v Kelso, the ASBCA had found an accord and satisfaction in executed modifications. The Federal Circuit disagreed on that point: courts "may refuse to bar a claim based upon the defense of accord and satisfaction where the parties continue to consider the claim after execution of a release." The Navy had continued to negotiate and audit the claims for years after they were submitted. (The contractor still lost those claims on the merits.) Keep the correspondence that shows the government continued to consider the claim after signature.

Cumulative impact after a series of bilateral modifications

Cumulative impact is the claim these releases most often extinguish. It is productivity lost on unchanged work because of the combined effect of many changes, so by definition no single change order priced it.

The federal textual hook is FAR 52.243-4(d) (JUN 2007). An equitable adjustment is due where a change increases the cost or time of "any part of the work under this contract, whether or not changed by any such order." Entitlement to recover impact on unchanged work therefore comes from the Changes clause. Whether the claim survives depends on the modifications the contractor signed.

AACE International Recommended Practice No. 130R-23 sets out entitlement elements running from Causal Event Occurrence through Adherence to Contract Change Notice Requirements to Quantification of Impacts. AACE's announcement describes cumulative impact as "the unforeseeable disruption of productivity resulting from the synergistic effect of an undifferentiated group of changes." (Inference.) Placing notice compliance inside entitlement supports treating release and reservation as a gating question to be decided before anyone builds a productivity curve.

Applying Bell BCI across a series of modifications gives four working rules:

1. Every modification carrying the release extinguishes impact attributable to it. Repeated release language is the fact pattern that decided Bell BCI.
2. Impact tied to unreleased changes stays open. The remand in Bell BCI was about exactly that question. Unincorporated extra work orders, unilateral change orders and modifications without the release are where a surviving claim is found. Map every change to its instrument before pricing anything.
3. A reservation that names impact "alone or in combination with other changes, on unchanged work" is the wording that carried the claim in Alares. That is the aggregate claim, stated in the aggregate.
4. Foreseeable impact should be priced, not reserved. If a knock-on was predictable when the contractor priced the change, a tribunal will expect it in the price. (Opinion.) A reservation is most persuasive when it covers only what could not yet be quantified, and says so.

Subcontractor claims: the settlement that keeps them alive

A prime's release can kill a subcontractor's claim from two directions. The Harbert release was given "on behalf of the Contractor and its Subcontractors and Suppliers." The prime's own settlement with its subcontractor can also end the pass-through claim. Under Severin v United States, 99 Ct. Cl. 435 (1943), a prime recovers a subcontractor's damages only if it has paid them or remains liable for them.

Appeal of Sauer Inc. is the current model. Sauer agreed to pay its painting subcontractor $7,850,000. The release of the subcontractor's claims against Sauer carved out "all claims and claim rights that exist as against the Government, including any and all pass-through rights and related payment obligations." Sauer undertook to "vigorously pursue its CDA Claim/ASBCA Appeal, including those claims relating to TSI's work," and to pay 11.5% of any recovery up to $1,150,000. The Board held that "a settlement agreement under which the prime contractor remains conditionally liable to the subcontractor only as and when the prime contractor receives payment from the government suffices," relying on W.G. Yates & Sons Constr. Co. v Caldera, 192 F.3d 987, 991–92 (Fed. Cir. 1999). It concluded that the agreement preserved conditional liability "by specifically carving out an exception to the general release and obligating Sauer to pursue TSI's claim and remit a portion of any recovery."

How to cite this. Commentary often presents a three-element test for a "liquidating agreement": liability, limitation to the recovery, and prosecution. No single Federal Circuit holding states that test. Yates supports the conditional-liability element. Sauer supplies all three on its facts. The Board's opinion uses the term "settlement agreement," not "liquidating agreement." Cite Sauer, and draft to its facts.

A comparison, clearly labelled

This section compares jurisdictions and is not part of the US analysis. Canada reaches a similar result by a different route. CCDC 2 – 2020's change-order machinery contains no release wording. The bar comes instead from the finality of the agreed price combined with the form's notice gates. There is no Canadian equivalent of Bell BCI. The US route runs through construction of release wording and an affirmative defence the government must prove. The Canadian route leaves no release to read narrowly. The drafting lesson is the same in both: put the reservation in the instrument.

Drafting, both sides

For the contractor. Put this in the change proposal and make sure the modification incorporates the proposal or repeats the wording. Do it on every modification, starting with the first:

This proposal and any resulting modification cover only the direct cost of the changed work. The Contractor reserves its rights to additional costs for the impact of this change, alone or in combination with other changes, on unchanged work, including loss of productivity, disruption, acceleration and cumulative impact; to additional time for any schedule impact; and to time-related and extended performance costs, all of which will be evaluated separately.

Then:

• Fill the FAR blank. If the Statement of Release is used, write the reserved heads into "(except for ____________)." If it is left empty, the release has no exceptions.
• Reserve acceleration by name (Harbert).
• Map every change to its instrument (bilateral with release, bilateral without, unilateral, unincorporated). The Bell BCI remand shows that surviving claims sit in the gaps.
• Keep an REA separate from the modification. A reservation keeps a claim open, but it does not stop the CDA six-year clock, and it will not by itself survive final payment: re-list the claim as unsettled (A201 §9.10.5) or as an excepted claim in the federal final release when final payment is accepted. See the US change-order hub for the notice clocks.
• Settle with subcontractors on Sauer terms, never with an unqualified release.

For the owner or contracting officer.

• Use the FAR 43.204(c) form, identify the proposal it settles, and complete the exceptions blank deliberately, including "none" where that is the agreement.
• Allocate a stated part of the price to impact and time-related cost. (Opinion.) A release backed by consideration identified for the head of loss released is harder to attack on meeting of the minds.
• Say whether the modification settles the delay in issuing it (Group III).
• Once the modification is signed, stop negotiating the released claim unless you intend to reopen it (Community Heating & Plumbing Co. v Kelso).

About this material Library content is general information about construction claim practice, not legal advice. Entitlement, deadlines and procedure are governed by your own contract and by the law of the place the work is performed. Reviewed October 6, 2026 · Report a correction