Insist That Settlement Agreements Clearly State No Admission of Liability - Takeaways From Regiment Construction Corp.

In Regiment Construction Corp., CBCA 6449 (October 1, 2020), the Civilian Board of Contract Appeals (CBCA) addressed the interplay between contractor claims and Government fraud allegations. The matter arose when the contractor filed a certified claim arising out of a condensate piping replacement at a VA healthcare facility. When the Contracting Officer failed to issue a decision, the contractor considered its claim 'deemed denied,' and filed its appeal with the CBCA.

After several months of settlement discussions, the Government filed a motion for summary judgment, asking the Board to find as a matter of law that the contractor had committed fraud, and therefore the contract was void ab initio. The motion stemmed from a 10-year investigation into the contractor's SDVOSB status which culminated in a Department of Justice settlement in which the Government was to be paid a sum of money as 'restitution.'

After denying the contractor's motion to strike, which was based on the Government's failure to raise fraud as an affirmative defense in its answer, the CBCA turned to the Government's motion for summary judgment. The Board denied the motion, noting that the settlement agreement itself specifically stated it was not to be construed as an admission of liability. The CBCA likewise rejected other evidence introduced by the Government as constituting an admission of fraud.

The takeaway from this decision is that, when settling any fraud allegations, the contractor should insist that the settlement agreement contain a clear statement that the agreement may not be construed as an admission of liability.