By Bruce Jervis
Project owners have started imposing contract language requiring documentation of actual costs in support of claims. These costs alone will be grounds for a price adjustment. Courts are enforcing this language. It is a challenge to some long-used techniques for quantifying construction claims.
The most recent example comes out of Virginia. A contractor was allowed to use “Blue Book” daily rental rates to determine the actual cost of idled, contractor-owned equipment, but only because the contractor presented expert testimony that these rates accurately reflect actual costs. The contractor was not allowed to calculate its extended job site overhead using an average daily rate. The contractor should have presented actual costs, although those costs could have been prorated over the period of delay.
At first glance, it seems perfectly reasonable for project owners to insist on paying only documented actual costs. Yet the increased costs of performance are not always simple or straightforward. It is a longstanding practice to use estimating guides such as the Blue Book. Will expert testimony always be required as a foundation for the use of this information? It is also a longstanding practice to use deductive or comparative methods for determining costs. Unabsorbed home office overhead and lost labor efficiency are examples. Will project owners be able to demand job cost records for these items? I welcome your comments.