By Paul Levin
In a recent case in the state of Washington, the judge voided, as a matter of law, a $425,388 jury award to a subcontractor who computed his own lost productivity costs using the measured mile. Meanwhile, in another case where a contractor computed his own lost profit costs, the court allowed the method of calculation. What’s the difference? How does one know when expert input, or even testimony, is required to pursue a claim for damages? Let’s step through these two cases and see what gives, and provide guidance for those out there who are contemplating pursuit of a sizeable damages award.
The measured-mile is at issue on a project where Salinas Contracting Inc. (SCI) was contracted to place concrete on Joint Base Lewis-McChord. During construction, SCI claimed that CJW Construction, Inc. provided insufficient concrete, failed to properly prepare the subgrade, and cited some weather-related issues, causing SCI to work in a less productive manner. SCI’s president, John Salinas II, was able to convince a jury that extra labor, trucking and equipment costs in the amount of $425,388 were incurred. To substantiate the costs, the measured-mile approach was used. Use of the measured-mile theory calculates the costs incurred during an unimpacted period of the job as a baseline unit cost, and then calculates the cost during the impacted period. The difference between the impacted and unimpacted unit costs would be a measure of the disruption, and applied to the total quantity of impacted work.
In the SCI case, to make a long story short, the contractor used the three last days of performance where CJW provided the most cubic yards of concrete per hour as the unimpacted period and calculated its cost per square foot of machine paving provided. Not so fast, declared the judge responding to a post-trial motion by CJW. There were a number of factors involved in the use of the measured-mile application which SCI did not address and ruled that Mr. Salinas "…possessed neither the ability nor the objectiveness" required of an expert.
The use of the measured mile method necessarily involves hypotheticals, not just fact. The court noted it wasn’t the method of calculations that defeated his use of the measured-mile, but in the selection of the comparator dates and in the conclusion that the calculations represented the inefficiency damages. These judgments on comparator dates and calculations required the use of an expert who can demonstrate that the data has been used in a fair and reasonable manner.
In the lost profit case, also, coincidentally involving a paving subcontractor and Western Surety. MMS Construction & Paving LLC walked off the job after the general contractor, Head, stopped making payments. MMS sued for the payments and lost profits on unperformed work. MMS owner Mike Mathews testified that his anticipated profit was the bid price less the cost estimate, adjusted for added performance costs. Head appealed, arguing, among other things, that the anticipated profit calculation required an expert financial opinion. The Oklahoma appeals court noted “[M]ost courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert.”
This raises several questions about the SCI case. For more insight to these questions, and possible answers, we turned to Construction Claims Advisor editor Bruce Jervis:
Q: Could the contractor have taken the steps mentioned in the case and had himself qualified as an expert?
A: No. Even if Mr. Salinas possessed the appropriate credentials of an expert, he lacked objectivity.
Q: Could the contractor have performed the calculations correctly and undertaken the same steps an expert would have taken, possibly even asked for review and confirmation by an expert?
A: Expert opinion was necessary. If the qualified expert wanted Mr. Salinas's assistance in performing the calculations, that would be fine. But the opinion would have to be the expert's alone.
Q: If an approach like step two were taken and it appears the contractor’s approach was accurate and reasonable, could it still be submitted and left up to the defense to refute the results with its own expert?
A: No. Mr. Salinas' testimony to hypotheticals was inadmissible, requiring no rebuttal.
Q: What are the distinctions between this case and the lost profit case?
A: The measured mile method involves hypotheticals and therefore requires expert opinion. Lost profit can be determined from fact and mathematical calculation, so it does not necessarily require expert opinion.
A couple of other things to keep in mind, according to Jervis:
Expert testimony in court must be disclosed well in advance of a hearing, both the identity of the expert and a synopsis of the proffered opinion. This gives the other side an opportunity to challenge the qualifications of the witness or prepare an expert rebuttal. Expert opinion can't be slipped in as a Plan B.
While methods such as the measured mile for calculating extra costs may succeed in negotiating a settlement; in that situation it is a matter of being reasonable and persuasive. But if a claim is not settled and goes into litigation, the exacting evidentiary standards of the courts come into play.