Pricing claims for lost productivity or inefficiency caused by delay or disruption to the construction schedule can be challenging. It is not simply a matter of documenting direct and indirect costs. There must be a methodology. A flawed method can result in an unpersuasive claim—or worse.
A contractor on a federal project recently employed an “inefficiency ratio,” which used actual days of work as the numerator and baseline scheduled days as the denominator. The problem was that the numerator had been knowingly overstated and the denominator knowingly understated, inflating the value of the contractor’s claim. The Court of Federal Claims called this “patently deceitful” and allowed the government to recover under the False Claims Act.
The other case in this issue involved a sole shareholder’s diversion of corporate funds to his personal use, leaving insufficient funds to complete a construction contract. A Pennsylvania court was asked to decide whether the individual could be held liable to the project owner for interfering with his own company’s construction contract.