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Calculating Damages For Constructive Acceleration

Thursday, January 04, 2007 11:21 am

Calculating Damages For Constructive Acceleration

Last month, CCM looked at constructive acceleration and the evidence needed to prove such a claim. This month CCM focuses on ways that courts calculate damages for constructive acceleration once the contractor or subcontractor (plaintiff) proves its entitlement to damages.

Contract law requires that the plaintiff that alleges breach of contract prove its damages to a reasonable certainty. But in the context of constructive acceleration, the requirement can be difficult for a plaintiff contractor or subcontractor to meet. The problem is that the work performed is work the contract envisioned, while the damages incurred are the result of the acceleration.

The challenge courts face is to ensure that the breaching party compensates the plaintiff for its losses while at the same time protecting the defendant against speculative and specious damage claims. Over time, courts have developed several methods for measuring the quantum of the plaintiff's damages: (1) actual costs established through actual cost data; (2) the total cost method; and (3) the jury verdict method. Note that courts use restitution or quantum meruit to calculate damages when the contract breach essentially rescinds the original contract or when no contract existed between the parties.

Actual Cost

The actual cost method is, by far, the method courts favor. The reason is that it "provides the court, or contracting officer, with documented underlying expenses, ensuring that the final amount of the equitable adjustment will be just that -- equitable -- and not a windfall for either the government or the contractor." Dawco Const. v. U.S., 903 F. 2d 872 (Fed. Cir. 1991), rev'd on other grounds by Reflectone, Inc. v. Dalton, 60 F. 3d 1572 (Fed. Cir. 1995). Courts employ the actual cost method if: (1) clear proof of injury appears; (2) no more reliable method for computing damages exists; and (3) the evidence is sufficient for a court to make a fair and reasonable approximation of the damages. See Dawco, 903 F. 2d at 880, citing [...]

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