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Total Cost Delay Claims

Tuesday, August 09, 2005 03:00 pm

 

The "total cost method" of quantifying claims continues to hold great appeal with contractors despite judicial skepticism toward the technique. The reason is readily apparent. A contractor simply compares its estimated costs with its actual costs and attributes the overrun to some act or omission of the project owner. Or, in the case of a subcontractor, the overrun is attributed to the prime contractor.

Courts have recognized the use of the total cost method, but only under limited circumstances. The method may be used when: (1) actual damages are impracticable to segregate or itemize; (2) the contractor's estimated costs at the time of bid submittal were reasonable; (3) the contractor's actual performance costs were reasonable; and (4) the contractor was not responsible for the increased costs. Servidone Construction Corp. v. United States, 931 F.3d 860 (Fed.Cir. 1991); CCM September 1991, p.3.

The total cost method has particular appeal in delay claim situations. Actual damages may be difficult to track and itemize. And sometimes contractors don't fully appreciate the cost ramifications of a delay event until well after the fact. The total cost method offers a convenient solution in these situations.

This simplicity is also the source of the judicial skepticism toward the method. Courts would much prefer to have specific increased costs attributed to specific causes. But there are a number of cases expressly authorizing the use of the total cost method for q [...]

 
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