Quantum and Damages Experts: Product Deficiency or Defective Project Performance Claims
Product deficiency and defective project performance claims strike at the bottom line. A business cannot survive if it does not recover its capital and operating costs and make a profit. Our approach to damages quantification integrates the expertise of engineering, accounting, and financial professionals.
Quantification and recovery of damages is critical.
When delay, acceleration, design changes, or other events cause capital cost overruns on a construction project, contractors try to recoup their expenses, and owners strive not to pay more than a project “should” cost. In addition to the financial problems that a facility’s increased capital cost cause, if an owner’s operating costs increase, then its business will be less profitable. A deficient product may also cause lost sales. Quantification and recovery of damages associated with increased capital costs, increased cost of production, and product deficiency are critical to a profitable business.
Job cost reports and general accounting ledgers do not label product deficiency or defective project performance costs as “lost profits,” “damages due to defective work,” or “abnormal production equipment maintenance costs.” Cause-and-effect engineering and economic analyses determine the entitlement for recovery of these costs, basing the cause on facts and relevant data. Financial, accounting, and economic principles and methods form the basis for damages conclusions.
Measuring damages involves quantifying the amount of money required to put a contractor, owner, or other party in as good a position as it would have been in had a contract been performed according to specifications, terms, and conditions. Our damages experts evaluate the impact of non-performance on project outcome and, sometimes, on an owner’s business profitability. Measurement of product deficiency and defective project performance damages is complex, requiring careful causation analysis from an engineering and construction perspective combined with elements of business operations, economics, and accounting.
An Integrated Approach
Product deficiency or defective project performance claims occur when events cause a process plant or manufacturing facility to be delayed in its completion, operate less profitably, or require abnormal maintenance costs. Our engineering and construction experts study the causes of delay to project completion and identify who is responsible. We can also determine if flawed production design resulted in a product that differs from specifications, and our financial experts examine the economic impacts of these problems.
Product deficiency or defective project performance may include defective construction, flawed design, delays in meeting end-customer orders, and regulatory penalties. These problems can also cause economic damages such as current and future warranty costs, ongoing abnormal maintenance expenses, lost profits, and regulatory fines.
Long International’s engineering and construction experts and financial experts work together to analyze damages, identifying the causes of problems and linking cause with effect. For example, when our engineering experts determine that faulty construction has caused product deficiencies resulting in loss of business, our economic and financial experts quantify the dollar effect and strengthen the overall argument by evaluating and eliminating other causes. Economic analysis considers:
- The plaintiff’s profitability on similar past projects
- Market size for similar products
- Competitor experience and success on similar bids
- Impact of new technology on the market for similar projects
- Existence of qualified labor and supervisors to perform the work
- Financial and/or bonding capacity to add new work
In analyzing damages, Long International evaluates accounting and financial information according to Generally Accepted Accounting Principles (GAAP). Our experts’ financial and accounting backgrounds enable them to consider how management uses underlying data to prepare accounting and financial information, evaluate the costs in cost estimates and job cost reports, and determine whether claims are for real costs incurred or based on standard rates or scheduled costs. After our experts have prepared a claim or set forth a claim evaluation, they know how to present the results of their work in ways understandable to the decision-making audience..
Any claim requires careful analysis to determine solid association of causation with effect and proper measurement of damages. Long International’s experienced engineers and financial professionals provide an integrated approach for superior claim analysis.
Quantum and Damages Experts: Cost-Based Engineering and Construction Claims
Combining engineering analyses and fact finding with cost accounting and cost-variance analysis produces a well-supported and compensable claim or presents a strong defense against a claim’s validity.