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BP Business Economic Loss Claim Appeal 2016-411: AVM appropriate for certain construction claims


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

BP appeals a pre-RTP BEL award in the amount of $279,717.41 to a Raleigh, MS road construction company on the single preserved basis that the Program accountants violated Policy 495 by analyzing the unmatched financials through the AVM methodology rather than the Construction methodology. In their support, BP refers to the assigned NAICS code of (Highway, Street and Bridge Construction), which under Policy 495 is presumed entitled to analysis by the Construction methodology. BP admits, however, that said presumption is “absent certain case-specific exceptions.”

Herein, the vendors presented at least two “case specific” factors upon which they determined that the AVM methodology was more appropriate. First there is the fact that Claimant records negative amounts in variable expense accounts, which BP deems is an “accounting device” which is immaterial to Claimant’s monthly variable expenses; and second, the finding that Claimant’s specific business operates on a short-term cycle where jobs are billed and collected shortly thereafter. As to this second factor, BP argues that since Claimant admits that its jobs may last from a single day to several months, and further that it receives payment usually within 30 to 45 days of billing, the conclusion of a “short -term cycle” by the vendors is inaccurate. BP proposes a pre-RTP award of $154,045.00, based on calculations using the Construction methodology, or a remand to recalculate.

Before stating its decision, this panelist must comment on a 23-page boilerplate memorandum filed by Claimant’s counsel, only one page of which had any information germane to the single issue being appealed. Its responsive memorandum, while dramatically shorter, was far more helpful to this panelist in reaching a decision. In the end, this panelist after de novo review relies upon footnote 6 of Policy 495, providing:

“A claimant with a given NAICS code will not automatically be assigned to a given methodology by virtue of the NAICS code if, in the judgment of the Claims Administrator’s office, there are factors that indicate that revenues and expenses would be more sufficiently matched by applying an alternative methodology…”

Herein, the vendors provided just those factors, concluding that this Claimant’s business model overall involved revenue collection patterns that closely reflected the activities of the business and thereby opting to apply AVM to the financials. BP proposes that its own judgment be substituted for that of the Program vendors, undermining their judgment calls in closely analyzing this Claimant’s financials. Policy 495 more than justified the selection of the AVM methodology to this Claimant’s business model, and in this baseball appeal process, Claimant’s final proposal, affirming the award, must be chosen.

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