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BP Business Economic Loss Claim Appeal 2016-1287: Professional Services NAICS Code: Variable Expenses Allocated IAW A Month’s Percentage of Total Annual Revenue

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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 questions on this appeal why, after reallocating one-half of Claimant’s 2009 revenue from a job performed for a customer, from that year to 2008, the Settlement Program did not reallocate any of Claimant’s“corresponding” expenses for the project. The panelist requested a Summary of Review explaining “what, if
any, reallocation of expenses was undertaken, and, if none, the thinking behind that decision.”
The Settlement Program timely responded with this explanation:
The Claimant is classified under a Professional Services NAICS code and was processed using the Professional Services methodology upon confirming the claimant is involved in both short and long-term engagements. Per Policy 495 Attachment F Professional Services Methodology pg. F2,“Variable expenses will be allocated to each month of the Benchmark Period and the Compensation Period based on that month’s percentage of total annual revenue, unless alternative documentation has been provided that supports when effort actually occurred.” Additionally, per pg. F11-F12, “Where revenue has been restated and/or allocated on a basis other than the straight line basis, variable expenses incurred during each Fiscal Year included in the Benchmark Period and the Compensation Period will be allocated to individual months based on the total effort expended, estimated using the same information utilized in allocating revenue.”
In accordance with Attachment F, the Claimant’s revenue from long-term engagements was allocated on a straight-line basis over the life of each engagement per the Case Summary provided by the Claimant and as such the variable expenses were allocated on a monthly basis as a percentage of post-Case Summary monthly revenue to total annual revenue in each respective fiscal year as per F2 noted above.
This satisfactorily answers the only issue on this appeal, and the decision of the Settlement Program is upheld. Appeal denied.

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