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BP Business Economic Loss Claim Appeal 2016-1784:AVM Methodology Applied To Engineering Firm Instead of Professional Services Methodology

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 the BEL award of $358,945.69 (Pre-RTP) to Claimant, an engineering firm in Daphne, Alabama.
Claimant’s financials triggered Policy 495 matching criteria and the claim proceeded under the AVM Methodology. BP contends on appeal that the Settlement Program incorrectly applied the AVM Methodology and should have utilized the Professional Services Methodology (PSM). BP submits a final proposal of $285,222 (pre-RTP).
BP argues that the PSM recognizes that in professional service firms, the timing of revenue recognized on a claimant’s P&Ls may not correlate with the timing of the activities performed to earn such revenue due to advance retainers, progress invoices, contingent fees, etc. BP contends that Claimant’s monthly revenues exhibit
extreme fluctuations. In addition, Claimant’s NAICS code (541330 “Engineering Services”) falls within the professional services list in Policy 495. Claimant does not collect advance retainers or contingency fees. It bills monthly for the work completed that month, similar to most non-professional businesses.
Although BP contends that this necessarily creates a one month timing difference in recording payment relative to when the work was performed, this, of itself, does not
justify the imposition of the PSM. The NAICS code is not restrictive and the Claims Administrator has the discretion to use his professional judgment and change methodologies under appropriate circumstances. This discretion has been upheld by the Appeal Panel and the District Court in prior decisions.  After a de novo review of the record, this panelist concludes that the AVM Methodology was appropriate. Accordingly, the award is affirmed and the appeal is denied.

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