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BP Business Economic Loss Claim Appeal 2016-1827: Professional Services Methodology Has Both Positive and Negative Consequences (Architectural and Engineering Firm)

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 ($269,858.23 pre-RTP) to Claimant, a Lake Charles, Louisiana architectural and engineering firm. Claimant’s financials triggered Policy 495 matching criteria and the claim proceeded under the Professional Services Methodology (PSM), the rationale for which was explained in calculation note 10:
Revenue is recognized on the cash basis when collected. “In general,
engagements last longer than 30 days. Most revenue for jobs are based
on a progress basis. Progress payments are made during the design
phase. The payments are made for the preliminary design phase,
design developments phase, construction documents phase, and
construction administration phase. Generally when construction is
finished there will be a final payment for all fees due, less fees paid to
date. All jobs do not pay the same percentage for these phases, and
there is no set interval between the phases. Most of [the Claimant’s]
clients are architects who are the prime designers. [The Claimant] is
sub-consultants. The architects pay [the Claimant] when they get paid
which can be a wide range.
The PSM is designed to address timing differences in months where sales are recorded versus when the work is performed. It allocates revenue on a straight line basis over the period of engagement unless the claimant can submit appropriate records that permit an alternative allocation. BP does not contest the Program’s
utilization of the PSM methodology but rather how it was applied, arguing that Claimant provided such data on a number of projects, including the project which BP contends Claimant acknowledged was 95% complete when it was paid 95% of the total fee.
Claimant responds that, while it is not particularly delighted with the PSM either, BP identified only one of 1,600 invoices to highlight and that the methodology contemplates that fluctuations between straight line and monthly percentage of completion allocations has both positive and negative effects.
After a de novo review, there is insufficient basis in the record to overturn the award. Claimant’s final proposal is the correct result and the appeal is denied.

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