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BP Business Economic Loss Claim Appeal 2016-693: Calculating costs in cancelled contract 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 $362,900 pre-RTP BEL award to a Slidell, LA builder of custom homes on a single basis preserved in its supporting briefs. Therein, it asserts that the Program vendors erred in their application of Exhibit 4E of the Settlement Agreement pertaining to Claimant’s cancelled contracts. BP claims that under Sec. C.2 of said Exhibit, the calculation of costs incurred as a result of cancelled contracts must refer to Claimant’s variable margin from May to December of 2009, unless one of two documentations are submitted:

(1) the cancelled contract documentation that provides costs to be incurred or the profit margin; or (2) a specific estimate of the profit expected from the cancelled contract based on specific accounting for prior events that occurred after Jan. 1, 2007 and were comparable in terms of type, size, and revenue.

BP assails the acceptance by the vendors and sufficiency of a one-page hand-written statement of costs incurred for alternative (1) above, arguing that this insufficiency and unreliability should have prompted resort to the general rule of using the variable margin from May to December, 2012. In response, Claimant notes that as a builder of custom homes, each of which is unique in its specific features, it is impossible to “cookie-cut” costs from prior homes built. It further states that it is a two-man operation with less formal record-keeping than larger entities, and that what it did provide in the form of its hand-written records was its best contemporaneous compilation of the costs for each of the three cancelled contracts.

Importantly, Claimant points out that Exhibit 4E allows providing “documentation” for cancelled contracts, and does not require the providing of the contract itself. BP responds that the handwritten notes provided are too unverifiable to rely on, and Claimant responds by reference to the sworn SWS-26 form that was executed in connection with its submission.

In its de novo review of this record, this panelist was impressed by the detailed dialogue between Claimant’s representatives and the Program vendors, especially the interchange that began in August of 2015 that led to the calculation of the award. BP’s argument is largely one of semantics and form over substance, and especially in light of its final proposal of $0 or a remand whose grounds do not exist, the discretion of the vendors in computing this award based on the records provided cannot be undermined. Thus, Claimant’s final proposal, affirming the award, must be chosen in this baseball process.

[Editor’s Notes:  This decision was affirmed in a Discretionary  Review 2016-693.]

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