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BP Business Economic Loss Claim Appeal 2016-961: Contractor properly treated under AVM, not construction


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.

In a Claimant friendly decision, the Vendor Accountants applied the AVM Methodology rather than the Construction Methodology to this Claimant that uses a NAICS Code of 238990, “All Other Specialty Trade Contractors” on its tax returns. The Claimant is a drafting services company creating plans and specifications for fabrication of buildings and miscellaneous metal frames.

The Vendor Accountants, after inquiry, decided the Claimant was not a contractor because it does not purchase materials or other inventory in the regular course of business. It provides labor, contract labor and drafting services to a single customer. Policy 495 states the use of the Construction Methodology SHALL be used to restate the P/Ls of a Claimant that uses a NAICS Code that begins with 238, and who submits insufficiently matched P/Ls. Of course, if the Vendor Accountants use their court approved discretion, they can simply assign a different NAICS Code and avoid the mandatory direction of Policy 495.

BP also asserts an appeal issue that this Claimant derives revenue from a related party in violation of Policy 328. Claimants’ sole customer is [XXXXX], a company that shares the same company officers and address. After inquiry, the Vendor Accountants accepted the explanation that did not always use Claimant as its drafting source and often bid the work and accepted the bids for the best specific type of detailing work to be performed based on the time to complete the work, expertise and availability of the Claimant and other bidders.

This claim decision by the Administrator could easily gone against the Claimant had the Vendor Accountants not used their discretion in favor of the Claimant, however, as the presiding court has affirmed on several occasions, the appeal panel should be hesitant to reverse their professional judgment. The Award is affirmed.

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