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BP Business Economic Loss Claim Appeal 2017-772: Professional Judgment of the Program Duly Exercised; Reallocation “Sufficiently Matched” Under Construction 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

This appeal arises out of a BEL claim whereby the Settlement Program awarded Claimant $2,785,907.81 pre RTP ($3,491,146.76 post RTP with accounting support).
Claimant is a construction, plant maintenance, and fabrication business in Pell City, Alabama (Zone D).
BP argues that the Program erred by adjusting Claimant’s accrual and reversal of purchases expense line item; by not inquiring into the period over which these adjustments applied; and by merely estimating that 6 months was an appropriate adjustment. Indeed, the record shows, and BP acknowledges, Claimant recorded an accrual of purchases COGS expenses at its fiscal year-end in October 2008. Claimant then reversed this adjustment in November 2008. Further the record shows, and BP acknowledges, the Program inquired into this adjustment, and Claimant explained it accrued additional job costs and supported it with documentation. Thereupon, the Program reallocated Claimant’s reversal over a 6 month period from November 2008-April 2009.
Claimant asserts that this inquiry and reallocation was within the professional judgment of the Program and was a sufficient matching of the Construction Methodology as supported by Policy 495. More specifically, Claimant’s revenues declined substantially between May and December post Spill compared to the same months averaged from 2007, 2008, and 2009. Said decrease in revenue was the primary reason for the significant reduction in variable profits in 2010.
Upon review of the record on appeal this Panel agrees that the professional judgment of the Program was duly exercised; that the reallocation was “sufficiently matched”; that remand is not necessary or appropriate.
BP has submitted a Final Proposal of “$0″ and the Panel is obliged under the controlling Baseball Process to choose between that Final Proposal and that of Claimant, which is in the amount of the Settlement Program’s said PRT-award of $2,785,907.81. BP has expressed no disagreement with the Program’s decision to reallocate the amounts in question but, rather, objects only to the period of time over which the Program decided to spread the reallocation, six months. The Settlement Program had extensive information from Claimant about the nature and duration of its jobs and selected the time frame for reallocation based on that information. Even if the adjustment were to be spread over a longer time frame-a year, for example-the resulting change in the award would not produce an award figure closer to “$0″ than to $2,785,907.81, so as to make “$0″ the preferred selection.
Accordingly, the Claimant’s Proposal is selected and the appeal of BP is denied.

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