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BP Business Economic Loss Claim Appeal 2017-816:Paving Contractor Not Operating “Out-Of-Zone Facilities” From Which It Received Impermissible Revenue

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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

The three-member panel, having duly convened and deliberated, enters the following unanimous decision:
BP appeals the BEL award to claimant, a paving contractor in Naples, Florida. BP presents two issues for review: whether the Settlement Program (SP) award included impermissible revenues from out-zone-facilities; and whether the SP misclassified “contract management” costs as a fixed expense. BP argues that in addition to its headquarter facility in Naples, Florida, claimant operated several other asphalt plants, one of which is located in Lake Placid, Florida, and is located out-of-zone. BP contends that this asphalt plant qualifies as a separate out-of-zone facility and that revenues derived from its operation should have been excluded from the SP award. BP also argues that “contract management” expenses should have been classified as a variable expense and not as a fixed cost.
Claimant in response acknowledges it has an asphalt plant it uses in an out-of-zone location in Lake Placid, Florida. Claimant contends this plant is not a “facility” as defined by the Settlement Agreement and policy 467 from which it performs or manages its operations. Claimant posits it is an auxiliary location that serves as a supply
depot to transport hot asphalt to nearby job sites. Claimant asserts there is only one facility from which it operates in Naples, Florida, and from which its operations are performed and managed. Claimant argues this issue was fully considered and explored by the SP which determined that there were no revenues that resulted from out-of-zone activities or facilities. Claimant also argues that operations at the Lake Placid site comprise less than 10% of claimant’s total annual operations so that any alleged out-of-zone revenues tied to it would be minimal and have little impact on an award of this magnitude if excluded. Relative to the remaining issue of misclassification of the “contract management” expense, claimant agrees that this cost was misclassified as a fixed expense; and that remand to the SP for reconsideration of it as a payroll expense is in order.
A review of the record discloses that claimant operates from its headquarters in Naples, Florida. Claimant has other sites which it uses to supply paving projects. These projects take place in neighboring counties which are not geographically remote from Naples, making oversight and supervision from there possible. The SP analyzed claimant’s business operations as explained in paragraph 18 of the Calculation Notes: “On its purple form***the claimant checked Question B 2 stating that its business maintains more than one separate distinct physical location. DWH Accountant inquired about the separate facilities and regarding trailers used by the claimant within 2010. The claimant’s attorney noted that ‘the Claimant operates all activities from their single location in Naples. They have mobile asphalt plants that are towed to quarries depending on job site locations being worked for duration of a paving operation. They pay sales tax in multiple counties because they perform work in multiple counties and have registered in multiple counties for that purpose as required. But, they do not operate physical plants in multiple locations and have no trailers or site equipment other than mobile asphalt plants, trucks and equipment at any locations at any times. When not in use, all equipment is stored at the Naples yard.
So, the claim form was determined by your personnel previously to be in error as there is only a single physical location for this entity. To be specific, there were no job site trailers in use in 2010, or any other period, at any site.’ “Against this backdrop, this panel is satisfied that the SP correctly determined that claimant was not operating or managing an out-of-zone facility from which it derived impermissibly revenues. BP has failed to rebut this determination and provide a reasonable basis to overturn it. A claimant may include revenues from out-of-zone operations if such operations are managed and supervised from an in-zone facility. To this extent, the decision of the Claims Administrator is affirmed.
Because claimant has agreed that remand is appropriate for the reasons stated earlier with regard to “contract management” expenses, this claim is remanded to the Claims Administrator for the limited purpose of resolving whether the expense should be treated as a variable expense or a payroll related cost; and then recalculate a proper award consistent with the foregoing.

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