Section 12.19 Total Cost Method

• Library: Construction Law 2016 Supp

2. (§12.19) Total Cost Method

Rare is the project when all occurs as expected. When it does, that ideal project results in a job completed on time at the owner’s and contractor’s expected costs. If owner-caused delay is the only reason for the contract completing late at more cost to the contractor, it is logical to conclude that the contractor’s compensable damages are the difference between the costs expected at the outset (its estimate) and the actual costs. That approach has been dubbed the “total cost method” and is possibly the most simplistic, least rigorous, and least expensive approach to calculating delay damages.

Because of its nature, however, the total cost method is “highly disfavored,” “viewed with caution,” and only used as “a last resort” when no other means of calculating damages is available. See, e.g., Servidone Constr. Corp. v. United States, 931 F.2d 860 (Fed. Cir. 1991). The flaws in the total cost method lie in the two assumptions that must be made in order to apply it:

1. That the original estimate was accurate

2. That all increased costs were caused by the other party

For that reason, the total cost damages analysis is seldom accepted unless the contractor has established the following:

1. The nature of the claim is such that it is virtually impossible to estimate actual damages with a reasonable degree of certainty.

2. The contractor’s bid estimate was accurate.

3. The actual cost of performing the work was reasonable.

4. There were no causes for the increased cost other than the compensable delay by the party being charged with the costs.

5. The claimant used a

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