Jury Verdict Method for Calculating and Presenting Damages in a Construction Claim: Part 1

When a contractor’s costs exceed its contract amount on a construction project due to owner-caused impacts, the contractor can choose from several damages methods in seeking equitable compensation.

If the claimant can show 1) entitlement to recover for the other party’s wrongful conduct, and 2) damage incurred because of that wrongful conduct, the claimant may recover even though the amount of the damage is uncertain or is based on estimates. There are several methods currently in use for the calculation of recoverable damages.

Previous blog posts addressed the Total Cost method and the Modified Total Cost method. This blog post will discuss the Jury Verdict method, and the next post will discuss when this method can be used, the two steps of the Jury Verdict approach, and more. Subsequent blog posts will discuss Quantum Meruit and the A/B Estimate, Delta Estimate, and Discrete Damages/Cost Variance Analysis methods.

The Jury Verdict method provides the courts another way to calculate damages when the contractor or owner does not present discrete damages. The term “Jury Verdict” is misleading in that most cases that have received damages awards on a Jury Verdict basis involve decisions by courts or Boards of Contract Appeals, not juries. In these cases, judges and board panel members serve the role of a jury and as triers of fact, hearing testimony and weighing evidence, and awarding damages based on an approximation of damages suffered.

Needles v. United States in 1944 was one of the earliest Jury Verdict cases.¹ The Jury Verdict method has been applied in many subsequent cases. Examples of courts and boards justifying the Jury Verdict method follow:

[I]t would be unjust to only permit recovery for a recognized wrong by holding plaintiff to a near impossible standard of requiring him to list with mathematical precision the amount of every item of damage flowing from that wrong.²

When a contractor has proven entitlement, but cannot define his costs with exact data…, it is not uncommon to resort to the ‘jury verdict’ method of determining excess costs. It is not essential that the amount be ascertainable with absolute exactness or mathematical precision. It is enough if the testimony and evidence adduced is sufficient to enable the court or board (acting as the jury) to make a fair and reasonable approximation of the amount recoverable.³

When a contractor has proven entitlement, but cannot define his costs with exact data, courts and appeal boards have been reluctant… to send the contractor away empty handed when it is at all possible to make a fair and reasonable approximation of the extra costs.⁴

Where a court or a board of contract appeals sitting as the finder of fact is confronted with competent but conflicting evidence on what is a reasonable amount for an equitable adjustment, it may employ what is referred to as the ‘jury verdict approach.’… The conceptual touchstone for the use of the jury verdict approach is the existence of conflicting competent evidence calling into question the accuracy and reliability of the plaintiff’s computations. As the name implies, the technique by necessity requires the application of the fair, equitable and informed discretion of the trial judge.⁵

Courts prefer that damages be proven discretely:

The proper measure of damages is the amount of the contractor’s extra costs directly attributable to the government’s breaches. Obviously, the preferable method for calculating such losses would be to itemize and total the cost of each piece of equipment and each man hour necessitated by the unanticipated conditions encountered in performing the contract.⁶

The U.S. Court of Appeals for the Federal Circuit explained this preference:

Clearly, the actual cost method is preferred because it provides the court, or contracting officer, with documented underlying expenses, ensuring that the final amount of the equitable adjustment will be just that – equitable – and not a windfall to either the government or the contractor.⁷

However, courts and boards have found that unless the Jury Verdict approach, with its relaxed evidentiary requirements, is used, the contractor often would be unable to recover.⁸ If proof of actual costs associated with the breach of contract events that the contractor experienced is not presented, courts may choose the Jury Verdict method instead of accepting the Total Cost method. A 1985 Arizona case expressly prohibited the use of Total Cost “when there is sufficient evidence to use the jury verdict method.”⁹ However, another court found that the Jury Verdict method “is not favored and may be used only when other, more exact, methods cannot be applied.”¹⁰ In 2000, the board in Clark Construction Group, Inc.,¹¹ awarded cumulative impact damages to the contractor and its subcontractors using a Jury Verdict method, based on the Mechanical Contractors Association of America (MCAA) productivity loss factors as a measure of productivity loss.

Courts are concerned with the Jury Verdict method because as one court stated: “its primary peril, as evidenced in this case, is the risk that unrealistic assumptions will be adopted and extrapolated, greatly multiplying an award beyond reason, and rewarding preparers of imprecise claims based on undocumented costs with unjustified windfalls.”¹²

¹     See Needles v. United States, 101 Ct. Cl. 535 (1944).

²     Fattore Co., Inc. v. Metropolitan Sewerage Comm’n, 505 F.2d 1, 4 (7th Cir. 1974).

³     E. Arthur Higgins, 79-2 BCA ¶ 14,050, pp. 69,052, 69,066 (AGBCA 1979).

⁴     Ibid.

⁵     Delco Electronics Corp. v. United States, 17 Ct. Cl. 302 (1989) at 323.

⁶     State Highway Comm’n of Wyoming v. Brasel & Sims Construction Co., Inc., 688 P.2d 871, 877 (Wyo. 1984).

⁷     Dawco Constr., Inc. v. United States, 930 F.2d 872, 880, 882 (1991).

⁸     See R-D Mounts, Inc., 75-1 BCA ¶ 11,237, pages 53,491, 53,492 (ASBCA 1975).

⁹     See New Pueblo Constructors, Inc. v. State, 144 Ariz. 95, 696 P.2d 185, 194 (1985). See also, Metropolitan Sewerage Comm’n v. R.W. Constr., 78 Wis.2d 451, 255 N.W.2d 293-302 (1977).

¹⁰     Dawco Constr., Inc. v. United States, 930 F.2d 872, 880, 882 (1991).

¹¹     See Clark Construction Group, Inc., 00-1 BCA ¶ 30,870, VABCA No. 5674 (April 2000).

¹²     Mergentime Corp. v. WMATA, 1997 U.S. Dist. LEXIS 23408 at 5.

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