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When you win a bid, you might be singing that everything is going your way. Then something goes wrong. The owner hands you defective plans, sits on RFI responses or other critical information, or otherwise upends the work. The costs pile up through no fault of your own. You feel wronged, and you want to be made whole. But a feeling that you got burned is not enough. To recover, that feeling has to become something the law recognizes as damages. So what are damages, and how do you prove them?
At bottom, contract damages are the money that puts the non-breaching party (i.e., the party that doesn’t breach the contract) in the position it would have occupied had the contract been performed.
Two requirements turn a sense of grievance into a recoverable claim. First, the damages must flow from the breach. The loss must be caused by the other party’s conduct, not by the contractor’s own problems or some unrelated event. Second, the amount must be proven with reasonable certainty. Courts do not demand mathematical precision. Once the fact of loss is established, the difficulty of fixing the exact amount will not bar recovery so long as there is a reasonable basis to approximate it. That said, the damages estimate generally must rest on objective facts, figures, or data rather than complete guesswork.
Those two gates — causation and reasonable certainty — are the heart of any damages claim. Everything that follows is simply about how a contractor satisfies them with evidence.
Construction damages come in many forms, and this article does not attempt to cover them all. As a starting point, damages tend to fall into two categories. Direct damages flow from the breach itself, such as the added cost of performing disrupted work. Consequential damages are the downstream ripple effects, such as lost profits on other projects. The distinction matters because parties often address the two differently by contract. For example, construction contracts can include a waiver of consequential damages, a no-damages-for-delay clause, or a cap on liability that can limit or even eliminate a recovery before any question of proof arises. Therefore, the parties’ contract should always be reviewed at the outset when assessing damages.
Beyond these categories, contractors and owners pursue claims for, among other things, delay and extended general conditions, unabsorbed home office overhead (often calculated under the Eichleay formula), acceleration, defective or non-conforming work, and lost profits. Each carries its own proof requirements.
To illustrate how the causation and reasonable-certainty gates operate in practice, this article focuses on two commonly used methods for quantifying certain types of damages, the measured mile (for lost productivity claims) and the total cost method, and then turns to a question that cuts across all forms of damage claims. To be clear, these are not the only two methods of quantifying damages, nor can they otherwise be applied to all types of claims. But these two methods are generally informative regarding certain issues parties face when providing damages. They also help to highlight another component of this article: When do you actually need an expert to support your damages claim?
Two Methods (out of Many) for Proving Damages
Loss of Productivity and The Measured Mile
When an owner’s interference makes the same work take more labor than it should, the contractor has potentially suffered a loss of productivity. A favored way to quantify the damages from this interference is the measured mile. That method compares the contractor’s actual productivity on similar work during an unimpacted period of the project to its productivity during the disrupted period. The difference is the lost productivity, which is a quantifiable damage that can be recovered.
One advantage of the measured mile method is what it does not require to prove it. Because it measures the contractor’s own actual performance against itself, the measured mile does not depend on the accuracy or reasonableness of the original bid, and it sidesteps disputes over the validity of the contractor’s pre-construction estimate. Courts often favor the measured mile method when it is applicable to the issues precisely because it compares real, observed work. That comparison makes the resulting damages far less speculative and ties them directly to the disruption, satisfying both causation and reasonable certainty.
Total Cost, the Last Resort
The total cost method takes a blunter approach. It calculates damages as the difference between the contractor’s total cost of performance and its original bid. The problem is that it assumes the bid was reasonable and that every dollar of overrun is the other party’s fault, which often is not correct. For that reason, many courts treat total cost claims with greater skepticism. The Federal Circuit, for example, has held that the total cost method should be used only as a last resort.[1] A contractor must generally satisfy four prerequisites: (1) proving actual losses by other means is impractical or impossible; (2) the original bid was reasonable; (3) the actual costs were reasonable; and (4) the contractor was not responsible for the added costs.
The second prerequisite, the reasonableness of the bid, is where total cost claims often fail. A contractor who underbid the job, or who cannot show its bid was sound, has a harder road to prove that the overrun reflects the owner’s conduct rather than its own overly optimistic estimate. That failure of proof goes straight to causation. If a bad bid, rather than the breach, explains the cost, then the damages do not flow from the breach. This is the practical danger of the total cost method. It is also the reason a contractor should reach for a more direct method whenever the project records allow.
To overcome the skepticism associated with total cost, contractors can instead consider a related method, the modified total cost. The modified total cost method uses the same calculation, and requires the same four prerequisites, but allows adjustment for contractor error. This can make for a more realistic estimate in the eyes of the court.
When Do You Need an Expert?
An expert witness can help translate raw project data into a defensible calculation, but an expert is not always required. Lost profits are the classic example. Under Texas law, for instance, a business owner or officer with knowledge of the company’s operations can prove lost profits through competent testimony, so long as the claim rests on objective evidence and at least one complete calculation.[2] In one such case, the Texas Supreme Court upheld a lost-profits award where the plaintiff did exactly that. It established its lost revenue with comparative evidence from a recent period and proved its profit margin through the testimony of its owner, without an expert.[3]
Other methods, by contrast, can sometimes require an expert. The measured mile is a leading example. Building the comparison means recreating a hypothetical project in which the disruption never happened. That kind of specialized, methodical analysis is usually a hallmark of expert opinion. One federal court made the point bluntly, observing that in every measured mile case it had reviewed, an expert was required to apply the method, and it found no case approving lay opinion for the analysis.[4] The contractor there learned the lesson the hard way. It tried to prove its measured mile claim through a company employee rather than a disclosed expert. The court excluded the testimony and left the productivity claim without support.
The total cost and modified total cost methods fall somewhere in between. Neither method necessarily requires expert testimony, but because each turns on contested judgments about bid reasonableness and the allocation of cost overruns, contractors often find that the right expert makes the difference. For example, in one case, a contractor proved a modified total cost claim through a team of estimating, accounting, and scheduling experts, where one of the qualified experts was the contractor’s own vice president.[5] As a general matter, the more complex or contested the calculation, the more an expert tends to help, while a straightforward claim well supported by records may be provable through knowledgeable lay testimony.
Even then, the line between expert and lay testimony is not always clear cut. Some contractors have been successful in qualifying their own employees as experts based on their experience and industry knowledge. That can be a game-changer because experts, unlike laypeople, are allowed to offer opinions and respond to hypotheticals.[6]
An Expert is Only as Good as the Record
Hiring an expert is not a magic wand. An expert is only as persuasive as the evidence and analysis behind the opinion. In one decision of the Court of Federal Claims, the contractor’s experts could not explain their methodology or tie their estimates to actual project data. They had not even examined all of the contractor’s books and records. Meanwhile, the government’s expert showed that the claimed damages flowed from the contractor’s own inefficiencies.[7] The court found the experts lacked credibility. The through-line back to the two gates is direct. An expert who cannot connect the numbers to the project record proves neither causation nor a reasonably certain amount. The expert is a vehicle for satisfying those requirements, not a substitute for them.
Takin’ Care of Business: Building the Record from Day One
Every method, and every expert, ultimately depends on the quality of the underlying evidence. The most valuable work happens during the project, not after the dispute. Contractors should keep the following in mind:
- Start with an accurate bid. A low bid may win the project but can sink a total cost claim and undermine any claim method tied to the estimate.
- Keep contemporaneous records. Real-time daily reports, RFIs, schedules, and cost data establish causation and give an expert something solid to stand on. They also preserve the measured mile, which can disappear if the contractor did not capture good data.
- Link causes to specific damages. Segregate the costs tied to each impacting event so the loss can be traced to the breach rather than to your own performance, the weather, or unrelated causes.
- Vet your expert. If you retain one, confirm the expert is qualified for the specific issue, has access to all relevant records, and can withstand cross-examination on both methodology and credentials.
Courts award damages on what can be proven, not on speculation. Whether the claim rides on an owner’s testimony, a measured mile, or a total cost calculation, recovery turns on the same two questions. Did the loss flow from the breach, and can the amount be shown with reasonable certainty? The contractor who builds that record during the project, rather than after the dispute arises, puts itself in the strongest position to turn more than a feeling into a recovery.
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The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.
[1] Servidone Constr. Corp. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991).
[2] Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84–85 (Tex. 1992).
[3] ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867, 877 (Tex. 2010).
[4] Flatiron-Lane v. Case Atlantic Co., 121 F. Supp. 3d 515, 543–44 (M.D.N.C. 2015).
[5] JMR Construction Corp. v. Environmental Assessment & Remediation Management, Inc., 243 Cal. App. 4th 571, 589-91 (Cal. Ct. App. 2015) (modified total cost claim supported by contractor’s estimating, accounting, and scheduling experts).
[6] Fed. R. Evid. 701-03.
[7] Daewoo Engineering & Construction Co. v. United States, 73 Fed. Cl. 547, 580–83 (2006).