Interface Consulting Damage Calculations Add Up to a Win

The American Arbitration Association (AAA) award in favor of Petrofac, Inc., in its construction claim against DynMcDermott Petroleum Operations Company (DM), was affirmed by the Fifth Circuit Court of Appeals in its July 17, 2012, filing. Petrofac received over 90% of damages sought, including attorney’s fees and interest, as the AAA relied heavily on the calculations in Interface Consulting’s damage analysis.

Interface Consulting played the key role of calculating Petrofac’s damages against DM arising from its EPC contract for the design and construction of a transportable degasification plant to remove accumulated gas from crude oil stored at two Strategic Petroleum Reserves sites in Texas. Specifically, Petrofac argued that the damages were a result of constructive changes, defective specifications, productivity loss, cost of additional materials, and the unpaid contract balance.

Interface Consulting expert Frank G. Adams, PE, testified before the three-arbitrator panel by outlining Petrofac’s contractual liability positions, linking causation to costs, and calculating damages based on engineering and field labor productivity losses due to design and construction issues.

DM first tried to attack the AAA panel award in district court by asserting that the claim award was not covered by the parties’ agreement for arbitration under AAA rules. Failing that, DM appealed by asserting that the claim award was not covered by the parties’ agreement for arbitration under AAA rules. On appeal, the fifth circuit court affirmed the district court’s confirmation. DM received no award on any counterclaims.

The Fifth Circuit stated in its filing, “We agree with most of our sister circuits that the express adoption of these rules presents clear and unmistakable evidence that the parties agreed to arbitrate….Therefore, the arbitration panel properly made the decision that the damages calculations in the Adams report fell within the agreement to arbitrate.”

Andrews Myers, PC, shareholder William “Bill” K. Andrews and co-counsel David J. Bush Kent, Anderson & Bush, PC, represented Petrofac throughout the arbitration hearings occurring between 2009 and 2010.

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