Modified Total Cost Method

If a contractor is unable to perform its work as efficiently as expected due to the actions of other project participants, the contractor may incur loss of productivity damages. There are many ways to price those types of damages. Some methods are better than others, but the least accepted method is the total cost method.

Under the total cost method, the contractor shows the amount it cost to complete its work and subtracts the contract amount. For example, if the contract amount was $10 million, but it cost the contractor $15 million to complete its work, the contractor might claim that it is owed $5 million.

Courts frequently reject the use of the total cost method because it does not take into account damages that are the result of the contractor’s unrealistic bid or the contractor’s own improper performance of its work.

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