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Quantum in a request for equitable adjustment: where contractor claims lose money

A request for equitable adjustment or a certified claim has two halves. Entitlement asks whether the government owes an adjustment at all, and that is a legal argument. Quantum asks what the change actually cost, and that is accounting. Claims that survive entitlement are routinely reduced on quantum, usually for one of the reasons below.

1. The changed work was never segregated

The strongest quantum comes from charge codes set up when the change was recognized, so that labor, materials, and equipment for the changed work were recorded separately from the base scope as they were incurred. When that didn't happen, the alternatives are estimates or total-cost approaches, and the weight those methods receive is a legal question. The accountant's job is to use the best method the records allow, explain why, and state its limitations before the other side does.

2. Estimates where actuals exist

Job cost ledgers, certified payroll, vendor invoices, and equipment logs are actual cost records. Where they exist, they should be the basis of the claim. Estimates belong only where actuals genuinely do not exist, and the claim should say which figures are which.

3. Unsupported indirect rates

Overhead, G&A, and profit are applied to direct costs at rates the contractor's accounting system should be able to support for the period in question. Rates that don't match the contractor's own books, or that are applied inconsistently with its disclosed practices, invite a reduction.

4. Delay costs without a schedule

Extended field overhead and unabsorbed home-office overhead depend on how many days of compensable delay occurred. That number comes from a schedule analysis, not from the accounting. Quantify the daily rates from the books and apply them to the days the schedule expert establishes. Doing both from one desk is where claims lose credibility.

5. Productivity loss asserted, not measured

Where a measured-mile comparison is possible (the same crew, the same work, impacted and unimpacted periods), it is the most persuasive basis for a loss-of-productivity claim. Where it isn't, the claim should say what was used instead and why.

6. Thin contemporaneous records

Daily reports, timesheets, change-order logs, and correspondence are what the contracting officer and any later tribunal will ask for. A certified claim carries a certification of its accuracy, which makes supportable quantum a requirement, not a preference.

Related: Government contracts and False Claims Act practice →

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