International Construction Law Review
THE TOTAL COST METHOD: IS IT DEAD YET? A CROSS-JURISDICTIONAL COMPARATIVE ANALYSIS
Steven G M Stein, Esq1
Yelena Archiyan, Esq1(a)
I. INTRODUCTION
The total cost method has long been known to be a largely disfavoured model for quantifying construction claims. Developed and used by courts in common law jurisdictions, the method crept its way into the construction industry in the middle part of the twentieth century. Since that time, the total cost method has undergone a level of refinement and today is available as a tool for calculating damages only in narrow circumstances. This article offers a comparative analysis of the various approaches courts in common law jurisdictions follow when confronted with a total cost claim, and concludes that on balance, under the “common approach,” while the use of the total cost method in an effort to circumvent a plaintiff’s burden of establishing causation is inappropriate, the total cost method is suitable in narrow circumstances for purposes of establishing quantum.
Typically, it is the contractor who avails itself of the method, seeking the difference between the estimated and the actual cost of performance without attempting to causally attribute specific costs to particular delays, overruns, extra work, or other alleged breaches of the contract. However, owners too have had recourse to this approach where comparison of as-planned budgets against actual costs is used as the measure of damages. From either perspective, the method assumes (without establishing) that the claimant’s costs are not attributable to the claimant itself (or to some other cause for which the claimant bears contractual risk). As such, it “permits a plaintiff to circumstantially prove causation between the damages alleged and the defendant’s wrongdoing.”2 For this reason, courts are generally reluctant to permit parties to rely on it unless certain criteria are met.
This article does not make a distinction between the total cost method and a concept coined the “total time” method. The former addresses costs associated with a variety of breaches; the latter specifically addresses the allocation of delay. Of course, costs follow delay and thus, the total time method is a step to the total cost method.
1 Partner, Stein Ray LLP, Chicago, IL, USA.
1a Associate, Stein Ray LLP, Chicago, IL, USA.
2 3 Steven GM Stein, Construction Law ¶11.02[5][B].
Pt 4] The Total Cost Method: Is It Dead Yet?
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