The Shaw Group, Inc., Stone & Webster, Inc., and Stone & Webster Michigan, Inc. vs. New Harquahala Generating Company, LLC

The Situation

The New Harquahala Generating Company had an engineering, procurement, and construction contract with the Shaw Group to construct the Harquahala generating plant. The construction of the project was not completed on schedule and Shaw paid liquidated damages to New Harquahala. Shaw subsequently claimed for a refund of the damages collected by New Harquahala Generating Company, and New Harquahala counterclaimed for damages, delays, and defective work.

NERA's Role

NERA was retained to provide a critique of the Shaw Group’s calculation of lost net revenue damages from the delay in completing the plant, and to independently calculate the lost net revenue damages due to the delay. The opposing side presented forecast estimates of delay damages that were derived from a simulation model and NERA was asked to review the inputs and results of the model. NERA prepared an independent forecast of power prices in the Arizona region to determine the lost net revenue damages.

The Result

NERA’s testimony and analysis demonstrated that the Shaw Group’s experts’ results could not be replicated; that the simulation model used by the opposing expert produced biased estimates of damage; and that when the model was corrected for bias, the results were quite similar to those independently derived by another consultant providing an estimate in the case for the Respondent.