NERA Economists Helped Employer Attain Compensation from Supplier of Defective Components in Construction Case

The Situation

Defective components disrupted and delayed construction of a power plant. The employer incurred damages resulting from disrupted construction schedules, further delays in other construction works, and compensation claims from other contractors. The employer therefore claimed damages from the supplier of the defective components in international arbitration proceedings.

NERA's Role

NERA’s team, led by Managing Director Tomas Haug and Associate Director Bastian Gottschling, was retained as quantum expert by the employer. We provided our client a framework for assessing damages, considering the difference in the claimant’s position between the actual scenario and a counterfactual scenario but for the supplier’s defective components (also referred to as a but-for scenario).

To define the counterfactual scenario, we specified various input requirements from technical experts and witnesses to establish (i) how the defective components disrupted subsequent construction works and (ii) further delays in certain subsequent works and in the completion of the overall construction project.

We quantified the claimant’s claim of damages resulting from the disruption, and additional damages from subsequent construction delays, which had been caused by the supplier’s failure to meet quality specifications and deadlines for the delivery of the components.

The Result

After two rounds of written submissions, the employer was successful in obtaining a settlement from the supplier of the defective components. Several factors were instrumental in attaining compensation for the employer in this case, including (i) our framework for calculating multiple damages claims consistently based on differences between the actual scenario and the counterfactual scenario, (ii) a robust definition of the counterfactual scenario based on technical expert opinion and factual input, and (iii) counsel’s understanding of quantum issues.