The Forensic Accountant's Role in Construction Quantum Disputes
Construction quantum disputes frequently involve both quantity surveying and financial accounting dimensions. While quantity surveyors address the contractual and physical aspects of the claim, the forensic accountant addresses whether the financial data supports the quantum claimed and which overhead recovery methodology is appropriate.
Overhead Recovery Methodologies
The Emden formula calculates head office overhead recovery by dividing total company overhead by total company turnover, then multiplying by the contract sum and delay period. The Hudson formula applies a fixed percentage to the contract sum and delay period. Both are frequently disputed because they produce different results depending on the underlying financial data.
The forensic accountant's role is to assess which formula is appropriate given the contract terms and the company's financial records, and whether the underlying data (overhead costs, turnover, contract sum) is accurately stated in the company's accounts.
Loss of Profit on Contract
Loss of profit claims require analysis of the company's overall profitability, the specific contract's contribution margin, and whether the contractor had sufficient remaining capacity to take on replacement work. The forensic accountant reviews audited accounts, management information, and order books to establish a robust loss of profit calculation.
TCC and Adjudication Practice
Construction quantum expert evidence in the Technology and Construction Court must comply with CPR Part 35. Reports must be written for judges, not accountants, with clear methodology and transparent assumptions. In adjudication, the 28-day timetable requires rapid preliminary assessment, making early instruction critical.
Sterling Forensic confirms realistic timelines for construction quantum instructions at the outset, taking into account the volume and complexity of financial records to be reviewed.
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