Methods for the Calculation of the Lost Profit in Construction Contracts

Abstract

The aim of each investor is to procure the construction work in an efficient and economical way. This goal can be achieved by managing costs from the beginning of the investment process. It is necessary to determine the estimated price of the construction work in all phases of the investment process and not to underestimate the importance of this activity. It is almost a rule that the contractor or investor does not allow sufficient time for the contractor to prepare the construction for good quality, which may lead to insufficient preparation. The consequences of poor construction preparation vary from poorly built construction to litigation over the lost profits of the contractor—and this is the topic we discuss in this paper. The issue of asserting lost profits on the contract by the contractor is the subject of legal disputes between the contractor and the customer of construction work. In such cases, the question becomes the design of a methodology suitable for its calculation. The article deals with the presentation of the existing methods of loss of profit calculation, two of which are applied to the example of litigation from construction practice, with the definition of their results and differences.