Construction Contracts and Disputes: How Forensic Accountants Can Help
Construction projects often start with optimism but can quickly unravel into disputes. Cost overruns, delays, and change orders frequently trigger financial conflict, and the construction contract becomes the main battleground. Moreover, the sale or purchase of these contracts can also be prone to such financial disputes. In these situations, attorneys, owners, and contractors turn to us, the forensic accountants; or at least we hope they do, because we can help. By analyzing financial data, quantifying damages, and linking costs to contract terms, we provide the clarity needed to resolve disputes efficiently.
Common Sources of Disputes
Disagreements in construction often arise from:
- Change Orders: Disputed costs or poorly documented variations in the reported work in progress (WIP).
- Cost Overruns: Rising labor and material expenses exceeding budget. This can include overruns due to macroeconomic factors such as supply chain turbulence, tariffs, or labor market changes.
- Payment Conflicts: Unpaid invoices, retainage, or lien filings.
- Joint Venture Disputes: Conflicts over cost allocations and profit-sharing.
- Asset Purchase Agreement (APA) Disputes: Conflicts between sellers and buyers of construction contracts over profit-sharing conditions and the underlying profit margin variations, as well as claims over outstanding receivables and payables.
Each dispute blends contract interpretation with financial complexity which makes independent accounting expertise necessary.
The Forensic Accountant’s Role in Disputes
We bring order and clarity to messy and complex financial records. With experience in residential and non-residential building construction, as well as heavy and civil engineering construction, our role often includes:
- Reconstructing Project Costs: Reviewing billing records, payment applications, and cost allocations.
- Quantifying Damages: Calculating extended overhead, lost profits, or extra costs from scope changes.
- Spotting Red Flags: Identifying inflated or duplicate charges.
- Supporting Legal Teams: Preparing defensible analyses and, when needed, serving as expert witnesses.
The result is a clear financial story that supports stronger legal arguments and more reliable outcomes.
Adding Value in Litigation and Arbitration
We add value by:
- Delivering independent, fact-based analysis.
- Helping attorneys build or challenge claims with reliable financial insight.
- Translating complex data into clear exhibits and reports for courts, arbitrators, and mediators.
- Providing objective numbers that can facilitate settlements and reduce litigation costs.
Conclusion
When construction projects go wrong, financial disputes can escalate quickly. We help cut through the confusion by reconstructing costs, reviewing supporting documentation, quantifying damages, and presenting objective analysis.
