Impermissible to calculate delay damages for additional labor costs based on comparison of pre-contract estimate of labor costs and actual labor costs.

A subcontractor on a city project brought an action for delay damages, and the defendant appealed an award in excess of $40 million following a non-jury trial, including $9.8 million in additional labor cost damages. The plaintiff’s expert had utilized the plaintiff’s pre-bid estimate of the project’s expected labor costs in calculating the labor cost damages. The First Department vacated that portion of the award for additional labor costs as it is generally impermissible to calculate such costs based on a comparison of a contractor’s pre-contract estimate and the actual labor cost. While the contract provided for a lump-sum payment based on a reasonable bid amount, which in turn was purportedly based on the plaintiff’s internal estimates including labor costs, this did not provide a sufficient basis to conclude that those internal estimates were accurate and reasonable for purposes of determining the number of labor hours for which the plaintiff was to be paid under the contract. Thus, there was no reason to conclude that the internal estimates could properly be used as a basis for calculating the additional labor costs incurred. The First Department also vacated the remainder of the award, explaining that the trial court improperly credited the plaintiff’s expert’s conclusion that the defendants alone were responsible for the delay damages regardless of any delays also attributable to the City.

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