Richard E. Westney, PE, PMP, NAC Logo
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Previous Experience as a Construction Industry Cost & Risk Analysis Expert Witness

 The subjects I have advised and testified in include:

  • Cost Estimating Best Practices
  • Cost Estimate Classification (E.G. Screening, Conceptual, Authorization or Control)
  • Cost - Risk Assessment and Analysis
  • Cost Estimate Accuracy and Contingency

I have more than five years of experience as an expert witness on these subjects. There are two primary engagements that comprise this experience. Both involve multi-billion dollar disputes concerning oil and gas production and transportation facilities in Alaska.

Litigation between the Prudhoe Bay Operators (ExxonMobil, BP, ARCO) and the Internal Revenue Service

The issue in this case was the degree to which the Operators (plaintiffs) could reduce their tax obligations for certain years due to their liability for the future cost of dismantling of the facilities at Prudhoe Bay, removal of all the materials and equipment, associated with those facilities, and restoration of the area to its original condition ("DR&R".)

The dispute was focused on whether the Prudhoe Bay Operators could estimate the DR&R cost with "reasonable accuracy". A key challenge to this type of estimate included the long duration between when the facilities were constructed and their end-of-life when the dismantling, removal, and restoration would take place. An additional estimating challenge was the unusual nature of this type of project.

Testifying in federal court, my role as an expert witness was to "educate" the judge on the cost estimating best practices that applied in this scenario, why it is possible to develop credible estimates for major projects that take place well into the future, and how the estimates prepared by various specialty contractors conformed to best practice. We successfully argued that, in the aggregate, the estimates for the various scopes of work required, met the test of reasonable accuracy.

The lead law firm in this case was Miller & Chevalier.

Litigation between the taxpayers, Alyeska Pipeline Service Company (the Trans-Alaska Pipeline System (TAPS) operator) and its owners (ExxonMobil, BP, ConocoPhillips); and the State of Alaska, along with the various municipalities through which TAPS passes.

The issue in this case was to determine a fair valuation, for tax assessment purposes, of TAPS. Since TAPS is a unique facility in several important ways, this valuation was challenging and the source of considerable dispute between the Taxpayers and the State and Municipality Taxing Authorities. The Alaska Supreme Court determined that the assessment principle of "Replacement Cost New" would be the basis for this assessment.

The dispute was around the correct estimate of the cost to replace TAPS, including the pipeline, pump stations, and Valdez Marine Terminal for the tax years 2010 - 2015. A key challenge of this type of estimate was the correct way to apply the principles of Replacement Cost New to a large project such as TAPS. This not only impacted the cost estimate, but also the assessment of risk and contingency.

I was engaged as an expert on project risk analysis and contingency assessment. The expert witness teams for all parties worked in each of these years to prepare an expert analysis and presentation to the State Appraisal Review Board. I participated in this process for several years, including testifying as an expert at these Board hearings. I was also selected to provide cost estimating, risk and contingency analysis expertise, as well as testimony, for a new trial scheduled for 2017. However, after the trial team had begun its work, a settlement agreement between the parties was reached.

The law firms engaged in this case were Stoel Rives, Manley & Brautigam; Garatoni, Breen & Malone; and Quarles & Brady.