When may a contractor recover profit as part of a monetary claim?
Profit is recoverable only where the contract or damages rules provide for it and the contractor proves the relevant loss. Some cost definitions expressly exclude profit, while other valuation mechanisms include an agreed addition.
Entitlement depends on the claim route, contractual definition and proof of the profit actually lost
Distinguish profit added to variation valuation from loss of profit caused by lost turnover, omitted work, prevention or termination. For lost opportunity, prove that work was available, capacity was constrained and the opportunity would probably have produced a normal recoverable margin. Exceptional profit requires proof that the special opportunity was within the parties' contemplation. Deduct saved cost, released capacity and profit earned elsewhere. Do not add profit where the contract defines cost or expense to exclude it.
| Issue | Position |
|---|---|
| Variation valuation | Apply the stated rate or profit addition |
| Cost definition excluding profit | No profit through that contractual route |
| Lost opportunity | Requires available work, capacity and probable margin |
| Employer-default termination | Lost contract profit may be recoverable less savings |
| Exceptional margin | Requires knowledge and remoteness proof |
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