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Understanding Delay in Start-Up (DSU)and Soft Costs:

Updated: Jul 6, 2023


How a Forensic Accountant Helps Evaluate Insurance Losses.

With Stephen Dodd: Director, Forensic Accounting


Delay in Start-Up (DSU) is insurance that shields businesses from financial losses caused by project delays or unexpected interruptions during the construction or start-up phase. In this process, a forensic accountant plays a pivotal role in assessing DSU and associated soft costs insurance losses. By leveraging their financial analysis and accounting expertise, forensic accountants help determine the financial impact of project delays and interruptions.


Stephen Dodd, Director of Forensic Accounting at MBC Group, explores the invaluable contribution of forensic accountants in calculating DSU and soft costs insurance losses, shedding light on their key responsibilities and methodologies.


Data Collection - Building a Solid Foundation:

Forensic accountants begin by gathering financial data related to the project. This includes cost estimates, project schedules, contracts, invoices, and financial statements. They meticulously review project documentation to comprehensively understand the planned timeline and anticipated costs. Without this foundation, a proper analysis is not possible.


Baseline Analysis - Establishing the Starting Point:

Next, forensic accountants embark on establishing a baseline by analyzing the project's original budget, timeline, and expected costs. This serves as a reference point against which the financial impact of delays and interruptions can be evaluated. By comparing the initial projections to the actual progress of the project, forensic accountants can gauge the impact the insured loss had on the planned budget and completion.


Impact Assessment - Uncovering the Financial Consequences:

One of the critical tasks performed by forensic accountants is identifying the specific impacts caused by events or factors that led to project delays or interruptions. While a standard business interruption primarily focuses on lost revenues, DSU and soft costs insurance losses are predominantly associated with increased incremental expenses incurred due to the delay. Forensic accountants meticulously analyze various cost elements, such as higher financing costs, additional labour expenses, increased property taxes, and elevated warranty expenses. By quantifying these costs, forensic accountants uncover the true financial consequences of the delay.


Revenue Analysis - Evaluating Lost Opportunities:

To paint a comprehensive picture of the financial impact for commercial buildings, forensic accountants delve into the anticipated revenue that would have been generated had the project been completed on time. They compare this projected revenue with the actual revenue generated during the delayed period. This analysis considers lost sales, missed opportunities, and contract penalties attributable to the delay. By considering these factors, forensic accountants provide a full calculation of the total loss caused by the delay.


Reporting - Delivering Comprehensive Findings:

The forensic accountant's role culminates in the preparation of a detailed report that documents the financial impact of the delay, and the communication of the findings to all parties. This comprehensive report includes precise calculations and supporting evidence, contributing to the successful closing and conclusion of the loss.


Conclusion- Relying on Forensic Accounting Expertise:

It is essential to recognize that the calculation of DSU and soft costs insurance losses is a complex task that necessitates the involvement of forensic accounting experts. Engaging a qualified forensic accountant with experience in construction-related claims can significantly enhance the accuracy and credibility of the loss calculation process. By leveraging their financial acumen and analytical skills, forensic accountants assist businesses in navigating the intricate terrain of DSU and soft costs insurance, ensuring that losses are accurately assessed and mitigated.


Contact Stephen Dodd at Stephen.dodd@mbc-group.ca today to take advantage of his years of forensic accounting experience to assist with your DSU and soft costs calculations.


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