Eichleay Formula Home Office Overhead

The eichleay f ormula is used to calculate the amount of unabsorbed home office overhead when the government indefinitely suspends or delays work.

Eichleay formula home office overhead. Fischer the court determined that the original eichleay formula is the exclusive means available for calculating unabsorbed home office overhead costs. This formula has also been called the direct cost allocation method the difference between the two methodologies is simply that the eichleay formula develops a daily overhead rate which is then multiplied by the total number of owner caused delay days while the manshul formula uses the as bid home office overhead rate multiplied by the actual cost of work performed during the delay. In 1984 the federal circuit held that the eichleay formula was the most appropriate method of allocating home office overhead. Despite different formulas being used some critical opinions of the eichleay formula and a modified eichleay formula being used when the contract fails to provide an alternative formula for calculating home office overhead according to the federal courts the original eichleay formula is the only proper method to calculate unabsorbed overhead.

The prerequisites for use of the eichleay formula are standby with uncertainty and the impractical ability to take on additional work during the delay period to absorb the home office overhead. Problems associated with applying the eichleay formula. 5183 60 2 bca 2688 1960 used to calculate home office overhead. Attorneys federal government contracts eichleay damages.

This ruling applies only to contracts with the federal government and is not as yet applicable to any state except perhaps virginia. Even so the eichleay formula is generally considered to be a reasonable basis for estimating the amount of unabsorbed home office overhead resulting from construction delays. This formula enunciated in eichleay corp asbca 60 2 bca 2688 aff d on reconsideration 61 1 bca 2894 had suffered setbacks recently but was given new life in capital elec. U s gsbca 5316 83 2 bca 16548 rev d 729 f 2d 743.

In wickham contracting co. To receive eichleay damages the contractor must first establish its prima facie case that 1 there was a. Calculating the eichleay formula for delay damages. What is the eichleay formula.

United states 331 f 3d 878 888 fed. Formula was the exclusive formula to use to calculate home office overhead damages when the eichleay prerequisites were met. One line of argument against the eichleay formula runs that it is only unabsorbed home office overhead that should be charged to the owner. 2003 we reaffirm that the eichleay formula as it is set forth in our precedent is the exclusive formula for the calculation of damages for unabsorbed overhead due to a period of.

The eichleay formula was established following a decision of the armed services board of contract appeals in eichleay corporation asbca no. The eichleay formula is considered an estimate or an approximation and it s accuracy can be questioned.