Home Office Overhead Definition

For example if the project is delayed a month by a compensable delay then the contractor would be entitled to recover the time dependent field overhead costs. T he eichleay formula. Relies on a daily allocable overhead rate as an alternative to the fixed percentage method.

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The contractor s home office overhead during this period totaled 250 000.

Home office overhead definition. The duration of this project including delays totals 265 days. Home office overhead costs are costs that are incurred to support the work but are not directly chargeable to a specific project. Again the best example of this may be the contractor s home office. Direct cost incurred during delay period x home office overhead home office overhead owed estimated or known hooh portion of bid markup.

The eichleay formula is one of the most used calculations when computing home office extended overhead costs or damages in construction delay claims construction delay claims about extended overhead are among the most complicated claims and almost always require the services of an expert to both determine damages and how those costs can be recovered. Our sample calculation of home office overhead damages follows. Office expense this category would include any office rents or lease expense or if their building is owned the cost plus a return on their investment. Home office overhead damages.

The most well known and widely accepted approach for determining compensable unabsorbed overhead is the eichleay formula. The other kind of overhead is home office overhead. Unabsorbed home office overhead is also a well known but not well understood delay damage and like extended field overhead is only caused by a critical project delay. Items included in a contractor s estimation of indirect overhead costs are as follows.

This project s allocable overhead. Home office overhead costs are overhead costs incurred by the contractor that are not associated with a particular project but really are necessary to support the contractor s operations as a whole. This also includes office supplies utilities insurance phones office equipment furniture and taxes. It is a creature of the courts in the state of new york.

Extended field overhead costs also called field office or jobsite overhead costs are by definition costs that increase due a critical and compensable delay. These are indirect costs because. Field office overhead costs also known as general conditions are costs incurred at the job site incident to performing the work such as the cost of supervision timekeeping and clerical work engineering utility costs supplies material handling restoration and cleanup etc. Most of those working in the construction contract claims business are familiar with 1960 decision by the armed services board of contract appeals asbca in the eichleay corporation case which recognized a contractor s right to recover unabsorbed home office overhead for owner caused delays and work stoppages.

This formula has also referred to as the direct cost allocation method. Zack jr james g calculation and recovery of home office overhead cm ejournal august 2001.