Holloway Consulting is a Construction Consulting Firm that stays abreast of the cases that affect our practices. This page is intended for clients seeking to retain a claims consultant or expert witness in litigation and/or where a contractor claim for home office overhead is relevant:

Home Office Overhead Litigation

Construction Claims Consultant – Expert Witness

Court Recognizes Eichleay

At the outset of Melka, the Federal Circuit acknowledged that the Eichleay formula “is the only means approved on our case law for calculating recovery for unabsorbed home office overhead“. The court then set forth the respective burdens that Melka and the government bore and the two requirements necessary to show entitlement to Eichleay home office overhead damages:

1. The government required the contractor to stand by during government-caused delay of indefinite duration; and
2. While and because of standing by, the contractor was unable to take on other work.

The burden shifts to the government to show either:

1. That it was not impractical for the contractor to obtain “replacement work” during the delay, or,
2. That the contractor’s inability to obtain such work, or to perform it, was not caused by the government’s suspension. 

Of course, depending on the State, our experience as claims consultant or expert witness indicate that an owner under a private sector construction contract would likely have a similar burden in an Eichleay home office overhead damages claim.

Contractor Entitlement

In analyzing Melka’s entitlement claims, the court broke its claim down into three discrete time periods. With regard to the earliest time period, November 16 through January 4, 1995, the court determined that no government-imposed delay existed because, although the dredging and breakwall work was suspended, the non-permit related work could, and did, continue. While Melka argued that the dredging and breakwater work was a significant portion of the overall contract, the court summarily concluded that:

“If work on the contract continues, uninterrupted, albeit in a different order than originally planned, the contractor is not on standby”.

With regard to the second time period, from the January 4, 1995 completion of the non-permit related repair work, to February 2, 1995, the date of the government notice that the dredging work would not start for another 8 months, the government conceded that Melka’s work was on standby, but contended that it still was not entitled to recovery because it was not impractical for Melka to obtain “replacement work” and/or that Melka’s inability to obtain “replacement work” was not due to the government-caused delay. In particular, the government argued that Melka was able to use the demobilized dredging and breakwall equipment on two other projects during this time period and that Melka continued to bid on other work during this period.

In closing, home office overhead expenses can be recovered without using the Eichleay Formula.

Read our next expert page on home office overhead claims and Eichleay claims.

The Holloway Consulting Group, LLC
Construction Home Office Overhead Claims Consultants and Expert Witness
12081 W. Alameda Pkwy., #450
Lakewood, CO 80228-2701
Denver Phone: (303) 984-1941
International Toll Free: (888) 545-0666
Fax: (303) 716-0432
Email: steve.holloway@disputesinconstruction.com
Blog: disputesinconstruction.com
Web: hcgexperts.com

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