Since 1960 the Eichleay Formula has been used to price extended and/or unabsorbed home office overhead. Most in the construction industry treat the Eichleay Formula as an accounting mechanism – seldom understanding that the Armed Services Board of Contract Appeals created this “formula” as an estimating tool, not an accounting method. There are some practical problems with the Eichleay Formula. From the accounting perspective there are several major flaws built into the formula. From the project owner’s perspective, there is a risk of overcompensation unless certain contractual defenses are employed. And, from the contractor’s perspective, there are issues with the applicability and the use of the formula. This webinar examines the traditional Eichleay Formula from all three viewpoints to identify the problems and offer some recommendations on how to alleviate them.
Why Should You Attend:
The session will provide attendees with a better understanding of the Eichleay Formula including its weaknesses and flaws from the perspectives of the accountant/auditor, the contractor and the owner. The session offers attendees 19 different alternatives to the Eichleay Formula which may be employed through incorporation in the contract documents prior to bidding.
Areas Covered in this Webinar:
The elements of Home Office Overhead (HOOH)
How HOOH is typically recovered
What is the Eichleay Formula
How the Eichleay Formula operates
History of the formula
Potential problems with using the Eichleay Formula to price delay from the viewpoint of the accountant/auditor, the owner and the contractor
Potential remedies including
Some ways to prohibit recovery
Ways to change the rules concerning HOOH recovery
Creation of a mid-course HOOH recovery method
Bid daily delay cost
Present and explain the problems associated with the use of the Eichleay Formula.
Examine these problems from the perspective of both the owner and the contractor.
Offer multiple alternatives concerning the pricing of home office overhead that owners may employ in their contract documents.
Who Will Benefit:
Project owners about to embark on a new project
Legal counsel for owners looking for alternatives to the Eichleay Formula
Design professionals involved in preparation of bidding documents
Construction managers involved in the preparation and administration of contract documents
David W. Halligan, Ph.D., P.E.
Dr. Halligan is an Associate Director in the Global Construction Practice of Navigant Consulting Inc. Dr. Halligan has twenty-two years of experience providing clients with schedule delay analyses, construction management, project controls, and claims resolution assistance on a wide variety of heavy civil and facilities projects. He has supported clients with schedule and cost control, cost audits, change order management, and in resolving disputes related to delay and loss of efficiency claims. Dr. Halligan has also conducted management procedures compliance audits on several large civil engineering infrastructure programs and has testified in Federal and State Courts as an expert in construction delay. He has performed schedule and labor productivity analyses on a number of diverse and significant assignments, including tunneling, underground pipe installation, transportation projects, residential projects, commercial projects, water and wastewater treatment facilities, pipelines, military and high-tech facilities, correctional facilities, dams, and high rise office buildings.
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