Eichleay Formula Calculator
Contract Billings (CB) $ Total Company Billings (TCB) $ Total Home Office Overhead (THO) $ Contract Performance Days (CPD) days Days of Delay (DD) days Allocable Contract Overhead $ Daily Contract Overhead $ /day Total Delay Damages $ Calculate Reset Copy Result Eichleay Formula: Step 1: Allocable Overhead = (CB ÷ TCB) × THO Step…
Eichleay Formula:
Step 1: Allocable Overhead = (CB ÷ TCB) × THO
Step 2: Daily Overhead = Allocable Overhead ÷ CPD
Step 3: Delay Damages = Daily Overhead × DD
Where: CB = Contract Billings, TCB = Total Company Billings, THO = Total Home Office Overhead, CPD = Contract Performance Days, DD = Days of Delay
The Eichleay Formula calculates home office overhead damages during construction delays by allocating a proportionate share of total overhead costs to the delayed contract based on its size and duration.
Example Calculation:
Contract: $1M | Total Billings: $5M | Overhead: $750K | Performance: 365 days | Delay: 60 days
Allocable Overhead = ($1M ÷ $5M) × $750K = $150K
Daily Overhead = $150K ÷ 365 = $411/day
Delay Damages = $411 × 60 days = $24,658
Home Office Overhead Components:
- Administrative Costs: Salaries, benefits for management and support staff
- Facility Expenses: Office rent, utilities, maintenance, insurance
- Professional Services: Legal, accounting, consulting fees
- Business Operations: Communications, software licenses, office supplies
Prerequisites for Eichleay Application:
- Government-Caused Delay: Delay must be attributable to owner/government actions
- Standby Requirement: Contractor must be required to remain ready to resume work
- Inability to Take Other Work: Contractor unable to pursue additional contracts
- Construction Context: Formula typically applies to construction contracts only
⚠️ Important Limitations:
- Extraordinary Remedy: Courts consider this an exceptional remedy with strict requirements
- Documentation Requirements: Must maintain detailed records of overhead costs and delays
- Causation Issues: Must prove delay was solely due to owner/government actions
- Jurisdictional Variations: Application varies significantly between courts and jurisdictions
Alternative Overhead Calculation Methods:
- Hudson Formula: UK-based method using planned overhead percentages
- Actual Cost Method: Direct documentation of specific overhead costs during delay
- Modified Eichleay: Adjusted versions accounting for contract variations
- Canadian Method: Alternative allocation approach used in Canadian courts
In construction projects, delays often lead to additional costs. When contractors face government- or client-caused delays, they may be entitled to compensation for unabsorbed home office overhead (HOOH). The industry-standard method for calculating this is the Eichleay Formula.
The Eichleay Formula Calculator makes it simple to compute overhead costs for delay claims, helping contractors, project managers, and legal teams present accurate compensation requests.
What Is the Eichleay Formula?
The Eichleay Formula is a method established by U.S. case law for calculating the portion of a contractor’s home office overhead attributable to a specific project that has been delayed or suspended.
It answers the question:
👉 “How much of our home office overhead should be reimbursed due to delays beyond our control?”
The Eichleay Formula Equation
The formula involves three key steps:
Step 1: Determine Allocable Overhead
Allocable Overhead=Contract BillingsTotal Company Billings×Total Home Office Overhead\text{Allocable Overhead} = \frac{\text{Contract Billings}}{\text{Total Company Billings}} \times \text{Total Home Office Overhead}Allocable Overhead=Total Company BillingsContract Billings×Total Home Office Overhead
Step 2: Calculate Daily Overhead Rate
Daily Overhead Rate=Allocable OverheadDays of Contract Performance\text{Daily Overhead Rate} = \frac{\text{Allocable Overhead}}{\text{Days of Contract Performance}}Daily Overhead Rate=Days of Contract PerformanceAllocable Overhead
Step 3: Compute Compensation for Delay
Eichleay Compensation=Daily Overhead Rate×Days of Delay\text{Eichleay Compensation} = \text{Daily Overhead Rate} \times \text{Days of Delay}Eichleay Compensation=Daily Overhead Rate×Days of Delay
How the Eichleay Formula Calculator Works
The calculator typically requires:
- Total Company Billings → All billings for the period.
- Contract Billings → Billings for the delayed contract.
- Total Home Office Overhead → Overhead costs for the period.
- Contract Performance Days → Actual duration of contract.
- Days of Delay → Length of compensable delay.
The output includes:
- Allocable Overhead
- Daily Overhead Rate
- Eichleay Compensation (reimbursable claim amount)
Example Calculation
- Total Company Billings: $20,000,000
- Contract Billings: $2,000,000
- Total Home Office Overhead: $1,000,000
- Contract Performance Days: 400
- Days of Delay: 50
Step 1: Allocable Overhead 2,000,00020,000,000×1,000,000=100,000\frac{2,000,000}{20,000,000} \times 1,000,000 = 100,00020,000,0002,000,000×1,000,000=100,000
Step 2: Daily Overhead Rate 100,000÷400=250100,000 ÷ 400 = 250100,000÷400=250
Step 3: Eichleay Compensation 250×50=12,500250 \times 50 = 12,500250×50=12,500
✅ Result: The contractor can claim $12,500 in home office overhead for the delay.
Why Use the Eichleay Formula Calculator?
- Contractors → Quantify legitimate delay costs.
- Lawyers → Support claims with accurate calculations.
- Owners/Clients → Evaluate claims fairly.
- Project Managers → Document overhead impacts during disputes.
Features & Benefits
Features
- Input key contract and overhead data
- Step-by-step Eichleay computation
- Transparent breakdown of results
Benefits
- Ensures consistent, case-law-approved method
- Saves time in complex overhead allocation
- Strengthens documentation for claims and disputes
- Reduces risk of under- or over-estimating compensation
Legal Background
The Eichleay Formula originated from Eichleay Corp. v. U.S., a landmark case that established this method as the standard for federal government contracts in the U.S. It has since been referenced widely in boards of contract appeals and construction litigation cases.
Limitations of the Eichleay Formula
- Only applies to government- or owner-caused delays (not contractor’s fault).
- Requires standby status (contractor ready to perform).
- Does not cover profit or field overhead — only home office overhead.
- Must be supported with clear records of costs and billings.
FAQ
1. What is the Eichleay Formula used for?
To calculate unabsorbed home office overhead costs due to owner/government-caused project delays.
2. Is it only for U.S. government contracts?
It originated in U.S. federal contracts but is often used in private-sector disputes too.
3. What costs are included in “home office overhead”?
General office expenses (rent, admin salaries, insurance, utilities, etc.).
4. Can contractors claim profit in Eichleay?
No, it’s strictly for overhead — profit is not included.
5. What if multiple projects are delayed?
Each project’s compensation must be calculated separately.
6. Does it require proof of financial harm?
Yes, claimants must show that the delay prevented overhead recovery.
7. Is Eichleay still valid law?
Yes, it’s recognized by courts and boards, though applied narrowly.
8. How accurate is the calculator?
Very accurate if inputs (billings, overhead, delays) are correct.
9. Can Eichleay be used outside construction?
Primarily used in construction/government contracts, rarely outside.
10. How often should contractors calculate Eichleay?
Whenever delays occur that may lead to claims, especially in government projects.
Conclusion
The Eichleay Formula Calculator is an essential tool for contractors, lawyers, and project managers handling delay claims. By allocating overhead proportionally to billings and applying daily delay costs, it provides a fair, legally recognized measure of compensation.
Whether you’re pursuing a claim or defending against one, using the Eichleay Formula ensures transparency and compliance with established standards.